Coleman v. BAC Servicing

Decision Date07 September 2012
Docket Number2100453.
Citation104 So.3d 195
PartiesEvelyn COLEMAN v. BAC SERVICING, agent for the Secretary of Veterans Affairs, an officer of the United States of America.
CourtAlabama Court of Civil Appeals


Alabama Supreme Court 1111285.D. Alexander Ealy of Legal Services Alabama, Birmingham; and Lawrence F. Gardella of Legal Services Alabama, Montgomery, for appellant.

Greggory M. Deitsch, R. Ryan Daugherty, and Meaghan E. Ryan of Sirote & Permutt, P.C., Birmingham, for appellee.

On Application for Rehearing


This court's opinion of February 3, 2012, is withdrawn and the following is substituted therefor.

Evelyn Coleman appeals from a summary judgment entered in favor of BAC Servicing (BAC), agent for the Secretary of Veterans Affairs, an officer of the United States of America (“the Secretary”), in an ejectment action. We affirm.

Facts and Procedural History

On November 30, 1994, Coleman and her husband obtained a loan in the amount of $93,215 from Johnson & Associates Mortgage Company (“Johnson”) to purchase a house. The Colemans executed a promissory note and a mortgage to Johnson. On May 31, 1995, Johnson assigned its interest in the mortgage to Trans Financial Mortgage Company (“Trans Financial”). On December 2, 2000, Firstar Bank, alleged to be the successor in interest to Trans Financial, assigned the mortgage to Mortgage Electronic Registrations Systems, Inc. (“MERS”), as nominee for Lehman Brothers Holdings, Inc. In support of its summary-judgment motion, BAC submitted evidence indicating that MidFirst Bank had acquired possession of the note on September 17, 2005.

Coleman's husband died on April 1, 2007, after which Evelyn Coleman used the couple's savings and the proceeds of policies insuring her husband's life to make the payments due on the mortgage indebtedness. According to Coleman, those funds had been depleted by February 2009, and Coleman failed to make the mortgage payments due in February, March, and April 2009. In support of its summary-judgment motion, BAC submitted evidence indicating that Midland Mortgage Company, MidFirst's operating subsidiary, had sent Coleman a notice of default on April 8, 2009, and that an attorney retained by MidFirst had sent Coleman a notice of acceleration on July 24, 2009.

On July 28, 2009, MidFirst conveyed its interest in the property to the Secretary by special warranty deed.1 On July 25, August 1, and August 8, 2009, notice of the foreclosure sale regarding Coleman's property was published in The Alabama Messenger; the notice identified MidFirst as the assignee of the mortgage. On August 27, 2009, MERS, as nominee for Lehman Brothers Holdings, Inc., assigned the mortgage and [t]he promissory note evidencing the indebtedness secured by the mortgage” to MidFirst.2 On September 1, 2009, MidFirst purchased the property for $81,132.97 at the foreclosure sale. The same day, MidFirst's attorney sent Coleman a demand for possession of the property.

On September 28, 2009, BAC filed a complaint in the Jefferson Circuit Court seeking to eject Coleman from the property. Coleman's late husband was also named as a defendant. On November 11, 2009, one day after Coleman's time for answering the complaint had expired, BAC filed an application for the entry of a default judgment against Coleman and moved to voluntarily dismiss any claim as to Coleman's husband. On November 12, 2009, Coleman obtained counsel and answered the complaint, asserting the affirmative defenses of defective notice, defective sale, and wrongful foreclosure. On November 15, 2009, the trial court entered a default judgment against Coleman and dismissed the action as to Coleman's husband. On November 20, 2009, the trial court set aside the default judgment against Coleman and restored the case to the active trial docket.

Following discovery, BAC moved for a summary judgment. In support of that motion, BAC submitted the following: the note; the mortgage; a notice-of-default letter dated April 8, 2009, from Midland Mortgage Company to Coleman; a notice-of-acceleration letter addressed to Coleman dated July 24, 2009, from an attorney retained by MidFirst; a sworn copy of the published foreclosure notice; certified copies of three assignments of the mortgage—from Johnson to Trans Financial, from Firstar to MERS, and from MERS to MidFirst; certified copies of MidFirst's foreclosure deed and the special warranty deed from MidFirst to the Secretary; and the affidavit of Melissa Poage, vice president of MidFirst.

With respect to the promissory note that Coleman had executed in favor of Johnson on November 30, 1994, Poage authenticated MidFirst's copy of the note, which had been stamped on its face with two indorsements. The first indorsement is stamped “Without recourse, pay to the order of Trans Financial Mortgage Company. Johnson & Associates Mortgage Co., Inc., by Betty J. Knight.” The second indorsement is stamped:

“Pay to The Order of


Without Recourse

This _____ day of ________, 19___

Trans Financial Mortgage Company

/s/ James K. Oliver

James K. Oliver, Executive Vice President”

Poage stated that MidFirst had acquired its interest in the note [p]rior to the initiation of the foreclosure made the subject of this action.”

Coleman filed a response in opposition to BAC's summary-judgment motion, attaching, among other materials, her own affidavit; she argued that the foreclosure sale and the foreclosure deed were void for the following reasons: (1) MidFirst did not have the right to exercise the power of sale under the mortgage because, Coleman said, MidFirst was not the assignee of the mortgage or the note when it commenced the foreclosure proceedings; (2) MidFirst had failed to comply with the notice requirements in the mortgage instrument; (3) MidFirst had failed to comply with the statutory notice requirements in § 35–10–13, Ala.Code 1975, because, Coleman said, the foreclosure notice published in the newspaper on July 25, August 1, and August 8, 2009, reflected that the mortgage had been assigned to MidFirst, when, in fact, MERS had not assigned the mortgage to MidFirst until August 27, 2009; (4) MidFirst had failed to comply with its loss-mitigation program; and (5) BAC had failed to support its summary-judgment motion with evidence compliant with Rule 56, Ala. R. Civ. P. Specifically, Coleman argued that Poage's affidavit was not based on personal knowledge and did not state how or when MidFirst had acquired an interest in the note that Coleman had executed in favor of Johnson.

BAC filed a reply to Coleman's response and moved to strike a portion of Coleman's affidavit. Thereafter, the trial court continued the hearing on the summary-judgment motion in order to allow the parties to brief the following issues:

“Whether mere physical possession of the promissory note in question works an assignment of the power to sell the underlying mortgage to the party who has acquired physical possession of the said promissory note; and,

“If so, then evidentiary proof of the date upon which [MidFirst] acquired physical possession of the said promissory note, which should predate the date upon which [MidFirst] commenced the process of statutory foreclosure.”

BAC filed a supplement to its summary-judgment motion, attaching a second affidavit of Poage. That affidavit stated, in pertinent part:

“MidFirst, through its operating subsidiary Midland Mortgage Co., became servicer of the loan in July 2005, at which time the original note was transferred to MidFirst. As part of the servicing transfer, MidFirst received [Coleman's and her husband's] loan file and conducted a review of every document contained therein. According to MidFirst's business records, the original Coleman note was notated as present in the custodial file maintained at MidFirst on September 17, 2005. The note was endorsed in blank and MidFirst has had continuous physical possession of the note since that time. A true and correct copy of a screen print from MidFirst's document tracking system showing the information regarding the receipt of the Coleman loan documents is attached hereto as ‘Exhibit B.’ The Coleman loan is assigned Loan Number xxxx9851 as shown on the attached Exhibit B.

“MidFirst Bank, or its servicing agent, has been in possession of the collateral file since its receipt as set forth above. MidFirst Bank has therefore been a holder of the note, entitled to the money owed under the note and secured by the mortgage, since taking possession of the note endorsed in blank.”

Coleman filed a response to BAC's supplemented motion and moved to strike Poage's second affidavit, arguing that it failed to comply with Rule 56(e), Ala. R. Civ. P.

On August 31, 2010, the trial court entered a summary judgment in favor of BAC, setting out the reasons for its decision. Coleman filed a timely postjudgment motion on September 27, 2010. That motion was denied by operation of law on December 27, 2010, when the trial court failed to act on it within the time prescribed by Rule 59.1, Ala. R. Civ. P.3 Coleman appealed on February 7, 2011. The supreme court transferred Coleman's appeal to this court pursuant to § 12–2–7(6), Ala.Code 1975.

Standard of Review

Appellate review of a summary judgment is de novo. Ex parte Ballew, 771 So.2d 1040 (Ala.2000). A motion for a summary judgment is to be granted when no genuine issue of material fact exists and the moving party is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. A party moving for a summary judgment must make a prima facie showing “that there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law.” Rule 56(c)(3); see Lee v. City of Gadsden, 592 So.2d 1036, 1038 (Ala.1992). If the movant meets this burden, “the burden then shifts to the nonmovant to rebut the movant's prima facie showing by ‘substantial evidence.’ Lee, 592 So.2d at 1038 (footnote omitted). [...

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