Wilmington Sav. Fund Soc'y, FSB v. Bowling
| Decision Date | 30 June 2015 |
| Docket Number | No. 39A05–1409–MF–433.,39A05–1409–MF–433. |
| Citation | 39 N.E.3d 395 |
| Parties | WILMINGTON SAVINGS FUND SOCIETY, FSB, Not In Its Individual Capacity But Solely as Trustee for the Primestar–H Fund I Trust, Appellant–Defendant, v. Ty BOWLING and Asset Acceptance, LLC, Appellees–Plaintiffs. |
| Court | Indiana Appellate Court |
Leanne S. Titus, Bryan K. Redmond, Feiwell & Hannoy, P.C., Indianapolis, IN, Attorneys for Appellant.
Charles E. McFarland, New Castle, KY, Mary Jean Stotts, Joas & Stotts, Madison, IN, Attorneys for Appellees.
GARRARD
, Senior Judge.
[1] Ty Bowling executed a promissory note and secured the note by executing a mortgage on property located in Madison, Indiana. He later defaulted on the note. A complaint was filed naming Bowling and a judgment lien holder, Asset Acceptance, LLC,1 as defendants to the action. Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Trustee for the Prime Star–H Fund I Trust, brings this interlocutory appeal from the trial court's order granting partial summary judgment in favor of Wilmington on the issue of enforcement of the note but finding genuine issues of material fact existed precluding entry of summary judgment on the mortgage foreclosure. We affirm.
[2] Bowling executed a promissory note in the principal amount of $166,500 on March 31, 2006, with Oak Street Mortgage FTC as the named payee. The parties dispute whether the note was endorsed in blank. Wilmington claims that the note is endorsed in blank and that it holds the original note that is signed but not endorsed. Bowling agreed in his affidavit that the original promissory note is endorsed in blank, but argues that there should be an allonge containing special endorsements by the various intervening holders that he claims are part of a real estate mortgage investment conduit, or REMIC. Bowling claims that the prospectus for the pertinent REMIC requires a special endorsement which would convert the bearer instrument to one payable to the identified payee, and that the trial court erred by concluding that the note was a bearer instrument without waiting for the completion of additional discovery about the allegedly missing allonge.
[3] The mortgage document listed Mortgage Electronic Registration Systems, Inc. as a nominee for Oak Street, and MERS was also named a mortgagee. MERS assigned the mortgage as nominee for Oak Street to LaSalle Bank National Association, as Trustee for Certificateholders of Bear Stearns Asset Backed Securities I LLC, Asset Backed–Certificates, Series 2006–HE5. JPMorgan Chase Bank, NA, attorney-in-fact for U.S. Bank National Association, as Trustee, successor in interest to Bank of America, National Association as Trustee as successor by merger to LaSalle Bank National Association, as Trustee for Certificateholders of Bear Stearns Asset Backed Securities I LLC, Asset Backed–Certificates, Series 2006–HE–5 assigned the mortgage to EMC Mortgage LLC f/k/a EMC Mortgage Corporation. Each of these assignments was recorded.
[4] Later, Bowling executed a loan modification agreement with EMC Mortgage Corporation. After Bowling stopped making payments, EMC Mortgage filed a complaint on the promissory note and sought a decree to foreclose the mortgage on the secured real estate. The various assignments were attached to the complaint. EMC Mortgage subsequently assigned the note to Wilmington, the assignment was recorded, and Wilmington was substituted as party plaintiff to the action.
[5] Wilmington filed a motion for summary judgment, and the trial court granted its motion in part, but denied its motion in part. Wilmington appeals from the trial court's order. Bowling also raises cross-appeal issues.
[6] Our review of the trial court's order on a motion for summary judgment involves the same analysis used by the trial court. Cherokee Air Prods., Inc. v. Buchan, 14 N.E.3d 831, 833–34 (Ind.Ct.App.2014)
. Summary judgment is appropriate only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id. at 834. The moving party bears the burden of making a prima facie showing of those two requirements. Id. Upon that showing, the burden shifts to the non-moving party to show the existence of a genuine issue of material fact by way of specifically designating facts. Id. We accept as true those facts alleged by the non-moving party, construe the evidence in favor of the non-moving party, and resolve all doubts against the moving party. Id.
[7] The trial court granted summary judgment as to the enforcement of the promissory note. Bowling admitted that he defaulted on the note secured by the mortgage by failing to make the required payments. However, he cross-appeals from the trial court's partial grant of summary judgment, contending that the trial court erred by concluding that Wilmington was the holder of a bearer instrument. Wilmington contends that the trial erred by failing to enter a decree of foreclosure after concluding that Wilmington was entitled to enforce the note.
[8] The evidence designated to the trial court established that Wilmington was in possession of the original promissory note that was endorsed in blank, and the complete chain of recorded assignments, which was designated, established who held the note and mortgage at various times. JPMorgan Chase assigned the mortgage to EMC on September 20, 2012, and EMC filed the complaint on October 11, 2012. EMC was the holder of the note and mortgage at the time the complaint was filed.
[9] Bowling argues that his online research of the prospectus of the pertinent REMIC pooling and servicing agreement reflects that the assignees of the mortgage and note were required to transfer possession by a special endorsement that must be reflected on an allonge. In other words, Bowling challenges Wilmington's standing to foreclose on the note and mortgage because of a breach of the pertinent PSA, which is reflected by the absence of the allonge.2
[10] In general, only the parties to a contract or those in privity with the parties have rights under the contract. Evan v. Poe & Assocs., Inc., 873 N.E.2d 92, 98 (Ind.Ct.App.2007)
. Only where it can be demonstrated that the parties clearly intended to protect a third party by imposing an obligation on one of the contracting parties can the third party enforce the agreement. Id. Here, the designated evidence does not establish that Bowling was a party to the PSA nor was there an intent to protect him as a third party such that he can enforce any obligation under the PSA.
[11] In Wells Fargo Bank, N.A. v. Strong, 149 Conn.App. 384, 89 A.3d 392, 398 (2014)
, the court cited D. Caron & G. Milne, Connecticut Foreclosures (5th Ed. 2011) § 30–3, p. 401, which discussed borrowers' attempts to attack the holder status of a plaintiff seeking to foreclose on mortgaged property by invoking the terms of a PSA, also referred to as a trust document. The borrower, who is not a party to such an agreement, may not challenge its enforcement. Id. The parties to the PSA are the certificateholders, a trustee, and a servicer, and a borrower has no contractual privity with them. Id. Further, in In re Walker, 466 B.R. 271, 285 (Bankr.E.D.Pa.2012), the court noted an apparent judicial consensus that had developed “holding that a borrower lacks standing to (1) challenge the validity of a...
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