Deutsche Bank Nat'l Trust Co. v. Brock

• Decision Date: 22 March 2013
• Docket Number: No. 55,Sept. Term 2012.,55
• Citation: 63 A.3d 40,430 Md. 714
• Parties: DEUTSCHE BANK NATIONAL TRUST COMPANY As Trustee for the Certificate Holders of ISAC 2006–5 MTG Pass–Through Certificates and Bank of America, N.A., as Successor by Merger to BAC Home Loans Servicing, LP v. Angela BROCK.
• Court: Maryland Court of Appeals

430 Md. 714

63 A.3d 40

DEUTSCHE BANK NATIONAL TRUST COMPANY As Trustee for the Certificate Holders of ISAC 2006–5 MTG Pass–Through Certificates and Bank of America, N.A., as Successor by Merger to BAC Home Loans Servicing, LP

v.Angela BROCK.

No. 55, Sept. Term 2012.

Court of Appeals of Maryland.

March 22, 2013.

Gary C. Tepper, (Ballard Spahr LLP, Washington, D.C.; Robert A. Scott of Ballard Spahr LLP, Baltimore, MD), on brief, for Petitioner.

John Hautman, Sterling, VA, (John H. Harman, Rockville, MD), on brief, for Respondent.

Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, BARBERA, McDONALD, JJ.

HARRELL, J.

This case arises out of a challenge by a borrower, Respondent Angela Brock (“Brock”), to the authority of various individuals and entities to effectuate a valid foreclosure on her residential property. After a foreclosure sale was scheduled in Montgomery County by the substitute foreclosure trustees, Edward S. Cohn, Stephen N. Goldberg, Richard E. Solomon, and Richard J. Rogers (referred to collectively as the “Substitute Trustees”), but before the sale took place, Brock filed a separate action in the Circuit Court for Montgomery County, seeking compensatory damages and declaratory and injunctive relief, against the Substitute Trustees, Deutsche Bank National Trust Company (as Trustee for the Certificate Holders of ISAC 2006–5 MTG Pass–Through Certificates) (“Deutsche Bank”), and BAC Home Loans Servicing LP (“BAC”) (now known as Bank of America, N.A.), for alleged defects in the foreclosure process and the authority of the named Defendants to foreclose on her property. Deutsche Bank and BAC (referred to collectively as “Petitioners” ¹) filed a motion for summary judgment in Brock's action, which motion was granted by the Circuit Court, which concluded that no genuine dispute of material fact existed as to the Petitioners' authority to foreclose on the property and dismissed Brock's complaint in its entirety. The Court of Special Appeals reversed, in an unpublished opinion, finding, pursuant to this Court's decision in Anderson v. Burson, 424 Md. 232, 35 A.3d 452 (2011), that Petitioners did not prove they were persons entitled to enforce the promissory note, and thus genuine disputes of material fact existed precluding summary judgment. We are asked here to determine whether, based on the indorsements to the promissory note at issue, Petitioners are entitled to enforce the Note. For the reasons explained below, we determine that BAC is entitled to enforce the Note. Therefore, we reverse the judgment of the Court of Special Appeals.

FACTUAL AND PROCEDURAL BACKGROUND

On 28 September 2006, Brock executed a promissory note in the principal amount of $544,000 to her lender, Amerifund Mortgage Services, LLC (“Amerifund Mortgage”), for the purpose of financing the purchase of improved residential real property located in Silver Spring, Maryland. The promissory note (the “Note”) was secured by a deed of trust, signed by Brock that same day, in favor of Amerifund Mortgage.²

Although the loan originated with Amerifund Mortgage, it was sold and securitized thereafter. As we explained in Anderson v. Burson,

[s]ecuritization starts when a mortgage originator sells a mortgage and its note to a buyer, who is typically a subsidiary of an investment bank. The investment bank bundles together the multitude of mortgages it purchased into a “special purpose vehicle,” usually in the form of a trust, and sells the income rights to other investors. A pooling and servicing agreement establishes two entities that maintain the trust: a trustee, who manages the loan assets, and a servicer, who communicates with and collects monthly payments from the mortgagors.

424 Md. at 237, 35 A.3d at 455 (internal citations and footnote omitted). A special purpose vehicle “is a business entity that is exclusively a repository for the loans; it does not have any employees, offices, or assets other than the loans it purchases.” Id. at 237 n. 7, 35 A.3d at 455 n. 7 (quoting Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L.Rev. 1359, 1367 (2010)).

Here, although the Note originated with Amerifund Mortgage, it appears that it was sold later. The allonge ³ attached to the Note contains the following three indorsements:

PAY TO THE ORDER OF:

American Brokers Conduit

WITHOUT RECOURSE,

Amerifund Mortgage Services, LLC

PAY TO THE ORDER OF:

IMPAC FUNDING CORPORATION WITHOUT RECOURSE:

American Brokers Conduit

PAY TO THE ORDER OF

WITHOUT RECOURSE

IMPAC FUNDING CORPORATION

The allonge does not indicate on what date each indorsement was made. ⁴ Although not reflected in the Note's indorsements, Petitioners contend that ownership of the Note was assigned ultimately to a trust,⁵ the beneficiaries of which are the Certificate Holders of ISAC 2006–5 MTG Pass–Through Certificates. According to a Pooling and Servicing Agreement for the 2006–5 MTG Pass–Through Trust (the “Trust”), Deutsche Bank National Trust Company is the Trustee, and IMPAC Funding Corporation (“IMPAC”) is denominated the Master Servicer. IMPAC entered into a Sub–Servicing Agreement with BAC,⁶ pursuant to Section 3.02 of the Pooling and Servicing Agreement, to be the sub-servicer for the loan. Under the Pooling and Servicing Agreement, therefore, both BAC and IMPAC have the power of attorney from Deutsche Bank, as Trustee, to fulfill their duties—including, but not limited to, instituting legal proceedings and appointing attorneys for the purpose of effectuating foreclosure.⁷

Due to personal financial difficulties, Brock fell behind on her loan payments. After she became delinquent, BAC appointed, in 2009, substitute trustees to initiate foreclosure proceedings.⁸ The Substitute Trustees filed an Order to Docket Foreclosure of Residential Property, pursuant to Maryland Rule 14–207, in the Circuit Court for Montgomery County, thus commencing a foreclosure proceeding against Brock and her property. The record in this case does not indicate when the Order to Docket was filed, but a foreclosure sale was scheduled for 24 February 2010.

On 16 February 2010, Brock filed a Complaint for Injunctive Relief, Breach of Fiduciary Duty, and Fraud in a separate action in the Circuit Court for Montgomery County, naming as defendants Deutsche Bank, BAC, and the Substitute Trustees (referred to collectively as “Defendants”). Brock contended that: (1) Deutsche Bank and BAC lacked authority to appoint the Substitute Trustees; (2) the Substitute Trustees breached their fiduciary duty to Brock by attempting allegedly to foreclose unlawfully on the property and failing to investigate the authority of Deutsche Bank and BAC to initiate foreclosure; and, (3) Deutsche Bank defrauded Brock by attempting to foreclose on the property. Brock sought: (a) a permanent injunction preventing the Defendants from selling or foreclosing on the property under the deed of trust; (b) a declaration that Deutsche Bank is neither the beneficiary nor the lender under the deed of trust and thus is not empowered to enforce it or appoint substitute trustees; ⁹ (c) compensatory and punitivedamages; and, (d) attorneys fees and costs. Brock filed additionally, on 18 February 2010, a motion for a temporary restraining order seeking to enjoin the Substitute Trustees from proceeding with the foreclosure sale until the court decided Brock's claims. In response, the Substitute Trustees cancelled voluntarily the foreclosure sale, pending the outcome of Brock's suit. In light of the Substitute Trustees' action, the trial court denied the motion for a temporary restraining order.

On 16 September 2010, Petitioners filed a motion for summary judgment, contending principally that, because indisputably BAC has physical possession of the Note, indorsed in blank, it is entitled to enforce it, regardless of who owns the Note. In support of its contentions, Petitioners attached portions of the Pooling and Servicing Agreement, as well as an affidavit from Ron Morrison, Executive Vice President of IMPAC, stating that the Trust is the owner, IMPAC the Master Servicer, and BAC the sub-servicer of the Note. Additionally, Petitioners provided an affidavit from Lindsay Weiss, a litigation specialist at BAC, stating that according to BAC's records, although the Trust is the owner of the Note, BAC is in physical possession of the Note. Both affidavits stated that, pursuant to the Pooling and Servicing Agreement, BAC has a Power of Attorney from Deutsche Bank to do “all things that are necessary to foreclose and sell the Property per the Deed of Trust.”

Brock filed on 4 October 2010 an Amended Complaint for Injunctive Relief, Negligence,¹⁰ and Declaratory Judgment, claiming that, because the Trust made its last filing with the Securities and Exchange Commission (“SEC”) in 2007 and terminated its SEC registration, the Trust exists no longer. Alternatively, Brock claimed, as she had in her original complaint,that the Trust does not own the Note and thus had no authority to appoint the Substitute Trustees or invoke the power of sale under the deed of trust. Brock sought a declaration that the deed of trust was “null and void,” and an order requiring “such Deed of Trust and all related filings to be removed from the land records of Montgomery County.” The same day, Brock filed a memorandum opposing Petitioners' summary judgment motion, arguing that genuine material facts existed as to the existence of the Trust and the ownership of the Note, and that Petitioners were required to support their motion for summary judgment with “the best evidence available to them,” referring to the actual assignment documents. In support of her contention that the Trust existed no longer, Brock produced her personal affidavit, stating that, as a result of the Trust's Notice of Suspension of Duty to File Reports with the SEC in 2007, “[t]he inference to be drawn from this delisting action...