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The fact that Deutsche had possession of the mortgage, however, is irrelevant to its status as mortgagee. While a promissory note endorsed in blank may be enforced by the party in possession of the note, this is not the case with a mortgage”

“Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor.” Ibanez, 458 Mass at 649. Deutsche had not received a written assignment of the mortgage from MERS prior to May 3, 2011. The fact that it had possession of the mortgage instrument did not render Deutsche the mortgagee and thus it lacked the power to sell the property.”

In re: SIMA SCHWARTZ, Chapter 7, Debtor.
Case No. 06-42476-MSH, Adversary Proceeding No. 07-04098.

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

August 22, 2011.

David G. Baker, Boston, MA, for the plaintiff.
Christopher Matheson, Richard C. Demerle and Christopher Decosta, Michienzie & Sawin, LLC, Boston, MA, for both defendants.
Gary A. Barnes, Sarah-Nell Walsh, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Atlanta, GA, for Defendant Deutsche Bank National Trust Company, as Trustee.

MELVIN S. HOFFMAN, Bankruptcy Judge.
After the plaintiff, Sima Schwartz, presented her case in chief during the first day of the trial in this adversary proceeding, upon oral motion of the defendants, HomEq Servicing and Deutsche Bank National Trust Company, as Trustee, I granted judgment on partial findings in favor of the defendants on all counts of the complaint, pursuant to Fed. R. Civ. P. 52(c), made applicable to this proceeding by Fed. R. Bankr. P. 7052. Ms. Schwartz then moved for a new trial as a result of which judgment was vacated on count I of the complaint only.Schwartz v. HomEq Servicing (In re Schwartz), 2011 WL 1331963 (Bankr. D. Mass. Apr. 7, 2011). In count I, Ms. Schwartz alleges that the May 24, 2006 foreclosure sale of her home by Deutsche was invalid because Deutsche did not own the mortgage on the property at the relevant time.1 I reopened the trial so that the defendants could present their case with respect to that count, which they did on June 1, 2011. Based on the evidence and legal submissions presented by the parties, my findings of fact, conclusions of law and order are set forth below.
Jurisdiction and Standing
Core jurisdiction over this case is conferred upon the bankruptcy court by 28 U.S.C. § 157(b)(2)(G) and (O). See Atighi v. DLJ Mortg. Capital, Inc. (In re Atighi), 2011 WL 3303454, at *3 (B.A.P. 9th Cir. Jan. 28, 2011). Ms. Schwartz’s standing to seek relief is based on her property interest in light of the alleged wrongful foreclosure. Brae Asset Fund, L.P. v. Kelly, 223 B.R. 50, 56 (D. Mass. 1998).
Legal Framework
Mass. Gen. Laws ch. 244, § 14 establishes the procedure for a mortgagee to foreclose a mortgage by exercise of the statutory power of sale. The statute provides that prior to a foreclosure sale a notice of the sale must appear weekly for three consecutive weeks in a newspaper either published in or generally circulated in the city or town where the property is located. The Massachusetts Supreme Judicial Court has recently clarified that a foreclosing mortgagee must hold the mortgage as of the date that the first notice of sale is published.U.S. Bank Nat. Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011). If the party intending to foreclose the mortgage is not the original mortgagee, a typical state of affairs when a mortgage loan is owned by the trustee of a securitized pool of mortgage loans, then the foreclosing mortgagee must hold a valid assignment of the mortgage prior to publishing the first sale notice.
The Defendants’ Case
It is undisputed that Deutsche was not the original mortgagee of the mortgage on Ms. Schwartz’s home, so it must prove that the mortgage was assigned to it prior to the date when the first foreclosure notice was published. As discussed in the memorandum and order on the plaintiff’s motion for a new trial, while the evidence established that an assignment of the mortgage from Mortgage Electronic Registration Systems, Inc. (“MERS”) to Deutsche was executed on May 23, 2006, the day before the foreclosure sale, this assignment, being well after the notice of foreclosure sale was first published, did not confer on Deutsche the power to foreclose on May 24. The Supreme Judicial Court in Ibanez,however, offered an alternative method for a party to acquire sufficient rights in a mortgage to qualify to foreclose:
Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder.
Ibanez, 458 Mass. at 651.
With this in mind, the defendants introduced into evidence at trial all of the agreements tracking the transfer of Ms. Schwartz’s mortgage loan from its originator, First NLC Financial Services, LLC (“First NLC”), to Deutsche, complete with the necessary schedules of the pooled mortgage loans specifically identifying her mortgage as being among those transferred. The defendants argue that these agreements, together with other evidence introduced by them, establish that Deutsche was the holder of the mortgage well in advance of the first publication of the notice of sale.
At trial, Ronaldo Reyes, a Deutsche vice president, testified that he had management responsibility over the administration of the Morgan Stanley Home Equity Loan Trust 2005-4 (the “Trust”) and that Deutsche had always been the trustee of the Trust. He testified that in his capacity as vice president he had access to the books and records of the Trust and was qualified to authenticate and testify about the documents admitted into evidence by the defendants. During the course of his testimony, Mr. Reyes authenticated executed copies of each of the agreements discussed below, and demonstrated that Ms. Schwartz’s mortgage loan was included on the mortgage loan schedules attached as exhibits to several of the agreements. Mr. Reyes testified that each was used in the ordinary course of Deutsche’s business as trustee of the Trust.
The following documents were admitted into evidence: (i) the mortgage on Ms. Schwartz’s home; (ii) the original promissory note executed by Ms. Schwartz, which Mr. Reyes noted was endorsed in blank by First NLC; (iii) the Amended and Restated Mortgage Loan Purchase Agreement (the “Loan Purchase Agreement”) dated as of September 1, 2005 by and between Morgan Stanley Mortgage Capital, Inc. (“MS Mortgage Capital”) and First NLC; (iv) the Assignment and Conveyance Agreement dated September 29, 2005, by and between First NLC and MS Mortgage Capital; (v) the Bill of Sale dated November 29, 2005 by and between MS Mortgage Capital and Morgan Stanley ABS Capital I Inc. (“MS ABS Capital”); and (vi) the Pooling and Servicing Agreement (the “PSA”) dated as of November 1, 2005 by and among MS ABS Capital, HomEq Servicing Corporation, JPMorgan Chase Bank, National Association, First NLC, LaSalle Bank National Association and Deutsche. Mr. Reyes also testified regarding a custodial log that was admitted into evidence for the purpose of proving that Ms. Schwartz’s loan documents were in Deutsche’s custody prior to the date when the first notice of foreclosure sale was published.
Findings of Fact2
1. On July 22, 2005, Ms. Schwartz refinanced the mortgage loan on her property at 23 Sigel Street, Worcester, Massachusetts, executing a promissory note in the amount of $272,000 payable to First NLC and a mortgage securing her obligation under the note naming MERS, solely as nominee for First NLC, its successors and assigns, as mortgagee.
2. The mortgage, which was duly recorded at the Worcester District Registry of Deeds, includes the statutory power of sale under Mass. Gen. Laws. ch 183, § 21 which is invoked by reference to the statute and which permits a mortgagee to foreclose a mortgage by public auction sale of the property upon the mortgagor’s default in performance or breach of any conditions thereof.
3. On May 3, May 10 and May 17, 2006, a notice of foreclosure sale was published in the Worcester Telegram and Gazette stating that “Deutsche Bank National Trust Company, as Trustee,” the “present holder” of the mortgage, intended to foreclose the mortgage by public sale of Ms. Schwartz’s property on May 24, 2006.
4. On May 23, 2006, Liquenda Allotey, described as a vice president of MERS, executed an Assignment of Mortgage for the purpose of assigning the mortgage from MERS to “Deutsche Bank National Trust Company, as Trustee.”
5. Deutsche, in its capacity as trustee of the Trust,3 conducted the foreclosure sale as scheduled on May 24, 2006, bid in its mortgage debt and purchased the property.
6. In its answer, Deutsche admitted that a foreclosure deed conveying the property to itself was recorded on October 13, 2006. There has been no evidence presented of any subsequent conveyance of the property and hence I find that Deutsche remains the record owner of the Sigel Street property.
7. As she testified on the first day of trial, Ms. Schwartz continues to reside in the Sigel Street Property.
8. The original promissory note executed by Ms. Schwartz was endorsed in blank by an officer of First NLC.
9. The original mortgagee as identified in the mortgage on Ms. Schwartz’s home was MERS, as nominee for First NLC, its successors and assigns.
10. In accordance with Section 2 of the Loan Purchase Agreement, First NLC agreed to sell “Mortgage Loans” to MS Mortgage Capital.
11. The Loan Purchase Agreement defines a “Mortgage Loan” as
An individual Mortgage Loan which is the subject of this Agreement, each Mortgage Loan originally sold and subject to this Agreement being identified on the applicable Mortgage Loan Schedule, which Mortgage Loan includes without limitation the Mortgage File, the Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, Servicing Rights and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan, excluding replaced or repurchased mortgage loans.
12. On September 29, 2005, by way of the Assignment and Conveyance Agreement, First NLC sold, transferred, assigned, set over and conveyed to MS Mortgage Capital “all right, title and interest of, in and to the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto as Exhibit A.”
13. Ms. Schwartz’s mortgage loan was listed on the exhibit attached to the Assignment and Conveyance Agreement.
14. First NLC, therefore, transferred all of its right, title and interest in Ms. Schwartz’s mortgage loan to MS Mortgage Capital on November 29, 2005.
15. By the Bill of Sale dated November 29, 2005, MS Mortgage Capital, as the “Seller,” transferred to MS ABS Capital “all the Seller’s right, title and interest in and to the Mortgage Loans described on Exhibit A attached hereto.”
16. Ms. Schwartz’s mortgage loan was listed on Exhibit A to the Bill of Sale.
17. MS Mortgage Capital, therefore, transferred its entire interest in Ms. Schwartz’s mortgage loan to MS ABS Capital on November 29, 2005.
18. Section 2.01 of the PSA, which was dated November 1, 2005, provides that the MS ABS Capital, as “Depositor,”
concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to [Deutsche] for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund, and the Trustee, on behalf of the Trust, hereby accepts the Trust Fund.
19. The “Trust Fund” includes all of the mortgage loans listed on an attached mortgage loan schedule.
20. Ms. Schwartz’s mortgage loan was listed on the mortgage loan schedule attached to the PSA.
21. While the PSA provides that the mortgage loans were transferred from MS ABS Capital to Deutsche, “concurrently with the execution and delivery hereof” on November 1, 2005, the Bill of Sale provides that MS ABS Capital did not acquire the mortgage loans until November 29, 2005. The November 2009 PSA indicates, however, that the transaction in which MS ABS Capital would transfer the loans to Deutsch, as trustee of the Trust, would not be consummated until November 29, 2005, which is defined as the “Closing Date.” Therefore, MS ABS Capital transferred Ms. Schwartz’s mortgage loan to Deutsche, as trustee of the Trust, on the Closing Date of November 29, 2005, which is the same date as the Bill of Sale by which MS ABS Capital acquired the loan from MS Mortgage Capital.
22. Section 2.01(b) of the PSA provides that if
any Mortgage has been recorded in the name of Mortgage Electronic Registration System, Inc. (“MERS”) or its designee, no Assignment of Mortgage in favor of the Trustee will be required to be prepared or delivered and instead, the applicable Servicer shall take all reasonable actions as are necessary at the expense of the applicable Originator to the extent permitted under the related Purchase Agreement and otherwise at the expense of the Depositor to cause the Trust to be shown as the owner of the related Mortgage Loan on the records of MERS for the purpose of the system of recording transfers of beneficial ownership of mortgages maintained by MERS.
23. Thus MS ABS Capital did not assign to Deutsche the mortgage on Ms. Schwartz’s home in connection with the transaction through which it transferred Ms. Schwartz’s mortgage loan pursuant to the PSA.
24. In the chain of transactions by which Ms. Schwartz’s mortgage loan was sold, initially by First NLC to MS Mortgage Capital, next by MS Mortgage Capital to MS ABS Capital and finally by MS ABS Capital to Deutsche, the seller sold all of its right, title and interest in the mortgage loans being transferred. However, as the mortgage itself was originally in the name of MERS as mortgagee, and not First NLC, First NLC never held legal title to the mortgage and could not have transferred such title to MS Mortgage Capital. Consequently, neither MS ABS Capital nor Deutsche, as successors to First NLC and MS Mortgage Capital, obtained legal title to the mortgage. This is consistent with § 2.01 of the PSA quoted above.
25. As of November 29, 2005, the Closing Date defined in the PSA, MERS continued to hold legal title to the mortgage on Ms. Schwartz’s home as nominee for First NLC, its successors and assigns.
26. MERS continued to hold legal title to the mortgage until May 23, 2006, when it assigned the mortgage to Deutsche.
27. The custodial log establishes that Deutsche received Ms. Schwartz’s mortgage loan documents, including the promissory note and mortgage instrument, on September 15, 2005 (presumably in anticipation of the November loan sale), and retained custody of these documents until March 27, 2006, when they were sent to HomEq. The custodial log indicates that the documents were sent to HomEq for servicing and lists the reason for the transfer as “foreclosure.” According to the custodial log, the loan documents were returned to Deutsche on May 24, 2006, the day of the foreclosure sale.
Conclusions of Law
In In re Marron, 2011 WL 2600543, at *5 (Bankr. D. Mass. June 29, 2011), I held that where a loan was secured by a mortgage in the name of MERS, even when the loan itself changed hands several times, MERS remained the mortgagee in its capacity as nominee for the original lender, its successors and assigns.4 As MERS was the mortgagee, it had the authority to assign the mortgage to the foreclosing entity. In this case too, while Ms. Schwartz’s loan passed from hand to hand, MERS remained the mortgagee throughout. While MERS held only bare legal title to the mortgage on behalf of Deutsche, the successor to First NLC, until it assigned the mortgage to Deutsche on May 23, 2006, only MERS had the authority to foreclose.
Having determined that MERS, and not Deutsche, held legal title to the mortgage on Ms. Schwartz’s home mortgage as of May 3, 2006, when the notice of the foreclosure sale of her home was first published, it follows that Deutsche did not have the right to exercise the statutory power of sale and to foreclose the mortgage. See, e.g., Novastar Mortgage, Inc. v. Safran, 79 Mass.App.Ct. 1124, 948 N.E.2d 917 (2011) (finding, in a post-foreclosure eviction proceeding, that the foreclosing entity had the burden to prove its title to the property by establishing that the mortgage had been assigned to it by MERS “at the critical stages of the foreclosure process.”). By publishing notice of the foreclosure sale when it was not the mortgagee, Deutsche failed to comply with Mass. Gen. Laws ch. 244, § 14, and thus its foreclosure sale is void. Ibanez, 438 Mass. at 646-47.5 A declaratory judgment to that effect shall enter on count I of the complaint.

1. The complaint is unclear as to the relief Ms. Schwartz seeks as a result of the allegedly invalid foreclosure. In addition to the allegation that the defendants did not own the mortgage, Ms. Schwartz alleges that she was damaged by the foreclosure sale, which “was conducted fraudulently, in bad faith” and to her detriment. I previously found that Ms. Schwartz failed to produce any evidence of the defendants’ intent to defraud her. In addition, Ms. Schwartz failed to establish the extent of her damages or that the foreclosure sale was conducted in bad faith. Though Ms. Schwartz does not expressly request a declaratory judgment as to the validity of the foreclosure, based on the allegation of invalidity in the complaint, and the parties’ arguments in the course of trial, I will consider count I of the complaint to be a request for a declaratory judgment that the foreclosure sale was invalid.
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2. Any finding of fact which should more properly be considered a conclusion of law, and vice versa, shall be deemed as such.
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3. The documents pertaining to the foreclosure sale identify Deutsche as “Deutsche Bank National Trust Company, as Trustee” without identifying the trust.
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4. The sophisticated financial minds who wrought the MERS regime sought to simplify the process of repeatedly transferring mortgage loans by obviating the need and expense of recording mortgage assignments with each transfer. No doubt they failed to consider the possibility of a collapse of the residential real estate market, the ensuing flood of foreclosures and the intervention of state and federal courts. Professor Alex Tabarrok of George Mason University has observed “[t]he law of unintended consequences is when a simple system tries to regulate a complex system.” Alex Tabarrok, The Law of Unintended Consequences, Marginal Revolution (Jan. 24, 2008, 7:47 am),
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5. Deutsche presented sufficient evidence to prove that either it or HomEq, its agent, had possession of both the Schwartz mortgage and promissory note as of May 3, 2011. The note was endorsed in blank, which gave Deutsche the right to enforce the note. The fact that Deutsche had possession of the mortgage, however, is irrelevant to its status as mortgagee. While a promissory note endorsed in blank may be enforced by the party in possession of the note, this is not the case with a mortgage. “Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor.” Ibanez, 458 Mass at 649. Deutsche had not received a written assignment of the mortgage from MERS prior to May 3, 2011. The fact that it had possession of the mortgage instrument did not render Deutsche the mortgagee and thus it lacked the power to sell the property.
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TN CT on STATUS AS CREDITOR: Authentication of Documents Insufficient with Self Serving Affidavits

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EDITOR’S NOTE: The walls are closing in on the pretender lenders. The number of Judges that are insisting on applying the substantive, procedural law and rules and evidence is climbing rapidly. The allegation that the loan was transferred is put in factual issue requiring the pretender to plead and prove its case. The burden of proof is shifting back to where it belongs — on the party seeking affirmative relief (i.e., taking the house or collecting force-placed insurance or whatever).

The bottom line is that if a pretender can’t prove they are the real thing in a judicial proceeding, they are not entitled to anything because they lack jurisdictional standing — and that applies whether it is non-judicial or judicial. The use of self-serving affidavits or “representations of counsel” won’t cut it. There must be real evidence of real facts. And documents must be properly authenticated — which means that a witness must forward who is legally COMPETENT to testify.

If you look at the all the affidavits filed in the millions of foreclosures that were initiated, there is an absence of such a witness on the face of the self-serving affidavit or declaration. Without authentication, not even the mortgage can be admitted into evidence, much less transfers of the mortgage. Those witnesses, if they ever existed have long since been downsized (fired) out of organizations that either no longer exist or which have been reorganized and reconstituted.

There are numerous established ways of correcting defects or clouds on the chain of title. The pretenders are not using any of them because the truth is they never loaned the money, they were not at the closing, they never purchased the loan, and the loan documents describe a transaction that never occurred, ignoring the real transaction that occurred between the borrower and the investor-lender which must either be considered undocumented or only partially documented.


TN Court Finds Sufficient, Genuine Issue Regarding Sold Loans, Unrecorded Assignment LEE v. EQUIFIRST

TN Court Finds Sufficient, Genuine Issue Regarding Sold Loans, Unrecorded Assignment LEE v. EQUIFIRST

TERI LEE, Plaintiff,

Case No. 3:10-cv-809.

United States District Court, M.D. Tennessee, Nashville Division.

April 25, 2011.


ALETA A. TRAUGER, District Judge.

Pending before the court is the Motion for Summary Judgment filed by defendant EquiFirst Corp. (Docket No. 64), to which the plaintiff has filed a response (Docket No. 68), and in support of which the defendant has filed a reply (Docket No. 74). For the reasons discussed below, the defendant’s motion will be denied.


Plaintiff Teri Lee took out two mortgage loans, the larger of which was for $152,000 (the “Primary Loan”), to purchase her residence in Nashville, Tennessee.[1] Eventually, she missed payments on the Primary Loan. This action arises from the resulting foreclosure.

At the March 2, 2007 closing of the plaintiff’s home purchase, defendant EquiFirst Corp. (“EquiFirst”) held the promissory notes and the servicing rights to both loans. The Amended Complaint alleges that, on May 1, 2007, EquiFirst assigned the servicing rights of the loans to defendant HomEq Servicing Corp. (“HomEq”). (Docket No. 50 ¶ 12.)

The plaintiff’s deed of trust required her to carry an insurance policy on her property, and she allegedly maintained sufficient coverage for the duration of the loans. (Id. ¶ 25.) The plaintiff alleges that on two occasions — May 13, 2008 and October 14, 2008 — HomEq charged her for additional, unnecessary insurance policies, because it failed to discover that she already had insurance. (Id. ¶¶ 27-28.) These charges totaled approximately $4,700, and this expense allegedly caused the plaintiff to fall behind on her loan payments. (Id. ¶¶ 27-28, 34.)

On February 25, 2009, the plaintiff allegedly received a notice of acceleration of the Primary Loan from a law firm, identifying the current creditor as defendant Sutton Funding, LLC (“Sutton”). (Id. ¶ 35.) The next month, Lee received a notice of foreclosure from the same law firm. (Id.)

At that point, the plaintiff called HomEq, which allegedly offered her a forbearance agreement. Under the proposed plan, the plaintiff would immediately pay $3,500 and would then pay increased monthly payments until November 2009, at which point her account would be current. (Id. ¶¶ 36-37.) The plaintiff alleges that she accepted these terms and signed an agreement (the “Forbearance Agreement”) with HomEq on March 27, 2009. (Id.) The agreement provided that it would be binding upon the parties’ “successors and assigns.” (Id. ¶ 39.)

On May 15, 2009, after accepting the plaintiff’s up-front payment and first increased monthly payment, HomEq allegedly transferred the servicing rights for the Primary Loan to defendant Quantum Servicing Corp. (“Quantum”). (Id.Id. ¶ 40.) The letter informed her that she was more than $6,900 in arrears, and it did not reference the Forbearance Agreement. (Id. ¶ 40.) ¶ 38.) Shortly thereafter, the plaintiff received a “Validation of Debt” letter from Quantum, listing defendant Roosevelt Mortgage Acquisition Co. (“Roosevelt”) as the current creditor. (

Quantum allegedly never recognized the Forbearance Agreement. The plaintiff claims that the amounts she paid HomEq under the Forbearance Agreement left her unable to pay the balance that Quantum asserted was due. (Id. ¶¶ 42-43.) Ultimately, on March 24, 2010, after several months of communications with Quantum and its law firm, the plaintiff’s home was sold at a foreclosure sale.

The plaintiff asserts three causes of action: (1) negligence by HomEq for charging her for unnecessary insurance; (2) negligence by HomEq and Quantum for failing to ensure that the Forbearance Agreement was honored when the servicing of her loan was transferred between those companies; and (3) violation of the Real Estate Settlement and Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq., by Quantum, for failing to respond to several “qualified written requests” in the months before the foreclosure.[2] (Id. ¶¶ 24-76.) The plaintiff alleges that EquiFirst is vicariously liable, as the creditor of the Primary Loan and as the principal of HomEq and Quantum, for the first two causes of action. (Id. ¶¶ 30, 46, 52.)

The deed of trust for the plaintiff’s property was recorded by Mortgage Electronic Registering Service (“MERS”), of which all of the defendants are members. This allegedly made it difficult for the plaintiff to determine which defendant was the creditor for the Primary Loan at any given time. (Docket No. 50 ¶ 20.) The plaintiff alleges that “[m]embers of MERS do not publicly list this information in the MERS system, which they use to avoid listing the chain of title in the county registry.” (Id. ¶ 19.)

Defendant EquiFirst previously filed a Motion to Dismiss, arguing, in relevant part, that it sold both of the plaintiff’s mortgage loans before any of the servicers’ alleged negligence had occurred. In support of that motion, the defendant filed the declaration of Karen L. Stacy, an EquiFirst Vice President. (Docket No. 18.) In response, the plaintiff requested more time for discovery.

In ruling on the Motion to Dismiss, the court declined to consider the defendant’s extrinsic evidence. (Docket No. 28 at 7 n.2.) The court held that EquiFirst, as mortgagee, could be held vicariously liable for actions taken by HomEq, as servicer. (Id. at 8.) It also found that the plaintiff’s initial Complaint contained sufficient allegations that EquiFirst was the creditor when HomEq charged the plaintiff for insurance. (Id. at 6-7.) There were no allegations, however, suggesting that EquiFirst was the creditor after February 2009; thus, the court dismissed all claims against EquiFirst, except for the negligence claim related to insurance. (Id. at 7.)

The court stated that, “if the evidence ultimately shows that EquiFirst did sell the loans in March 2007, then [EquiFirst] will not be held liable for actions taken by the servicer in 2008.” (Id. at 8.) It further noted that, “[i]f discovery ultimately shows that EquiFirst owned the loan at a later date, the plaintiff may move to amend her Complaint as necessary to re-assert the relevant claims against EquiFirst.” (Id. at 7 n.3.) The plaintiff did subsequently file an Amended Complaint, which, as mentioned above, alleges that EquiFirst is vicariously liable for HomEq’s negligence regarding the insurance and for HomeEq’s and Quantum’s negligence in handling the Forbearance Agreement.

EquiFirst has now filed a Motion for Summary Judgment, pursuant to Federal Rule of Civil Procedure 56. Relying exclusively on the previously filed declaration of Karen L. Stacy, the defendant once again argues that it was not the creditor on the Primary Loan when the servicers’ alleged negligence occurred.


I. Summary Judgment Standard

Rule 56 requires the court to grant a motion for summary judgment 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). If a moving defendant shows that there is no genuine issue of material fact as to at least one essential element of the plaintiff’s claim, the burden shifts to the plaintiff to provide evidence beyond the pleadings “set[ting] forth specific facts showing that there is a genuine issue for trial.” Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir. 2009); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). “In evaluating the evidence, the court must draw all inferences in the light most favorable to the [plaintiff].” Moldowan, 578 F.3d at 374.

At this stage, “`the judge’s function is not . . . to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.’” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). But “the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient,” and the plaintiff’s proof must be more than “merely colorable.” Anderson, 477 U.S. at 249, 252. An issue of fact is “genuine” only if a reasonable jury could find for the plaintiff. Moldowan, 578 F.3d at 374 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

II. EquiFirst’s Sale of the Loans

The instant dispute boils down to the factual issue of when, exactly, EquiFirst sold the plaintiff’s loans. The defendant argues that Karen L. Stacy’s declaration shows that it sold the loans on March 30, 2007, so it was not liable for HomEq’s or Quantum’s subsequent negligence. The plaintiff argues that her own evidence shows that EquiFirst still owned the loans on May 14, 2007 and February 20, 2009.

Stacy’s declaration states that, “[o]n March 30, 2007, EquiFirst sold both of the [plaintiff’s mortgage] Loans to Sutton Funding, LLC,” and, “[o]n May 1, 2007, EquiFirst transferred the servicing of both of the Loans to HomEq Servicing Corporation.” (Docket No. 18 ¶¶ 3, 5.) The declaration further states:

EquiFirst was not, at any point in time, the creditor on the Loans during the periods of time in which the Loans were serviced by HomEq Servicing Corporation or by Quantum Servicing Corporation. . . . After EquiFirst transferred the servicing of both Loans to HomEq Servicing Corporation on May 1, 2007, EquiFirst did not have, and EquiFirst continues to not have any ownership interest in the two Loans or the two corresponding liens on the subject property.

(Id. ¶¶ 6-7.) But, “[b]ecause MERS was the beneficiary on the relevant security instruments, no assignment was prepared or recorded in the Register’s Office of Davidson County, Tennessee.” (Id. ¶ 4.)

In opposing the assertions contained in this declaration, the plaintiff relies on several documents. First, the plaintiff has submitted two “Validation of Debt” letters that she received from HomEq, one for each loan, both dated May 14, 2007. These letters, which are dated six weeks after EquiFirst’s claimed sale date, state that HomEq “is responsible for providing monthly remittance processing . . . on behalf of the current owner of the loan EquiFirst.” (Docket No. 68, Exs. 3-4 (emphasis added).) The plaintiff has also submitted five largely identical notice-of-default letters from HomEq, dated February 15, 2008, August 15, 2008, October 16, 2008, January 19, 2009, and February 19, 2009, each of which states that “Barclays Bank PLC” is the Primary Loan’s “current creditor/owner.” (Id., Exs. 6-7.) The plaintiff points out that EquiFirst, which was formally dissolved as of June 2010, was owned, via a string of wholly owned subsidiaries, by Barclays Bank PLC (“Barclays”).[3] (See Docket No. 4 at 1 (EquiFirst’s corporate disclosure statement).) Finally, the plaintiff has submitted a document included in HomEq’s initial disclosures titled “Communication History,” which appears to be an internal log of events and communications related to the plaintiff’s loan file. (Docket No. 68, Ex. 5.) It contains an entry, dated February 20, 2009, labeled “comment log.” In the “description” column, the entry states: “INVESTOR 394 EQUIFIRST BBPLC FORECLOSURE IN THE NAME OF: BARCLAYS CAPITAL.” (Id.)

The court finds that, at least at this stage in the litigation, the plaintiff’s documents are sufficient to create a genuine issue for trial regarding when EquiFirst sold the loans. Significantly, the defendant’s sole piece of evidence is the self-serving declaration of its own employee, which contains the bare assertion that EquiFirst sold the loan to Sutton in March 2007. The defendant has not, for example, attached any supporting documentary evidence of that sale or submitted any relevant testimony from Sutton or HomEq.

In opposition, the plaintiff has produced a letter from HomEq stating that EquiFirst was still the creditor in May 2007.[4] Furthermore, the “Communication History” document states that, as of February 2009, the “investor” for the plaintiff’s loan was “EQUIFIRST BBPLC.” Presumably, “BBPLC” refers to Barclays Bank PLC. The document is ambiguous, but, construed in the light most favorable to the plaintiff (particularly in the absence of countervailing evidence regarding the proper interpretation of the document), it indicates that EquiFirst had some interest in the loan as of February 2009. It also suggests that HomEq might have equated EquiFirst with Barclays Bank PLC in its records. In that event, the five notice-of-default letters naming Barclays as the Primary Loan’s creditor might support the conclusion that EquiFirst owned the loan throughout 2008 and early 2009.

In sum, after reviewing the parties’ evidence, a reasonable juror could conclude that EquiFirst owned the loans during the relevant time periods. On this record, summary judgment is inappropriate.[5] Moreover, although the plaintiff does not argue that she needs time for additional discovery, the court believes that the defendant’s Motion for Summary Judgment is premature. The parties have not had a full and fair opportunity to engage in discovery. In fact, a discovery deadline has not even been set in this case, for various reasons apparent in the case record. Given the apparent lack of transparency regarding which defendant owned the plaintiff’s loans at any given time, the court believes that it would be inappropriate to resolve the instant factual issue before the close of discovery.

Finally, the defendant argues that the court must disregard the plaintiff’s documents because she has not properly authenticated them. (Docket No. 74 at 6-7.) It is true that, at summary judgment, parties must submit evidence that would be admissible at trial. See Fed. R. Civ. P. 56(c), (e). Federal Rule of Evidence 901 requires that, to be admissible, documents must be accompanied “by evidence sufficient to support a finding that the matter in question is what its proponent claims.” Fed. R. Evid. 901(a); see also id. 901(b)(1) (explaining that a matter can be authenticated by “[t]estimony [from a witness with knowledge] that a matter is what it is claimed to be”). Consequently, the Sixth Circuit has repeatedly stated that documents submitted in support of a summary judgment brief must be properly authenticated. Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009) (noting the Sixth Circuit’s “repeated emphasis that unauthenticated documents do not meet the requirements of Rule 56(e)”); Baugham v. Battered Women, Inc., 211 Fed. Appx. 432, 441 n.5 (6th Cir. 2006) (“[T]he documents Plaintiffs submitted in support of their opposition motion were neither signed nor authenticated and, therefore, are inadmissible evidence for purposes of summary judgment.”); Mich. Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 532 (6th Cir. 2002) (“[The] memo [submitted by the defendant] was not accompanied by an affidavit or document that attested to its validity or authenticity. . . . `[D]ocuments submitted in support of a motion for summary judgment must satisfy the requirements of Rule 56(e); otherwise, they must be disregarded.’”).

But Federal Rule of Civil Procedure 56, as amended effective December 1, 2010, provides that, “[i]f a party fails to properly support an assertion of fact,” the court may “give an opportunity to properly support or address the fact.” Fed. R. Civ. P. 56(e)(1). The Advisory Committee’s notes to the 2010 amendments state that, “[i]n many circumstances[,] this opportunity will be the court’s preferred first step.” Here, nothing suggests that the documents submitted by the plaintiff are actually inauthentic, and the defendant does not dispute that the plaintiff canSee Docket No. 68, Ex. 5.) Accordingly, the court will give the plaintiff an opportunity to submit declarations authenticating the documents.[6] authenticate the documents. Indeed, the Bates label on the “Communication History” document clearly indicates that it was produced by defendant HomEq. (


For all of the reasons discussed above, the defendant’s Motion for Summary Judgment will be denied, although EquiFirst is free to file a renewed motion after the close of discovery. The plaintiff will be ordered to file declarations that properly authenticate the documents that she submitted in support of her summary judgment opposition.

An appropriate order will enter.

[1] Unless otherwise noted, the facts are drawn from the parties’ statements of undisputed facts (Docket No. 64, Ex. 1; Docket No. 68, Ex. 1). The court draws all reasonable inferences in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Brown v. United States, 583 F.3d 916, 919 (6th Cir. 2009).

[2] The Amended Complaint does not explicitly set out a claim for wrongful foreclosure, although it does allege that the defendants’ negligence “helped facilitate the eventual wrongful foreclosure of her home.” (Docket No. 50 ¶ 34; see also id. ¶ 54.)

[3] The plaintiff’s Amended Complaint added Barclays as a defendant. (See Docket No. 50 ¶ 7.) Soon after, however, the plaintiff voluntarily dismissed Barclays without prejudice, because she was unable to serve process on it. (Docket No. 59.)

[4] EquiFirst argues that this letter, which was not created by EquiFirst, was mistaken. (Docket No. 74 at 9.) Although that is certainly possible, at summary judgment, the court must view the evidence in the light most favorable to the plaintiff; thus, the court cannot simply assume that the letter contained mistakes.

[5] The defendant argues that the plaintiff does not oppose entry of summary judgment in favor of EquiFirst on her RESPA and wrongful foreclosure claims. (Docket No. 74 at 2.) But the Amended Complaint does not seek to hold EquiFirst liable for any RESPA violations, and it does not contain a separate wrongful foreclosure claim. (See Docket No. 50 ¶¶ 55-76.) The defendant further argues that, because the plaintiff’s brief does not sufficiently address the issue, she has waived any argument that EquiFirst is vicariously liable for the servicers’ negligence regarding the Forbearance Agreement. (Docket No. 74 at 8.) The court disagrees. First, the defendant’s initial motion papers did not mention the plaintiff’s Forbearance Agreement claim, so the plaintiff could not possibly have waived any arguments by failing to discuss that claim. Second, the plaintiff argues that the “Communication History” document shows that EquiFirst owned the loan in February 2009, the month before she signed the Forbearance Agreement. The clear implication is that EquiFirst owned the loans during the time period relevant to the Forbearance Agreement claim.

[6] It should be enough (1) for the plaintiff to declare that the letters are true copies of letters that she received and (2) for her attorney to declare that the Bates-labeled documents are true copies of documents that HomEq produced in its initial disclosures.









This appeal presents significant issues regarding the evidence required (E.S.) to establish the standing of an alleged assignee of a mortgage and negotiable note to maintain a foreclosure action.

Wells Fargo claims that it acquired the status of a holder in due course as a result of this assignment and therefore is not subject to any of the defenses defendant may have been able to assert against Argent.

Wells Fargo asserted that Argent had assigned the mortgage and note to Wells Fargo but that the assignment had not yet been recorded.

Wells Fargo subsequently filed a motion for summary judgment. This motion was supported by a certification of Josh Baxley, who identified himself as “Supervisor of Fidelity National as an attorney in fact for HomEq Servicing Corporation as attorney in fact for [Wells Fargo].”

Baxley’s certification stated: “I have knowledge of the amount due Plaintiff for principal, interest and/or other charges pursuant to the mortgage due upon the mortgage made by Sandra A. Ford dated March 6, 2005, given to Argent Mortgage Company, LLC, to secure the sum of $403,750.00.” Baxley did not indicate the source of this purported knowledge. Baxley’s certification also alleged that Wells Fargo is “the holder and owner of the said Note/Bond and Mortgage”

The documents defendant alleged were forgeries included a purported handwritten note by her stating that she was employed by Bergen Medical Center at a monthly salary of $9500, even though her actual income was only approximately $10,000 per year.
Defendant also alleged that “[t]he estimate for closing fees that was given to me prior to closing was around $13,000.00 and the Good Faith Estimate of Closing Costs was for $13,673.90 but on the closing statement they were $36,259.06.”

On appeal, defendant argues that (1) Wells Fargo failed to establish that it is the holder of the negotiable note she gave to Argent and therefore lacks standing to pursue this foreclosure action; (2) even if Wells Fargo is the holder of the note, it failed to establish that it is a holder in due course and therefore, the trial court erred in concluding that Wells Fargo is not subject to the defenses asserted by defendant based on Argent’s alleged predatory and fraudulent acts in connection with execution of the mortgage and note; and (3) even if Wells Fargo is a holder in due course, it still would be subject to certain defenses and statutory claims defendant asserted in her answer and counterclaim.

We conclude that Wells Fargo failed to establish its standing to pursue this foreclosure action. Therefore, the summary judgment in Wells Fargo’s favor must be reversed and the case remanded to the trial court. This conclusion makes it unnecessary to address defendant’s other arguments.

we note that Wells Fargo argues in its answering brief that “[defendant] is estopped to contest Wells Fargo’s standing”; “defendant’s brief exceeds the scope of this appeal,” and “[defendant’s] arguments are counterintuitive.” These arguments are clearly without merit and do not warrant discussion. R. 2:11-3(e)(1)(E).
“As a general proposition, a party seeking to foreclose a mortgage must own or control the underlying debt.” Bank of N.Y. v. Raftogianis, ___ N.J. Super. ___, ___ (Ch. Div. 2010) (slip op. at 3). In the absence of a showing of such ownership or control, the plaintiff lacks standing to proceed with the foreclosure action and the complaint must be dismissed. See id. at ___ (slip op. at 35-36).1

If a debt is evidenced by a negotiable instrument, such as the note executed by defendant, the answer to this question is governed by Article III of the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-101 to -605, in particular N.J.S.A. 12A:3-301. See generally Raftogianis, supra, ___ N.J. Super. at ___ (slip op. at 3-8). N.J.S.A. 12A:3-301 states in pertinent part:

N.J.S.A. 12A:3-201(b) provides in pertinent part that “if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder.”

Therefore, even if Wells Fargo had presented satisfactory evidence that it was in “possession” of the note executed by defendant (which is discussed later in this opinion), Wells Fargo admittedly presented no evidence of “its indorsement by [Argent].” Therefore, Wells Fargo was not a “holder” of the note within the first category of “person entitled to enforce” an instrument under N.J.S.A. 12A:3-301. See Raftogianis, ___ N.J. Super. at ___ (slip op. at 6).

the question is whether Wells Fargo presented adequate evidence that it fell within the second category of “person entitled to enforce” an instrument under N.J.S.A. 12A:3-A-3627-06T1 301; that is, “a nonholder in possession of the instrument who has the rights of a holder.”

Transfer of an instrument occurs “when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.”

the documents that Wells Fargo relied upon in support of its motion for summary judgment to establish its status as a holder were not properly authenticated. A certification will support the grant of summary judgment only if the material facts alleged therein are based, as required by Rule 1:6-6, on “personal knowledge.” See Claypotch v. Heller, Inc., 360 N.J. Super. 472, 489 (App. Div. 2003). Baxley’s certification does not allege that he has personal knowledge that Wells Fargo is the holder and owner of the note. In fact, the certification does not give any indication how Baxley obtained this alleged knowledge. The certification also does not indicate the source of Baxley’s alleged knowledge that the attached mortgage and note are “true copies.”

Furthermore, the purported assignment of the mortgage, which an assignee must produce to maintain a foreclosure action, see N.J.S.A. 46:9-9, was not authenticated in any manner; it was simply attached to a reply brief. The trial court should not have considered this document unless it was authenticated by an affidavit or certification based on personal knowledge. See Celino v. Gen. Accident Ins., 211 N.J. Super. 538, 544 (App. Div. 1986).

On the remand, defendant may conduct appropriate discovery, (e.s.) including taking the deposition of Baxley and the person who purported to assign the mortgage and note to Wells Fargo on behalf of Argent.

for the guidance of the trial court in the event Wells Fargo is able to establish its standing on remand, we note that even though Wells Fargo could become a “holder” of the note under N.J.S.A. 12A:3-201(b) if Argent indorsed the note to Wells Fargo even at this late date, see UCC Comment 3 to A-3627-06T1 N.J.S.A. 12A:3-203, Wells Fargo would not thereby become a “holder in due course” that could avoid whatever defenses defendant would have to a claim by Argent because Wells Fargo is now aware of those defenses. See N.J.S.A. 12A:3-203(c); UCC Comment 4 to N.J.S.A. 12A:3-203; see generally 6 William D. Hawkland & Larry Lawrence, Hawkland and Lawrence UCC Series [Rev.] § 3-203:7 (2010); 6B Anderson on the Uniform Commercial Code, supra, § 3-203:14R. Consequently, if Wells Fargo produces an indorsed copy of the note on the remand, the date of that indorsement would be a critical factual issue in determining whether Wells Fargo is a holder in due course.

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