Roger A. Buchanan and Susan Buchanan v. HSBC Mortgage Services, Inc.

Aug 22 2013, 5:59 am
FOR PUBLICATION
ATTORNEY FOR APPELLANTS: ATTORNEYS FOR APPELLEE:
JAMES C. SPENCER JULIA BLACKWELL GELINAS
Dattilo Law Office LUCY R. DOLLENS
Madison, Indiana JACOB V. BRADLEY
Frost Brown Todd LLC
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
ROGER A. BUCHANAN and )
SUSAN BUCHANAN, )
)
Appellants-Defendants, )
)
vs. ) No. 39A01-1211-MF-515
)
HSBC MORTGAGE SERVICES, INC., )
)
Appellee-Plaintiff. )
APPEAL FROM THE JEFFERSON CIRCUIT COURT
The Honorable Ted R. Todd, Judge
Cause No. 39C01-0812-MF-874
August 22, 2013
OPINION - FOR PUBLICATION
NAJAM, Judge
STATEMENT OF THE CASE
Roger Buchanan and Susan Buchanan appeal the trial court’s grant of summary
judgment in favor of HSBC Mortgage Services, Inc. (“HSBC”) in this foreclosure action.
The Buchanans raise two issues on appeal which we restate as:
1. Whether the trial court erred when it found that HSBC is the holder
of a promissory note executed by the Buchanans when they
purchased their home.
2. Whether the trial court erred when it found that the mortgage is valid
despite an allegedly defective acknowledgement.
We affirm.
FACTS AND PROCEDURAL HISTORY
On July 28, 2006, the Buchanans executed a promissory note (“the note”) and
mortgage for the purchase of a house in Madison for $235,000. The original lender was
Accredited Home Lenders, Inc. (“Accredited”), and the mortgage listed Mortgage
Electronic Registrations Systems, Inc. (“MERS”)1 as mortgagee and nominee for
Accredited and its successors and assigns. On October 18, 2006, Accredited sold the
note to HSBC. And in November 2007, the Buchanans stopped making their monthly
mortgage payments. They have made no payments since that time, but have continued to
reside in the house.
1
Our supreme court has explained that in the 1990s “a consortium of investment banks” created
MERS to maintain “a computer database designed to track servicing and ownership rights of mortgage
loans anywhere in the United States.” Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 809 (Ind. 2012).
MERS member banks list MERS as both “nominee” for Lender and as “mortgagee” on their mortgage
documents. Id. MERS member banks can then buy and sell the note among themselves without
recording an assignment of the mortgage. Id. In the event of default, MERS simply assigns the mortgage
to whichever member bank currently owns the note, and that bank forecloses on the borrower. Id.
2
On December 29, 2008, HSBC filed a complaint to foreclose against the
Buchanans. And in March 2009, HSBC filed a motion for default2 and summary
judgment. In April, the Buchanans filed their answer, motion to dismiss, affirmative
defenses, motion to include Accredited as a party, and response to HSBC’s summary
judgment motion. And in January 2010, the Buchanans filed a cross-motion for summary
judgment.
Following a hearing on the summary judgment motions in May 2010, the trial
court took the matter under advisement. The parties filed supplemental memoranda with
the court. In July 2011, the Buchanans filed a second summary judgment motion and, in
the alternative, a motion for partial summary judgment. Following a hearing on the
Buchanans’ second summary judgment motion and motion for partial summary judgment
in October 2011, the trial court took the matter under advisement.
On October 26, 2012, the trial court entered summary judgment for HSBC and
found and concluded in relevant part as follows:
4. The Buchanans made some payments on the note, but have not made
any payments since November of 2007.
5. On December 19, 2008, MERS solely as nominee of the Accredited
Home Lenders, Inc., assigned its interest in the mortgage to the Plaintiff
HSBC Mortgage Services, Inc. This lawsuit was filed on December 29,
2008.
6. By the terms of the mortgage MERS, as the mortgagee and nominee
for Accredited, had the authority to assign the mortgage to HSBC.
7. As between the Plaintiff HSBC and the Defendants Buchanans,
HSBC is both the holder of the note and the mortgagee of the mortgage
sued upon in this case. The Buchanans are the debtors and mortgagors.
2
The Buchanans had not yet filed an answer to the complaint, but had requested an extension of
time to do so.
3
***
9. There is no issue of genuine or material fact and the Plaintiff is
entitled to judgment against the Defendants as a matter of law.
IT IS THEREFORE CONSIDERED, ORDERED, ADJUDGED AND
DECREED by the Court that:
1. The Plaintiff HSBC Mortgage Services, Inc. recover from the
[Buchanans] the sum of [$269,637.97] owing as of January 21, 2009 plus
interest at the rate of 8.9990% per annum ($57.23 per day) from January
22, 2009[,] to the date of this judgment (1373 days) plus attorney’s fees in
the amount of $1,500, for a total judgment of [$349,714.76]. Interest shall
accrue on the judgment amount at the rate of [8%] per annum after the date
of this judgment.
2. The mortgage of the Plaintiff HSBC Mortgage Services, Inc. is
hereby foreclosed, and the interests of [the Buchanans] are hereby
foreclosed as liens junior and subordinate to the lien of the Plaintiff on the
[subject real property]. . . .
Appellants’ App. at 340-42. This appeal ensued.
DISCUSSION AND DECISION
Standard of Review
Our standard of review for summary judgment appeals is well established:
When reviewing a grant [or denial] of summary judgment, our standard of
review is the same as that of the trial court. Considering only those facts
that the parties designated to the trial court, we must determine whether
there is a “genuine issue as to any material fact” and whether “the moving
party is entitled to a judgment as a matter of law.” In answering these
questions, the reviewing court construes all factual inferences in the non-
moving party’s favor and resolves all doubts as to the existence of a
material issue against the moving party. The moving party bears the
burden of making a prima facie showing that there are no genuine issues of
material fact and that the movant is entitled to judgment as a matter of law;
and once the movant satisfies the burden, the burden then shifts to the non-
moving party to designate and produce evidence of facts showing the
existence of a genuine issue of material fact.
4
Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267, 1269-70 (Ind. 2009)
(citations omitted). The party appealing a summary judgment decision has the burden of
persuading this court that the grant or denial of summary judgment was erroneous.
Knoebel v. Clark County Superior Court No. 1, 901 N.E.2d 529, 531-32 (Ind. Ct. App.
2009). Where the facts are undisputed and the issue presented is a pure question of law,
we review the matter de novo. Crum v. City of Terre Haute ex rel. Dep’t of Redev., 812
N.E.2d 164, 166 (Ind. Ct. App. 2004). While we are not bound by the trial court’s
findings and conclusions and give them no deference, they aid our review by providing
the reasons for the trial court’s decision. See GDC Envtl. Servs. Inc. v. Ransbottom
Landfill, 740 N.E.2d 1254, 1257 (Ind. Ct. App. 2000).
Issue One: Assignment of Note
The Buchanans first contend that the trial court erred when it found that HSBC
was the holder of the note. The Buchanans allege that there are genuine issues of
material fact precluding summary judgment on this pivotal question. In essence, the
Buchanans maintain that the validity of the assignment of the note to HSBC is in doubt.
In support of that contention, the Buchanans assert that: the note attached to HSBC’s
complaint did not include an endorsement; the allonge3 purporting to assign Accredited’s
interest in the note to HSBC is not dated and is not affixed to the note; and HSBC has not
yet provided an original of the note to the trial court. The Buchanans also allege that
3
An “allonge” is a paper “attached to a negotiable instrument for the purpose of receiving further
endorsements when the original is filled.” Black’s Law Dictionary 76 (7th ed. 1999). Here, it was not
necessary to use an allonge, as the original did not contain any endorsements. But we are not aware of
any reason to prohibit the use of an allonge in this case.
5
there is a genuine issue of material fact whether the person who signed the allonge on
behalf of Accredited was authorized to transfer Accredited’s interest in the note.
In support of summary judgment, HSBC designated as evidence an allonge
showing that the promissory note was endorsed in blank. As such, the note was
converted into a bearer instrument pursuant to Indiana Code Section 26-1-3.1-109(a)(2)
(“A promise or order is payable to bearer if it: . . . (2) does not state a payee.”) Thus,
HSBC demonstrated that it was the holder of the bearer instrument, and it was entitled to
enforce the instrument pursuant to Indiana Code Section 26-1-3.1-301(1), which states
that a “‘[p]erson entitled to enforce’ an instrument means . . . the holder of the
instrument.” A “holder” means “the person in possession of a negotiable instrument that
is payable . . . to bearer.” Ind. Code § 26-1-1-201(20)(A). HSBC also designated
evidence showing that it was assigned the mortgage by MERS.
The undisputed designated evidence shows that Accredited transferred the note to
HSBC in 2006. And the Buchanans do not direct us to any authority to support their
assertions that the lack of a date on the allonge renders it invalid, that HSBC’s failure to
attach the allonge to its complaint is fatal to its claim, or that an original of a note is
required to be attached to a complaint. Indeed, HSBC has designated as evidence an
affidavit stating that it has the original note in its possession and will make it available to
the trial court upon request. And while Indiana Code Section 26-1-3.1-204 requires that
the allonge be affixed to the note, there is no evidence in the record to indicate that the
allonge is not so affixed. HSBC did not include the allonge when it filed its complaint,
but under Trial Rule 9.2(F), a plaintiff may amend its complaint to correct the omission
6
of a required written instrument.4 See, e.g., Wilson v. Palmer, 452 N.E.2d 426, 430 (Ind.
Ct. App. 1983). Here, while HSBC did not amend its complaint, it designated evidence
with its motion for summary judgment that was the functional equivalent of an
amendment.
Finally, the Buchanans’ contention that Jacquelyn Rohrscheib may not have had
the authority to execute the allonge is not supported by the designated evidence. The
only evidence in support of that contention is a list dated June 1, 2009, purporting to
contain the names of then-current and former officers with Accredited.5 But that list was
prepared in the course of a bankruptcy proceeding in response to a request to identify
current officers and “each member [of Accredited] who withdrew from the [business]
within one year immediately preceding the commencement of this case.” Appellants’
App. at 324. Because Accredited’s bankruptcy proceeding commenced in 2009, the list
of former officers would not have included those whose employment ended prior to 2008.
And because Accredited sold the note to HSBC in 2006, Rohrscheib could have executed
the allonge at that time and ceased working for Accredited before 2008. In sum, the list
of former Accredited officers is by its terms not an exhaustive list and does not support
the Buchanans’ contention that there is a genuine issue of material fact whether
Rohrscheib had authority to execute the allonge.
4
Under Trial Rule 9.2(F), had the Buchanans moved to dismiss on the basis that HSBC had not
complied with Trial Rule 9.2(A), the trial court could have ordered the amendment. And while the
Buchanans filed a motion to dismiss on April 1, 2009, the motion does not mention Trial Rule 9.2 or
otherwise indicate any concern regarding the missing allonge.
5
HSBC contends that the Buchanans did not timely designate this evidence in opposition to
summary judgment, but HSBC did not object to the submission of the list at the summary judgment
hearing and cannot now complain.
7
The Buchanans have not demonstrated the existence of any genuine issue of
material fact precluding summary judgment. The trial court did not err when it found that
HSBC is the holder of the note.6
Issue Two: Acknowledgement
The Buchanans also contend that the “mortgage lacked the requisite
acknowledgement and was unenforceable.” Brief of Appellants at 20. In support of that
contention, the Buchanans point out that the notary public who acknowledged their
execution of the mortgage “had no power to take acknowledgements in Indiana nor did
he have the power to take oaths given outside of his commission by the State of
Kentucky.” Id. at 21-22. The Buchanans rely on this court’s opinion in Frazer v.
McMillin & Carson, 94 Ind. App. 431, 179 N.E. 564, 567 (1932), where we observed that
“the official activities of a notary public are limited to the political division for which he
is appointed and commissioned, and that his acts outside his territorial limits are void.”
But for purposes of this appeal, we need not decide whether the mortgage was
properly acknowledged. The Buchanans do not deny that they executed the mortgage
and note when they purchased their home in 2006. And it is well settled that “[a]n
unacknowledged instrument is binding between parties and their privies.” Hunter v.
Milhous, 159 Ind. App. 105, 305 N.E.2d 448, 458 n.3 (1973). In other words, as between
the Buchanans, Accredited, and Accredited’s remote assignee, HSBC, the notarial
6
Because we hold that HSBC is the holder of the note, as a matter of law, we need not address
the Buchanans’ contention that HSBC did not have standing to file the foreclosure complaint. And
because the undisputed designated evidence shows that Accredited transferred its interest in the note to
HSBC, we need not address the Buchanans’ contention that MERS did not have authority to transfer the
note.
8
acknowledgement is insignificant. The Buchanans’ contention on this issue is without
merit.
Affirmed.
MATHIAS, J., and BROWN, J., concur.
9