Wells Fargo Bank Minn., N.A. v. Rouleau

Citation77 UCC Rep.Serv.2d 148,46 A.3d 905,2012 VT 19
Decision Date23 March 2012
Docket NumberNo. 11–078.,11–078.
PartiesWELLS FARGO BANK MINNESOTA, N.A. as Trustee for the Registered Holders of Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass–Through Certifications, Series 2011–CF2 v. Randy J. ROULEAU.
CourtUnited States State Supreme Court of Vermont

46 A.3d 905
77 UCC Rep.Serv.2d 148
2012 VT 19

WELLS FARGO BANK MINNESOTA, N.A. as Trustee for the Registered Holders of Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass–Through Certifications, Series 2011–CF2
v.
Randy J. ROULEAU.

No. 11–078.

Supreme Court of Vermont.

March 23, 2012.


[46 A.3d 906]


Heather Z. Cooper and Rodney E. McPhee of Kenlan, Schwiebert, Facey & Goss, P.C., Rutland, for Plaintiff–Appellee.

Lauren S. Kolitch, Waitsfield, and Randy J. Rouleau, Pro Se, Berlin, for Defendant–Appellant.


Present: DOOLEY, JOHNSON and BURGESS, JJ., and KUPERSMITH and EATON, Supr. JJ., Specially Assigned.

BURGESS, J.

¶ 1. Defendant Randy J. Rouleau appeals the decision of the Washington Civil Division holding that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass–Through Certifications, Series 2001–CF2 (Wells Fargo), is entitled to enforce defendant's personal guaranty of a promissory note secured by mortgages on five mobile home parks. The civil division concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3–301(i), which defines who may enforce a negotiable instrument. Defendant argues that the court erred in ruling that Wells

[46 A.3d 907]

Fargo has standing to enforce the guaranty because Wells Fargo cannot prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty. Defendant also argues that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned. Finally, defendant argues that because Wells Fargo lacks standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action. We affirm.

¶ 2. The civil division's findings may be summarized as follows. In November 2000, R & G Properties, Inc. (R & G) borrowed $2.15 million from Column Financial, Inc. (Column). Defendant, as R & G's president and agent, signed a promissory note memorializing the loan, which was secured by a mortgage on five mobile home parks owned by R & G. Attached to the note is an allonge, entitled “First Allonge to Promissory Note,” assigning the note to Wells Fargo. The allonge states, “Pay to the order of *, without recourse or warranty,” below which, stamped in ink, appears Wells Fargo's name next to an asterisk. Another document, entitled “Assignment of Mortgage,” similarly assigns the mortgage on each of R & G's five properties to Wells Fargo. Defendant also executed a personal guaranty, entitled “Exceptions to Non–Recourse Obligations of Borrower Agreement,” stipulating that defendant would be personally liable for “the entire Secured Indebtedness ... if the Property or any part thereof shall become an asset in [a bankruptcy proceeding].”

¶ 3. Column granted R & G's loan intending that it become part of a larger transaction known as securitization. Securitization involves the pooling of many similar loans into a trust, which the trustee manages for the benefit of individual investors. This process requires assignment of the loans to the trustee. To that end, at the time of the loan, Column prepared a General Assignment in blank warranting that it had not previously assigned the note, mortgage, or any of the other security documents to any other party, and that it had the “full right and power” to make such an assignment in the future. In April 2001, Wells Fargo, Credit Suisse First Boston—which bought Column sometime after November 2000—and GMAC Commercial Mortgage Corporation (GMAC) entered into a “Pooling and Servicing Agreement,” which created a special form of trust called a Real Estate Mortgage Investment Conduit (REMIC). R & G's loan, along with about 200 similar loans, was deposited into the REMIC as part of the securitization. Under the Pooling and Servicing Agreement, Wells Fargo was the trustee and would hold the promissory notes, mortgages, and other security documents related to the loans that were deposited into the REMIC.

¶ 4. The exact date on which R & G's promissory note was assigned to Wells Fargo is unknown. By June 2002, however, the securitization was “largely complete.” 1 By October 2003, the assignment of the mortgage on the last of R & G's five mobile home parks had been recorded.

¶ 5. In addition to the court's findings, the following facts form the background of this case. In September 2008, R & G filed for bankruptcy, triggering defendant's liability

[46 A.3d 908]

pursuant to the guaranty.2 On February 13, 2009, Capmark Finance, Inc. (formerly GMAC), as special servicer of the loan acting on behalf of Wells Fargo, filed an action in the Washington Superior Court to enforce the guaranty. Capmark itself later filed for bankruptcy, was sold to Berkadia Commercial Mortgage, and Berkadia became special servicer of R & G's loan. Based on these events, in an April 19, 2009 decision, the superior court granted Capmark's motion to substitute Wells Fargo as the plaintiff in the guaranty action. It reasoned that Capmark, in its role as special servicer, had standing to enforce the guaranty only as Wells Fargo's representative, and that “Wells Fargo remains, as it always has been, the real party in interest.”

¶ 6. The civil division conducted a bench trial on the guaranty action, during which the only issue was whether Wells Fargo had standing to enforce the guaranty. At trial, Wells Fargo produced the original note, allonge, and assignment of the mortgage, as well as an original guaranty, although there is evidence of multiple originals of the guaranty. The court accordingly found that Wells Fargo was the holder of the note under 9A V.S.A. § 3–301(i) and was entitled to enforce the guaranty. Defendant appealed.

¶ 7. We first address defendant's claim that the civil division erred in treating assignment of the note as sufficient to prove assignment of the guaranty. We consider de novo whether the assignment of a personal guaranty follows, as a matter of law, the assignment of a promissory note. In re Vill. Assocs. Act 250 Land Use Permit, 2010 VT 42A, ¶ 7, 188 Vt. 113, 998 A.2d 712. The civil division, applying Restatement (Third) of Suretyship and Guaranty § 13(5) (1996), concluded that “assignment of the note and mortgage results in the assignment of the personal guaranty as a matter of law—even without an express assignment of the guaranty.”

¶ 8. Defendant, in contrast, argues that because the guaranty is an independent contract, Wells Fargo needed to prove that it was assigned not just the note and the mortgage, but also the guaranty itself. Defendant submits that negotiable instruments, like the note, must be distinguished from nonnegotiable instruments, like the guaranty, in that negotiable instruments may be assigned in blank, while nonnegotiable instruments may not. As such, defendant asserts that Wells Fargo needed, but failed, to prove that it was expressly assigned the guaranty. We hold that proof of the assignment of a promissory note and mortgage is sufficient as a matter of law to establish assignment of a...

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