Jun 30 2015, 10:56 am
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEES
Leanne S. Titus Charles E. McFarland
Bryan K. Redmond New Castle, Kentucky
Feiwell & Hannoy, P.C.
Mary Jean Stotts
Indianapolis, Indiana
Joas & Stotts
Madison, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Wilmington Savings Fund June 30, 2015
Society, FSB, Not In Its Court of Appeals Case No.
Individual Capacity But Solely 39A05-1409-MF-433
as Trustee for the Primestar-H Appeal from the Jefferson Circuit
Fund I Trust, Court.
The Honorable Fred H. Hoying,
Appellant-Defendant, Senior Judge.
Cause No. 39C01-1210-MF-945
v.
Ty Bowling and Asset
Acceptance, LLC,
Appellees-Plaintiffs.
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
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1
Acceptance, LLC, 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 LLC 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
1
Asset Acceptance, LLC is a judgment lienholder as to Bowling and was named a defendant to answer to its
interest in the mortgaged property. Asset did not participate in the proceedings below and has not
participated in this appeal. However, pursuant to Indiana Appellate Rule 17(A) “[a] party of record in the
trial court . . . shall be a party on appeal.”
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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.
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[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.
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[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
2
Indiana Code section 26-1-3.1-204 (1993) defining endorsement includes “a paper affixed to the
instrument.” None was attached to the note in this case.
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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, 89 A.3d 392, 398 (Conn. App. Ct. 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 mortgage securitization or (2) request a judicial determination that a loan
assignment is invalid due to noncompliance with a pooling and servicing
agreement, when the borrower is neither a party to nor a third party beneficiary
of the securitization agreement, i.e., the PSA.” We find these holdings
persuasive and conclude that Bowling cannot attack Wilmington’s holder status
by way of invoking the PSA. The trial court properly found that the designated
evidence established that the note was a bearer instrument and as a holder of it
Wilmington was entitled to enforce the note. Ind. Code § 26-1-3.1-301 (1993).
[12] Two of Bowling’s cross-appeal issues contest the trial court’s grant of partial
summary judgment in the absence of Bowling receiving satisfactory discovery
responses from Wilmington. More specifically, Bowling sought discovery from
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Wilmington about the alleged allonge reflecting the trail of special
endorsements made pursuant to the applicable REMIC prospectus.
[13] Bowling correctly cites Boyd v. WHTIV, Inc., 997 N.E.2d 1108, 1113 (Ind. Ct.
App. 2013) for the proposition that summary judgment should only be granted
where the parties have adequate time to complete discovery. Trial courts
generally will deny summary judgment when there are pending discovery
requests that might impact the trial court’s ability to rule on the motion. Collins
v. HSBC Bank USA, Nat’l Ass’n, 974 N.E.2d 537, 541 (Ind. Ct. App. 2012).
Here, Bowling, as the borrower, could not challenge the enforcement of the
PSA or noncompliance with it. Therefore, to the extent Bowling did not have
the discovery responses he sought, the responses would not have had an impact
on the trial court’s ability to rule on the issue of enforcement of the note.
[14] Further, other options were available to Bowling to complete the discovery to
his satisfaction. Bowling could have requested the production of documents to
EMC, now a non-party, by way of Indiana Trial Rule 34. Bowling also could
have moved under Indiana Trial Rule 56(F) for additional time in which to
complete discovery prior to responding to the summary judgment motion or
could have filed another motion to compel under Indiana Trial Rule 37.
Neither of these cross-appeal arguments support a reversal of the trial court’s
grant of partial summary judgment as to the promissory note.
[15] Next, Bowling asks whether a substituted party plaintiff, in this case substituted
under Indiana Trial Rule 25(C), who stands in the shoes of the original party,
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can avoid providing discovery requested of the original party, but not provided.
However, Bowling frames the issue as trial court error in partially granting the
motion for summary judgment when discovery was not yet complete. The trial
court’s order that is the subject of this interlocutory appeal is the partial grant
and partial denial of summary judgment, not an order pertaining to discovery.
To avoid waiver and receive proper review on appeal, an argument should be
raised first at the trial court level to allow the opposing party the opportunity to
respond and allow the trial court the opportunity to consider the issue and reach
a decision before it is taken up on appeal. Lunsford v. Deutsche Bank Trust Co.
Americas as Trustee, 996 N.E.2d 815, 819 (Ind. Ct. App. 2013). Bowling has
waived this cross-appeal issue.
[16] Wilmington argues that the trial court determined that it was not entitled to
foreclose the mortgage. Its assertion is incorrect. The trial court determined
that as simply a holder of the note, Wilmington was not entitled to summary
judgment on the foreclosure question. It determined that there remained
genuine factual disputes concerning the defenses alleged by Bowling that were
available against a holder. If at a trial on the merits Wilmington prevailed
against the defenses, it would be entitled to foreclosure.
[17] Furthermore, this result is not altered by the provision in the mortgage
concerning foreclosure. We suspect this argument was advanced due to
Wilmington’s belief that the court had determined it could not foreclose the
mortgage. The provision merely provides that upon an uncured default the
lender may accelerate the balance due and may foreclose the mortgage by
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judicial proceeding. It is an advisement to the mortgagor and is not intended to
expand the right of foreclosure beyond the otherwise applicable judicial
proceedings.
[18] The trial court did not err by denying summary judgment on foreclosure of the
mortgage and granting it on the note.
[19] Affirmed.
Najam, J., and Riley, J., concur.
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