I hear what she’s saying about googling her name, because I can tell you there were a ton of “Linda Almonte” searches that lead to SFF.
She’s a hero to many.
HuffPO-
When Linda Almonte alerted her boss at JPMorgan Chase about potential fraud in a major deal she was helping to close, she expected him to applaud her great catch.
Instead, he fired her.
“We went down fast,” said Almonte, 41, about her family. She had been making $100,000 a year as a division vice president at Chase, enough to support her stay-at-home husband, their four kids, ages 12 to 22, and rent a three-bedroom house in San Antonio, Texas.
Her move at Chase amounted to “essentially suicide,” Almonte told The Huffington Post. No bank in town would hire her after word spread that she had stood up to the banking giant, she said. After more than a year of fruitless job hunting, Almonte and her family left town, landing at a hotel near Disney World, paying $300 a week for a two-bedroom with a kitchenette.
Bank of America Corp (BAC.N) and U.S. Bancorp (USB.N) have been sued by a Chicago pension fund that said they failed to protect investors in their roles as trustees for mortgage-backed securities for Washington Mutual Inc.
Wednesday’s complaint was filed eight days after U.S. District Judge William Pauley in Manhattan let four pension funds pursue similar claims against Bank of New York Mellon Corp (BK.N) over its role as trustee for Countrywide Financial Corp mortgage debt.
In re: CARMEN M. BAILEY, Chapter 13, Debtor, CARMEN M. BAILEY, Plaintiff,
v.
WELLS FARGO BANK, NA, Defendant.
Case No. 09-44760-HJB, Adversary Proceeding No. 09-4190.
United States Bankruptcy Court, D. Massachusetts, Central Division.
April 10, 2012.
MEMORANDUM OF DECISION
HENRY J. BOROFF, Bankruptcy Judge.
Before the Court are the parties’ cross-motions for summary judgment on the debtor’s claim that the defendant’s prepetition foreclosure of her residence was void under Massachusetts law because the defendant did not provide proper notice of the foreclosure and did not hold the mortgage on the property at either the time it sent notice of the foreclosure or at the time of the foreclosure sale. Although many of the discrete arguments raised in the motions are determinable on summary judgment, for the reasons that follow, remaining issues of material fact preclude the entry of summary judgment for either party.
I. FACTS AND POSITIONS OF THE PARTIES
Most of the facts relevant to this case are not disputed.1 In 1992, the Debtor obtained a loan from Shawmut Mortgage Company (“Shawmut Mortgage”) in the amount of $104,000, secured by a mortgage (the “Mortgage”) on her condominium located in Hudson, Massachusetts (the “Property”).2 In 2008, the Debtor fell behind on her mortgage payments, and Wells Fargo Bank, NA (“Wells Fargo”), representing itself as the holder of the Mortgage, commenced its foreclosure process against the Property by filing a petition under the Servicemembers Civil Relief Act with the Land Court Department of the Massachusetts Trial Court (the “Land Court”) on August 26, 2009. See Bailey I, 437 B.R. at 724.3
On September 22, 2009, Harmon Law Offices, P.C. (“Harmon”), the law office retained by Wells Fargo to foreclose on the Mortgage, mailed both a Notice of Foreclosure Sale and a Notice of Intention to Foreclose Mortgage and of Deficiency After Foreclosure of Mortgage (the “Foreclosure Notices”) to the Debtor by both certified mail, return receipt requested, and by first class mail. Aff. of Kristin A. Hedvig in Supp. of Wells Fargo Bank, NA’s Mot. for Summ. J. 2 ¶¶ 9, 10 & Exs. A, B, Oct. 6, 2011, ECF No. 63. The certified mailings were returned to Harmon as “unclaimed,” but the first class mailings were not returned as undeliverable. Id. at 2 ¶¶ 9, 10.
The Debtor says that she received none of the Foreclosure Notices until well after the foreclosure sale was concluded. She did not find the slip left by the post office indicating that a certified letter was waiting to be claimed until some weeks after the sale, as the notice had been attached to her seldom-used front door and not left in the condominium complex’s common mailbox area. Pl.’s Aff. in Supp. of Cross-Mot. for Summ. J. 1-2 ¶¶ 3, 4, 6, Nov. 7, 2011, ECF No. 68. She claims not to have received the first class mailings due to an illness that prevented her from walking to the common mailbox area. Id. at 2 ¶ 7.
On October 23, 2009, Wells Fargo conducted a foreclosure sale at which the Property was sold to a third-party buyer (the “Foreclosure Sale”). Prior to the recording of the foreclosure deed, however, the Debtor filed a petition under Chapter 13 of the Bankruptcy Code.4 And on November 23, 2009, the Debtor filed this adversary proceeding, seeking, inter alia, a declaratory judgment that the Foreclosure Sale is void. Id. The Court has previously disposed of several other claims contained in the complaint, see Bailey I, 437 B.R. 721, and the only issue remaining is the validity of the Foreclosure Sale.
A. Notice of the Foreclosure Sale
The Debtor argues that the Foreclosure Sale should be declared void because she did not receive notice of the Foreclosure Sale as required by Massachusetts General Laws (“MGL”) ch. 244, § 14.5 The Debtor does not dispute Wells Fargo’s contention that the required notices were sent to the Debtor’s address by both certified and first-class mail.6 Rather, the Debtor says she did not receive the certified mailings because the postal worker left the notice of certified mail at her rarely-used front door instead of at the common mailbox station. According to the Debtor, due to the importance of the rights lost through foreclosure, Wells Fargo simply should have done a better job of insuring that the Debtor actually received the notices.
In response, Wells Fargo argues that Massachusetts law requires only that advance notice of a foreclosure sale be properly mailed, and that the foreclosing entity is not required to prove actual receipt of the notice. It was the Debtor’s responsibility, says Wells Fargo, to provide an address where certified mailings and other notices could be received, and her failure to do so cannot now invalidate the foreclosure.
B. Whether Wells Fargo Held the Mortgage at the Time of the Foreclosure Sale
1. Travel of the Mortgage
With one notable exception discussed below, the parties are substantially in agreement as to the travel of the Mortgage through various entities from execution through foreclosure. On February 24, 1992, the Debtor granted the Mortgage to Shawmut Mortgage. Sherri E. Russell Aff. in Supp. of Wells Fargo’s Mot. for Summ. J. Ex. B, Oct. 6, 2011, ECF No. 61. The Mortgage then passed to Fleet Mortgage Corp. (“Fleet Mortgage”) when Fleet Mortgage merged with Shawmut Mortgage on May 31, 1996, as confirmed by an assignment of the Mortgage from “Fleet Mortgage Corp. Successor by Merger to Shawmut Mortgage Co.” to “Fleet Mortgage Corp.” dated May 31, 1996. Russell Aff. Exs. C, D. On June 1, 2001, the Mortgage became an asset of Washington Mutual Home Loans, Inc. (“WaMu HLI”), when Fleet Mortgage and WaMu HLI merged. Russell Aff. Ex. F.
What happened next is the subject of some dispute between the parties, although that dispute turns largely on their different legal interpretations of the events, rather than a true factual dispute. After the merger between Fleet Mortgage and WaMu HLI, Washington Mutual Bank, FA (“WaMu FA”) and one of its wholly-owned subsidiaries,7 Washington Mutual Mortgage Securities Corp. (“WaMu Securities”), formed WMHLI Transfer Interim LP (the “Limited Partnership”), a limited partnership organized under the laws of Ohio. WaMu FA was the sole general partner and WaMu Securities the sole limited partner of the partnership. WaMu HLI (the holder of the Mortgage) then merged with and into the Limited Partnership, and the Mortgage presumably became an asset of the Limited Partnership. WaMu FA (the general partner) thereafter purchased all of WaMu Securities’ (the limited partner) interest in the Limited Partnership, and the Limited Partnership was canceled. WaMu FA then changed its name to “Washington Mutual Bank,” Russell Aff. Ex. H, which in turn assigned the Mortgage to Wells Fargo through an “Assignment of Mortgage” dated March 22, 2007 (the “Assignment”), Russell Aff. Ex. E.
2. Standing
The Debtor argues that Wells Fargo is not the holder of the Mortgage, because WaMu FA did not acquire the assets of the Limited Partnership, which assets included the Mortgage, and thus had no rights in the Mortgage to assign to Wells Fargo. Wells Fargo maintains that this Court need not consider the Debtor’s argument, because the Debtor does not have standing to pursue it.8 Characterizing the Debtor’s argument as “based upon the premise that the foreclosure sale is void because the assignment to Wells Fargo was invalid,” Wells Fargo argues that the Debtor “does not have standing to challenge an assignment,” and that only “Shawmut Mortgage, or its assigns, have standing to challenge the assignment.” Wells Fargo Mem. 8. Wells Fargo further contends that the “injury” — i.e., the Foreclosure Sale — did not result from the Assignment, but occurred as a consequence of the Debtor’s default, and therefore the Debtor’s challenge to the Assignment is not directed at the cause of her injury. Finally, Wells Fargo argues, the Debtor cannot attack the Assignment because, under the Mortgage contract, the “mortgagee has the right . . . to assign the mortgage to whomever it chooses. The assignment merely affects to whom the borrower owes the obligation.” Wells Fargo’s Post-Hr’g Mem. in Supp. of Mot. for Summ. J. 4, Dec. 16, 2011, ECF No. 79.9
The Debtor first asserts that Wells Fargo mischaracterizes the nature of her injury and its causes. According to the Debtor, “[i]t is not the foreclosure per se that caused harm . . . . It is the fact that Wells Fargo lacked record title as the holder of the mortgage and thereby lacked authority to foreclose.” Pl.’s Mem. in Opp’n to Def.’s Mot. for Summ. J. 5, Nov. 7, 2011, ECF No. 67. Thus, the Debtor concludes that she has standing to challenge Wells Fargo’s right to foreclose. Furthermore, the Debtor contends, the Debtor’s position as a Chapter 13 debtor gives her standing as the estate’s representative to seek a determination of her property rights, to object to claims, and to pursue causes of action that would benefit the estate.
3. The Land Court Order
Even if the Debtor were found to have standing to prosecute the declaratory judgment claim, Wells Fargo maintains that it held the Mortgage at the time it initiated foreclosure proceedings and thus the Foreclosure Sale was valid. While Wells Fargo generally asserts that WaMu FA’s purchase of WaMu Securities’ interest in the Limited Partnership caused the assets of the Limited Partnership (including the Mortgage) to become assets of WaMu FA, Wells Fargo does not rely on documentary evidence of these various transactions to support its contention that the Mortgage traveled from WaMu HLI to Washington Mutual (and ultimately to Wells Fargo). Instead, Wells Fargo relies on an order issued by the Land Court dated June 28, 2002, see Russell Aff. Ex. G, as establishing Washington Mutual’s title to the assets of the Limited Partnership, and thus its ownership of the Mortgage at the time the Assignment to Wells Fargo was executed. In its order, the Land Court stated that:
After due proceedings, it is ORDERED: that that [sic] all assets (including without limitation all instruments of record) standing in the name of Washington Mutual Home Loans, Inc. be deemed assigned to and stand in the name of Washington Mutual Bank, FA, effective as of March 1, 2002, the date of the sale and assignment of Limited Partner Interest.
The Land Court Order was issued after WaMu FA filed an Ex-Parte Subsequent Petition (the “S-Petition”) in the Massachusetts Land Court on June 2, 2002. According to Wells Fargo, the S-Petition, filed pursuant to MGL ch. 185, § 114, was not limited to any specific piece of property, and Wells Fargo places emphasis on the order’s reference to “all” assets of WaMu HLI, which assets would have included the Debtor’s Mortgage. Additionally, Wells Fargo says that a search at the Plymouth Registry District of the Land Court shows that the Land Court Order was assigned an individual document number not associated with a particular property address, thus supporting its argument that the order is effective against all property, registered or unregistered, and including the Debtor’s Property.
Wells Fargo therefore contends that the Land Court Order effectively “assigned” all of WaMu HLI’s assets, including the Mortgage, to WaMu FA, even if the assets of WaMu HLI failed to otherwise become assets of WaMu FA by operation of law. According to Wells Fargo, this Court has no jurisdiction to “invalidate” the Land Court Order, because, under the Rooker-Feldman doctrine, the Court is “precluded `from exercising subject matter jurisdiction where the issues in the case are “inextricably intertwined” with questions previously adjudicated by a state court, such that a federal district [or bankruptcy] court would be in the unseemly position of reviewing a state court decision for error.'” Wells Fargo Post-Hr’g Mem. 5 (quoting Mills v. Harmon Law Offices, P.C., 344 F.3d 42, 44 (1st Cir. 2003)).
The Debtor maintains, however, that the Land Court Order is not binding on either the Debtor or this Court. The Debtor characterizes the S-Petition as an action to correct the certificate of title on a particular piece of registered land (not the Property at issue in this case). Arguing that the S-Petition was essentially an in rem proceeding, the Debtor says that the Land Court Order has no preclusive effect here.
4. The Limited Partnership
Because Wells Fargo relies on its standing argument and its assertion that the Land Court Order precludes further litigation regarding whether the Mortgage was transferred from WaMu HLI to WaMu FA, it has not provided further documentation or legal argument to support its contention that WaMu FA’s purchase of WaMu Securities’ interest in the Limited Partnership transferred all the partnership assets to WaMu FA.
The Debtor argues, however, that the Mortgage, as an asset of the Limited Partnership, was never transferred to WaMu FA and instead remains an asset of the Limited Partnership.11 According to the Debtor, under Ohio’s limited partnership law, the dissolution of the Limited Partnership did not terminate the legal existence of the partnership. Instead, the Debtor argues that the Limited Partnership remains in existence (and in possession of its assets) until the completion of the winding up of the partnership’s affairs (which winding up would include the distribution of partnership assets). Because no evidence relative to the winding up process or distribution of the partnership assets has been provided, the Debtor says Wells Fargo has failed to demonstrate that title to the Mortgage ever passed from the Limited Partnership to WaMu FA. Accordingly, the Debtor argues, the Assignment could not have transferred the Mortgage to Wells Fargo.
II. DISCUSSION
A. Summary Judgment Standard
Summary Judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a), made applicable to this proceeding by Fed. R. Bank. P. 7056. “[W]hile the absence of a genuine dispute as to a material fact is a necessary prerequisite to a finding of summary judgment in favor of the movant,” the moving party must still “show that it is entitled to judgment as a matter of law.” Tomsic v. Sales Consultants of Boston, Inc. (In re Salience Assoc., Inc.), 371 B.R. 578, 585 (Bankr. D. Mass. 2007) (citing Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 764 (1st Cir. 1994)). In resolving cross motions for summary judgment, the court “must resolve all genuine factual disputes in favor of the party opposing each such motion and draw all reasonable inferences derived from the facts in that party’s favor. Atlantic Fish Spotters Ass’n v. Evans, 321 F.3d 220, 224 (1st Cir. 2003); see also E.E.O.C. v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 603 n.8 (1st Cir. 1995) (the “court must consider each motion separately, drawing inferences against each movant in turn”).
B. Foreclosure by Power of Sale in Massachusetts
In Massachusetts, foreclosure of a mortgage may be undertaken without judicial authorization. Ibanez, 941 N.E.2d at 49. “With the exception of the limited judicial procedure aimed at certifying that the mortgagor is not a beneficiary of the Servicemembers Act, a mortgage holder can foreclose on a property . . . by exercise of the statutory power of sale, if such a power is granted by the mortgage itself.” Id. The Mortgage here did grant that power, thus “includ[ing] by reference the power of sale set out in G.L. c. 183, § 21, and further regulated by G.L. c. 244, §§ 11-17C.” Id. “Under Massachusetts General Laws chapter 183, section 21, after a mortgagor defaults in the performance of the underlying note, the mortgagee may sell the property at a public auction, conveying the property to the purchaser in fee simple.” Culhane v. Aurora Loan Servs. of Neb., ___ F. Supp. 2d ___, Civil Action No. 11-11098, 2011 WL 5925525, *6 (D. Mass. Nov. 28, 2011) (citing Ibanez, 941 N.E.2d at 49). Because the statutory power of sale allows a mortgage holder to foreclose on property “without immediate judicial oversight,” the Massachusetts Supreme Judicial Court (the “SJC”) has ruled that “one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void.” Ibanez, 941 N.E.2d at 49-50 (quoting Moore v. Dick, 72 N.E. 967, 968 (Mass. 1905)).
C. Sufficiency of Notice
A mortgage holder who forecloses by power of sale must comply with the notice requirements set forth in MGL ch. 244, § 14. “Advance notice of the foreclosure sale must be provided to the mortgagor by registered mail and other interested parties by publication in a newspaper published or generally circulating in the town where the mortgaged property lies.”12Culhane, 2011 WL 5925525, at *7; Mass. Gen. Laws ch. 244, § 14. The Debtor has challenged neither the content of the Foreclosure Notices nor the fact that the notices were mailed to the Debtor by registered mail. See Mass. Gen. Laws ch. 4, § 7 (“`Registered mail,’ when used with reference to the sending of notice . . . shall include certified mail.”); see also Town of Andover v. State Fin. Servs., Inc., 736 N.E.2d 837, 840 (Mass. 2000); Carmel Credit Union v. Bondeson, 772 N.E.2d 1089, 1091 & n.4 (Mass. App. Ct. 2002) (quoting Durkin v. Siegel, 165 N.E.2d 81, 83 n.3 (Mass. 1960)).
The law in Massachusetts is clear; the requirement that the notice be mailed to the owner of the relevant property “is satisfied by mailing and nonreceipt is irrelevant.” Hull v. Attleboro Sav. Bank, 596 N.E.2d 358, 362 (Mass. App. Ct. 1992) (emphasis supplied); see also Lindsey v. First Horizon Home Loans, Civil Action No. 11-10408-FDS, 2012 WL 689745, *3 (D. Mass. March 1, 2012). Wells Fargo has submitted copies of the Foreclosure Notices sent to the Debtor bearing certified mailing stamps. See Hedvig Aff. Ex. A. Wells Fargo admits that the certified mail was returned unclaimed, but there is no dispute that the Foreclosure Notices were sent. Accordingly, there being no material issue of fact in dispute, the Court must rule as a matter of law that Wells Fargo complied with the notice requirement under MGL ch. 244, § 14, and summary judgment should be entered in favor of Wells Fargo on the Debtor’s claim that notice of the Foreclosure Sale was insufficient.
D. Debtor’s Standing to Challenge the Foreclosure Sale
Even if the notice of the Foreclosure Sale were proper, the Debtor also argues that the sale should be declared void, as Wells Fargo is not (and was not) the holder of the Mortgage and thus had no authority to exercise the statutory power of sale. The Debtor is correct in her general assertion that, absent Wells Fargo’s status as holder of the Mortgage, the Foreclosure Sale is void; as the SJC has explained:
One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose. The “statutory power of sale” can be exercised by “the mortgagee or his executors, administrators, successors or assigns.” G.L. c. 183, § 21. Under G.L. c. 244, § 14, “[t]he mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person” is empowered to exercise the statutory power of sale. Any effort to foreclose by a party lacking “jurisdiction and authority” to carry out a foreclosure under these statutes is void.
Despite the SJC’s clear admonition that failure to hold the mortgage at the time of foreclosure renders a foreclosure sale void, Wells Fargo argues that the Debtor cannot challenge the Foreclosure Sale through her request for declaratory judgment, because the Debtor lacks standing to challenge the Assignment of the Mortgage. This argument is unpersuasive for several reasons.
First, the thrust of the Debtor’s argument is not an attack on the Assignment itself, but instead a challenge to Wells Fargo’s assertion that Washington Mutual held the Mortgage at the time it executed the Assignment. The Debtor’s claim that Washington Mutual did not own the Mortgage at the time it purported to assign it is not a “claim[ ] that the assignment . . . is defective,” but rather a claim that, as a stranger to the Mortgage, Washington Mutual could not have passed any ownership rights in the Mortgage to Wells Fargo.14
This case is thus distinguishable from those where the courts have concluded that borrowers lacked standing to challenge assignments of mortgages on grounds that assignments failed to comply with the terms of underlying Pooling and Servicing Agreements (“PSAs”). In such cases, the courts have found that the borrowers lacked standing to challenge a mortgage assignment based on an alleged breach of an underlying PSA, because the borrowers were neither parties to nor third-party beneficiaries under those agreements. See, e.g., Juarez v. U.S. Bank Nat’l Ass’n, Civil Action No. 11-10318, 2011 WL 5330465, *4 (D. Mass. Nov. 4, 2011); In re Correia, 452 B.R. at 324 (citing In re Almeida, 417 B.R. 140, 149 n.4 (Bankr. D. Mass. 2009)). The Debtor’s argument here is not based on the breach of an underlying contract to which she was not a party; instead, her argument is aimed at the ownership of the Mortgage at the time it was purportedly assigned.
The Court also finds the two cases relied on by Wells Fargo to be inapposite here. In In re Lopez, Judge Hillman discussed standing only in the context of a debtor’s allegation that a bank’s denial of his request for a loan modification was actionable under the Home Affordable Modification Program (“HAMP”). 446 B.R. 12, 21 (Bankr. D. Mass. 2011). Noting his agreement with the “nearly unanimous” conclusion that HAMP “affords no private right of action and that borrowers lack standing as third-party beneficiaries to enforce the HAMP guidelines under a breach of contract theory,” Judge Hillman ultimately concluded that the debtor had failed to adequately plead his standing under HAMP. Id. at 21-22.15 Because the issue in Lopez was the Debtor’s standing under HAMP, it has no relevance to the Debtor’s standing to question Wells Fargo’s status as holder of the Mortgage in this case.
In Kiah v. Aurora Loan Servs., LLC, Civil Action No. 10-40161-FDS, 2011 WL 841282 (D. Mass. March 4, 2011), the borrower filed an action seeking “a declaratory judgment that `the mortgage on record [was] legally null and void.'” Id. at *1 (emphasis supplied). Among the various allegations raised in the complaint was the borrower’s assertion that the mortgage assignment was invalid because it was given for no consideration. Id. at *6. In rejecting that argument, Judge Saylor noted that the allegation was not only speculative, but that the borrower’s standing to contest the assignment on the basis of lack of consideration was questionable — since it was doubtful whether the plaintiff could demonstrate a “compensable injury if the consideration was not paid.” Id. The Debtor here is not seeking a declaration that the Mortgage is void, nor is she contesting the consideration given for the Assignment. Accordingly, the Court finds Judge Saylor’s discussion of standing in Kiah to be irrelevant to the issues raised here.
And while recent cases have contained somewhat broader language to the effect that a borrower has no standing to challenge a mortgage assignment, as the borrower is neither a party to, nor a third-party beneficiary of, the assignment, see, e.g., Oum v. Wells Fargo, N.A., ___ F. Supp. 2d ___, Civil Action Nos. 11-11663-RGS, 11-11683-RGS, 2012 WL 390271 (D. Mass. Feb. 8, 2012); Wenzel v. Sand Canyon Corp., ___ F. Supp. 2d ___, Civil Action No. 11-30211-JCB, 2012 WL 219371 (D. Mass. Jan. 5, 2012); Peterson, 2011 WL 5075613, the Debtor is not, as previously discussed, challenging the Assignment per se. Instead, the Debtor questions only whether the assignor had any rights in the Mortgage to transfer to the assignee.16
The Debtor has standing to challenge the validity of the Foreclosure Sale because she has demonstrated “a concrete and particularized injury in fact, a causal connection that permits tracing the claimed injury to the defendant’s actions, and a likelihood that prevailing in the action will afford some redress for the injury.” Antilles Cement Corp. v. Fortuno, 670 F.3d 310, 317 (1st Cir. 2012) (quoting Weaver’s Cove Energy, LLC v. R.I. Coastal Res. Mgmt. Council, 589 F.3d 458, 467 (1st Cir. 2009)). The injury to the Debtor is the purported termination of her equity of redemption in the Property by a party who had no authority to foreclose that equity of redemption.17 If Wells Fargo did not hold the Mortgage at the time it foreclosed, then the injury is traceable directly to Wells Fargo, as it is the allegedly invalid foreclosure by Wells Fargo that constitutes the Debtor’s claimed injury. Should the Court determine that the Foreclosure Sale is void, the Debtor will retain the equity of redemption — an interest in the Property that cannot be lightly disregarded.
Also of paramount importance is the Debtor’s status as a Chapter 13 debtor. By dint of § 1322(b)(5), Congress has promised such debtors the opportunity to propose a Chapter 13 Plan that “provide[s] for the curing of any default within a reasonable time and maintenance of payments while the case is pending,” thereby allowing a debtor to “restore and maintain his currency on a longterm debt.” In re Euliano, 442 B.R. 177, 186 (Bankr. D. Mass. 2010) (quoting 11 U.S.C. § 1322(b)(5); Grubbs v. Houston First Am. Sav. Ass’n, 730 F.2d 236, 245 (5th Cir. 1984)).
But under § 1322(c)(1) of the Bankruptcy Code, a Chapter 13 debtor’s ability to cure a default on a mortgage note through a Chapter 13 Plan is only available “until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law.” 11 U.S.C. § 1322(c)(1); see also In re Mellino, 333 B.R. 578, 584 (Bankr. D. Mass. 2005) (“Section 1322(c)(1) of the Bankruptcy Code allows a debtor to cure his or her default under a mortgage unless the property has been sold at a foreclosure sale which was conducted in accordance with applicable state law.”) (citing In re Crichlow, 322 B.R. 229, 234 (Bankr. D. Mass. 2004)).
And, as previously noted, in Massachusetts, a foreclosure sale is “conducted in accordance with applicable nonbankruptcy law” only if the foreclosing party held the mortgage at the time the notice of foreclosure was sent and the foreclosure sale conducted. The Debtor’s ability to cure the default and reinstate the Mortgage through a Chapter 13 plan thus turns on whether or not the Foreclosure Sale was validly conducted under Massachusetts law by an entity holding the Mortgage. For these reasons, the Court determines that the Debtor has standing to seek a ruling on the validity of the Foreclosure Sale.18
E. Effect of the Land Court Order
Wells Fargo next argues that the substance of the underlying transactions affecting the Mortgage should not be reexamined, because the Land Court Order established WaMu FA’s ownership of WaMu HLI’s assets (including the Mortgage), and the Assignment therefore validly conveyed ownership to Wells Fargo prior to the Foreclosure Sale. But Wells Fargo fails to adequately articulate any legal theory supporting its contention that both the Debtor and the Court are bound by the Land Court Order. Wells Fargo refers only briefly to the Rooker-Feldman doctrine as preventing this Court from deciding questions regarding the ownership of the Mortgage, maintaining that this Court has no jurisdiction to “invalidate” the Land Court Order.
The Rooker-Feldman doctrine is not applicable here, because the Debtor was not a party to the Land Court action. See Lance v. Dennis, 546 U.S. 459, 465 (2006) (Rooker-Feldman does not apply where party was not party to the state court proceeding); Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005) (The Rooker-Feldman Doctrine has been limited to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.”). Similarly, although this Court is bound by 28 U.S.C. § 1738 (the Full Faith and Credit Statute) to “give the same preclusive effect” to the Land Court Order that the order “would be given in the courts of [Massachusetts],” In re Ellis, 354 B.R. 11, 17 (Bankr. D. Mass. 2006) (quoting Migra v. Warren City Bd. of Educ., 465 U.S. 75, 81 (1982)), Wells Fargo has provided no reason why Massachusetts courts would give preclusive effect to the Land Court Order in an unrelated case involving non-parties to the Land Court action.
As Wells Fargo itself notes, “[t]he purpose of an S-Petition, filed pursuant to G.L. c. 185, § 114, et seq., is to alter certificates of title on registered land.” Wells Fargo Post-Hr’g Mem. 2 (emphasis supplied).19 There is no indication, despite its broad language, that the Land Court Order applied to any property other than the property affected by the registered certificate of title at issue in that case. The Property here, in fact, is not registered land. Although the Land Court may, in some cases, exercise jurisdiction over recorded land, see MGL ch. 185, § 1, the evidence produced by Wells Fargo indicates that the Land Court Order was issued pursuant to its jurisdiction over a particular certificate of title in registered land, and thus has no preclusive effect here. Similarly, even if this Court were to reach a conclusion different than that reached by the Land Court and find that WaMu HLI’s assets were not transferred to WaMu FA, such a ruling would in no way “invalidate” the Land Court’s Order. Just as that order has no preclusive effect in the case before this Court, the decision reached in this case would not affect the parties involved in the case before the Land Court.
In sum, because the Land Court Order was issued in a case unrelated to the one before this Court, and involved neither the Debtor nor the Property at issue here, and because Wells Fargo has not articulated any other reason why the order has preclusive effect in this case, the Court concludes that the Land Court Order is insufficient to establish, for purposes of this case, that Washington Mutual held the Mortgage when it executed the Assignment to Wells Fargo.
F. So Who Holds the Mortgage?
To re-cap: the parties agree that the Mortgage was originally given to Shawmut Mortgage. Shawmut Mortgage merged with Fleet Mortgage, which in turn merged with WaMu HLI. WaMu HLI then merged with the Limited Partnership (created in Ohio), and the Mortgage thus became an asset of the Limited Partnership. The sole general partner (WaMu FA) then purchased the sole limited partner’s (WaMu Securities) interest in the Limited Partnership and the partnership was “canceled” pursuant to Ohio law. See Sale & Assignment of Limited Partner Interest and “Washington Mutual bank, FA Secretary’s Certificate,” both attached as exhibits to Pl.’s Post-Hr’g Mem. and Wells Fargo’s Post-Hr’g Mem; see also Ohio Rev. Code § 1782.10 (A) (“A certificate of limited partnership shall be canceled . . . at any other time there are no limited partners.”).
But neither party has provided evidence demonstrating what happened to the assets of the Limited Partnership. Under Ohio law, “a partnership interest is personal property.” Ohio Rev. Code § 1782.39. The assignment of a partnership interest transfers only the interest in the partnership and the right to receive distributions as a partner; it does not transfer the underlying partnership assets themselves. Ohio Rev. C. § 1782.40. Thus, WaMu FA’s purchase of WaMu Securities’ interest in the Limited Partnership did not necessarily transfer the assets of the Limited Partnership (which included the Mortgage) to WaMu FA.
The Debtor assumes that the Limited Partnership was merely “dissolved,” and therefore would have the Court conclude that, consistent with Ohio law, the assets of the Limited Partnership remain with the Limited Partnership until otherwise distributed through the “winding up process.” While the Debtor is correct that, under Ohio law, the assets of a Limited Partnership do not vest in the partners as a matter of law and must be appropriately distributed, see Ohio Rev. Code § 1782.46, it is possible that the Limited Partnership assets vested in WaMu FA pursuant to the underlying partnership agreement or as a result of distribution during the winding-up process. See id. (“Except as otherwise provided in the partnership agreement, the general partners . . . . may wind up the affairs of a limited partnership . . . [and] may do any or all of the following . ..: (3) Dispose of and convey the property of the limited partnership; . . . (5) Distribute to the partners any remaining assets of the limited partnership.”). Simply put, there is insufficient evidence on the summary judgment record to conclude either that the Mortgage remains an asset of the Limited Partnership (as the Debtor argues) or became property of WaMu FA (as Wells Fargo argues). Accordingly, the Court cannot determine whether Washington Mutual owned the Mortgage at the time it executed the Assignment to Wells Fargo and both parties’ motions for summary judgment must be denied.
III. CONCLUSION
For the foregoing reasons, the Court will deny both the Debtor’s and Wells Fargo’s motions for summary judgment. However, in accordance with the conclusions of law reached herein, a further evidentiary hearing is necessary only to resolve the limited issue of whether the Mortgage, as an asset of the Limited Partnership, ultimately became an asset of Washington Mutual, allowing the assignment of the Mortgage from Washington Mutual to Wells Fargo. An order in conformity with this memorandum shall issue forthwith.
Footnotes
1. Many of the relevant facts were also detailed in this Court’s earlier memorandum regarding the defendant’s motion to dismiss. See Bailey v. Wells Fargo Bank, NA (In re Bailey), 437 B.R. 721 (Bankr. D. Mass. 2010) (“Bailey I”).
2. The Property was originally purchased by the Debtor and her former husband in 1984. The mortgage loan at issue here was incurred by the Debtor to purchase her former husband’s interest in the Property pursuant to a judgment of divorce and modification agreement. Bailey I, 437 B.R. at 724 n.1.
3. The Servicemembers Civil Relief Act (the “Servicemembers Act”), 50 U.S.C. App. §§ 501-591, prevents the foreclosure of a mortgage where the owner of the property is an armed servicemember and the mortgage was entered into prior to the start of military service; the act “restricts foreclosures against active duty members of the uniformed services.” Akar v. Fed. Nat’l Mortg. Ass’n, ___ F. Supp. 2d ___, Civil Action No. 10-10539 NMG, 2012 WL 661458, *12 (D. Mass. Feb. 8, 2012). In Massachusetts, a special legislative act created a “court procedure to determine that no one interested in the property is in the military service.” See Bailey I, 437 B.R. at 724 n.2 (quoting 28 Mass. Prac. § 10.4).
4. See 11 U.S.C. § 101 et seq. (the “Bankruptcy Code” or the “Code”).
5. In order to validly foreclose on property under power of sale, “advance notice of the foreclosure sale [must be] provided to the mortgagor, to other interested parties, and by publication in a newspaper published in the town where the mortgaged land lies or of general circulation in that town.” U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40, 50 (Mass. 2011). The Debtor has not argued that Wells Fargo failed to appropriately publish notice of the Foreclosure Sale in the relevant newspaper, and her arguments are targeted only at the adequacy of the notice provided directly to the Debtor.
6. According to Wells Fargo, identical copies of the Foreclosure Notices were sent by certified and first class mail to two different versions of the Debtor’s address (one identifying the building and unit of the condominium complex in which the Property is located and the other identifying the address by the unit number only). Hedvig Aff. 2 ¶ 8. The Debtor has not argued that either form of address was incorrect or incomplete.
7. WaMu HLI was also a wholly-owned subsidiary of WaMu FA.
8. In its original brief submitted in support of the summary judgment motion, Wells Fargo supported this argument with a citation to an order from the Land Court, cited as JP Morgan Mortg. Acquisition Corp. v. Lord, Land Court Case No. 10 MISC 427846, Memorandum and Order Denying Defendant’s Motion to Vacate Judgment and Dismiss Plaintiffs’ Complaint (Nov. 29, 2010) (Long, J.). See Wells Fargo Mem. in Supp. of Mot. for Summ. J. 8, Oct. 6, 2011, ECF No. 60. This citation is, at least so far as the Court was able to discern, insufficient to allow easy access to a copy of the referenced order in a publicly-available database, and Wells Fargo failed to attach a copy of the order to its brief. As such, the Court is unable to lend any persuasive value to the quote from that order provided by Wells Fargo.
9. At the hearing on the parties’ motions for summary judgment, counsel for Wells Fargo also directed the Court’s attention to two additional cases (which were not, as represented by counsel, cited in Wells Fargo’s brief). Those cases, Kiah v. Aurora Loan Servs., LLC, Slip Copy, Civil Action No. 10-40161-FDS, 2011 WL 841282 (D. Mass. March 4, 2011), and In re Lopez, 446 B.R. 12 (Bank. D. Mass. 2011), are discussed later in this memorandum.
10. Viewing both parties’ arguments relative to the Land Court Order to be somewhat sparse, at the conclusion of the hearing on the summary judgment motions, the Court asked the parties to provide further briefing on the preclusive effect, if any, of the Land Court Order. Both parties have done so.
11. The Debtor raises additional arguments premised on the fact that many of the documents relied on by Wells Fargo to demonstrate how ownership of the Mortgage changed, through various corporate mergers and name changes, were not recorded in the relevant Registry of Deeds. The Debtor has asserted, with no citation to relevant case law or statute, that those documents should have been recorded because the various corporations were foreign to Massachusetts and were not registered to do business in Massachusetts. Because they were not recorded, the Debtor says a title examiner would not be able to ascertain how title ultimately vested in Wells Fargo. In Bailey I, however, the Court specifically rejected the Debtor’s assertion that the documents on record at the time of the foreclosure had to demonstrate an unbroken chain of ownership of the Mortgage from Shawmut Mortgage to Wells Fargo. 437 B.R. at 728-29. And the SJC has subsequently agreed, holding that although a foreclosing party must have evidence that they hold the Mortgage at the time the foreclosure notice is sent, recording of those documents prior to the sending of the foreclosure notice, while perhaps the best practice, is not required. See U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40, 53 (Mass. 2011); Bailey I, 437 B.R. at 728-29 (citing U.S. Bank Nat’l Ass’n v. Ibanez, Nos. 384283 (KCL), 386018 (KCL), 386755 (KCL), 2009 WL 795201 (Mass. Land Ct. March 26, 2009); U.S. Bank Nat’l Ass’n v. Ibanez, Nos. 08 Misc. 384283 (KCL), 08 MISC. 386755 (KCL), 2009 WL 3297551 (Mass. Land Ct. Oct. 14, 2009), aff’d 941 N.E.2d 40).
12. As noted earlier, there is no assertion or evidence that notice of the Foreclosure Sale was not published in a relevant newspaper as required by MGL ch. 244, § 14.
13. And, as the SJC explained further in Ibanez, if the foreclosing entity was not the holder of the mortgage at the time it sent notice of the foreclosure and claimed status as holder of the mortgage, “the failure to identify the [correct] holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void.” Id.
14. In her post-hearing brief, the Debtor raises an additional scattershot attack on the Assignment directly, arguing that the individual who executed the Assignment has been the subject of “widespread national scrutiny.” Pl.’s Post-Hr’g Mem. in Supp. of Pl.’s Mot. for Summ. J. 20, Jan. 5, 2012, ECF No. 81. Based on allegations raised in other (unrelated) cases, the Debtor maintains that the “Assignment was prepared . . . years after the events recited therein, and signed by someone who had no personal knowledge of the facts or events,” and is “nothing short of outright fraud.” Id. at 21. While the Court could simply ignore this untimely argument to which Wells Fargo has had no opportunity to respond, see Correia v. Deutsche Bank Nat’l Trust Co. (In re Correia), 452 B.R. 319, 323 (B.A.P. 1st Cir. 2011), the Court feels compelled to note its lack of merit based on extant case law, see, e.g., Id. at 323-24; Culhane, 2011 WL 5925525, at *17-18; Peterson v. GMAC Mortg., Civil Action No. 11-11115-RWZ, 2011 WL 5075613, *4-5 (D. Mass. Oct. 25, 2011); Rosa v. Mortg. Elec. Sys., Inc., ___ F. Supp. 2d ___, Civil Action No. 10-12141-PBS, 2011 WL 5223349, *4-5 (D. Mass. Sept. 29, 2011); In re Marron, 455 B.R. 1, 8 (Bankr. D. Mass. 2011); Kiah, 2011 WL 841282, at *7.
15. While Judge Hillman did address the debtor’s additional attacks on an assignment of the mortgage, those claims were found deficient not because the debtor lacked standing to challenge the assignment of his mortgage, but because the Debtor had failed to articulate any affirmative objection to the allegedly defective assignment in that case. Id. at 19.
16. The Court expresses no opinion here on whether it would agree with those courts that have rejected challenges to foreclosures based on the borrowers’ lack of standing to challenge an assignment and have concluded that the SJC, in Ibanez, “did not intend to `give [ ] Massachusetts mortgagors a legally protected interest in assignments to which they are not a party . . . .'” Oum, 2012 WL 390271, at *6 (quoting Peterson, 2011 WL 5075613, at *3). The Court notes, however, that other courts in this district have assumed jurisdiction and recognized a borrower’s standing to bring such actions based on the SJC’s conclusion that foreclosures conducted by non-mortgage holders are void. See, e.g., Rosa, 2011 WL 5223349, at *3 n.5 (“Under Massachusetts law, `any effort to foreclose by a party lacking “jurisdiction and authority” to carry out a foreclosure . . . is void.’ The Plaintiffs appear to have standing under this principle, because the allegations, if proven, would render the foreclosure sale void, under Massachusetts law.”); see also Culhane, 2011 WL 5925525, at *12 (possible cloud on title that may reduce value of property at foreclosure and thus increase deficiency claim was sufficient to give borrower standing to challenge authority of assignor to assign mortgage); cf. Bevilacqua v. Rodriguez, 955 N.E.2d 884, (Mass. 2011) (mortgagor retains an interest in the property by holding the equity of redemption until a valid foreclosure sale is conducted).
17. “In Massachusetts, a `mortgage splits the title in two parts: the legal title, which becomes the mortgagee’s, and the equitable title, which the mortgagor retains.'” Bevilacqua, 955 N.E.2d at 895 (quoting Maglione v. BancBoston Mortg. Corp., 557 N.E.2d 756, 757 (1990)). The equitable title, or “equity of redemption,” retained by the mortgagor “[is] the basic and historic right of a debtor to redeem the mortgage obligation after its due date, and ultimately to insist on foreclosure as the means of terminating the mortgagor’s interest in the mortgaged real estate.” Id. (quoting Restatement (Third) of Property (Mortgages) c.3, Introductory note at 97 (1996)).
18. In its post-hearing brief, Wells Fargo argues, as an additional ground for affirming the validity of the Foreclosure Sale, that any defect in the Assignment could, in accordance with the SJC’s statements in Ibanez, be resolved by the recording of a “confirmatory assignment.” While the SJC indicated that a post-foreclosure “confirmatory assignment” may be used in cases where a valid pre-foreclosure assignment of mortgage was made but “is not in recordable form or bears some defect,” the court also stressed that such a confirmatory assignment “cannot confirm an assignment that was not validly made earlier.” Ibanez, 941 N.E.2d at 55. If the Court finds that Washington Mutual did not hold the Mortgage at the time the Assignment was executed, then there is no “valid” assignment to which a confirmatory assignment could refer.
19. In Massachusetts, real property may be either registered or unregistered (recorded) land. Real estate in Massachusetts primarily consists of unregistered land, which is conveyed by the delivery of a deed. 28 Mass. Prac., Real Estate Law § 4.59. Registered land is not recorded in the same manner as other real estate, but is governed by Massachusetts statutes codifying a version of what is commonly referred to as a “Torrens System” for the registration of land titles. See, e.g. The Torrens System, 25 Law. & Banker. Cent. L.J. 226 (1932). Registered land has gone through an adjudication process in order to quiet title, and “the Commonwealth guarantees and insures the title to land that is registered.” 28 Mass. Prac., Real Estate Law § 22.1. A certificate of title in registered property is stored on the “registered land side of the registry of deeds,” 28 Mass. Prac., Real Estate Law § 31A.1, and may be altered only through an action (like the S-Petition referred to here) brought in the Land Court, see MGL ch. 185 § 114.
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF RICHMOND
ONEWEST BANK, FSB, as successor in interest to INDYMAC BANK, FSB,
Plaintiff
against
JOHN A. GALLI, GEORGANN GALLI, and “JOHN DOE #1″ through “JOHN DOE #10″, inclusive the last ten names being fictitious and unknown to the plaintiff, the persons or parties intended being the persons, tenants, occupants, or corporations, if any, having or claiming an interest in or lien upon the mortgaged premises described in the complaint
Defendants
The plaintiff moves for partial summary judgment dismissing the defendants’ third, fourth, sixth, seventh, eighth, tenth, eleventh, twelfth, thirteenth, fifteenth and sixteenth affirmative defenses. In opposition, the defendants cross-move for summary judgment arguing that the plaintiff lacks standing; lacks capacity to commence and maintain this action; failed to elect remedies pursuant to RPAPL § 1301; and failed to provide each defendant with the requisite acceleration notices. The plaintiff’s motion is denied, and the defendants’ motion is granted.
Facts
This is an action to foreclose real property known as 231 Douglas Road, Staten Island, New York. On August 26, 2003 John A. Galli and Georgann Galli executed a promissory note and mortgage in favor of WMC Mortgage Corp. (“WMC”) in the amount of $550,000. The mortgage contained the following language concerning the business entity known as Mortgage Electronic Registration Systems, Inc. (“MERS”):
I understand and agree that MERS holds legal title to the rights granted by me in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successor and assigns) has 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 Lender including, but not limited to, releasing and canceling this Security Instrument.
In addition the Promissory Note submitted in connection with these motions contain an undated Allonge to Promissory Note stating: “Pay to the Order of INDYMAC BANK, FSB Without Recourse WASHINGTON MUTUAL BANK”. On October 22, 2004, MERS purportedly assigned this mortgage as nominee for WMC to Washington Mutual Bank, FA.
On November 16, 2004 the defendants executed a promissory note and mortgage in favor of Washington Mutual Bank, F.A. in the amount of $457,050.77. Once again, the Promissory Note submitted for consideration in connection with these motions contains an undated Allonge to Promissory Note that states “Pay to the Order of IndyMac Bank, FSB Without Recourse Washington Mutual Bank”. Simultaneously, the defendants executed a Consolidation, Extension and Modification Agreement (“CEMA”) with Washington Mutual Bank, F.A. on the same day. Exhibit A of the CEMA lists the 2003 WMC mortgage executed by the defendants as well as the concurrently executed Washington Mutual Bank, FA mortgage as being consolidated, extended and modified by this agreement. However, WMC was not a signatory to the November 16, 2004 CEMA.
Two years later on April 5, 2006, MERS as nominee for Washington Mutual Bank, FA purportedly assigned the 2003 WMC mortgage and the 2004 Washington Mutual Bank, FA mortgage to Washington Mutual Bank. A second assignment on the same day had Washington Mutual Bank, F/K/A Washington Mutual Bank, FA purportedly made the following assignments to MERS as nomminee for Indymac Bank, FSB:
Mortgage dated 08/26/2003 made by John A. Galli and Georgeann Galli, Husband and Wife to Mortgage Electronic Registration Systems, Inc. as nominee for WMC Mortgage Corporation in the principal sum of $550,000.00 and recorded on 01/28/2004, in the office of the CLERK of the County of RICHMOND, in Book 17109 of Mortgages, page 242.
ASSIGNMENT FROM: Mortgage Electronic Registration Systems, Inc. as nominee for WMC Mortgage Corporation to Mortgage Electronic Registration Systems, Inc. as nominee for Washington Mutual Bank, FA dated 10/22/2004 recorded 6/2/2005.
ASSIGNMENT FROM: Mortgage Electronic Registration Systems, Inc. As nominee for Washington Mutual Bank FA to Washington Mutual Bank dated 4/4/2006 to be recorded concurrently.
2nd Mortgage dated 11/16/2004 recorded 6/2/2005 in document control 48484 between John A. Galli and Georgeann Galli, aka Georgeann Galli husband and wife and Washington Mutual Bank, FA in the amount of $457,050.77
Consolidation, Extension, and Modification Agreement made by John A. Galli and Georgeann Galli, aka Georeann Galli husband and wife and Washington mutual Bank, FA dated 11/16/2004 recorded 6/2/2005 in document number 48485 consolidated mortgages 1 & 2 to form a single lien in the amount of $1,000,000.00
On April 14, 2006 the defendants executed another Promissory Note and Mortgage this time in favor of IndyMac Bank, FSB in the amount of $143,595.50. Concurrently with the third mortgage, the defendants executed a Consolidation, Extension and Modification Agreement in favor of IndyMac Bank, FSB. Once again, neither WMC, nor Washington Mutual Bank f/k/a Washington Mutual Bank, FA were signatories to this second CEMA.
According to the affidavit of Brian Burnett, an Assistant Vice President of OneWest Bank, FSB (“OneWest”) that on or about July 11, 2008, IndyMac Bank, FSB failed and went into receivership. Upon entering receivership it changed its name to IndyMac Federal Bank, FSB and on or about March 19, 2009 merged with OneWest. According to Mr. Burnett, OneWest acquired all of IndyMac’s assets. However, notably absent from the record is a copy of the purchase and assumption agreement between OneWest and IndyMac.
On or about September 1, 2008 the defendants allegedly defaulted on the notes and mortgages.
The plaintiff moved for partial summary judgment dismissing the defendants third, fourth, sixth, seventh, eighth, tenth, twelfth, thirteenth, fifteenth and sixteenth affirmative defenses. The defendant cross moves to dismiss the plaintiff’s action arguing that the plaintiff: 1) lacks standing; 2) lacks capacity to commence and maintain this action; and 3) failed to elect remedies pursuant to RPAPL § 1301. In opposition to the defendants’ cross motion, the plaintiff submits attorney certified copies of the relevant notes and mortgages encumbering 231 Douglas Road, Staten Island, New York.
Discussion
The court will address the defendants’ cross-motion to dismiss the complaint pursuant to CPLR § 3211(a). The record in this case shows that MERS assigned the mortgage several times before the original notes and mortgages found their way to the plaintiff in this action. Here the court must determine whether the plaintiff in a foreclosure action must establish a clear chain of title of the relevant notes and mortgages prior to commencing the foreclosure proceeding. This court concludes that a foreclosing plaintiff must establish how it came to possess the relevant notes and mortgages it wishes to foreclose.
On June 7, 2011 the Appellate Division, Second Department issued its decision in the Bank of New York v. Silverberg case.1 In that case the court was called to resolve the issue of, “. . . whether a party has standing to commence a foreclosure action when that party’s assignor–in this case, Mortgage Electronic Registration Systems, Inc. . . . was listed as a nominee and mortgagee for the purposes of recording, but was never the actual holder or assignee of the underlying notes.”2 The Appellate Division, Second Department held that such a party did not have standing to commence a foreclosure action.
In a mortgage foreclosure action, a plaintiff must be both the holder or assignee of the mortgage and the underlying note at the time the action is commenced.3 Here, as was the case in Silverberg, MERS purportedly transferred the WMC mortgage to Washington Mutual Bank, FA in connection with a consolidation as nominee. In turn, MERS as the nominee of Washington Mutual Bank, FA assigned the mortgage to Washington Mutual Bank. Subsequently, Washington Mutual Bank assigned the mortgages, prior assignments and CEMAs to MERS as nominee of IndyMac Bank, FSB. The Appellate Division, Second Department found in Silverberg that “. . . as ‘nominee,’ MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the lender.” Here, as was the case in Silverberg, MERS lacked the authority to assign the underlying notes. Consequently, how the plaintiff came into possession of the mortgages and notes in this case is suspect.
The plaintiff cites a multitude of cases purportedly holding that possession of the physical notes establishes its standing to commence this action.4 But each of these cases predate the Appellate Division, Second Department’s decision in Silverberg. Consequently, this court finds that the initial transfer between WMC Mortgage and Washington Mutual Bank, F.A. is a nullity and therefore the plaintiff must establish how it procured the notes and mortgages for 231 Douglas Road, Staten Island, New York.
Given this court’s decision on the cross-motion the plaintiff’s motion for summary judgment is denied.
Accordingly, it is hereby:
ORDERED, that John A. Galli and Georgann Galli’s cross-motion dismissing the plaintiff’s complaint is granted and the complaint is dismissed without prejudice; and it is further ORDERED, that the plaintiff’s motion to foreclose is denied.
No sooner did Linda Almonte show up for work on November 30, 2009 than was she escorted out the door by security at JPMorgan Chase’s Credit Card Litigation Support Group in San Antonio. A midlevel Chase executive who oversaw business process execution employees, Almonte says she was fired after just six months on the job for challenging her superiors about the accuracy of the bank’s credit card records.
Colleagues first learned of her dismissal later in the day when operations manager Jason Lazinbat, Almonte’s former boss, gathered bank staff in a conference room and announced she was no longer with the bank. Under no circumstances, Lazinbat warned, were staffers to communicate with Almonte, recalls Carole McGinn, a quality control worker who spent 14 years at Chase. The account was confirmed by second employee, who requested to speak anonymously.
JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.
The bank’s errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.
For the banking industry at large, the situation at Chase highlights the risk that shoddy back-office procedures and flawed legal work extends well beyond mortgage servicing.
“We did not verify a single one” of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. “We were told [by superiors] ‘We’re in a hurry. Go ahead and sign them.'”
Either way the banks are screwed on these as well.
CBS-
The nation’s banks are looking at a robo-signing problem with commercial real estate which may dwarf the one for home mortgages, according to a new study.
Research by Harbinger Analytics Group shows the widespread use of inaccurate, fraudulent documents for land title underwriting of commercial real estate financing. According to the report:
This fraud is accomplished through inaccurate and incomplete filings of statutorily required records (commercial land title surveys detailing physical boundaries, encumbrances, encroachments, etc.) on commercial properties in California, many other western states and possibly throughout most of the United States.
An 11th-hour settlement is expected to stave off potential class action status in a lawsuit that claims foreclosed borrowers were overcharged for attorneys’ fees that the Mortgage Electronic Registration Systems Inc. did not actually incur.
National Mortgage News-
The plaintiffs, Jose and Lorry Trevino, filed a motion seeking class action status and an amended complaint on Jan. 12. The defendants had until Jan. 17 to respond, but received a two-week extension, “so that the parties can memorialize their settlement,” according to court documents filed Jan. 13.
The parties have agreed to terms, but the settlement is pending final paperwork. The case hasn’t been dismissed and likely won’t until the settlement is finalized.
The suit, originally filed in 2007, names Merscorp and a number of its shareholders, including Citigroup, Countrywide, Fannie Mae, Freddie Mac, GMAC Residential Funding, HSBC, JPMorgan Chase, Washington Mutual and Wells Fargo.
Note: This post went missing shortly after it was on the site back in June 2011 and IMO may be a clue as to why the recent massive halts nationwide, but in reality, this began last June 🙂
This is far worse than the foreclosure fraud robo-signing scandal and they do not want this to get out of control…it’ll spell doom.
For its first witness, plaintiff called Martin Lavergne, who worked for CHASE BANK USA, N.A.(“Chase”) in various roles over a period of approximately 17 years. Presently, he holds the title of “custodian of records.” While Mr. Lavergne maintained that he had personal knowledge of the practices and procedures that Chase utilized in creating and maintaining consumer credit card account records, he never described these practices and procedures and never testified as to how he acquired personal knowledge of them.
[…]
Notably, some of the records that were shown to Mr. Lavergne were apparently created by Washington Mutual Bank. Mr. Lavergne explained this by stating that at some point in time, Chase had acquired Washington Mutual Bank. No testimony was elicited from Mr. Lavergne that he had worked for Washington Mutual Bank or that he had personal knowledge of the practices and procedures that Washington Mutual Bank employed in creating and maintaining consumer credit card account records.
[…]
Here, Mr. Lavergne’s foundational testimony was essentially a verbatim recitation of the statutory elements set forth in CPLR 4518[a]. He gave absolutely no testimony as to how the electronic records concerning defendant’s account statements came into existence nor did he indicate that he even knew how such information was collected. It would appear that credit card statements contain information that is conveyed from multiple entities, from the reporting merchant through various intermediaries, until the information is ultimately incorporated into plaintiff’s business records (see Discover Bank v Williamson, 2007 NY Slip Op 50231[U] [App Term, 9th and 10th Jud Dists]). Certainly, Mr. Lavergne did not demonstrate that the person or persons who inputted the electronic data had actual knowledge of the events inputted or that such person or persons obtained knowledge of those events from someone with actual knowledge of them and who had a business duty to relay information regarding the events (see Corsi v Town of [*4]Bedford, 58 AD3d 225, 229 [2d Dept 2008]; Capasso v Kleen All of America, Inc., 43 AD3d at 1347).
[…]
Further, Mr. Lavergne’s testimony was highly suspect. As stated above, some of the records that plaintiff sought to introduce into evidence through the testimony of Mr. Lavergne were apparently prepared by Washington Mutual Bank. The foundational testimony given by Mr. Lavergne concerning these records was identical to the foundational testimony he gave concerning the Chase records. It is well settled law that in order for a witness to lay the foundation for the admission of a document as a business record pursuant to CPLR 4518[a], the witness must demonstrate personal knowledge of the business practices and procedures pursuant to which the document was made (see Reiss v Roadhouse Rest., 70 AD3d 1021, 1025 [2d Dept 2010]; Lodato v Greyhawk N. Am., LLC, 39 AD3d 494, 495 [2d Dept 2007]; Vento v City of New York, 25 AD3d 329, 330 [1st Dept 2006]; Dayanim v Unis, 171 AD2d 579 [1st Dept 1991]; Midborough Acupuncture, P.C. v New York Cent. Mut. Fire Ins. Co., 2006 NY Slip Op 51879[U] [App. Term, 2d & 11th Jud Dists]). Because Mr. Lavergne never worked for Washington Mutual Bank, it defies logic that he would have personal knowledge of Washington Mutual Bank’s business practices and procedures. For these reasons, the Court gives Mr. Lavergne’s “robo-testimony” and plaintiffs’ no weight or credit (People v Barrett, 14 AD3d 369 [1st Dept 2005]; see also Washington Mut. Bank v Phillip, 2010 NY Slip Op 52034[U] [Sup Ct, Kings County]).
[…]
In sum, the offered “robo-testimony” was insufficient to establish its case by a preponderance of the credible evidence. [*5]
Based on the above, it is hereby
ORDERED that judgment be entered in favor of defendant SHADY A. GERGIS and against plaintiff CHASE BANK USA, N.A. and that plaintiff’s complaint be DISMISSED with prejudice on the merits.
The foregoing constitutes the Decision and Order of the Court.
In the case of the salesman who wouldn’t sell, the two sides have starkly different tales to tell.
Greg Saffer says conscience and common sense prevented him from pushing the product his bosses wanted him to sell – “Option ARM” home loans that, he says, put homeowners at risk.
“I’m not going to steer people into a loan program that might not be good for them just because it’s more profitable for the company,” he says.
On May 9, 2011 in the U.S. District Court for the Central District of California to recover alleged losses of approximately $154,529,000. The FDIC’s complaint alleged that these losses were the direct and proximate result of the defendants’ breach of contract with WAMU and alleged gross negligence of the defendants with respect to the provision of certain appraisal services.On November 2, 2011, the court issued an order limiting the FDIC’s claims to breach of the contract and granting the Company’s Motion to Dismiss the FDIC’s claims of gross negligence, alter ego, single business enterprise and joint venture claims. With respect to the limited remaining breach of contract claim, the Company maintains that the Appraisal Outsourcing Services Agreement between LSI and WAMU clearly specifies a $10,000 per claim limitation of liability. The Company is confident that it will ultimately prevail on any remaining breach of contract claim.
THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
WASHINGTON MUTUAL, INC., et al.,
OPINION1
Before the Court is the request of Washington Mutual, Inc. (“WMI”) and WMI Investment Corp. (collectively the “Debtors”) for confirmation of the Modified Sixth Amended Joint Plan of Affiliated Debtors (the “Modified Plan”). For the reasons stated below, the Court will deny confirmation of the Modified Plan.
A federal judge ruled that the Federal Deposit Insurance Corp has to face a $10 billion lawsuit tied to the failure of Washington Mutual Bank.
The judge refused the FDIC’s request to dismiss the lawsuit brought by Deutsche Bank National Trust Co over bad mortgages that were securitized by Washington Mutual.
Washington Mutual, or WaMu, was seized by the Office of Thrift Supervision in September 2008 in the biggest bank failure in U.S. history.
The FDIC was appointed receiver and immediately sold the bank to JPMorgan Chase & Co for $1.9 billion.
Keep moving…nothing to read here….just more of the same
SEATTLEPI-
No charges will be filed against the leadership team of Washington Mutual Bank, which failed in 2008 amid a cloud of suspicion that improper lending had been occurring there.
Announcing the decision late Friday, a U.S. Attorney’s Office spokesperson said in a statement that a federal task force examining the WaMu failure did not find evidence of criminal violations.
“Investigators have conducted an extensive investigation that included hundreds of interviews and the review of millions of documents relating to the operations, and the subsequent failure, of Washington Mutual Bank,” the statement read. “Based upon its investigation, the Department of Justice has concluded that the evidence does not meet the exacting standards for criminal charges in connection with the bank’s failure.”
For its first witness, plaintiff called Martin Lavergne, who worked for CHASE BANK USA, N.A.(“Chase”) in various roles over a period of approximately 17 years. Presently, he holds the title of “custodian of records.” While Mr. Lavergne maintained that he had personal knowledge of the practices and procedures that Chase utilized in creating and maintaining consumer credit card account records, he never described these practices and procedures and never testified as to how he acquired personal knowledge of them.
[…]
Notably, some of the records that were shown to Mr. Lavergne were apparently created by Washington Mutual Bank. Mr. Lavergne explained this by stating that at some point in time, Chase had acquired Washington Mutual Bank. No testimony was elicited from Mr. Lavergne that he had worked for Washington Mutual Bank or that he had personal knowledge of the practices and procedures that Washington Mutual Bank employed in creating and maintaining consumer credit card account records.
[…]
Here, Mr. Lavergne’s foundational testimony was essentially a verbatim recitation of the statutory elements set forth in CPLR 4518[a]. He gave absolutely no testimony as to how the electronic records concerning defendant’s account statements came into existence nor did he indicate that he even knew how such information was collected. It would appear that credit card statements contain information that is conveyed from multiple entities, from the reporting merchant through various intermediaries, until the information is ultimately incorporated into plaintiff’s business records (see Discover Bank v Williamson, 2007 NY Slip Op 50231[U] [App Term, 9th and 10th Jud Dists]). Certainly, Mr. Lavergne did not demonstrate that the person or persons who inputted the electronic data had actual knowledge of the events inputted or that such person or persons obtained knowledge of those events from someone with actual knowledge of them and who had a business duty to relay information regarding the events (see Corsi v Town of [*4]Bedford, 58 AD3d 225, 229 [2d Dept 2008]; Capasso v Kleen All of America, Inc., 43 AD3d at 1347).
[…]
Further, Mr. Lavergne’s testimony was highly suspect. As stated above, some of the records that plaintiff sought to introduce into evidence through the testimony of Mr. Lavergne were apparently prepared by Washington Mutual Bank. The foundational testimony given by Mr. Lavergne concerning these records was identical to the foundational testimony he gave concerning the Chase records. It is well settled law that in order for a witness to lay the foundation for the admission of a document as a business record pursuant to CPLR 4518[a], the witness must demonstrate personal knowledge of the business practices and procedures pursuant to which the document was made (see Reiss v Roadhouse Rest., 70 AD3d 1021, 1025 [2d Dept 2010]; Lodato v Greyhawk N. Am., LLC, 39 AD3d 494, 495 [2d Dept 2007]; Vento v City of New York, 25 AD3d 329, 330 [1st Dept 2006]; Dayanim v Unis, 171 AD2d 579 [1st Dept 1991]; Midborough Acupuncture, P.C. v New York Cent. Mut. Fire Ins. Co., 2006 NY Slip Op 51879[U] [App. Term, 2d & 11th Jud Dists]). Because Mr. Lavergne never worked for Washington Mutual Bank, it defies logic that he would have personal knowledge of Washington Mutual Bank’s business practices and procedures. For these reasons, the Court gives Mr. Lavergne’s “robo-testimony” and plaintiffs’ no weight or credit (People v Barrett, 14 AD3d 369 [1st Dept 2005]; see also Washington Mut. Bank v Phillip, 2010 NY Slip Op 52034[U] [Sup Ct, Kings County]).
[…]
In sum, the offered “robo-testimony” was insufficient to establish its case by a preponderance of the credible evidence. [*5]
Based on the above, it is hereby
ORDERED that judgment be entered in favor of defendant SHADY A. GERGIS and against plaintiff CHASE BANK USA, N.A. and that plaintiff’s complaint be DISMISSED with prejudice on the merits.
The foregoing constitutes the Decision and Order of the Court.
Former Washington Mutual Inc. (WAMUQ) Chief Executive Officer Kerry Killinger and Chief Operating Officer Stephen Rotella are in lawsuit settlement talks with the Federal Deposit Insurance Corp., according to a court filing.
Lawyers for Killinger, Rotella and David Schneider, Washington Mutual’s former home-loans president, exchanged term sheets with FDIC attorneys and are “diligently working to resolve their remaining disputes,” according to papers filed yesterday in federal court in Seattle.
“In some instances, the settlement terms must have consent of certain third parties,” lawyers for both sides said.
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver of
Washington Mutual Bank,
v.
LSI APPRAISAL, LLC; FIDELITY
NATIONAL INFORMATION
SERVICES, INC.; LENDER
PROCESSING SERVICES, INC.;
LEENDER PROCESSING SERVICES, LLC; LPS PROPERTY TAX
SOLUTIONS, INC., f/k/a FIDELITY
NATIONAL TAX SERVICE, INC.; LSI
TITLE COMPANY;
and LSI TITLE AGENCY, INC.
Posted in STOP FORECLOSURE FRAUDComments Off on COMPLAINT | FDIC v. Lender Processing Services, Inc., LSI Appraisal LLC, Fidelity National Information Services, Inc. et al
The Federal Deposit Insurance Corporation (“FDIC”), in its capacity as Receiver for Washington Mutual Bank (“WAMU”), filed a complaint on May 9, 2011 in the U.S. District Court for the Central District of California to recover alleged losses of approximately $154,519,000. The FDIC contends these losses were a direct and proximate result of the defendants’ alleged breach of contract with WAMU and alleged gross negligence of the defendants with respect to the provision of certain services by LPS’s subsidiary LSI Appraisal LLC, an appraisal management company. In particular, the FDIC claims that the services provided failed to conform with federal and state law, regulatory guidelines and other industry standards, including specifically the provisions of the Uniform Standards of Professional Appraisal Practice (“USPAP”). LPS previously described the possibility of this suit in its Form 10-Q filed May 5, 2011.
In its complaint, the FDIC cites, as the cause of the damages claimed, 220 appraisals performed between June 2006 and May 2008. However, for more than 75 percent of the appraisals identified by the FDIC, LSI was contracted only to provide reviews of appraisals, not to conduct the initial, full appraisals. For these properties, the full appraisals were provided by other entities, unrelated to LSI. For all appraisals subject to this complaint, LPS believes there is no basis for a claim that LSI engaged in “gross negligence” or breach of contract related to these appraisal services.
LPS stands firmly behind the integrity of the services it provides to the mortgage industry and intends to vigorously defend itself against these allegations.
John E. Bowman, Acting Director
Office of Thrift Supervision
Sheila C. Bair, Chairman
Federal Deposit Insurance Corporation
This report presents the results of our review of the failure of Washington Mutual Bank (WaMu), Seattle, Washington; the Office of Thrift Supervision’s (OTS) supervision of the institution; and the Federal Deposit Insurance Corporation’s (FDIC) monitoring of WaMu for insurance assessment purposes. OTS was the primary federal regulator for WaMu and was statutorily responsible for conducting full-scope examinations to assess WaMu’s safety and soundness and compliance with consumer protection laws and regulations. FDIC was the deposit insurer for WaMu and was responsible for monitoring and assessing WaMu’s risk to the Deposit Insurance Fund (DIF). On September 25, 2008, FDIC facilitated the sale of WaMu to JPMorgan Chase & Co in a closed bank transaction that resulted in no loss to the DIF.
Section 38(k) of the Federal Deposit Insurance Act requires the cognizant Inspector General to conduct a material loss review (MLR) of the causes of the failure and primary federal regulatory supervision when the failure causes a loss of $25 million to the DIF or 2 percent of an institution’s total assets at the time the FDIC was appointed receiver. Because the FDIC facilitated a sale of WaMu to JPMorgan Chase & Co without incurring a material loss to the DIF, an MLR is not statutorily required. However, given WaMu’s size, the circumstances leading up to WaMu’s sale, and non-DIF losses, such as the loss of shareholder value, the Inspectors General of the Department of the Treasury and FDIC believed that an evaluation of OTS and FDIC actions could provide important information and observations as the Administration and the Congress consider regulatory reform.
In the crazy days of 2005 and 2006, when home prices were soaring and mortgage underwriting standards were crumbling, it took foresight and judgment to see that it was all a bubble.
As it happens, there was a bank chief executive whose internal forecasts now seem prescient. “I have never seen such a high-risk housing market,” he wrote to the bank’s chief risk officer in 2005. A year later he forecast the housing market would be “weak for quite some time as we unwind the speculative bubble.”
“The factual allegations are fiction. The legal conclusions are political theater. Trial in a courtroom that honors the rule of law — and not the will of Washington D.C. — will confirm Kerry Killinger’s management, diligence and commitment to Washington Mutual responsibly and consistently served the interests of its depositors, customers and shareholders.”
Killinger added: “Washington Mutual’s management structure was a model of corporate governance.”
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