Nelson v. Wells Fargo Bank, N.A. (In re Nelson), BAP NOS. MW 19-057

• Decision Date: 06 November 2020
• Docket Number: BAP NOS. MW 19-057, BAP NO. MW 19-059,BAP NO. MW 19-058,Bankruptcy Case No. 19-40773-CJP
• Citation: 621 B.R. 542
• Parties: Bradley R. NELSON, Debtor. Bradley R. Nelson, Appellant, v. Wells Fargo Bank, N.A., Appellee.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

621 B.R. 542

Bradley R. NELSON, Debtor.

Bradley R. Nelson, Appellant,

v.Wells Fargo Bank, N.A., Appellee.

BAP NOS. MW 19-057

BAP NO. MW 19-058

BAP NO. MW 19-059

Bankruptcy Case No. 19-40773-CJP

United States Bankruptcy Appellate Panel of the First Circuit.

November 6, 2020

Bradley R. Nelson, pro se, on brief for Appellant.

William J. Hanlon, Esq., Dallin R. Wilson, Esq., and Nascine C. Howell, Esq., on brief for Appellee.

Before Godoy, Lamoutte, and Finkle, United States Bankruptcy Appellate Panel Judges.

Finkle, U.S. Bankruptcy Appellate Panel Judge.

Bradley R. Nelson (the "Debtor") appeals pro se from three bankruptcy court orders: (1) the order overruling his objection to the proof of claim filed by Wells Fargo Bank, N.A. ("Wells Fargo") based on its first mortgage on the Debtor's property (BAP No. MW 19-058); (2) the order overruling his objection to Wells Fargo's proof of claim based on its second mortgage on the Debtor's property (BAP No. MW 19-057); and (3) the order granting Wells Fargo's motion for relief from the automatic stay (BAP No. MW 19-059).¹ The crux of his challenge to the appealed orders is essentially two-fold: (1) Wells Fargo never owned the notes secured by the mortgages and therefore lacked standing to foreclose; and (2) the bankruptcy court abused its discretion by declining to conduct an evidentiary hearing. For the reasons set forth below, we AFFIRM all three orders (collectively, the "Orders").

BACKGROUND

I. Pre-Petition Events

On March 2, 2007, the Debtor entered into a loan agreement with World Savings Bank, FSB ("World Savings") in the principal amount of $511,500.00, signing an Adjustable Rate Mortgage Note (the "Note"). Under the terms of the Note, the Debtor promised to repay that sum to World Savings, "its successors and/or assignees, or anyone to whom th[e] the Note [wa]s transferred." The Note is secured by a first mortgage (the "First Mortgage") on the Debtor's property in Groton, Massachusetts (the "Property"). On the same date, the Debtor also entered into an equity line of credit agreement (the "Line of Credit Agreement") with World Savings for $102,300.00, secured by a second mortgage on the Property (the "Second Mortgage").

Effective December 31, 2007, World Savings changed its name to Wachovia Mortgage, FSB ("Wachovia"). On November 1, 2009, Wachovia converted into a national bank with the name Wells Fargo Bank Southwest, N.A., which merged into Wells Fargo Bank, N.A. on the same date.

In October 2010, the Debtor entered into a Home Affordable Modification Agreement (the "Modification Agreement") with "Wachovia Mortgage, a division of Wells Fargo Bank, N.A.," in connection with the Note and First Mortgage. Under the terms of the Modification Agreement, the Debtor agreed that the new principal balance due on the Note was $435,513.84.

II. Prior Bankruptcy Filing

The Debtor previously filed a petition for relief under chapter 7 of the Bankruptcy Code (the "Prior Bankruptcy Case") and received his discharge on October 23, 2012. On his Schedule D filed in that case, the Debtor listed "Wells Fargo Home Mortgage" as the holder of an approximate $414,000.00 claim, secured by the First Mortgage. He also listed "Wells Fargo Home Mortgage" as the holder of an approximate $80,000.00 claim, secured by a second mortgage on the Property. During that case, Wells Fargo filed a motion for relief from the automatic stay, alleging the Debtor was in default under the Note and seeking authorization to exercise its rights under the Note and First Mortgage. The court granted the motion in January 2014, and Wells Fargo commenced foreclosure proceedings.

III. The District Court Litigation

A. The Complaint

On September 4, 2014, the Debtor filed a five-count complaint (the "2014 Complaint") in state court against "Wells Fargo Bank, N.A., as servicer," and World Savings seeking to enjoin the foreclosure. In Count I, the Debtor asserted a cause of action against both Wells Fargo and World Savings for "violation of [the] duty to foreclose in good faith." In Count II, he set forth a claim for breach of contract against Wells Fargo based on its alleged failure to offer him a permanent loan modification. In Count III, he pled a cause of action for promissory estoppel against Wells Fargo, alleging that he relied to his detriment on Wells Fargo's promises of a loan modification. In Count IV, the Debtor requested a declaratory judgment that World Savings was not entitled to foreclose because it was not the holder of the Note. Lastly, in Count V the Debtor stated a claim against Wells Fargo under Mass. Gen. Laws ch. 93A, based on its alleged failure, among other things, to stop the foreclosure.

More particularly, as part of Count I, the Debtor alleged that Wells Fargo and World Savings had "no legal right" to foreclose. In support, he maintained that World Savings did not hold the Note and neither Wells Fargo nor World Savings were able "to produce" the Note "with all the necessary endorsements." He also asserted that Wells Fargo was merely World Savings' "agent for matters related to foreclosure." These allegations would eventually resurface in the subsequent bankruptcy proceedings, as discussed below.

B. The Motion to Dismiss

Wells Fargo removed the case to the United States District Court for the District of Massachusetts (the "District Court") and filed a motion to dismiss each of the Debtor's claims (the "Motion to Dismiss"). Insisting the Debtor had not pled a plausible claim for relief on his theory that it was not the holder of the Note, Wells Fargo argued:

The only allegations in the Complaint that support this claim are that Plaintiff requested from Wells Fargo a copy of the Note showing all endorsements and transfers and Wells Fargo allegedly has been unable to produce it to show that Wells Fargo is in fact entitled to enforce the Note. The Complaint, however, admits that Plaintiff borrowed money from World Savings and that the loan was secured by the Mortgage .... Because it is judicially noticeable that Wells Fargo is the successor-by-merger to World Savings and there are no credible allegations that the Note and/or Mortgage has been assigned to any third-party, Plaintiff has failed to state a plausible claim for relief that Wells Fargo is not entitled to enforce the Note and foreclose the Mortgage.

Effective December 31, 2007, World Savings changed its name to Wachovia Mortgage, FSB ("Wachovia"). A copy of a letter from the Office of Thrift Supervision establishing the name change is attached hereto .... Next, effective November 1, 2009, Wachovia changed its name to Wells Fargo Bank Southwest N.A. and then merged into Wells Fargo. A copy of a letter from the Comptroller of Currency establishing the name change and merger is attached ....

Federal banking law transferred all of World Savings' rights in the Note to Wachovia and then to Wells Fargo by operation of law, without the need for any endorsements or assignments.

During the December 15, 2016 hearing on the Motion to Dismiss, the Debtor, who was represented by counsel at the time, advised that he was pressing only Counts III and V of the 2014 Complaint (the promissory estoppel and Mass. Gen. Laws ch. 93A claims, respectively). Accordingly, on December 29, 2016, the District Court dismissed Counts I (violation of duty to foreclose in good faith), II (breach of contract), and IV (declaratory judgment), and allowed the Debtor's promissory estoppel and Mass. Gen. Laws ch. 93A counts to proceed.

C. The Motion for Summary Judgment

In April 2017, Wells Fargo filed a motion for summary judgment (the "Summary Judgment Motion") as to the remaining counts of the 2014 Complaint, namely Counts III and V. In its accompanying Statement of Material Facts, Wells Fargo stated:

Effective December 31, 2007, World Savings merged with Wachovia Mortgage, FSB ....

[ ] Effective November 1, 2009, Wachovia changed its name to Wells Fargo Bank Southwest, N.A. and merged into Wells Fargo.²

Wells Fargo also submitted the affidavit of Brandon McNeal, its vice president of loan documentation, who swore to the above facts. Although the Debtor filed an opposition to the Summary Judgment Motion along with a supporting memorandum of law and exhibits, he failed to dispute Wells Fargo's Statement of Material Facts or to submit his own statement of material facts supported by admissible evidence from the factual record.

Following a hearing, the District Court granted the Summary Judgment Motion, concurring with Wells Fargo's position that it was the holder of the Note by merger.³ Judgment entered in favor of Wells Fargo on May 30, 2017. The Debtor did not appeal the judgment.

IV. The Current Bankruptcy Case and the Proofs of Claim

On May 10, 2019, the Debtor filed a chapter13 petition (the "Present Bankruptcy Case"). On his Schedule A/B, the Debtor disclosed his ownership interest in the Property.

Wells Fargo filed proof of claim no. 5-1 ("POC 5-1"), stating it held a claim in the amount of $572,993.27, secured by the Property. Among the exhibits attached to POC 5-1 were copies of: (1) the First Mortgage; (2) the Note; (3) the Modification Agreement; (4) a letter dated November 19, 2007 from the Office of Thrift Supervision evidencing World Savings' change of name to Wachovia (the "OTS Letter"); and (5) a letter from the Comptroller of the Currency officially certifying that Wachovia converted to a national bank named Wells Fargo Southwest, National Association, which then merged into Wells Fargo Bank, National Association, effective November 1, 2009 (the "Comptroller Letter").

Wells Fargo also filed proof of claim no. 7-1 ("POC 7-1"), asserting an additional secured claim in the approximate amount of $79,700.00, secured by the Property. Wells Fargo attached to POC 7-1 copies of: (1) the Line of Credit Agreement; (2) the Second Mortgage; (3) a modification agreement relating to the Second Mortgage entered into with Wachovia; (4) the OTS Letter; and (5) the Comptroller Letter.

V. The Proofs of Claim...