Andinaria Nelson and Tarrance Nelson v. Federal National Mortgage Association

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REL: 05/11/2012 Notice: T h i s o p i n i o n i s s u b j e c t t o f o r m a l r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e Reporter o f Decisions, Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2011-2012 2100842 A n d i n a r i a Nelson and Tarrance Nelson v. F e d e r a l N a t i o n a l Mortgage A s s o c i a t i o n Appeal from J e f f e r s o n C i r c u i t Court (CV-10-900390) PER CURIAM. A n d i n a r i a N e l s o n and h e r husband, T a r r a n c e Nelson, appeal f r o m a summary j u d g m e n t i n f a v o r o f F e d e r a l N a t i o n a l M o r t g a g e Association the ("Fannie Mae") i n an e j e c t m e n t a c t i o n . judgment a n d d i s m i s s the appeal. We v a c a t e 2100842 Facts and P r o c e d u r a l History On O c t o b e r 8, 2007, M r s . N e l s o n , i n consideration fora l o a n o f $114,000 f r o m G l o b a l L e n d i n g G r o u p , I n c . ( " G l o b a l " ) , executed a promissory note agreeing t o repay G l o b a l i n monthly i n s t a l l m e n t s over a 30-year p e r i o d . On t h e same d a y , Mr. a n d Mrs. to Nelson executed a mortgage Registration Systems, I n c . ("MERS"), Mortgage acting solely nominee f o r [ G l o b a l ] a n d [ G l o b a l ' s ] s u c c e s s o r s Also on the same day, Mrs. Nelson Sale, "the or Transfer of S e r v i c i n g Rights," "as a and a s s i g n s . " signed a c k n o w l e d g i n g t h a t she h a d r e c e i v e d a " N o t i c e Electronic a document of Assignment, informing her that s e r v i c i n g o f [ h e r ] mortgage l o a n , t h a t i s , t h e r i g h t t o collect payments transferred from [ h e r ] , [ w o u l d b e ] a s s i g n e d , from [ G l o b a l ] t o F l a g s t a r Bank, FSB, sold, or effective December 1, 2007." The mortgage Nelsons failed indebtedness t o make t h e payments a n d F l a g s t a r Bank, FSB due on t h e ("Flagstar"), s e n t them n o t i c e s o f d e f a u l t on J a n u a r y 17, M a r c h 18, a n d May 17, 2008, a l o n g w i t h l o s s - m i t i g a t i o n p a m p h l e t s e n t i t l e d to Avoid Foreclosure." regarding their The N e l s o n s r e s p o n d e d w i t h financial status. 2 On A u g u s t "How information 28, 2008, an 2100842 attorney r e t a i n e d b y MERS n o t i f i e d the Nelsons v i aa mailed l e t t e r t h a t F l a g s t a r was a c c e l e r a t i n g t h e m a t u r i t y d a t e o f t h e loan and initiating foreclosure sale foreclosure scheduled proceedings, f o r October 2, 2008. with a Newspaper n o t i c e s p u b l i s h e d on S e p t e m b e r 6, S e p t e m b e r 13, a n d S e p t e m b e r 20, 2008, s t a t e d , i n pertinent part: " D e f a u l t h a v i n g been made i n t h e payment o f t h e indebtedness secured by t h a t certain mortgage e x e c u t e d by [the Nelsons] t o [MERS], s o l e l y a s nominee f o r [ G l o b a l ] on t h e 8 t h d a y o f O c t o b e r , 2007, s a i d m o r t g a g e h a v i n g been r e c o r d e d i n t h e o f f i c e o f t h e Judge o f Probate o f J e f f e r s o n County, A l a b a m a , i n Book: LR 200765, page 7255 a n d r e r e c o r d e d i n LR 200765, page 17347; s a i d m o r t g a g e h a v i n g s u b s e q u e n t l y been t r a n s f e r r e d a n d a s s i g n e d t o [MERS], s o l e l y a s nominee f o r [Flagstar], the undersigned [MERS], solely as nominee for [ F l a g s t a r ] , as m o r t g a g e e / t r a n s f e r e e , u n d e r a n d b y v i r t u e o f t h e power o f s a l e c o n t a i n e d i n s a i d mortgage, w i l l s e l l a t p u b l i c o u t c r y t o t h e h i g h e s t b i d d e r f o r cash, i n f r o n t o f t h e main e n t r a n c e o f the Courthouse a t Birmingham, J e f f e r s o n County, Alabama, [ p r o p e r t y d e s c r i p t i o n ] " (Emphasis Flagstar added.) entered Before into a the t h i r d forbearance n o t i c e was p u b l i s h e d , agreement with the N e l s o n s , r e d u c i n g t h e i r m o r t g a g e i n t e r e s t r a t e f r o m 7.5% t o 5% and s e t t i n g up a m o d i f i e d payment p l a n t o a l l o w them t o b r i n g their loan t o a current status. 3 2100842 By M a r c h 2009, t h e N e l s o n s were a g a i n i n d e f a u l t on t h e i r o b l i g a t i o n s under t h e note and mortgage. Flagstar sent the Nelsons m i t i g a t i o n pamphlet. information a notice On M a r c h 17, 2009, of default Mrs. Nelson provided MERS n o t i f i e d her f o ra loss- On J u n e 5, 2009, an a t t o r n e y the Nelsons v i a a mailed l e t t e r was a c c e l e r a t i n g t h e m a t u r i t y loss- Flagstar with the i t requested i n order t o consider m i t i g a t i o n program. and a r e t a i n e d by that Flagstar date o f t h e loan and i n i t i a t i n g foreclosure proceedings, with a foreclosure sale scheduled f o r July 27, 2009. Newspaper notices June 13, a n d June 20, 2009. were p u b l i s h e d I n e a r l y J u l y 2009, h o w e v e r , t h e N e l s o n s were a p p r o v e d f o r a t r i a l Home A f f o r d a b l e Plan ("HAMP"), and t h e Nelsons r e q u i r i n g them t o make t h r e e a t i m e l y manner. the foreclosure September default, consecutive 25, a HAMP agreement r e d u c e d payments i n postponing s a l e t o November 2 3 , 2009, was p u b l i s h e d . Flagstar attaching sent the foreclosure the Nelsons loss-mitigation November 2 3 , 2009, an a t t o r n e y that signed Modification On September 2 1 , 2009, a n o t i c e 22, 2009, again on June 6, On a notice of information. On f o r MERS i n f o r m e d t h e N e l s o n s s a l e was b e i n g p o s t p o n e d u n t i l 2010, u n d e r t h e same t e r m s a s s e t f o r t h 4 January i n the previous 2100842 foreclosure-sale postponing notices. On November 28, 2009, the foreclosure sale t o January a notice 25, 2010, was p u b l i s h e d i n t h e Alabama Messenger. On January 25, 2 0 1 0 , MERS, a s nominee f o r Flagstar, conducted a foreclosure sale of the Nelsons' property. purchased t h e p r o p e r t y and r e c e i v e d a f o r e c l o s u r e January The d e e d was r e c o r d e d i n t h e J e f f e r s o n P r o b a t e O f f i c e on F e b r u a r y alleging its On 27, 2 0 1 0 , MERS c o n v e y e d i t s i n t e r e s t i n t h e p r o p e r t y t o F a n n i e Mae b y s p e c i a l w a r r a n t y d e e d . On deed. MERS February 5, 2010, F a n n i e Mae 15, filed 2010. a complaint t h a t i t was t h e owner o f t h e p r o p e r t y b y v i r t u e o f s p e c i a l w a r r a n t y d e e d f r o m MERS a n d s e e k i n g t o e j e c t t h e Nelsons material from t h e p r o p e r t y . allegations affirmative defense The N e l s o n s answered, d e n i e d t h e of the complaint, and a s s e r t e d t h e that the foreclosure d e e d was v o i d a n d t h a t F a n n i e Mae h a d no r i g h t t o e j e c t them f r o m t h e p r o p e r t y because, they claimed, the foreclosure was "wrongful." 1 I n J a c k s o n v . W e l l s F a r g o Bank, N.A., [Ms. 1100594, F e b r u a r y 17, 2012] So. 3 d , ( A l a . 2 0 1 2 ) , o u r supreme c o u r t h e l d t h a t Alabama r e c o g n i z e s a c l a i m f o r " w r o n g f u l f o r e c l o s u r e " o n l y when t h e f o r e c l o s i n g e n t i t y " ' u s e s t h e power of s a l e g i v e n under a mortgage f o r a purpose o t h e r than t o s e c u r e t h e d e b t owed b y t h e m o r t g a g o r . ' " (Quoting Reeves C e d a r h u r s t Dev. C o r p . v . F i r s t A m e r i c a n F e d . S a v . & Loan 1 5 2100842 Following discovery, F a n n i e Mae moved f o r a summary j u d g m e n t . I n s u p p o r t o f t h a t m o t i o n , F a n n i e Mae s u b m i t t e d c o p i e s note, t h e mortgage, the foreclosure deed of the t o MERS, i t s own s p e c i a l w a r r a n t y d e e d f r o m MERS, a n d t h e a f f i d a v i t o f S h a r o n Morgan, an a s s i s t a n t vice president of Flagstar. s t a t e d t h a t she had r e v i e w e d F l a g s t a r ' s r e c o r d s N e l s o n s ' l o a n and t h a t she had p e r s o n a l set forth pertinent "Notice [from i n her affidavit. documents, Global documents Morgan or Transfer to Flagstar]," the series that Flagstar notice-of-default and t h e Nelsons letters that concerning the knowledge o f t h e f a c t s authenticated i n c l u d i n g the note, of Assignment, Sale, Flagstar With respect executed of Servicing stamped w i t h Rights of l o s s - m i t i g a t i o n had exchanged, t h e had mailed to the attorneys t o the Nelsons. t o t h e p r o m i s s o r y note t h a t Mrs. Nelson had i n favor authenticated the t h e mortgage, t h e N e l s o n s , and t h e n o t i c e - o f - a c c e l e r a t i o n l e t t e r s t h a t f o r MERS h a d m a i l e d Morgan of Global Flagstar's on copy October of the note, 8, 2007, which Morgan had been the f o l l o w i n g undated s p e c i a l indorsement: "Pay t o The O r d e r o f A s s ' n , 607 So. 2d 180, 182 ( A l a . 1992).) 6 2100842 F l a g s t a r Bank, FSB Without Recourse G l o b a l L e n d i n g Group, I n c . By: / s / Janice Hopkins Loan O p e r a t i o n s A s s o c i a t e " The materials attached t o Morgan's a f f i d a v i t d i d n o t i n c l u d e any assignment o f t h e mortgage. I n r e s p o n s e t o F a n n i e Mae's summary-judgment m o t i o n , t h e Nelsons presented t h e i r could own a f f i d a v i t s and argued t h a t MERS c o n v e y t o F a n n i e Mae o n l y t h e i n t e r e s t i n t h e p r o p e r t y t h a t MERS h a d , a n d , t h e y c o n t e n d e d , MERS h a d no i n t e r e s t i n the property accordingly, seek because i t s foreclosure deed was void; t h e y s a i d , F a n n i e Mae d i d n o t have s t a n d i n g t o possession contention that undisputed fact o f the property. The N e l s o n s the foreclosure that there deed h a d been was based void no a s s i g n m e n t their on t h e o f the m o r t g a g e f r o m t h e e n t i t y "MERS, a s nominee f o r G l o b a l , " e i t h e r t o F l a g s t a r o r t o t h e e n t i t y "MERS, as nominee f o r F l a g s t a r , " and o f f e r e d the f o l l o w i n g arguments: (1) t h a t t h e p o w e r - o f - s a l e p r o v i s i o n i n t h e m o r t g a g e i n s t r u m e n t was u n e n f o r c e a b l e because t h e note and mortgage had been separated; (2) t h a t MERS a n d t h e l o a n s e r v i c e r , F l a g s t a r , h a d b r e a c h e d t h e n o t i c e requirements i n t h e mortgage instrument 7 and had f a i l e d t o 2100842 f o l l o w t h e s t a t u t o r y n o t i c e r e q u i r e m e n t s o f § 35-10-13, A l a . Code 1 9 7 5 ; a n d (3) t h a t F l a g s t a r h a d f a i l e d t o c o m p l y w i t h i t s loss-mitigation program and had m i s r e p r e s e n t e d that the f o r e c l o s u r e w o u l d n o t o c c u r as l o n g as F l a g s t a r was w o r k i n g w i t h t h e N e l s o n s t o h e l p them keep t h e p r o p e r t y . F i n a l l y , the N e l s o n s a r g u e d t h a t F a n n i e Mae's summary-judgment m o t i o n was not s u p p o r t e d by a d m i s s i b l e C i v . P. e v i d e n c e u n d e r R u l e 56, A l a . R. S p e c i f i c a l l y , t h e y c o n t e n d e d t h a t Morgan's a f f i d a v i t was n o t b a s e d on p e r s o n a l k n o w l e d g e sworn or c e r t i f i e d copies a n d was n o t a c c o m p a n i e d b y o f t h e documents t o which i t referred. Fannie Mae filed a reply to the Nelsons' response, a r g u i n g t h a t t h e N e l s o n s h a d c o n t r a c t u a l l y a u t h o r i z e d MERS t o f o r e c l o s e on t h e p r o p e r t y , i n t h e e v e n t o f t h e i r d e f a u l t , when they signed the mortgage contained the following instrument, which instrument provisions: "Borrower i r r e v o c a b l y mortgages, g r a n t s and conveys t o MERS ( s o l e l y a s nominee f o r L e n d e r a n d L e n d e r ' s s u c c e s s o r s and a s s i g n s ) and t o t h e s u c c e s s o r s and a s s i g n s o f MERS, w i t h power o f s a l e , [ t h e P r o p e r t y ] . "... B o r r o w e r u n d e r s t a n d s a n d a g r e e s t h a t MERS h o l d s only legal title to the interests g r a n t e d by Borrower i n this Security Instrument, b u t , i f n e c e s s a r y t o c o m p l y w i t h l a w o r c u s t o m , MERS (as nominee f o r L e n d e r a n d L e n d e r ' s s u c c e s s o r s a n d 8 2100842 a s s i g n s ) has t h e r i g h t : t o e x e r c i s e any o r a l l o f those i n t e r e s t s , i n c l u d i n g , but not l i m i t e d t o , the r i g h t t o f o r e c l o s e a n d s e l l the P r o p e r t y . " (Emphasis added.) Following oral a r g u m e n t on t h e m o t i o n , the t r i a l court e n t e r e d a summary j u d g m e n t i n f a v o r o f F a n n i e Mae on J a n u a r y 18, 2 0 1 1 , s e t t i n g o u t t h e r e a s o n s f o r i t s d e c i s i o n . court's d e t e r m i n a t i o n c a n be summed up by The t r i a l the following e x c e r p t from i t s j u d g m e n t : "[Mrs.] N e l s o n a d m i t t e d i n h e r a f f i d a v i t t h a t she was s e n d i n g payments t o F l a g s t a r . [The N e l s o n s have] not s u b m i t t e d any e v i d e n c e , l e t a l o n e s u b s t a n t i a l evidence, t o show t h a t Flagstar was n o t t h e ' s u c c e s s o r o r a s s i g n ' o f t h e ' l e n d e r ' as d e f i n e d i n the m o r t g a g e . An a s s i g n m e n t o f m o r t g a g e f r o m MERS t o F l a g s t a r was u n n e c e s s a r y f o r MERS t o p r o c e e d w i t h the f o r e c l o s u r e on b e h a l f o f F l a g s t a r u n d e r t h e power o f s a l e i n t h e m o r t g a g e . A l l t h a t was r e q u i r e d was t h a t F l a g s t a r be e n t i t l e d t o t h e d e b t s e c u r e d by t h e mortgage as t h e s u c c e s s o r o r a s s i g n of t h e ' l e n d e r . ' " The N e l s o n s f i l e d a m o t i o n t o a l t e r , amend, o r v a c a t e t h e j u d g m e n t on F e b r u a r y 17, 2 0 1 1 . to t h e N e l s o n s ' postjudgment made e a r l i e r F a n n i e Mae f i l e d a response m o t i o n , r e i t e r a t i n g an argument i n i t s summary-judgment m o t i o n that i t was n o t s u b j e c t t o t h e d e f e n s e s a s s e r t e d b y t h e N e l s o n s b e c a u s e i t was a bona f i d e p u r c h a s e r f o r v a l u e , w i t h o u t n o t i c e o f any c l a i m or d e f e n s e t h e N e l s o n s may have h a d . 9 The t r i a l court denied 2100842 the postjudgment Nelsons timely transferred 1975, motion on A p r i l appealed. the The appeal to t h i s 18, 2011, supreme after which the court subsequently court pursuant t o A l a . Code § 12-2-7(6). Standard of Review Appellate parte r e v i e w o f a summary j u d g m e n t i s de B a l l e w , 771 So. 2d 1040 summary j u d g m e n t i s t o be material fact exists and ( A l a . 2000) . g r a n t e d when no the moving p a r t y j u d g m e n t as a m a t t e r o f l a w . novo. A motion genuine for a issue is entitled R u l e 5 6 ( c ) ( 3 ) , A l a . R. fact "that and t h a t law." 1036, burden t h e r e i s no [it] is entitled Rule 56(c)(3); 1038 then ( A l a . 1992). shifts to p r i m a f a c i e s h o w i n g by 2d at 1038 genuine (footnote issue as t o any to a facie material t o a j u d g m e n t as a m a t t e r see Lee v. C i t y o f Gadsden , 592 So. I f t h e movant meets t h i s b u r d e n , the nonmovant to rebut 'substantial evidence.'" omitted). "[S]ubstantial the of C i v . P. A p a r t y m o v i n g f o r a summary j u d g m e n t must make a p r i m a showing Ex of 2d "the movant's L e e , 592 So. evidence i s e v i d e n c e o f s u c h w e i g h t and q u a l i t y t h a t f a i r - m i n d e d p e r s o n s i n t h e e x e r c i s e o f i m p a r t i a l j u d g m e n t can r e a s o n a b l y i n f e r t h e e x i s t e n c e o f t h e f a c t s o u g h t t o be p r o v e d . " 10 West v. Founders 2100842 Life Assurance Co. o f F l o r i d a , 1 9 8 9 ) ; s e e A l a . Code 1975, 547 So. 2d 870, 871 (Ala. § 12-21-12(d). Discussion I. The N e l s o n s a r g u e t h a t t h e p o w e r - o f - s a l e p r o v i s i o n i n t h e mortgage i n s t r u m e n t was u n e n f o r c e a b l e b e c a u s e mortgage h a d been s e p a r a t e d . t h a t argument b e c a u s e So. 3d Mortg. Ass'n, T h i s c o u r t has r e c e n t l y i t does n o t c o m p o r t See Coleman v . BAC S e r v i c i n g , t h e note and rejected w i t h Alabama l a w . [Ms. 2100453, F e b r u a r y 3, 2012] ( A l a . C i v . App. 2 0 1 2 ) ; P e r r y v . F e d e r a l [Ms. 2100235, March 9, 2012] Nat'l So. 3d ( A l a . C i v . App. 2 0 1 2 ) . " T h i s o n c e - n o v e l t h e o r y o f mortgage l a w has been consistently rejected by courts which have considered i t s merit. See, e . g . , C e r v a n t e s v . C o u n t r y w i d e Home L o a n s , I n c . , 656 F.3d 1034, 1044 ( 9 t h C i r . 2011) ('[T]he p l a i n t i f f s a d v a n c e a n o v e l t h e o r y o f w r o n g f u l f o r e c l o s u r e . They c o n t e n d t h a t a l l t r a n s f e r s o f t h e i n t e r e s t s i n t h e home l o a n s w i t h i n t h e MERS s y s t e m a r e i n v a l i d b e c a u s e t h e d e s i g n a t i o n o f MERS a s a b e n e f i c i a r y i s a sham a n d the system s p l i t s t h e deed from t h e n o t e , and, t h u s , no p a r t y i s i n a p o s i t i o n t o f o r e c l o s e . ' ) ; K i a h v . A u r o r a Loan S e r v s . , L L C , [ ( N o . 10-40161-FDS) (D. Mass. Mar. 4, 2011) [ ( n o t p u b l i s h e d i n F. Supp. 2 d ) ] ( ' P l a i n t i f f ' s t h e o r y t h a t t h e note and t h e mortgage somehow became d i s c o n n e c t e d f r o m one a n o t h e r , a n d t h a t t h e m o r t g a g e s h o u l d d i s a p p e a r as a r e s u l t , i s ... n o t t e n a b l e as a m a t t e r o f l a w . ' ) . " 11 2100842 Kirby v . Bank of America, March 29, 2 0 1 2 ) ] N.A., (S.D. M i s s . p u b l i s h e d i n F. Supp. 2 d ) . note [ ( N o . 2:09-CV-182-DCB-JMR, 2012) (footnote "Although a n d t h e [ m o r t g a g e ] does omitted; not the separation of the not render either instrument v o i d , i t does c r e a t e a s u b s t a n t i a l q u e s t i o n o f what e n t i t y h a s the right t o f o r e c l o s e when the borrower defaults on t h e l o a n , " Morgan v. Ocwen L o a n S e r v i c i n g , L L C , 795 F. Supp. 2d 1370, 1375 (N.D. Ga. 2011), as w i l l be evident from our discussion i n Part I I . II. The assigned Nelsons insist, t h e mortgage t o F l a g s t a r , or to the e n t i t y Flagstar," that authority MERS, to exercise F a n n i e Mae m a i n t a i n s of because MERS, as successors nominee t h e power never "MERS, as nominee f o r for Flagstar, of sale had no i n t h e mortgage. t h a t , by e x e c u t i n g t h e mortgage i n f a v o r nominee and as was f o r the assigns," the lender Nelsons and the granted "lender's MERS the authority t o f o r e c l o s e t h e m o r t g a g e as nominee f o r F l a g s t a r because, Fannie Mae contends, "assignee." 12 Flagstar was Global's 2100842 There i s no transferred loan, dispute to Flagstar Global the r i g h t e f f e c t i v e December "Notice that 1, 2007. to service them t h a t December sold, 1, 2007." a Rights," " t h e s e r v i c i n g o f [ t h e i r ] mortgage or transferred or received of Servicing t h a t i s , t h e r i g h t t o c o l l e c t payments f r o m assigned, sold, the Nelsons' The N e l s o n s of Assignment, Sale, or Transfer informing assigned, loan, [them, was] b e i n g ... t o [ F l a g s t a r ] , e f f e c t i v e (Emphasis added.) As t h e n o t i c e c o r r e c t l y i n f o r m e d t h e N e l s o n s , a l o a n s e r v i c e r has t h e r i g h t t o c o l l e c t payments on b e h a l f o f t h e owner o f t h e d e b t a n d t o d i s b u r s e t h o s e p a y m e n t s , minus a n y a p p l i c a b l e c o m m i s s i o n o r f e e , t o t h e owner of the debt. See g e n e r a l l y Adam J. Levitin & Tara Twomey, M o r t g a g e S e r v i c i n g , 28 Y a l e J . on Reg. 1 ( 2 0 1 1 ) . There i s also became t h e h o l d e r that a no d i s p u t e that a t some p o i n t of the note. This court foreclosing entity that, foreclosure proceedings, obtains and becomes t h e h o l d e r Flagstar has r e c e n t l y before i t held initiates a note s e c u r e d by a mortgage o f t h e n o t e may e x e c u t e t h e power o f s a l e i n t h e m o r t g a g e b y v i r t u e o f § 35-10-12, A l a . Code, 1975. See P e r r y Section v. F e d e r a l N a t ' l Mortg. Ass'n, 35-10-12 p r o v i d e s , i n pertinent 13 part, So. 3d a t that . 2100842 " [ w ] h e r e a power t o s e l l l a n d s i s g i v e n i n any m o r t g a g e , t h e power i s p a r t o f t h e s e c u r i t y and may be executed by any person, or the personal r e p r e s e n t a t i v e o f any p e r s o n who, by a s s i g n m e n t o r otherwise, becomes e n t i t l e d t o t h e money thus secured." (Emphasis Little, for added.) In this court quoted 176 A l a . 267, 270, 57 So. 851, 851 Harton v. ( 1 9 1 1 ) , as s t a n d i n g the p r o p o s i t i o n t h a t " ' [ i ] t i s not a t a l l n e c e s s a r y t h a t a m o r t g a g e d e e d be the Perry, a s s i g n e d i n o r d e r t o e n a b l e t h e owner o f debt t o f o r e c l o s e under (emphasis added). a power o f s a l e . ' " So. 3d a t B a s e d on P e r r y and H a r t o n , i t i s c l e a r t h a t , u n d e r A l a b a m a l a w , t h e " p e r s o n who ... becomes e n t i t l e d to t h e money ... s e c u r e d [by a m o r t g a g e ] , " § 35-10-12, and is thereby mortgage, authorized i s the to execute owner o f t h e the debt, power not one of sale who i n the i s a mere c o l l e c t i n g a g e n t f o r t h e owner o f t h e d e b t . "[T]he b e n e f i t s of s p e c i a l i z a t i o n [ i n t h e modern home-mortgage m a r k e t ] have r e s u l t e d i n an a l m o s t complete b i f u r c a t i o n of the d u t i e s of a d m i n i s t r a t i o n ( r e f e r r e d t o as l o a n s e r v i c i n g ) f r o m t h e b e n e f i t s o f o w n e r s h i p . Loan s e r v i c i n g g e n e r a l l y i s p e r f o r m e d by s e p a r a t e c o m p a n i e s t h a t a r e p a i d by f e e s d e d u c t e d f r o m payments on t h e n o t e s , and t h a t o r d i n a r i l y have l i t t l e o r no o w n e r s h i p i n t e r e s t i n t h e n o t e s i n question. Thus, [ o f t e n ] t h e p a r t y t o whom t h e homeowner i s o b l i g a t e d t o make payments no l o n g e r owns t h e document. 14 who 2100842 Ronald J . Mann, S e a r c h i n g Credit Systems, 44 for Negotiability UCLA L. Rev. 951, 970 i n Payment (1997) and (footnote omitted). Our r e s e a r c h has l o a n s e r v i c e r who the holder of the proceedings: sale was was when t h e statute. See in foreclosure despite by the that the to initiate documents 4, 2011) (D. (approving by foreclose permitted the of note, 2011) the a of loan "lender," assignee because ' L e n d e r ' i s a d e f i n e d t e r m i n t h e documents and i s d e f i n e d t o be C i t i . The (not ("Citi"), n e i t h e r the the (No. initiation t h e power o f s a l e as was by Inc., Utah Citimortgage Citi holder or Citimortgage, 2d) invoked fact nor loan v. August Supp. had the mortgage F. of the mortgage nor s e r v i c e r ' s i n v o c a t i o n o f t h e power o f proceedings s e r v i c e r who permitted Hoverman 2:11-CV-00118-DAK, instances i n which a n e i t h e r the assignee n o t e was authorized published d i s c l o s e d o n l y two of "the ... the term 'Lender' documents do n o t add any a d d i t i o n a l r e q u i r e m e n t s f o r C i t i t o q u a l i f y as t h e L e n d e r f o r p u r p o s e s o f t h e d o c u m e n t s , s u c h as b e i n g t h e a c t u a l s o u r c e of the funding. Therefore, Trust Deed question, for Citi purposes i s the of Lender the Note and i s subject 15 and to a l l of in the 2100842 o b l i g a t i o n s and i s a u t h o r i z e d t o p e r f o r m a l l o f t h e a c t i o n s o f the Lender under the BAC Home Loan Servicing, (E.D. Mich. 2010) claim that loan property terms of the (No. c o n t r a c t s . " ) ; and 10-12632, (not p u b l i s h e d i n F. servicer lacked b e c a u s e t h e n o t e and December Supp. 2d) authority to Jarbo 15, v. 2010) (rejecting foreclose mortgage " c o n t a i n e d on provisions a u t h o r i z i n g t h e l e n d e r o r s e r v i c e r , o r an a s s i g n o f e i t h e r , t o invoke § t h e power o f s a l e , " and 600.3204(a) permitted b e c a u s e M i c h . Comp. Laws foreclosure by "'the owner Ann. of the i n d e b t e d n e s s o r o f an i n t e r e s t i n t h e i n d e b t e d n e s s s e c u r e d the mortgage (emphasis or the servicing agent of the mortgage'") omitted). I t i s u n c l e a r w h e t h e r F a n n i e Mae's a r g u m e n t t o t h e court -- that authorized mortgage by Flagstar's Flagstar -- was to based status invoke upon as the the the lender's power of assumption "assignee" sale (a) trial in the that the a s s i g n m e n t t o F l a g s t a r o f s e r v i c i n g r i g h t s a l o n e -- w i t h o u t a t r a n s f e r o f t h e d e b t -- s u f f i c e d t o p e r m i t F l a g s t a r t o e x e c u t e t h e power o f s a l e , o r servicing rights, (b) t h a t t h e t r a n s f e r t o F l a g s t a r o f e f f e c t i v e December t r a n s f e r o f t h e n o t e on December 1, 16 1, 2007. 2007, included the a In support of i t s 2100842 summary-judgment m o t i o n , F a n n i e Mae of presented Flagstar's t h e n o t e t h a t M r s . N e l s o n h a d e x e c u t e d t o G l o b a l on 8, 2007. Global copy October The n o t e c o n t a i n e d an u n d a t e d s p e c i a l i n d o r s e m e n t to presented no evidence i n d i c a t i n g t h a t the t r a n s f e r of s e r v i c i n g r i g h t s to Flagstar, Flagstar. effective Fannie December Mae, 1, 2007, t r a n s f e r of the note to F l a g s t a r . in the rights present to a case l o a n may, transfer of the note mortgage makes but also included a not transfer of necessarily, e v i d e n c i n g the debt. servicing include states: Paragraph 20 " S a l e o f N o t e ; Change o f Loan S e r v i c e r ; N o t i c e o f Grievance. The n o t e o r a p a r t i a l i n t e r e s t i n t h e n o t e ( t o g e t h e r w i t h t h i s s e c u r i t y i n s t r u m e n t ) can be s o l d one o r more t i m e s w i t h o u t p r i o r n o t i c e t o borrower. A s a l e m i g h t r e s u l t i n a change i n t h e e n t i t y (known as t h e 'Loan S e r v i c e r ' ) t h a t c o l l e c t s p e r i o d i c payments due under t h e n o t e and this s e c u r i t y i n s t r u m e n t and p e r f o r m s o t h e r m o r t g a g e l o a n s e r v i c i n g o b l i g a t i o n s under the note, t h i s s e c u r i t y i n s t r u m e n t , and a p p l i c a b l e l a w . T h e r e a l s o m i g h t be one o r more c h a n g e s o f t h e Loan S e r v i c e r u n r e l a t e d to a s a l e of the note. I f t h e r e i s a change o f t h e Loan S e r v i c e r , b o r r o w e r w i l l be g i v e n w r i t t e n n o t i c e of t h e change w h i c h w i l l s t a t e t h e name and a d d r e s s of t h e new L o a n S e r v i c e r , t h e a d d r e s s t o w h i c h payments s h o u l d be made, and any o t h e r i n f o r m a t i o n [the R e a l E s t a t e S e t t l e m e n t P r o c e d u r e A c t ("RESPA")] r e q u i r e s i n c o n n e c t i o n w i t h a n o t i c e of t r a n s f e r of servicing. I f t h e n o t e i s s o l d and t h e r e a f t e r t h e l o a n i s s e r v i c e d by a Loan S e r v i c e r o t h e r t h a n t h e 17 the As t h e m o r t g a g e i n s t r u m e n t clear, does however, by a of 2100842 p u r c h a s e r of the note, the mortgage l o a n s e r v i c i n g o b l i g a t i o n s t o b o r r o w e r w i l l r e m a i n w i t h t h e Loan S e r v i c e r o r be t r a n s f e r r e d t o a s u c c e s s o r Loan S e r v i c e r and a r e n o t assumed by t h e n o t e p u r c h a s e r u n l e s s o t h e r w i s e p r o v i d e d by t h e n o t e p u r c h a s e r . " (Emphasis Global's added.) I f F a n n i e Mae's argument t h a t F l a g s t a r assignee was i s not the based on the assumption that t r a n s f e r of s e r v i c i n g r i g h t s a l s o i n c l u d e d a t r a n s f e r of the note but i s , instead, example, that based Global's on some transfer other of theory -- servicing for rights c o n s t i t u t e d G l o b a l ' s a p p o i n t m e n t o f F l a g s t a r as i t s a g e n t , n o t only f o r the Global as purpose h o l d e r of foreclosing in the of the s h o u l d have materials submitted motion. M o r t g . Co., note event agreement judgment collecting of but was support Compare also default been, in but payments of f o r the -- then 639 behalf of purpose of such not, Fannie Mae's agency included L a r o t a - F l o r e n z v. 719 F. Supp. 2d 636, on was the summary- Goldman (E.D. Va. 2010) t h a t l o a n s e r v i c e r o f n o t e owned by F r e d d i e Mac in Sachs (holding entitled t o a p p o i n t a s u b s t i t u t e mortgagee t o f o r e c l o s e i n the event of mortgagor's appointment default, was and evidenced that by a S u b s t i t u t e T r u s t e e d a t e d J u l y 15, 18 substitute recorded 2009"). mortgagee's "Appointment of 2100842 In t h e t r i a l court, F a n n i e Mae d i d n o t a r g u e t h a t MERS, as nominee f o r F l a g s t a r , was e n t i t l e d t o e x e c u t e t h e power o f s a l e i n t h e m o r t g a g e as a c o n s e q u e n c e o f F l a g s t a r ' s s t a t u s as the holder of the note. argument i n t h e t r i a l that Fannie holder for Mae Likewise, court failed of the note before the Nelsons raised no a n d t h e y do n o t a r g u e on a p p e a l to e s t a b l i s h that Flagstar was t h e June 5, 2009, when MERS, as nominee Flagstar, i n i t i a t e d the foreclosure proceedings. In i t s a p p e l l a t e b r i e f , h o w e v e r , F a n n i e Mae a r g u e s t h a t t h e n o t e i s a negotiable i n s t r u m e n t t h a t was t r a n s f e r r e d b y thereby, i t says, the Nelsons' Flagstar, entitling mortgage F l a g s t a r t o t h e money s e c u r e d b y (and, by o r MERS as nominee power o f s a l e ) . possession, In response implication, for Flagstar, to that authorizing t o execute the argument, the Nelsons c o n t e n d i n t h e i r r e p l y b r i e f t h a t t h e n o t e was n o n n e g o t i a b l e because i t d i d not represent pay a f i x e d amount o f money." The Nelsons maintain mortgage] See § 7-3-104, A l a . Code 1975. that the f o l l o w i n g p r o v i s i o n i n the n o t e r e q u i r e s an u n d e r t a k i n g "[The "an u n c o n d i t i o n a l p r o m i s e ... t o instrument other t h a n t h e payment o f money: describes how and under what c o n d i t i o n s I may be r e q u i r e d t o make i m m e d i a t e payment i n f u l l 19 2100842 o f a l l I owe under t h i s n o t e . " The Nelsons argue t h a t because t h e n o t e r e q u i r e s t h a t t h e m o r t g a g e i n s t r u m e n t be c o n s u l t e d d e t e r m i n e how and u n d e r what c o n d i t i o n s t h e y w o u l d be to required t o make i m m e d i a t e payment i n f u l l of under the t e s t of n e g o t i a b i l i t y s e t note, the note f a i l s the a l l amounts t h e y o u t i n § 7 - 3 - 1 0 4 ( a ) ( 3 ) , A l a . Code 1975: not s t a t e any promising other undertaking o f money." n e e d n o t be well taken. note contains person The mortgage to determine the c o n d i t i o n s under which a c c e l e r a t i o n o f t h e i n d e b t e d n e s s can o c c u r . the the a c t i n a d d i t i o n t o t h e payment That argument i s not consulted t h a t the note "[d]oes o r i n s t r u c t i o n by ... payment t o do any owed the P a r a g r a p h 6(C) of same p r o v i s i o n : " I f I am i n d e f a u l t , t h e n o t e h o l d e r may s e n d me a n o t i c e t e l l i n g me t h a t i f I do n o t pay t h e o v e r d u e amount by a c e r t a i n date, the note h o l d e r may r e q u i r e me t o pay i m m e d i a t e l y t h e f u l l amount o f p r i n c i p a l w h i c h has n o t b e e n p a i d and a l l the i n t e r e s t t h a t I owe on t h a t amount. T h a t d a t e must be a t l e a s t 30 d a y s a f t e r t h e d a t e on w h i c h t h e n o t i c e i s m a i l e d t o me o r d e l i v e r e d by o t h e r means." See also First Ala. 564, 568, that there N a t ' l Bank o f 159 i s nothing acceleration clause if So. otherwise 73, 76 i n the destroyed negotiable. B i r m i n g h a m v. (1935) ("We appellee's the ... And 20 are De Jernett, fully contention persuaded that n e g o t i a b i l i t y of the we are equally 229 the note, convinced 2100842 that there i s no negotiability merit of the in appellee's n o t e was contention destroyed by that i t s reference t h e m o r t g a g e . . . . " ) ; T h i r d N a t ' l Bank o f N a s h v i l l e v. 35 Tenn. App. 82, "negotiability 92, 242 i s not S.W.2d 760, destroyed by by a mere r e f e r e n c e contract, where mortgage or the collateral note i n the 764 (1951) ( h o l d i n g t h a t ... an collateral not acceleration identified the F l a g s t a r was for failure crucial the security the holder collateral of the issue terms of the F l a g s t a r , i n i t i a t e d the of the expression instrument"). parties i n the nor instrument, i n t o t h e n o t e s u c h as by t h e ' s u b j e c t t o the terms o f ' the of a conditional sales incorporate does the to other instrument Despite note to Keathley, m a t u r i t y o f i n s t a l l m e n t payments by some a c t o f t h e maker ... the trial note before to have court clearly -- whether MERS, as nominee f o r e c l o s u r e proceedings -- this c o u r t i s " ' " ' d u t y b o u n d t o n o t i c e ex mero motu [an i s s u e t h a t indicates] See the absence S t u r d i v a n t v. BAC December 16, (quoting quoting of subject-matter jurisdiction.'"'" Home L o a n s S e r v i c i n g , LP, 2011] So. 3d R i l e y v. Hughes, 17 i n turn Baldwin , So. 2100245, ( A l a . C i v . App. 3d C n t y . v. Bay 21 [Ms. 643, 648 Minette, (Ala. 854 So. 2011) 2009), 2d 42, 2100842 45 ( A l a . 2003), q u o t i n g i n t u r n Stamps v. J e f f e r s o n C n t y . Bd. o f E d u c . , 642 So. 2d 941, 945 n. 2 ( A l a . 1 9 9 4 ) ) . "'When a p a r t y w i t h o u t s t a n d i n g p u r p o r t s t o commence an action, the trial court acquires no subject-matter j u r i s d i c t i o n . ' S t a t e v. P r o p e r t y a t 2018 Rainbow D r i v e , 740 So. 2d 1025, 1028 ( A l a . 1 9 9 9 ) . The i s s u e o f a l a c k o f s t a n d i n g may n o t be w a i v e d , a n d an argument c o n c e r n i n g s t a n d i n g may be a s s e r t e d f o r t h e f i r s t t i m e on a p p e a l . R L I I n s . Co. v. MLK A v e . Redev. C o r p . , 925 So. 2d 914, 918 ( A l a . 2 0 0 5 ) . I n f a c t , i n an a p p e a l f r o m a j u d g m e n t i n an e j e c t m e n t a c t i o n , o u r supreme c o u r t , on i t s own motion, has v a c a t e d t h e judgment e j e c t i n g t h e m o r t g a g o r when t h e e v i d e n c e d e m o n s t r a t e d t h a t t h e p l a i n t i f f d i d n o t have l e g a l t i t l e t o t h e p r o p e r t y at i s s u e and, t h e r e f o r e , l a c k e d s t a n d i n g t o b r i n g t h e a c t i o n . See C a d l e Co. v. S h a b a n i , [950 So. 2d 277 ( A l a . 2 0 0 6 ) ] . A c c o r d i n g l y , we a d d r e s s t h e i s s u e whether [MERS, as nominee f o r Flagstar,] had standing t o b r i n g the ejectment a c t i o n . " Sturdivant, "In plaintiff So. 3d a t order to must . maintain allege an either action possession f o r ejectment, or legal title." C a d l e Co. v. S h a b a n i , 950 So. 2d 277, 279 ( A l a . 2 0 0 6 ) . Nelsons challenged title F a n n i e Mae's a s s e r t i o n t h a t i t h e l d to the property Mae's g r a n t o r on t h e b a s i s -- MERS, as nominee that as nominee proceedings. for Flagstar, legal -- was void t h e m o r t g a g e when MERS, initiated T h a t argument h a s no m e r i t 22 The t h e deed o f Fannie for Flagstar b e c a u s e F l a g s t a r h a d n o t been a s s i g n e d a the foreclosure i n l i g h t o f § 35-10- 2100842 12, which authorizes "any person, or the personal r e p r e s e n t a t i v e o f any p e r s o n who, b y a s s i g n m e n t o r o t h e r w i s e , becomes e n t i t l e d t o t h e money t h u s secured" t o execute the power o f s a l e i n a m o r t g a g e . Our c a s e l a w i n t e r p r e t i n g § 35¬ 10-12 of t h e debt holds that t h e owner may foreclose p r o p e r t y t h a t i s t h e s u b j e c t o f a mortgage s e c u r i n g t h a t if debt t h e owner i s t h e h o l d e r o f t h e p r o m i s s o r y n o t e a t t h e t i m e t h e owner i n i t i a t e s BAC S e r v i c i n g , supra. the on foreclosure proceedings. supra; See Coleman v. P e r r y v. F e d e r a l N a t ' l Mortg. Ass'n, F a n n i e Mae p r e s e n t e d no e v i d e n c e i n d i c a t i n g t h a t , a t time MERS, as nominee for Flagstar, initiated the f o r e c l o s u r e p r o c e e d i n g s , F l a g s t a r was t h e h o l d e r o f t h e n o t e . The complete absence o f any e v i d e n c e F l a g s t a r was t h e owner o f t h e d e b t , indicating 2 that i . e . , the holder of the n o t e , b e f o r e June 5, 2009, when MERS, as nominee f o r F l a g s t a r , i n v o k e d t h e power o f s a l e i n t h e m o r t g a g e means t h a t MERS d i d not convey l e g a l t i t l e t o i t s e l f by v i r t u e o f t h e f o r e c l o s u r e The a b s e n c e o f e v i d e n c e as t o when F l a g s t a r o b t a i n e d t h e note from G l o b a l d i s t i n g u i s h e s t h e p r e s e n t case from our r e c e n t d e c i s i o n i n B y r d v. M o r E q u i t y , I n c . , [Ms. 2100734, M a r c h 16, 2012] So. 3d ( A l a . C i v . App. 2 0 1 2 ) , i n w h i c h t h e e j e c t m e n t p l a i n t i f f p r e s e n t e d c o n f l i c t i n g e v i d e n c e as t o whether i t had been a s s i g n e d t h e mortgage a t t h e time i t i n i t i a t e d the foreclosure proceedings. 2 23 2100842 d e e d b e c a u s e MERS h a d no a u t h o r i t y t o i n i t i a t e t h e f o r e c l o s u r e proceedings. Fannie Consequently, the special warranty deed that Mae r e c e i v e d f r o m MERS two d a y s a f t e r t h e f o r e c l o s u r e s a l e , w h i c h d e p e n d e d f o r i t s e f f i c a c y upon t h e v a l i d i t y o f t h e MERS f o r e c l o s u r e d e e d , 94.07(b)(2)(I) void. s e e 11 Thompson a t 390 ( D a v i d A. Thomas 2 d ed. A c c o r d i n g l y , Fannie the ejectment As this on R e a l Property § 2 0 0 2 ) , was a l s o Mae d i d n o t have s t a n d i n g t o b r i n g action. court stated i n Sturdivant, supra: "A j u d g m e n t e n t e r e d i n an a c t i o n commenced b y a p a r t y l a c k i n g s t a n d i n g i s a n u l l i t y . Vann v . Cook, 989 So. 2 d 556, 559 ( A l a . C i v . App. 2 0 0 8 ) ; s e e a l s o B l e v i n s v . H i l l w o o d O f f i c e C t r . Owners' A s s ' n , 51 So. 3d 317, 321 ( A l a . 2010) (same). B e c a u s e [ t h e ejectment p l a i n t i f f ] l a c k e d standing t o b r i n g the ejectment a c t i o n , t h e t r i a l court never a c q u i r e d subject-matter jurisdiction over this dispute. A c c o r d i n g l y , t h e summary j u d g m e n t i s v o i d a n d i s hereby vacated. B l e v i n s , 51 So. 3 d a t 3 2 1 ; a n d C a d l e Co., 950 So. 2d a t 280. A d d i t i o n a l l y , because a void judgment will not support an appeal, G a l l a g h e r B a s s e t t S e r v s . , I n c . v . P h i l l i p s , 991 So. 2d 697, 701 ( A l a . 2 0 0 8 ) , t h i s appeal must be dismissed f o rlack of subject-matter j u r i s d i c t i o n . B l e v i n s , 51 So. 3d a t 3 2 3 . " B a s e d on t h e f o r e g o i n g a u t h o r i t i e s , Jefferson Circuit Court i s vacated dismissed. JUDGMENT VACATED; APPEAL DISMISSED. 24 t h e judgment o f t h e and the appeal is 2100842 Thompson, P . J . , a n d Thomas a n d Moore, J J . , c o n c u r . Pittman, J . , dissents, with joins. 25 writing, which Bryan, J . , 2100842 PITTMAN, J u d g e , dissenting. S t a n d i n g i s d e t e r m i n e d a t t h e commencement o f an a c t i o n . C a d l e Co. v. S h a b a n i , 4 So. 3d 460, 463 ( A l a . 2 0 0 8 ) . the ejectment p l a i n t i f f 277 i n C a d l e Co. v. S h a b a n i , ( A l a . 2 0 0 6 ) , who h a d no p a p e r t i t l e Unlike 950 So. 2d t o t h e p r o p e r t y , when F a n n i e Mae commenced t h e e j e c t m e n t a c t i o n , i t was p r i m a the l e g a l t i t l e h o l d e r because i t produced deed. See M u l l e r v. Seeds, a special 919 So. 2d 1174, facie warranty 1177 ( A l a . 2 0 0 5 ) . N e v e r t h e l e s s , i n s u p p o r t o f i t s summary-judgment m o t i o n , Fannie Mae failed to present any e v i d e n c e indicating that F l a g s t a r was t h e h o l d e r o f t h e n o t e b e f o r e MERS, as nominee for Flagstar, i n i t i a t e d foreclosure proceedings. failure of proof inability question t o prove presents the allegations of standing. See B y r d 2100734, M a r c h 16, 2012] 2012) a classic example F a n n i e Mae's of a party's of i t s complaint, not a v. M o r E q u i t y , So. 3d , Inc., [Ms. ( A l a . C i v . App. (Pittman, J . , concurring i n the r e s u l t ) . Because t h e Nelsons d i d n o t argue t o t h e t r i a l ground made t h e b a s i s judgment court the o f t h e main o p i n i o n ' s v a c a t i o n o f t h e and d i s m i s s a l of the appeal, j u d g m e n t i s due t o be a f f i r m e d . 26 the t r i a l The N e l s o n s court's d i d not refute 2100842 F a n n i e Mae's f l a w e d theory that b e c a u s e F l a g s t a r was Global's i t was entitled "assignee," to recover and t h e t r i a l court r e l i e d on t h a t t h e o r y i n e n t e r i n g t h e j u d g m e n t f o r F a n n i e I would a f f i r m court will not hold the a trial trial court's court judgment because i n e r r o r on argument t h a t t h e p a r t i e s d i d n o t p r e s e n t See Ex p a r t e R y a l s , Bryan, J . , 773 So. 2d 1011, concurs. 27 1013 an issue to the t r i a l ( A l a . 2000). Mae. this or court.

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