Opinion
No. HHBCV076000732S
March 14, 2011
DECISION RE MOTION TO DISMISS #146
Before the court is the defendant's motion to dismiss for lack of subject matter jurisdiction. The defendant claims the plaintiff lacks standing to bring this foreclosure action.
FACTS
On March 26, 2007, the original plaintiff, Deutsche Bank National Trust Company as Trustee under the pooling and servicing agreement series ITF RAST 2005-A15, filed the present foreclosure action. The complaint alleges that on August 9, 2005, the defendant, Anna DeFranco, signed and delivered to NetBank a note for a loan in the principal amount of $315,000. As security for the note, the defendant signed and delivered a mortgage on her property located at 225 Ox Yoke Drive, Kensington, Connecticut to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for NetBank. The complaint further alleges that the mortgage was assigned to the plaintiff by virtue of an assignment of mortgage to be recorded on the Berlin land records and that the plaintiff is the holder of the note and the mortgage.
One court has explained this concept as follows: "Real Estate Mortgage Investment Conduits or `REMICS' . . . are trusts established to facilitate under favorable tax consequences the issuance of asset-backed securities in the form of beneficial interests in large pools of real estate mortgages. Typically an institutional lender or `depositor' assembles a pool of mortgages which it or an affiliated investment bank deposits into a trust administered by a trustee, which then issues certificates of beneficial ownership to investors. The trust holds the mortgages for the benefit of the certificate holders. When homeowners or other borrowers make their monthly mortgage payments, or pay off their mortgages when they sell or refinance, the payments go to the trust and are passed through to the certificate holders in accordance with the relative rights established for each class of certificate holder. The trustee typically retains a professional mortgage `Servicer' to collect and administer the mortgages in the pool. A servicer's duties are set out in a Pooling and Servicing Agreement (`PSA') between the depositor, the trustee, and the servicer. Such an agreement typically requires a servicer to collect monthly payments from borrowers, monitor borrowers' compliance with the terms of their mortgages, and maintain and administer tax and insurance escrows. A Pooling and Servicing Agreement also describes the servicer's duties in the event that borrowers default on their mortgages-specifying, for example, the scope of the servicer's authority to modify the terms of any mortgage to avoid foreclosure, and defining the servicer's duties with respect to the disposition of foreclosed properties." Carrington Asset Holding Co., LLC v. American Home Mortgage Servicing, Inc., Superior Court, complex litigation docket at Stamford-Norwalk, Docket No. X08 CV 09 5010295 (February 23, 2010, Jennings, Jr., J.T.R.) ( 49 Conn. L. Rptr. 483, 484).
"MERS does not originate, lend, service, or invest in home mortgage loans. Instead, MERS acts as the nominal mortgagee for the loans owned by its members. The MERS system is designed to allow its members, which include originators, lenders, servicers, and investors, to assign home mortgage loans without having to record each transfer in the local land recording offices where the real estate securing the mortgage is located . . . The benefit of naming MERS as the nominal mortgagee of record is that when the member transfers an interest in a mortgage loan to another MERS member, MERS privately tracks the assignment within its system but remains the mortgagee of record. According to MERS, this system saves lenders time and money, and reduces paperwork, by eliminating the need to prepare and record assignments when trading loans . . . If, on the other hand, a MERS member transfers an interest in a mortgage loan to a non-MERS member, MERS no longer acts as the mortgagee of record and an assignment of the security instrument to the non-MERS member is drafted, executed and typically recorded in the local land recording office." (Internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 572 n. 2, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010).
On October 29, 2009, a motion to substitute the party-plaintiff was filed to substitute Deutsche Bank National Trust Company, as Trustee of the Residential Asset Securitization Trust 2005-A15, Mortgage Pass-Through Certificates, Series 2005-O ("plaintiff or "substitute plaintiff") under the pooling and serving agreement dated December 1, 2005, as the new plaintiff. This motion resulted from the assignment by the original plaintiff of the subject mortgage deed and note, and cause of action to the substitute plaintiff.
On August 19, 2010, the defendant filed the present motion to dismiss. The defendant moves to dismiss arguing (1) that the plaintiff was not the holder of the note at the time it commenced the action; and (2) even if it was the holder of the note, it still lacks standing because it is not the owner of the debt.
DISCUSSION
"The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss. Practice Book § 10-31(a)." (Internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206, 213, 982 A.2d 1053 (2009). "[I]t is the burden of the party who seeks the exercise of jurisdiction in his favor . . . clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute." (Internal quotation marks omitted.) Wilcox v. Webster Ins. Co., Id., 213-14.
"Trial courts addressing motions to dismiss for lack of subject matter jurisdiction pursuant to § 10-31(a)(1) may encounter different situations, depending on the status of the record in the case . . . [L]ack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts . . . Different rules and procedures will apply, depending on the state of the record at the time the motion is filed." (Citation omitted; internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 650-51, 974 A.2d 669 (2009).
Holder of the Note at Commencement of the Foreclosure
The defendant disputes that the plaintiff was the holder of the note at the time it commenced the action. In essence, the defendant argues that IndyMac, FSB's ("IndyMac") involvement in the defendant's two bankruptcy proceedings in 2007 and 2008 demonstrates that IndyMac was the holder of the note at the time the plaintiff commenced the action. The defendant submits documents from the 2007 bankruptcy proceedings which identify the plaintiff as a creditor but IndyMac as the name of the person to whom notices should be sent. The defendant also submits documents from the 2008 bankruptcy that identify IndyMac as both a secured creditor and the name of the person to whom notices should be sent. The defendant also notes that, in the 2008 proceedings, IndyMac claimed to be the current holder of the note and claimed that it was entitled to enforce the mortgage. Additionally, the defendant submits a copy of the promissory note purporting to show an endorsement from NetBank to IndyMac, and an endorsement in blank by IndyMac.
The defendant disputes the authenticity of certain endorsements and does not concede that the note is endorsed in blank. The defendant provides no further argument or documentation to support these contentions. General Statutes § 42a-3-308(a) deems that "the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings." The defendant failed to plead and, thus, did not specifically deny the authenticity in the pleadings.
The plaintiff contends that the defendant's reliance on the bankruptcy documents is misplaced because IndyMac, as servicer, had standing to act on behalf of the holder of the note, the plaintiff. The complaint alleges that the defendant executed and delivered the note to NetBank; the defendant executed and delivered to MERS, as nominee for NetBank, a mortgage on the property; the mortgage was assigned to the original plaintiff as trustee under the pooling and servicing agreement series ITF RAST 2005-A15 by virtue of an assignment of mortgage to be recorded in the Berlin land records; and that it is the holder of the note and mortgage. In its memorandum of law in opposition to the motion to dismiss, the substitute plaintiff elaborates on the process by which it claims to have become the holder of the note since 2005: "[T]he subject loan was acquired by Deutsche Bank National Trust Company in its capacity as Trustee on behalf of the Trust under a certain Pooling and Servicing Agreement dated December 1, 2005 . . . The 2005 Agreement shows that IndyMac Bank, FSB (the first endorsee on the Note) sold the loan to the Trust, for which Deutsche Bank National Trust Company serves as Trustee. IndyMac Bank, FSB continued as the mortgage servicer for the loan." The defendant's memorandum of law in support of her motion to dismiss also sheds some light on the relevant issue: "The note [the] plaintiff claims is the original note purports to include an endorsement from NetBank to `IndyMac Bank FSB' and an endorsement in blank by `IndyMac Bank, F.S.B.'"
The plaintiff submits the affidavit of Matthew A. Rosenberg as assistant secretary on behalf of OneWest Bank, FSB. Rosenberg attests: "On or about August 9, 2005, the Defendant executed and delivered a Promissory Note . . . to . . . NetBank . . . On or about August 9, 2005, the Defendant conveyed by Mortgage Deed . . . her interest in certain real property . . . to [MERS] as Nominee for NetBank . . . The Mortgage was assigned to Deutsche Bank National Trust Company as Trustee under the Pooling and Servicing Agreement Series ITF RAST 2005-A15 by assignment of mortgage dated June 4, 2007 . . . The Mortgage was assigned to the [substitute] plaintiff by assignment of mortgage dated July 8, 2009 . . . On or about December 1, 2005, the subject loan was acquired by [the substitute plaintiff] Deutsche Bank National Trust Company in its capacity as Trustee under a Pooling and Servicing Agreement dated December 1, 2005 . . . The original note was delivered to Deutsche Bank National Trust Company in its capacity as Trustee at or about the time the loan was acquired. The original note at issue in this case was sent to the Plaintiff's local foreclosure attorney on March 21, 2007 for the limited purposes of commencing and maintaining the instance foreclosure action. The [substitute] Plaintiff has not assigned, pledged, transferred or hypothecated the subject Note. I submit this Affidavit to show that the [substitute] Plaintiff is currently, and has been since 2005 the holder of the subject Note." The affidavit also serves to authenticate the attached exhibits, including a copy of the note, the mortgage, assignments of the mortgage, and select portions of the December 1, 2005 pooling and servicing agreement.
"When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Conboy v. State, supra, 292 Conn. 651. "In contrast, if the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motion to dismiss . . . other types of undisputed evidence . . . and/or public records of which judicial notice may be taken . . . the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint . . . Rather, those allegations are tempered by the light shed on them by the [supplementary undisputed facts] . . . If affidavits and/or other evidence submitted in support of a defendant's motion to dismiss conclusively establish that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with counter affidavits . . . or other evidence, the trial court may dismiss the action without further proceedings . . . If, however, the defendant submits either no proof to rebut the plaintiff's jurisdictional allegations . . . or only evidence that fails to call those allegations into question . . . the plaintiff need not supply counter affidavits or other evidence to support the complaint, but may rest on the jurisdictional allegations therein." (Citations omitted; emphasis in original; internal quotation marks omitted.) Id., 651-52.
In the present case, the defendant's supplemental evidence does not conclusively establish that the plaintiff was not the holder of the note at the time the foreclosure was commenced. Moreover, even if the defendant's evidence did call into question whether the plaintiff was the holder at commencement, the plaintiff has successfully undermined this conclusion with an affidavit and other evidence. The plaintiff has submitted evidence that at the time of the bankruptcy proceedings, IndyMac was acting as the servicer on the note. Moreover, the plaintiff's evidence demonstrates that the note was acquired by the plaintiff in 2005 by way of the December 1, 2005 pooling and servicing agreement and, thus, was held by the plaintiff at the commencement of the action in 2007. Additionally, it is undisputed that the plaintiff is currently in possession of the note. Finally, the defendant's "defaulted status conclusively establishes the allegations of the complaint as true, and the complaint states that the plaintiff holds the note and the mortgage." U.S. Bank v. Curtis, Superior Court, judicial district of Fairfield, Docket No. CV 09 5021948 (July 23, 2010, Hartmere, J.) ( CT Page 9257 50 Conn. L. Rptr. 389, 391).
Standing to Enforce the Note
The defendant argues that the plaintiff lacks standing because it has nothing more than mere possession of the note; it is not the owner of the underlying debt and, as such, has no right to enforce the mortgage. The defendant argues that the Appellate Court wrongly decided Chase Home Finance, LLC v. Fequiere, 119 Conn.App. 570, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010) and that the ruling is inconsistent with Connecticut Supreme Court precedent. The plaintiff counters that it has standing because General Statutes §§ 49-17 and 42a-1-101 et seq., as interpreted by Fequiere, require only that the plaintiff be the holder of the note, which the plaintiff has proven itself to be.
In Fequiere, "the defendant executed and delivered a promissory note to BNC Mortgage, Inc., and as security for the note, the defendant executed and delivered a mortgage to MERS, as nominee for BNC Mortgage, Inc . . . MERS then assigned the mortgage to the plaintiff and the promissory note was endorsed in blank by BNC Mortgage, Inc., and was then in possession of the plaintiff." (Citation omitted.) Auroroa Loan Services, LLC v. Tompkins, Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 09 6001771 (April 15, 2010, Mintz, J.). The court denied the defendant's motion to dismiss for lack of standing finding that "[t]he defendant . . . failed to present even a scintilla of evidence demonstrating that the plaintiff was not in possession of the promissory note or contradicting its status as a bona fide holder of the note." Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. 578.
The court explained: "General Statutes § 49-17 permits the holder of a negotiable instrument that is secured by a mortgage to foreclose on the mortgage even when the mortgage has not yet been assigned to him . . . The statute codifies the common-law principle of long standing that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage . . . Our legislature, by adopting § 49-17, has provide[d] an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him . . .
General Statutes § 49-17 provides: "When any mortgage is foreclosed by the person entitled to receive the money secured thereby but to whom the legal title to the mortgaged premises has never been conveyed, the title to such premises shall, upon the expiration of the time limited for redemption and on failure of redemption. vest in him in the same manner and to the same extent as such title would have vested in the mortgagee if he had foreclosed, provided the person so foreclosing shall forthwith cause the decree of foreclosure to be recorded in the land records in the town in which the land lies."
"The plaintiff's standing to enforce the promissory note is set forth by the provisions of the Uniform Commercial Code as adopted in General Statutes § 42a-1-101 et seq. Under these statutes, only a `holder' of an instrument or someone who has the rights of a holder is entitled to enforce the instrument . . . The `holder' is the person or entity in possession of the instrument if the instrument is payable to bearer . . . When an instrument is endorsed in blank, it becomes payable to bearer and may be negotiated by transfer of possession alone . . . Furthermore, [t]he possession by the bearer of a note indorsed in blank imports prima facie that he acquired the note in good faith for value and in the course of business, before maturity and without notice of any circumstances impeaching its validity. The production of the note establishes his case prima facie against the makers and he may rest there . . . It [is] for the [makers] to set up and prove the facts which limit or change the [bearer's] rights." (Citations omitted; internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. 576-78; see LaSalle Bank v. Bialobrzeski, 123 Conn.App. 781, 3 A.3d 176 (2010).
In contrast to the defendant's assertions, "General Statutes § 49-17 . . . provides an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him. Our legislature, however, has not passed similar legislation that would give the holder of the mortgage, without having been assigned the note, the ability to foreclose on the property." Fleet National Bank v. Nazareth, 75 Conn.App. 791, 794, 818 A.2d 69 (2003).
In the present case, as previously determined, the defendant has not offered any evidence to counter the plaintiff's claim that it is the holder of the note. The affidavit submitted by the plaintiff states that the plaintiff possesses the original of the note, endorsed in blank, and has not further assigned, pledged, transferred or hypothecated the note. A copy of the note is attached as an exhibit to the affidavit, and thus an exhibit to the objection to the motion to dismiss. As the note was endorsed in blank by IndyMac, it is therefore payable to bearer which, in this case, is the plaintiff. "The plaintiff, by way of its possession of an instrument payable to bearer, is a valid holder of the instrument and, therefore, is entitled to enforce it." Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. 577; see U.S. Bank v. Curtis, supra, 50 Conn. L. Rptr. 391 ("While the defendants argue that the plaintiff does not `own' the note, § 49-17 and § 42a-1-101 et seq. require only that a plaintiff be the `holder' of the note, a legal status distinct from ownership. Similarly, even if the plaintiff cannot establish that it holds or owns the mortgage, General Statutes § 49-17 provides that the plaintiff need only establish that it is the holder of the note that is secured by the mortgage in order to bring a foreclosure action against the mortgaged property").
As Chase Home Finance, LLC v. Fequiere, supra, 119 Conn.App. 570 requires only that the plaintiff be the holder of the note in order to have standing to enforce it, the plaintiff has satisfied its burden of proving standing. Accordingly, the motion to dismiss is denied.