Deutsche Bank National Trust Co. v. Richardson

COMBS, J.

FACTUAL AND PROCURAL HISTORY

¶ 1 In a petition filed on October 15, 2010, Deutsche Bank National Trust Company, as trustee, (hereinafter Deutsche Bank), alleging to be the "present holder" of the note and mortgage, initiated a foreclosure action against Cory L. Richardson (hereinafter Richardson). A review of the note, filed as an exhibit to the Motion for Summary Judgment, filed May 26, 2011, reveals an undated blank indorsement. This blank indorsement was filed with the lower court for the first time in the Motion for Summary Judgment. Nowhere in the original petition did Deutsche Bank reference the undated blank indorsement.

¶ 2 WMC Mortgage Corporation (hereinafter WMC) was the original lender. Deutsche Bank filed with the County Clerk of Oklahoma County, a document entitled "Assignment of Real Estate Mortgage" on February 22, 2011. This document, which was dated February 15, 2011, claimed the assignment to be effective as of December 28, 2010. This was four months after the filing of the petition to foreclose.¹ Additionally, this Assignment of Mortgage executed by Mortgage Electronic - Registration - Systems, Inc. (MERS), as nominee for WMC and its sue-cessors and assigns, purportedly transferred the grantor's interest to Deutsche Bank as the trustee of WMC and was signed by a Vice President of MERS, Inc. There was only a minimal reference to the "note, debts and claims thereby secured ..." in this assignment of mortgage. A summary judgment was granted in Deustche Bank's favor against Richardson, dated July 1, 2011, signed by the trial judge on September 19, 2011, and filed on September 21, 2011. All were memorialized by a final journal entry of judgment order. Richardson appealed this summary judgment asserting Deutsche Bank failed to demonstrate standing.

STANDARD OF REVIEW

¶ 3 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶ 2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 631 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶ 4, 148 P.3d 203, 205.

ANALYSIS

¶ 4 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, the record demonstrates conflicting evidence as to when Appellee became entitled to enforce the note. Appellee has presented evidence of an indorsement in blank, not at the time of filing the original petition (October 15, 2010), but attached as an exhibit to the motion for summary judgment filed May 26, 2011. The purported "assignment of mortgage" was filed on February 15, 2011, claiming to be effective December 28, 2010, four months after the filing of the original petition to foreclose.

¶ 5 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is "direct, - immediate and - substantial." Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶ 7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner's standing to bring the tendered issue. Standing refers to a person's legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated "[s]tanding may be raised at any stage of the judicial process or by the court on its own motion." Additionally in Fent, this Court stated:

Standing refers to a person's legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact-i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (8) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶ 7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, "standing [must] be determined as of the commencement of suit; ..." Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n. 5, 112 S.Ct. 2130, 2142, 119 L.Ed.2d 351 (1992).²

¶ 6 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 195 Okla. 607, 159 P.2d 717.³ An assignment of the mortgage, however, is of no consequence because under Oklahoma law, "[p]roof of ownership of the note carried with it ownership of the mortgage security." Engle v. Federal Nat. Mortg. Ass'n, 1956 OK 176, ¶ 7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note. BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. A foreclosing entity has the burden of proving it is a "person entitled to enforce an instrument" by showing it was "(i) the holder of the instrument, (i) a nonholder in possession of the instrument who has the rights of a holder, or (ii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 124-838-8309 or subsection (d) of Section 12A-8-418 of this title." 12A 0.8.2001 § 3-301.

¶ 7 To demonstrate you are the "holder" of the note you must establish you are in possession of the note and the note is either "payable to bearer" (blank indorsement) or to an identified person that is the person in possession (special indorsement).⁴ Therefore, both possession of the note and an indorsement on the note or attached allonge⁵ are required in order for one to be a "holder" of the note.

¶ 8 To be a "nonholder in possession who has the rights of a holder" you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A 0.8. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 124 0.8.2001, § 3-2083. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A 0.8.2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A 0.9.2001, 3-208(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir.2011). See also, 12A 0.8.2001, § 38-208.

¶ 9 In the present case, Appellee has presented evidence in support of the motion for summary judgment of an indorsed-in-blank note, and an "Assignment of Mort gage" both arguably obtained after the filing of the petition. Appellee must prove it is the holder of the note or the nonholder in possession who has the rights of a holder prior to the filing of the foreclosure proceeding. In the present matter the timeliness of the transfer is a disputed fact issue. Since Deutsche Bank did not file the blank indorsement until it filed its motion for summary judgment it is impossible to determine from the record when Deutsche Bank acquired its interest in the underlying note.

¶ 10 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish they are a nonholder in possession who has the rights of a holder, they must bear the burden of establishing their status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the assignment of mortgage in order to establish the purpose of delivery. The assignment of mortgage purports to transfer "For value received, the undersigned, Mortgage Electronic Registration Systems, Inc., as nominee for WMC and its successors and assigns does hereby assign, transfer and set over unto Deutsche Bank National Trust Company, as Trustee of MASTR 2007-02, that certain real estate mortgage dated August 3, 2006, granted by Cory L. Richardson and Ernestine Richardson, a/k/a Ernestine V. Richardson, husband and wife "together with the note, debts and claims thereby secured, covering the following described real estate ..." We do not address the issue of whether MERS, as nominee of WMC had the authority to assign the note in question as the date of the assignment is well after the filing of the petition.

¶ 11 Appellee must show it became a "person entitled to enforce" prior to the filing of the foreclosure proceeding. There is a question of fact as to when and if this occurred, and thus summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If it is determined Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶ 12 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and to have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A 0.98.2001, § 3-809 or 12A 00.98.2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency and therefore, this Court's decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball, 2011 Vt. 81, 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶ 13 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, JJ. ¶ 14 CONCUR IN PART; DISSENT IN PART: GURICH (by separate writing), WINCHESTER (joins GURICH, J.), JJ. ¶ 15 RECUSED: COLBERT, V.C.J.

1 . Appellee filed an amended petition on January 28, 2011, which added additional defendants but made no change in the allegations as between the Appellant and Appellee.

2 . The concurring in part; dissenting in part opinion in this matter relies upon Justice Opala's concurring opinion in Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906, for the proposition that standing is not a jurisdictional question. Justice Opala's concurring opinion was not the majority opinion of this Court and as such "a minority opinion has no binding, precedential value." 20 Am.Jur.2d Courts § 138.

3 . This opinion was rendered prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

4 . 12A O.S.2001, §§ 1-201(b)(21), 3-204 and 3-205.

5 . According to Black's Law Dictionary (9th ed. 2009) an allonge is "[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements." See, 12A O.S.2001, § 3-204(a).