Tag Archives: assignment

Maine Really Doesn’t Like Lenders

Posted on by

I recently blogged in No MERS-y for Maine Lenders about a Maine Supreme Judicial Court opinion that seemed to go against the weight of authority as to a fundamental issue:  that the mortgage follows the note.

The lender in that Maine case, Bank of America, filed a Motion to Reconsider which the Court summarily denied. I think that the lender has it right on the law here and I quote from its motion:

The Court’s standing analysis conflicts with Maine’s Uniform Commercial Code (“UCC”) and sets Maine apart from other states (even those construing the same language that the Court finds of particular importance here). These persuasive authorities recognize MERS’s designation in a mortgage as a “nominee” and “mortgagee of record” does not prevent MERS from validly assigning all legal rights in the mortgage to a subsequent foreclosure plaintiff. The UCC “explicitly provides that . . . the assignment of the interest of the seller or other grantor of a security interest in the note automatically transfers a corresponding [beneficial] interest in the mortgage to the assignee.” Report of the Permanent Editorial Board for the Uniform Commercial Code 12 (Nov. 2011), available at https://www.uniformlaws.org/Shared/Committees_Materials/PEBUCC/PEB_Report_111411.pdf. The UCC further provides: “The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage or other lien.” 11 M.R.S. § 9-1203(7). The Editor’s Notes to this statutory provision confirm that it “codifies the common-law rule that a transfer of an obligation secured by a security interest or other lien on personal or real property also transfers the [beneficial interests in the] security interest or lien.” Id. cmt. 9. The UCC thus “adopts the traditional view that the mortgage follows the note; i.e., the transferee of the note acquires, as a matter of law, the beneficial interests in the mortgage, as well.” 11 M.R.S. § 9-1308 cmt. 6.

In these circumstances, “the UCC is unambiguous: the sale of a mortgage note (or other grant of a security interest in the note) not accompanied by a separate conveyance of the mortgage securing the note does not result in the mortgage being severed from the note.” Report of the Permanent Editorial Board for the Uniform Commercial Code 12 (emphasis added). Instead, by the explicit terms of the statute, the attachment of the note “is also attachment of a security interest in the . . . mortgage.” 11 M.R.S. § 9-1203(7). Thus, under the UCC, the beneficial interest in the mortgage travels with the note so holding the note in addition to the assignment from MERS of bare legal title means that party has everything necessary for standing under Section 6321. Thus, the Court was inconsistent with the UCC in stating that BANA’s right to enforce the Note (along with assignment of the legal title of the Mortgage by MERS) was not sufficient to show its requisite interest in the Mortgage. The Court should reconsider its analysis on this basis.

Moreover, this Court’s analysis stands in conflict with many other state and federal courts that have examined the issue. Many courts across the nation (in judicial and non-judicial foreclosures states alike) have determined that MERS can assign all rights under a mortgage in which it is named mortgagee as nominee for the lender and lender’s successors and assigns. (18-20, footnote omitted)

As I have acknowledged before, the Supreme Judicial Court is the final arbiter of Maine law. I think, nonetheless, that the Court got it wrong in this case. I also think that this summary denial of the well-argued motion for reconsideration does not do the issue justice.

 

HT Max Gardner

No MERS-Y for Maine Lenders

Posted on by

The Maine Supreme Judicial Court seems to be on a roll against the mortgage industry, having recently issued an opinion that effectively wiped out a mortgage because of the lenders bad faith negotiations during a foreclosure proceeding.

And now, the Maine Supreme Judicial Court issued an opinion in Bank of America, N.A. v. Greenleaf et al., 2014 ME 89 (July 3, 2014), that casts into doubt whether MERS has any life left in it in Maine.  The case’s reasoning is, however, somewhat suspect. The Greenleaf court held that the bank did not have standing to seek foreclosure even though it was the holder of the mortgage note. The court stated that

The interest in the note is only part of the standing analysis, however;  to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage. Unlike a note, a mortgage is not a negotiable instrument. See 5 Emily S. Bernheim, Tiffany Real Property § 1455 n.14 (3d ed. Supp. 2000). Thus, whereas a plaintiff who merely holds or possesses—but does not necessarily own—the note satisfies the note portion of the standing analysis, the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage. (8)

This seems to go against the weight of authority. The influential Report of The Permanent Editorial Board for The Uniform Commercial Code, Application of The Uniform Commercial Code to Selected Issues Relating to Mortgage Notes (November 14, 2011), states that

the UCC is unambiguous: the sale of a mortgage note (or other grant of a security interest in the note) not accompanied by a separate conveyance of the mortgage securing the note does not result in the mortgage being severed from the note. . . . UCC Section 9-308(e) goes on to state that, if the secured party’s security interest in the note is perfected, the secured party’s security interest in the mortgage securing the note is also perfected . . .. (12-13, footnotes omitted)

The Maine Supreme Judicial Court is the ultimate authority on the meaning of Maine’s foreclosure statute, of course, but their reasoning is still open to criticism.

Connecticut Court Rejects Invalid Assignment and Standing Claims

Posted on by

The court in deciding Bank of Am., N.A. v. Samaha, 2013 Conn. Super.  (Conn. Super. Ct., 2013) granted summary judgment in favor of the plaintiff.

Plaintiff sought to foreclose a mortgage executed by Joseph Samaha and Denise Samaha in favor of the Webster Bank in the principal amount of $162,000.00.

The defendant raised several special defenses to this foreclosure action. First, the defendant asserted that the plaintiff did not have standing to bring this litigation. Second, the defendant claimed that as a result of the death of one of the makers of the note, Joseph Samaha, that his estate had an indivisible interest in the subject property and was subject to probate court jurisdiction. Third, the defendant challenged the authority of MERS to assign this mortgage to the plaintiff. Four, that the defendant had tendered payment with regard to the note and she alleged accord and satisfaction. Fifth, the defendant challenged whether or not the note in question was a negotiable instrument.

Regarding the first special defense, the court decided that the plaintiff had standing.
The court found there was simply no authority for the defendant’s second assertion. Further, the court found there were no facts alleged in the special defense and there is no affidavit from the defendant providing any factual foundation for the third assertion. Regarding the fourth special defense the court found that the mere assertion of this defense, without any evidence to support it, and thereby contest or create a material issue of fact for a motion of summary judgment is insufficient. Lastly, the fifth special defense was deemed to be an assertion of a legal conclusion.

The court in deciding this case granted the plaintiff’s motion for summary judgment.

New York Court Denies Defendant’s Cross-Move to Dismiss Plaintiff’s Complaint Pursuant to CPLR 3211(a)(3)

Posted on by

The court in deciding Waterfall Victoria Master Fund, Ltd. v Hayle, 2013 N.Y. Misc. (N.Y. Sup. Ct. Dec. 11, 2013) denied the defendants’ cross-motion to dismiss the complaint based upon the plaintiff’s lack of standing is denied. The court granted the motion proffered by the plaintiff.

Plaintiffs brought an action to foreclose on the defendant’s property, and sought summary judgment in its favor against the defendant’s affirmative defenses and counter claims. Defendants, Parkers, opposed the plaintiff’s motion and cross-moved to dismiss the complaint pursuant to CPLR 3211(a)(3), asserting that plaintiff lacked standing to maintain the action.

The court found that the plaintiff’s well documented motion which included a copy of the note endorsed in blank, the written assignment of the mortgage by MERS, the subsequent assignments of the mortgage and note to Waterfall Victoria Master Fund, and the assignment of the mortgage and note Waterfall Victoria Master Fund, established its entitlement to summary judgment, including its standing. As such the court granted the plaintiff’s motion.

New Jersey Court Finds that Plaintiff had Both Possession of the Original Note and Assignment

Posted on by

The court in deciding Assets Recovery 23, LLC v. Odoemene, 2013 N.J. Super. (App.Div., 2013) this court affirmed the ruling of the lower court that the plaintiff was permitted to foreclose.

In this foreclosure matter, defendants Emmanuel C. Odoemene and Doris D. Odoemene appealed from a June 11, 2012 Chancery Division order, which granted summary judgment to plaintiff Assets Recovery 23, LLC and dismissed defendants’ answer, and denied defendants’ cross-motion to dismiss the complaint. After considering the plaintiff’s contentions this court affirmed the decision of the lower court.

On appeal, defendants merely reiterated that plaintiff lacked standing because it did not physically possess the note at the time it filed the foreclosure complaint. They also argued that the April 2011 assignment did not properly assign the note; however, the court found this argument to be lacking.

This court also found that the evidence in this case clearly established that plaintiff had standing when it filed the foreclosure complaint. Here, the plaintiff had both possession of the original note and an assignment of the mortgage and note prior to filing the complaint.

Ohio Court Held That the Promissory Note was a Negotiable Instrument Subject to Relevant Provisions of R.C. Chapter 1303

Posted on by

The court in deciding Bank of Am., N.A. v. Pasqualone, 2013-Ohio-5795 (Ohio Ct. App., Franklin County, 2013) ultimately decided that the motion to strike moot, thus this court affirmed judgment of the lower court.

This court held that the promissory note was a negotiable instrument subject to relevant provisions of R.C. Chapter 1303 because it contained a promise to pay the lender the amount of $100,000, plus interest, and did not require any other undertakings that would render the note nonnegotiable. Moreover, because Bank of America was the holder of the note it was a person entitled to enforce the note pursuant to R.C. 1303.31(A)(1).

The court noted that based on the authorization, the note became payable to the bank as an identified person and, because the bank was the identified person in possession of the note, it was the holder of the note. Further, as the property owner’s defenses to the mortgage foreclosure did not fit the criteria of a denial, defense, or claim in recoupment under R.C. 1303.36 or R.C. 1303.35, the bank’s right to payment and to enforce the obligation was not subject to the owner’s alleged meritorious defenses.

Ohio Court Reverses Summary Judgment in Favor of HSBC Bank

Posted on by

The court in deciding HSBC Bank USA v. Teagarden, 2013-Ohio-5816 (Ohio Ct. App., Trumbull County, 2013) reversed the ruling for summary judgment in favor of HSBC Bank.

Defendants-appellants, [Teagardens], appealed two judgment entries from the lower court, dismissing the Teagardens’ counterclaims and granting summary judgment in favor of plaintiff-appellee, HSBC Bank USA, National Trust Company.

The first issue before this court was whether the original lender may be a debt collector for the purposes of the Fair Debt Collection Practices Act (FDCPA) when the debt is assigned to a third party. The remaining issues were: whether the one-year statute of limitations for FDCPA actions precluded claims based on false affidavits filed in a prior foreclosure action; whether there is justifiable reliance on false affidavits to support a fraudulent misrepresentation claim when the veracity of the affidavits were contested; whether the failure to comply with federal mortgage servicing guidelines may sustain a cause of action for breach of contract; whether the term “branch office” as used in federal regulations refers only to offices with qualified mortgage servicing personnel; and whether actual damages are a necessary element to state a valid claim for a violation of the Real Estate Settlement Procedures Act (RESPA).

This court found that the original lender of a mortgage debt was not a debt collector under 15 U.S.C.S. § 1692a(6) or liable under the FDCPA, even though it had transferred the debt to a transferee and subsequently attempted to collect the debt on behalf of the transferee.

The court noted that the original lender consistently dealt with the debtors in entities using its name and the debtors did not allege that they believed these entities were third parties, independent of the original lenders. The court found that the debtors’ claim that the original lender misrepresented that it was the holder of the loan when it was the mortgage servicer did not raise a reasonable inference that it used a false name to create the impression that another party was attempting to collect the debt. The also found that the debtors’ claim against the transferee was based on actions that were time-barred under 15 U.S.C.S. § 1692k(d); the claims based on the underlying fees and costs were also time-barred.

Accordingly, this court affirmed the lower court’s dismissal of the Teagardens’ counterclaims. This court also reversed the lower court’s entry of summary judgment in favor of HSBC Bank on the note.