Erica Sumpter Congress v. U.S. Bank, N.A., as trustee

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REL: 06/08/2012 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 2100934 E r i c a Sumpter Congress v. U.S. Bank, N.A., as t r u s t e e Appeal from J e f f e r s o n C i r c u i t Court (CV-09-901113) THOMAS, Judge. In J u l y 2006, E r i c a Sumpter Congress executed a mortgage t o M o r t g a g e E l e c t r o n i c R e g i s t r a t i o n S y s t e m s , I n c . ("MERS"), a s nominee f o r M o r t g a g e L e n d e r s N e t w o r k USA, I n c . ("MLN"), a n d a promissory note f o r the p r i n c i p a l amount o f $104,400 i n favor 2100934 of MLN. MLN sold Congress's note t o EMAX F i n a n c i a l ("EMAX"); t h e n o t e c o n t a i n s an i n d o r s e m e n t sold The the note indorsement instead, note Shortly and i n d o r s e d trustee." ("the other LLC on t h e n o t e separate paper "securitized" 1 N.A., of i s the trustee Section ("PSA") itself; called an Congress's the note and and Assumption of the Trust 2.02 o f t h e P o o l i n g a n d f o r the Trust t r a n s f e r of the note i n t o Assignment a c k n o w l e d g e s U.S. associated the Trust. Agreement documentation Furthermore, between the Trust depositor, R e s i d e n t i a l Assets Securities Corporation and RFC p r o v i d e s the Trust agreement ("RFC"). o n t h e a l l o n g e , t o "U.S. B a n k a s trusts. Agreement receipt evidencing the the note, EMAX t h e n C o n g r e s s ' s n o t e was p l a c e d i n t o t h e 2 0 0 7 - E M X 1 T r u s t several Bank's i s on a t h e r e a f t e r , RFC T r u s t " ) ; U.S. B a n k , Servicing Company, t o RFC i s n o t c o n t a i n e d the indorsement allonge. and to R e s i d e n t i a l Funding t o EMAX. Group that t o U.S. i n March RFC h a d i n d o r s e d Bank, as trustee, ("RASC"), the notes placed at the time into of the 2007. A c c o r d i n g t o the p a r t i e s ' b r i e f s , a note i s " s e c u r i t i z e d " when numerous m o r t g a g e n o t e s a r e c o m b i n e d i n t o a p o o l , w h i c h , in turn, i s divided into smaller parts that are sold to i n v e s t o r s as mortgage-backed s e c u r i t i e s . 1 2 2100934 In February payments. Her loan delinquent bring and Congress defaulted and attempted current. t o work Congress Although with again. Ultimately, was a g a i n i ndefault. 24, Congress's 2008, foreclosure, the sent entire McCullough, testified t o Congress debt said, set GMAC reassured the she p r e p a r e d on J u l y 1 1 , foreclosure. with funds. for assigned 2008, a On J u n e foreclosure. to handle the the acceleration to notify foreclosure acceleration letter, her that and t o l d h e r that avoid t h e c h e c k was n o t h o n o r e d the attorney and spoke her loan sent a check t o sufficient was d u e a n d t h a t A f t e r she r e c e i v e d telephoned lacked that Congress t o Congress that h e r GMAC r e f e r r e d C o n g r e s s ' s m o r t g a g e Colleen letter account of her making payments Although Congress GMAC t o b r i n g h e r p a y m e n t s c u r r e n t , because loan i n May 2 0 0 8 , GMAC M o r t g a g e , w h i c h h a d merged w i t h Homecomings, n o t i f i e d loan her brought s h e was e v e n t u a l l y u n a b l e t o c o n t i n u e defaulted on s e r v i c e r , Homecomings, i n f o r m e d her payments her loan current, 2007, was her that imminent. s a i d Congress, she representative, who, s h e a f o r e c l o s u r e - s a l e date had n o t been GMAC w o u l d c o n t i n u e However, McCullough 3 t o work w i t h her t o had notice of the 2100934 foreclosure sale published consecutive i n t h e Alabama Messenger f o r three w e e k s -- J u l y 12, 19, and 26, 2008. When M c C u l l o u g h c h e c k e d t h e t i t l e she discovered mortgage. could To cloud that MERS remedy title f o r signing and executed GMAC, transferring Bank. although the The a mortgage anything discrepancy using her law f i r m , on J u l y an MERS, 29, 2008, f r o m MERS t o U.S. t h e mortgage the of the assignment assignment, included an to b u t t h e m o r t g a g e a s a way t o c l e a r t i t l e on stated the purpose foreclosure possession the McCullough, indebtedness, sale of that t h e a s s i g n m e n t was n o t of negotiating was $49,600 a t t h e f o r e c l o s u r e yield that of t h e mortgage held C o u r t h o u s e on A u g u s t 12, 2008. of the holder assignment that property, was n o t i n t e n d e d McCullough to serve as between to McCullough, of the r e l a t e d property. intended authority i t indicated assignment transfer the property, the ownership According listed the p o s s i b i l i t y to agreement was on C o n g r e s s ' s the note. at the Jefferson County U.S. B a n k made t h e w i n n i n g sale. the property 4 When C o n g r e s s t o U.S. Bank bid failed to after i t s 2100934 d e m a n d , U.S. Bank f i l e d on M a r c h 2009. 31, The case resulting November in 19, originally judgment 2009. g r a n t e d by the t r i a l was s e t f o r a new trial on of court February postjudgment On argues foreclosure fact that proceedings, those trial favor of U.S. Congress's a three-day t r i a l 2011. motion, the Congress held on After Congress trial s a l e was before the several the o f U.S. court Bank denied her court. judgment i s void because She invalid. this bases institution of the Bank of s t a n d i n g Sturdivant v. first the a r g u m e n t on o f t h e m o r t g a g e t o U.S. See 2010, She court's i t s the arguments. t h u s d e p r i v i n g U.S. proceedings. trial case After 1-3, i n favor BAC on motion and t h e 1, 2 0 1 0 . June 2009, entered postjudgment appealed to t h i s makes 13, Bank 11, 2010, e n t e r e d a l e n g t h y judgment 23, against October t o b e h e l d on J u n e the assignment accomplished in on c o u r t on M a r c h appeal, Congress that action tried However, was conclusion ejectment 2 was a an B a n k was the not foreclosure t o commence Home Loans As the t r i a l c o u r t e x p l a i n e d i n i t s judgment, Congress's s t e p m o t h e r , H e n r i e t t a J a c k s o n , was named as a d e f e n d a n t n s e r v i c e was not r e s i d e i n 2 5 2100934 Servicing, LP, , [Ms. 2100245, ( A l a . C i v . App. argues that reasons. the December 2011). foreclosure She p o s i t s a g a i n was U.S. exercise t h e power assigned in a related assignment recited that underlying any ineffective i t in she admitted i t was both t o U.S. the been indorsed the a sham to to mortgage i n that i t note the r e c i t a l s and the when MERS d i d n o t Bank underlying that several not e n t i t l e d contends that 3d Congress for had not been because transferred the So. because the mortgage had not argument, indebtedness interest McCullough not was invalid B a n k was t o i t and b e c a u s e t h e note it; of s a l e 2011] Alternatively, deed that 16, have to mortgage transfer and when i n t h e a s s i g n m e n t were true. Congress invalid next argues b e c a u s e U.S. that Bank the failed foreclosure to follow deed statutory was notice requirements s e t o u t i n A l a . Code 1975, § 3 5 - 1 0 - 9 , b e c a u s e i t did not l i s t the current the n o t e a n d m o r t g a g e a n d b e c a u s e i t s t a t e d t h a t U.S. identity of the holder o r owner b e e n a s s i g n e d t h e m o r t g a g e when i t h a d n o t y e t b e e n Congress separated, further making asserts the that the foreclosure 6 note and invalid, Bank had assigned. mortgage that of U.S. were Bank 2100934 breached i t s fiduciary duty to her by failing sale r e s u l t i n g i n a reasonable s a l e s p r i c e , and did not the and note, to debt. her properly her assured i t her that also of or the argues would acceleration that follow Bank to b r i n g the Bank relating Congress instrument, to to mortgage that the presumably to defeat that, regardless of whether the into the U.S. Trust, the improperly forged, Bank note. She also required her to fabricated, convincing was or evidence. court e r r e d by note, which, failing she says, not follow note not 7 while and she certain the was not trial n o t e was was current federal a negotiable court's conclusion properly i t s holder entitled that the trial that the allonge was clear and authenticity she complains timely transferred and to e x c l u d e or s t r i k e was procedures to foreclosures. establish Finally, mortgage mortgage payments argues lacked mortgage the occur a Bank Bank m i s r e p r e s e n t e d would failed argues of loss-mitigation U.S. regulations enforce U.S. foreclosure U.S. t h a t U.S. assignment of her that working with and her default, Congress that notify conduct by that the produced the allonge in to court trial to the discovery 2100934 and which, custodial As after she accuses, file was "on above, noted t h e eve the a three-day t r i a l of fact tenus ore on w h i c h rule: court's a c o u r t ' s judgment presumption the evidence." 1992). of issues by the is, trial instead, (Ala. unjust, Dixon However, our v. entered of f a c t ; the the trial as ore court to the i t s determination w i l l erroneous, without supporting or a g a i n s t the 596 review of the novo. to and legal governed S h e a l y v. So. by 2d 898, 899 of (Ala. conclusions reached the Golden, great weight ore 897 tenus So. rule 268, 2d and 271 at this 2004). We find one issue t i m e : whether the t r i a l prove forgery convincing was the findings by correctness exists Windsor, c o u r t i s not de was i s governed i s presented n o t be d i s t u r b e d u n l e s s c l e a r l y manifestly into Thus, our r e v i e w of the the judgment i s based c o n c l u s i o n s on evidence, inserted at which the c o u r t heard testimony "Where e v i d e n c e tenus, and trial." trial r e c e i v e d numerous e x h i b i t s . of prepared aiming or court prove of improperly fabrication evidence. to dispositive of the this appeal r e q u i r e d Congress allonge by clear C o n g r e s s ' s argument r e g a r d i n g at trial 8 is confusing at to and what she best. She 2100934 litters h e r argument w i t h "fraudulent," t h e d e s c r i p t i v e terms and " f a b r i c a t e d . " some e v i d e n c e a t t r i a l Although i n d i c a t i n g that "invalid," Congress digitized c o u l d be m a n i p u l a t e d a n d t h a t b o t h d i g i t i z e d adduced signatures signatures and s t a m p e d s i g n a t u r e s c o u l d be e a s i l y r e p r o d u c e d , i t a p p e a r s t h a t she was allonge that not i n t e n t were f o r g e d digitized r e p r o d u c e d was allonge on p r o v i n g was, that the signatures i n the t r a d i t i o n a l and stamped intended i n fact, sense. signatures Her e v i d e n c e could be t o support her contention fabricated t r a n s f e r o f the note t o the T r u s t . well after on t h e the easily that the alleged She s a y s a t t h e c o n c l u s i o n o f h e r argument on t h e i s s u e i n h e r a p p e l l a t e b r i e f t h a t t h e trial judge confused the r e a l "[a]uthenticity i s s u e , a b o u t w h i c h she s t a t e s of the business records i s qualitatively a d i f f e r e n t a n d more f u n d a m e n t a l i s s u e t h a n t h e a u t h e n t i c i t y o f t h e s i g n a t u r e on t h e a l l o n g e t h a t t h e t r i a l c o u r t f o c u s e s o n . " I t a p p e a r s t h a t C o n g r e s s w a n t e d t o p r o v e t h a t t h e a l l o n g e was fabricated or created a f t e r the f i r s t trial b y U.S. Bank o r GMAC i n r e s p o n s e t o h e r a r g u m e n t t h a t t h e n o t e h a d n o t b e e n properly negotiated t o U.S. Bank. 9 2100934 At the beginning discussion before file objections within the t o the although intended the Congress with file, which been l o c a t e d m i g h t have b e e n trial signatures ("the on and UCC"). before court also the and i n t o evidence, i n the on, that i t I ' l l consider time the the contains witnesses stated s t a t e d t h a t " i f [Congress] At allonge she q u e s t i o n e d The order. f o r Congress i n d i c a t e d trial case." attached a l l o n g e , were e n t e r e d authentic The the Bank's e x h i b i t s objections no counsel to scheduling some s h e n a n i g a n s were g o i n g the custodial had filed t o a d m i t a l l e x h i b i t s and t h a t when I d e c i d e Instead, pretrial a a u t h e n t i c i t y of c e r t a i n e x h i b i t s , allonge. show t h a t note a u t h e n t i c i t y o f U.S. d i d o b j e c t to the including f o r t h e p a r t i e s had c o u r t about Congress's f a i l u r e on t h e m o r n i n g o f t r i a l , t h a t she can the t r i a l counsel time s p e c i f i e d i n the Apparently, trial, of t r i a l , copy a copy of copy o f of the the the entire note and Congress d i d not object. r e g a r d i n g where t h e allonge custodial file and when and how i t created. court the was note authorized" correct and allonge under the A l a . Code 1975, in are that "presumed the to Uniform Commercial § 7-3-308(a). 10 stating be Code Likewise, Ala. R. 2100934 Evid. 902(9) provides that "[e]xtrinsic evidence of a u t h e n t i c i t y as a c o n d i t i o n p r e c e d e n t t o a d m i s s i b i l i t y i s n o t required with thereon, respect to ... [c]ommercial paper, signatures and documents r e l a t i n g t h e r e t o t o t h e e x t e n t by g e n e r a l commercial law." signatures thereon authorized, and Thus, t h e a l l o n g e i t s e l f and are U.S. provided presumed Bank was to not be the authentic required in the and first i n s t a n c e to e s t a b l i s h the a l l o n g e ' s a u t h e n t i c i t y to ensure i t s admissibility. However, authenticity despite of the any presumptions allonge or their authenticity. dispute but properly right, required i t insists Congress to that present clear Bank a r g u e s t h a t and signature convincing a forgery on evidence in i s presumed v a l i d , the 308(a) s t a t e s otherwise: 11 the Congress was not the trial and allonge. situations court convincing a n o t e must be Official of Bank does U.S. clear evidence of f o r g e r y or f a b r i c a t i o n of the U.S. favor i t s signatures, e n t i t l e d to challenge that in in Although shown by which a Comment t o § 7-3- 2100934 " ' P r e s u m e d ' i s d e f i n e d i n S e c t i o n [ 7 - ] 1 - 2 0 1 [ ] and means t h a t u n t i l some e v i d e n c e i s i n t r o d u c e d w h i c h would support a f i n d i n g t h a t the s i g n a t u r e i s forged or u n a u t h o r i z e d , the p l a i n t i f f i s not r e q u i r e d t o p r o v e t h a t i t i s v a l i d . The p r e s u m p t i o n r e s t s upon the f a c t t h a t i n o r d i n a r y experience forged or unauthorized signatures are very uncommon, and n o r m a l l y any e v i d e n c e i s w i t h i n t h e c o n t r o l o f , o r more a c c e s s i b l e t o , t h e d e f e n d a n t . The d e f e n d a n t i s t h e r e f o r e r e q u i r e d t o make some s u f f i c i e n t s h o w i n g of the grounds f o r the d e n i a l b e f o r e the p l a i n t i f f i s r e q u i r e d t o i n t r o d u c e e v i d e n c e . The d e f e n d a n t ' s evidence need not be sufficient to require a d i r e c t e d v e r d i c t , b u t i t must be enough t o s u p p o r t the denial by permitting a finding in the defendant's favor. Until i n t r o d u c t i o n of such e v i d e n c e the presumption r e q u i r e s a f i n d i n g f o r the plaintiff. Once s u c h e v i d e n c e i s i n t r o d u c e d the burden of establishing the signature by a preponderance of the total e v i d e n c e i s on the plaintiff." 3 In i t s brief, recorded U.S. deeds, i m p e a c h e d o n l y by Bank r e l i e s which are cases presumed v a l i d c l e a r and Thompson v. M i t c h e l l , 337 on So. involving properly and convincing evidence. 2d 1317, 1318 which See, ( A l a . 1976) may be e.g., ("This A l t h o u g h t h e O f f i c i a l Comment t o § 7-3-308 r e f e r s t o § 7-1-201, t h e d e f i n i t i o n o f "presumed" i s no l o n g e r c o n t a i n e d i n t h a t code s e c t i o n . I n s t e a d , § 7-1-206 e x p l a i n s t h e use o f p r e s u m p t i o n s u n d e r t h e UCC, s t a t i n g : "Whenever t h i s title c r e a t e s a 'presumption' w i t h respect to a f a c t , or p r o v i d e s t h a t a f a c t i s 'presumed,' t h e t r i e r o f f a c t must f i n d t h e e x i s t e n c e o f t h e f a c t u n l e s s and u n t i l e v i d e n c e i s i n t r o d u c e d that supports a f i n d i n g of i t s nonexistence." 3 12 2100934 c o u r t has s a i d t h a t p r o p e r e x e c u t i o n and r e c o r d a t i o n o f a d e e d i s p r i m a f a c i e e v i d e n c e o f i t s due s u c h a d e e d as clear and fact."). a f o r g e r y must show t h a t i t was convincing certainty, e x e c u t i o n and one leaving evidence, no doubt reaching of the a attacking a forgery high degree truthfulness of However, t h e n o t e i s n o t a d e e d , and t h e UCC t h e common l a w c o n c e r n i n g deed f o r g e r i e s a p p l i e s t o by of such and not questions r e g a r d i n g i t s a u t h e n t i c i t y . As t h e a b o v e - q u o t e d comment makes very clear, the only burden presumption i n favor substantial evidence presumption i s rebutted, on one attempting of a s i g n a t u r e to refute the on the trial to rebut a note i s to provide presumption. court If the then evaluates the i s s u e under a preponderance of the e v i d e n c e s t a n d a r d . e x p l a i n e d a b o v e , h o w e v e r , C o n g r e s s a p p e a r s t o be prevent enforcement of the note, f a b r i c a t e d or, e s s e n t i a l l y , order to remedy indorsements. trial court and apparent defect in first the not invalid t h a t the a l l o n g e c r e a t e d a f t e r the we trial was in chain of Thus, d e s p i t e t h e r e l i a n c e on § 7-3-308 by the the the but As arguing t h a t s i g n a t u r e s on t h e a l l o n g e a r e f o r g e d o r o t h e r w i s e to the arguments of the p a r t i e s r e s p e c t i n g i t s 13 2100934 m e a n i n g , we c o n c l u d e t h a t t h a t code s e c t i o n h a s no a p p l i c a t i o n here. Nevertheless, a higher contention rational the t r i a l burden that than was required the allonge basis for convincing-evidence question. c o u r t r e q u i r e d t h a t C o n g r e s s meet The the was t o prove her fabricated. application standard trial i n order of There the i s no clear-and- of proof to t h i s p a r t i c u l a r court was presented with fact indirect e v i d e n c e i n d i c a t i n g t h a t t h e a l l o n g e was p a r t o f t h e c u s t o d i a l file at least by August evidence by p r e s e n t i n g expert 2007. Congress the testimony i n mortgage s e c u r i t i z a t i o n , challenged that o f Thomas J . Adams, an who s t a t e d t h a t t h e f a c t t h a t t h e a l l o n g e was p h y s i c a l l y l o c a t e d i n a d i f f e r e n t p a r t o f the custodial file i n d i c a t e d t o him t h a t i t had been at a l a t e r time. I n a d d i t i o n , as t h e t r i a l judgment, was there custodial file the which, "an file, some was a c t u a l l y opportunity the t r i a l for the confusion created court noted i n i t s regarding where the k e p t p e n d i n g GMAC's r e q u e s t f o r court stated, at least documents manipulated." 14 to be indicated altered or 2100934 The trial c o u r t s h o u l d have e v a l u a t e d t h e i s s u e w h e t h e r the a l l o n g e had been c r e a t e d a f t e r t h e f i r s t preponderance-of-the-evidence standard. higher clear-and-convincing-evidence Congress's evidence, the t r i a l this trial under the Because i t used the standard to evaluate c o u r t has no c h o i c e b u t t o r e v e r s e c o u r t ' s judgment and remand t h e c a u s e t o t h e trial c o u r t f o r i t t o e v a l u a t e the e v i d e n c e adduced a t t r i a l under the a p p r o p r i a t e standard of p r o o f . So. 2d 46, 47 ( A l a . 1994) ( e x p l a i n i n g t h a t an a p p e l l a t e c o u r t , once i t d e t e r m i n e s t h a t a t r i a l a higher burden judgment of proof a n d remand[] make i t s d e t e r m i n a t i o n correct In See Ex p a r t e P e r k i n s , 646 t o an c o u r t has i m p r o p e r l y a p p l i e d i s s u e , must "reverse[] the the cause t o a l l o w the t r i a l court to from the d i s p u t e d e v i d e n c e , using the standard"). light particular of our reversal of the i s s u e , and b e c a u s e t h e t r i a l on t h i s i s s u e on remand may judgment on this court's determination a f f e c t t h e o t h e r i s s u e s r a i s e d by C o n g r e s s i n t h i s a p p e a l , we p r e t e r m i t d i s c u s s i o n o f C o n g r e s s ' s other issues. 2d 719, 723 See F a v o r i t e M a r k e t S t o r e v. W a l d r o p , ( A l a . C i v . App. 2005) 15 (stating 924 that this So. court 2100934 would pretermit dispositive discussion of further nature of another issues i n light of issue). REVERSED AND REMANDED WITH INSTRUCTIONS. P i t t m a n and Moore, J J . , c o n c u r . Thompson, without P . J . , and Bryan, writings. 16 J . , concur i n the r e s u l t ,

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