Edward J. Thomas and Ruth Thomas v. Wells Fargo Bank, N.A., as Trustee for the Certificateholders of Certain Asset-Backed Certificates

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REL: 08/31/2012 Notice: T h i s o p i n i o n i s s u b j e c t t o formal 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 R e p o r t e r o f D e c i s i o n s , 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 be 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 SPECIAL TERM, 2012 2101153 Edward J . Thomas and Ruth Thomas v. Wells Fargo Bank, N.A., as Trustee f o r the C e r t i f i c a t e h o l d e r s o f C e r t a i n Asset-Backed Certificates Appeal from Montgomery C i r c u i t (CV-08-900336) Court PER CURIAM. E d w a r d J . Thomas a n d h i s w i f e , R u t h Thomas, a summary Trustee judgment i n f a v o r of Wells Fargo appeal Bank, N.A., from as f o r t h e C e r t i f i c a t e h o l d e r s o f S o u n d v i e w Home L o a n 2101153 T r u s t 2007-OPTl, A s s e t - B a c k e d ("the trustee"), them. We Certificates, i n the t r u s t e e ' s Series ejectment 2007-OPTl action against affirm. F a c t u a l and P r o c e d u r a l B a c k g r o u n d The Thomases r e f i n a n c e d t h e e x i s t i n g m o r t g a g e on their r e s i d e n c e l o c a t e d i n Mathews t h r o u g h a new m o r t g a g e l o a n f r o m O p t i o n One M o r t g a g e C o r p o r a t i o n ( " O p t i o n 23, 2007, E d w a r d Thomas e x e c u t e d One"). $480,000 over payments of securing the note recorded on a period $5,141.47. March The Thomases P r o b a t e o f Montgomery 2007, executed i n the o f f i c e a the note, the monthly mortgage The m o r t g a g e was o f t h e Judge of County. I t i s u n d i s p u t e d t h a t , a f t e r making f o u r or f i v e on note i n indebtedness o f 30 y e a r s w i t h i n i t i a l i n f a v o r o f O p t i o n One. 2, February an a d j u s t a b l e - r a t e f a v o r o f O p t i o n One, a g r e e i n g t o p a y a p r i n c i p a l of On Thomases made no further payments payments. On November 8, 2007, O p t i o n One n o t i f i e d t h e Thomases t h a t i t was accelerating the maturity date of f o r e c l o s u r e p r o c e e d i n g s were i m m i n e n t . the 1 loan and that On November 14, 2007, U n l i k e t h e m o r t g a g e a t i s s u e i n J a c k s o n v. W e l l s F a r g o Bank, N.A., 90 So. 3d 168 ( A l a . 2 0 1 2 ) , t h e Thomases' m o r t g a g e d i d not c o n t a i n a requirement t h a t the lender g i v e the 1 2 2101153 an a t t o r n e y r e p r e s e n t i n g t h e t r u s t e e n o t i f i e d t h e Thomases v i a certified letter, letter that the trustee was t h e c r e d i t o r commencing foreclosure t o whom proceedings, s c h e d u l e d f o r December 1 3 , 2007. of the foreclosure notice (who, a c c o r d i n g t h e debt with was owed) was a foreclosure The l e t t e r t o be p u b l i s h e d That n o t i c e s t a t e d i n p e r t i n e n t to the enclosed sale a copy i n t h e newspaper. part: " D e f a u l t h a v i n g been made i n t h e i n d e b t e d n e s s s e c u r e d b y t h a t c e r t a i n m o r t g a g e e x e c u t e d b y Edward J. Thomas a n d R u t h Thomas, h u s b a n d a n d w i f e t o O p t i o n One M o r t g a g e C o r p o r a t i o n , d a t e d F e b r u a r y 28, 2007, s a i d m o r t g a g e b e i n g r e c o r d e d i n Book 03497, Page 0607, i n t h e O f f i c e o f t h e P r o b a t e Judge o f Montgomery C o u n t y , A l a b a m a . S a i d m o r t g a g e was l a s t s o l d , a s s i g n e d , a n d t r a n s f e r r e d t o W e l l s F a r g o Bank, N.A., as T r u s t e e f o r t h e C e r t i f i c a t e h o l d e r s o f S o u n d v i e w Home L o a n T r u s t 2007-OPT1, A s s e t - B a c k e d C e r t i f i c a t e s , S e r i e s 2007-OPT1. "The undersigned, as Trustee f o r the C e r t i f i c a t e h o l d e r s o f S o u n d v i e w Home L o a n Trust 2007-OPT1, Asset-Backed Certificates, Series 2007-OPT1, 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 contained 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 bidder f o r cash before the c o u r t h o u s e d o o r o f ... Montgomery C o u n t y , A l a b a m a d u r i n g t h e l e g a l h o u r s o f s a l e , on December 13, 2007, t h e f o l l o w i n g d e s c r i b e d r e a l e s t a t e s i t u a t e d i n Montgomery C o u n t y , A l a b a m a . " b o r r o w e r n o t i c e o f a n d an o p p o r t u n i t y before a c c e l e r a t i o n . 3 t o cure the default 2101153 The following assigned The the office and of the Judge o f s a l e was 15, 2007, Option r e c o r d e d on J a n u a r y 9, for s u b s e q u e n t l y postponed t o March were r e p u b l i s h e d . $510,000. possession trustee's demand, Montgomery C i r c u i t of the 2008, P r o b a t e o f Montgomery C o u n t y . On t r u s t e e c o n d u c t e d a f o r e c l o s u r e s a l e and property One the indebtedness secured t h e r e b y to a s s i g n m e n t was relinquish the November newspaper n o t i c e s 2008, t h e the The foreclosure 2008, on t h e m o r t g a g e and the t r u s t e e . in day, When the the Thomases property trustee 6, purchased refused to in response to the an filed Court, seeking March 6, action in the to e j e c t the Thomases f r o m property. The Thomases lacked standing trustee did instituted asserted claims not the answered, to foreclose own the note foreclosure counterclaims against asserting because, and the and the The trustee, O p t i o n One at 2 trustee had alleged, they mortgage proceedings. against O p t i o n One that the the time Thomases and i t also third-party Mortgage Services, T h e c o u n t e r c l a i m s were b a s e d upon t h e t r u s t e e ' s a l l e g e d n e g l i g e n c e ; w a n t o n n e s s ; t r e s p a s s ; abuse o f p r o c e s s ; s l a n d e r o f t i t l e ; respondeat-superior l i a b i l i t y ; n e g l i g e n t or wanton h i r i n g , s u p e r v i s i o n , t r a i n i n g , o r r e t e n t i o n ; and j o i n t - v e n t u r e liability. 2 4 2101153 Inc. (hereinafter defendants"). 3 referred Following to as discovery, "the Option t h e Thomases One amended t h e i r c o m p l a i n t t o a s s e r t s i m i l a r c l a i m s a g a i n s t an a d d i t i o n a l third-party ("LPS"), defendant, a manufacturer Lender Processing Services, of l o a n - t r a c k i n g software Inc. used by mortgage companies. The Thomases moved f o r a summary j u d g m e n t b a s e d on t h e trustee's a l l e g e d lack of standing. engaged i n e x t e n s i v e defendants, A f t e r the p a r t i e s had discovery, the t r u s t e e , the Option and LPS a l s o moved M a r c h 28, 2 0 1 1 , t h e t r i a l One f o r a summary j u d g m e n t . court denied On t h e Thomases' m o t i o n for a summary j u d g m e n t a n d e n t e r e d a summary j u d g m e n t i n f a v o r of the t r u s t e e , the Option One defendants, and L P S . The Thomases f i l e d a t i m e l y p o s t j u d g m e n t m o t i o n on A p r i l 27, 2 0 1 1 , specifically r e q u e s t i n g a h e a r i n g on t h a t m o t i o n . court s e t the matter on August 8, The trial f o r a h e a r i n g , b u t t h e h e a r i n g was h e l d 2011, a f t e r the motion had been denied by T h e t h i r d - p a r t y c l a i m s a g a i n s t t h e O p t i o n One d e f e n d a n t s included breach of c o n t r a c t ; c i v i l c o n s p i r a c y ; n e g l i g e n c e ; w a n t o n n e s s ; v i o l a t i o n o f t h e F a i r Debt C o l l e c t i o n P r a c t i c e s A c t ; wrongful f o r e c l o s u r e ; unjust enrichment; breach of a m o d i f i c a t i o n agreement; f r a u d ; s u p p r e s s i o n ; c i v i l c o n s p i r a c y ; r e s p o n d e a t - s u p e r i o r l i a b i l i t y ; n e g l i g e n t h i r i n g , t r a i n i n g , and s u p e r v i s i o n ; and j o i n t - v e n t u r e l i a b i l i t y . 3 5 2101153 o p e r a t i o n o f l a w on J u l y 26, 2011, p u r s u a n t t o R u l e 59.1, A l a . R. C i v . P. The Thomases a p p e a l e d on August 31, 2011; the supreme c o u r t t r a n s f e r r e d t h e a p p e a l t o t h i s c o u r t p u r s u a n t t o § 1 2 - 2 - 7 ( 6 ) , A l a . Code 1975. 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 novo. A motion genuine for a issue the moving p a r t y i s e n t i t l e d j u d g m e n t as a m a t t e r o f l a w . fact "that and law." 1036, burden t h e r e i s no 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 genuine that [ i t ] i s e n t i t l e d Rule 56(c)(3); 1038 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 of R u l e 5 6 ( c ) ( 3 ) , A l a . R. 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 nonmovant to rebut 'substantial evidence.'" (footnote omitted). "[S]ubstantial the of 2d "the movant's L e e , 592 evidence So. is 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 . " 6 West v. Founders 2101153 Life Assurance 1 9 8 9 ) ; see Co. of Florida, 547 § 1 2 - 2 1 - 1 2 ( d ) , A l a . Code So. 2d 870, 871 (Ala. 1975. Discussion On appeal, the Thomases c h a l l e n g e only the p r o p r i e t y of t h e summary j u d g m e n t i n f a v o r o f t h e t r u s t e e on i t s e j e c t m e n t claim. They do not argue t h a t the summary j u d g m e n t i n o f t h e t r u s t e e as t o t h e i r c o u n t e r c l a i m s the summary j u d g m e n t s i n f a v o r o f t h e were e r r o n e o u s . the trustee's The was erroneous or time Thomases f o c u s t h e i r argument s o l e l y alleged foreclosure lack of standing to foreclose. proceedings were initiated, t o w h i c h t h e i r d e b t was 2100245, App. December 2011), authority to the 16, they entity v. Mortgage BAC Home L o a n s S e r v i c i n g , LP, 2011] Thomases foreclose foreclosure the The ___ So. argue because 3d that i t ___ , ___ the did a s s i g n m e n t o f t h e m o r t g a g e f r o m O p t i o n One 2007, and but, at owed. I. Sturdivant on They l o a n agreement c o n t e n d , t h e t r u s t e e d i d n o t e s t a b l i s h t h a t i t was Citing that t h i r d - p a r t y defendants c o n c e d e t h a t t h e y were i n d e f a u l t o f t h e i r the favor proceedings 7 (Ala. trustee [Ms. Civ. had no receive an u n t i l November 15, not commenced on November 14, 2101153 2007, when an the date attorney Thomases t h a t of the Sturdivant, who the loan initiating dealt assignment, i s not with trustee notified a c c e l e r a t i n g the t r u s t e e was and which represented the maturity foreclosure the timeliness o f f o r e c l o s u r e p r o c e e d i n g s , t h e t r u s t e e was Thomases' p r o m i s s o r y note. (providing power exercised any "by the any p e r s o n who, person, by See of or 57 So. Ass'n, Civ. 851, [Ms. Property: sale the 851 ( 1 9 1 1 ) ; and 2 012) . Mortgages See § in a personal mortgage t r u s t e e made the initiation the h o l d e r of Code mortgage 1975 may representative becomes L i t t l e , 176 the be of entitled Ala. 267, P e r r y v. F e d e r a l N a t ' l M o r t g . 2012] generally 5.4(a) a 35-10-12, A l a . H a r t o n v. 2100235, June 29, App. § assignment or o t h e r w i s e , t o t h e money t h u s s e c u r e d " ) ; 270, of c o n t r o l l i n g here because the a p r i m a f a c i e s h o w i n g t h a t , s i x months b e f o r e that proceedings. So. 3d , Restatement (1997) (stating (Ala. (Third) that of "[a] t r a n s f e r o f an o b l i g a t i o n s e c u r e d by a m o r t g a g e a l s o t r a n s f e r s the mortgage unless the parties otherwise"). 8 to the transfer agree 2101153 II. Paragraph " [ t ] h e note this 19 the or a p a r t i a l security without of to One part t o UBS may several times. be sold The First, Option One one a pool of loans On Products, Inc. Greenwich t r a n s f e r r e d the 30, or more times loan sold to I n c . , and 2007, t h e loan On May 15, its affiliate, ("FASCO"). a trust process and known as converted Financial On t h e same day, conveyed to the t r u s t e e , pursuant The Thomases' was 2007, the pooled to mortgage-backed s e c u r i t i e s , "securitization." and Capital Thomases' l o a n , a l o n g w i t h o t h e r m o r t g a g e l o a n s , was into was Option to Greenwich ("Greenwich") . Asset S e c u r i t i e s Corporation (together with t h e l o a n was t r a n s f e r r e d April loan that Owner T r u s t 2001-2002, t h a t was Financial provided Thomases' Warburg R e a l E s t a t e S e c u r i t i e s , Owner T r u s t 2 0 0 2 - 2 0 0 3 . of mortgage i n t e r e s t i n the note borrower." t o Bank o f A m e r i c a and then Note Thomases' instrument) notice transferred The loan a was t o a " P o o l i n g and S e r v i c i n g A g r e e m e n t " ("PSA") t h a t had b e e n e x e c u t e d on A p r i l 1, 2007, by the depositor trustee New York (FASCO), (Wells Fargo). law and that the The servicer PSA One), and the s t a t e s t h a t i t i s g o v e r n e d by i t s purpose 9 (Option i s to establish a real- 2101153 estate-mortgage-investment-conduit ("REMIC") t r u s t . The PSA s e t s o u t s p e c i f i c r e q u i r e m e n t s r e g a r d i n g t h e t i m i n g a n d manner o f t r a n s f e r r i n g a s s e t s t o t h e t r u s t so as t o e n s u r e trust i s exempt f r o m the t r u s t agreed f e d e r a l income t a x , 4 set and t h e p a r t i e s t o n o t t o t a k e any a c t i o n t h a t w o u l d c a u s e t h e t r u s t t o be s u b j e c t t o f e d e r a l income t a x . compliance I n o r d e r t o be i n w i t h I n t e r n a l Revenue Code r e q u i r e m e n t s , a "closing that the date" o f May 15, 2007, t h e PSA f o r the t r a n s f e r of a s s e t s t o t h e t r u s t a n d p r o v i d e d a 90-day window ( w h i c h window c l o s e d on A u g u s t 13, 2007) f o r f i n a l i z i n g necessary t o complete the t r a n s f e r any documentation of assets to the t r u s t . S e c t i o n 2.01 o f t h e PSA s t a t e s : "The D e p o s i t o r [FASCO], c o n c u r r e n t l y w i t h t h e e x e c u t i o n a n d d e l i v e r y h e r e o f , does h e r e b y t r a n s f e r , a s s i g n , s e t over and o t h e r w i s e convey i n t r u s t t o the Trustee without recourse f o r the b e n e f i t of the C e r t i f i c a t e h o l d e r s a l l t h e r i g h t , t i t l e and i n t e r e s t 4 26 U.S.C. § 860A p r o v i d e s : "(a) G e n e r a l r u l e . - - E x c e p t as o t h e r w i s e p r o v i d e d i n t h i s p a r t , a REMIC s h a l l n o t be s u b j e c t t o t a x a t i o n under t h i s s u b t i t l e (and s h a l l n o t be t r e a t e d as a c o r p o r a t i o n , p a r t n e r s h i p , o r t r u s t f o r purposes o f t h i s s u b t i t l e ) . "(b) Income t a x a b l e t o h o l d e r s . - - T h e income o f any REMIC s h a l l be t a x a b l e t o t h e h o l d e r s o f i n t e r e s t s i n s u c h REMIC as p r o v i d e d i n t h i s p a r t . " 10 2101153 o f t h e D e p o s i t o r , i n c l u d i n g any s e c u r i t y i n t e r e s t t h e r e i n f o r t h e b e n e f i t o f t h e D e p o s i t o r , i n and t o ... e a c h M o r t g a g e Loan i d e n t i f i e d on t h e M o r t g a g e Loan S c h e d u l e "In connection with such transfer and a s s i g n m e n t , t h e D e p o s i t o r does h e r e b y d e l i v e r t o and d e p o s i t w i t h t h e C u s t o d i a n on b e h a l f o f t h e T r u s t e e , t h e [ t h e m o r t g a g e and t h e m o r t g a g e n o t e , a l o n g w i t h the c h a i n of assignments p e r t i n e n t t o each mortgage loan]." The T h o m a s e s ' l o a n was the PSA 15, specifically 2007. mortgage-loan schedule Patrick Gorrien, a as o f t h e Wells responsible f o r r e c e i v i n g and related loans to custodian, Wells was for which t e s t i f i e d by i d e n t i f i e d and employee was Fargo who collateral was Gorrien the files document explained that Fargo, i n a d d i t i o n to b e i n g the s e c u r i t i z a t i o n t r u s t e e , a l s o t h e document c u s t o d i a n f o r t h e s e c u r i t i z a t i o n According to Gorrien, Wells custodian f o r Option One and F a r g o had a l s o been the the other e n t i t i e s an i n t e r e s t i n t h e T h o m a s e s ' l o a n b e f o r e Gorrien One May t r a c k i n g the deposition. on c l o s i n g d a t e on Fargo Wells listed testified actual that Wells physical F a r g o had possession of received had securitized. from collateral p e r t a i n i n g t o t h e Thomases' l o a n on M a r c h 9, 2007. 11 document t h a t had i t was the trust. That Option file file 2101153 contained, The among o t h e r t h i n g s , t h e Thomases' p r o m i s s o r y n o t e . n o t e i s i n d o r s e d i n b l a n k b y an a u t h o r i z e d representative of O p t i o n One; the indorsement i s n o t c o n t a i n e d itself, b u t on an a l l o n g e . on t h e n o t e 5 G o r r i e n e x p l a i n e d t h a t e a c h t i m e t h e Thomas l o a n h a d b e e n transferred to a different entity, been r e l a b e l e d and p l a c e d to the l o c a t i o n testified of that securitization the c o l l a t e r a l on a d i f f e r e n t s h e l f that other Wells Fargo, trustee, had entity's in had corresponding files. i t s capacity physical file possession Gorrien as the of the c o l l a t e r a l f i l e c o n t a i n i n g t h e Thomases' n o t e on May 15, 2007, the closing accordance date with of the t r u s t . t h e terms Gorrien stated that, i n o f t h e PSA, he h a d c e r t i f i e d on An a l l o n g e i s a s e p a r a t e p a p e r c o n t a i n i n g an i n d o r s e m e n t . C o n g r e s s v . U.S. Bank, N.A., [Ms. 2100934, June 8, 2012] So. 3d , ( A l a . C i v . App. 2012) . O r i g i n a l l y , t h e u s e o f an a l l o n g e "was a l l o w a b l e o n l y when t h e b a c k o f t h e i n s t r u m e n t itself was s o c o v e r e d w i t h previous indorsements that convenience o r n e c e s s i t y r e q u i r e d a d d i t i o n a l space f o r f u r t h e r indorsements." See C l a r k v. Thompson, 194 A l a . 504, 505, 69 So. 925, 925 ( 1 9 1 5 ) . The l a s t s e n t e n c e o f § 7 - 3 - 2 0 4 ( a ) , A l a . Code 1975, p r o v i d e s t h a t , " [ f ] o r t h e p u r p o s e o f d e t e r m i n i n g w h e t h e r a s i g n a t u r e i s made on an i n s t r u m e n t , a p a p e r a f f i x e d to the instrument i s part of the instrument." The O f f i c i a l Comment t o § 7-3-204 s t a t e s t h a t " [ a ] n i n d o r s e m e n t on an a l l o n g e i s v a l i d e v e n t h o u g h t h e r e i s s u f f i c i e n t s p a c e on t h e i n s t r u m e n t f o r an i n d o r s e m e n t . " 5 12 2101153 t h r e e d i f f e r e n t o c c a s i o n s -- May 15, 2007, June 26, 2007, and A p r i l 1, 2008 -- t h a t W e l l s F a r g o h e l d t h e c o l l a t e r a l f i l e s c u s t o d i a n f o r the The trust. Thomases maintain that p o s s e s s i o n o f t h e n o t e on May for two reasons. a s s e t s was by New First, "negotiable they say, those two beyond that determinative acquisition could of trust i n t u r n , governed the be note was not transferred We will a by additional undertaking payment o f money. Thomases A p p l i c a b i l i t y of the argue documents t o t h e t r u s t was that terms of the Thomases p o i n t t o t h e PSA. or address conveyance In support and of the loan Y o r k law because the with the of t h a t argument, the deposition testimony of witness. Y o r k l a w y e r who mortgage-backed s e c u r i t i e s PSA documents i n c o m p l i a n c e affidavit Thomas Adams, t h e i r e x p e r t Adams, a New the v o i d u n d e r New t r u s t d i d not a c q u i r e those express not physical arguments i n t u r n . A. The the the contend, p o s s e s s i o n b e c a u s e i t r e q u i r e d "an instruction" trustee's w h i c h was, Second, they instrument" the 15, 2007, was g o v e r n e d by t h e PSA, Y o r k Law. as and 13 had had represented later i s s u e r s of b e e n e m p l o y e d as a 2101153 c r e d i t a n a l y s t a t Moody's I n v e s t o r s Service, opined that the t r u s t e e d i d n o t own t h e Thomases' n o t e b e c a u s e , he s a i d , t h e r e q u i r e m e n t s o f t h e PSA h a d n o t b e e n s a t i s f i e d . said, t h e PSA r e q u i r e d t h e d e p o s i t o r collateral files to the t r u s t ' s F i r s t , Adams (FASCO) t o d e l i v e r t h e document F a r g o ) on May 15, 2007, b u t , a c c o r d i n g custodian (Wells t o Adams, t h e r e was no a c t u a l " d e l i v e r y " b y FASCO t o W e l l s F a r g o on t h a t d a t e b e c a u s e Wells Fargo, entities i n i t s capacity other than the possessed the c o l l a t e r a l f i l e as t h e document c u s t o d i a n f o r securitization trust, already c o n t a i n i n g t h e Thomases' n o t e . A c c o r d i n g l y , Adams s a i d , d e l i v e r y o f t h e Thomases' n o t e t o t h e t r u s t ' s document c u s t o d i a n was a c t u a l l y made b y t h e o r i g i n a t o r of the loan violation title One) o f t h e PSA's rather requirement than that the depositor, the t r u s t t o t r u s t a s s e t s o n l y from t h e d e p o s i t o r . stated that the (Option transfer in receive S e c o n d , Adams t h e PSA r e q u i r e m e n t s were n o t s a t i s f i e d b e c a u s e o f t h e Thomases' m o r t g a g e t o t h e t r u s t was made a f t e r t h e c l o s i n g d a t e o f May 15, 2007, a n d a f t e r t h e 90-day extension o f A u g u s t 13, 2007, h a d p a s s e d . L a s t , Adams said, the mortgage d i d n o t r e f l e c t a complete c h a i n o f assignments 14 2101153 and t h e n o t e d i d n o t r e f l e c t a c o m p l e t e c h a i n o f i n d o r s e m e n t s , as r e q u i r e d by t h e PSA. I n response t o the Thomases' c h a l l e n g e t o the authority t o e n f o r c e t h e n o t e and m o r t g a g e b a s e d on v i o l a t i o n s o f t h e PSA, who trustee's were neither alleged t h e t r u s t e e a r g u e s t h a t t h e Thomases, parties to the PSA nor third-party b e n e f i c i a r i e s o f t h e PSA, do n o t have " s t a n d i n g " t o i n v o k e t h e PSA. A substantial have a g r e e d w i t h mortgagees. Co. number o f c o u r t s similar See, e.g., (In re C o r r e i a ) , i n other j u r i s d i c t i o n s l a c k - o f - s t a n d i n g arguments C o r r e i a v. D e u t s c h e 452 B.R. 319, 324-25 2 0 1 1 ) ; B i t t i n g e r v. W e l l s F a r g o Bank, NA, 625-26 (S.D. ( B a n k r . S.D. n.4 Tex. 2010); Bank N a t ' l T r u s t ( 1 s t C i r . B.A.P. 744 F. Supp. 2d I n r e Smoak, 461 B.R. 510, O h i o . 2 0 1 1 ) ; and I n r e A l m e i d a , 417 B.R. ( B a n k r . D. Mass. made by 518-21 140, 2009). "Most o f t h e r e p o r t e d d e c i s i o n s a r i s e i n c a s e s i n which the borrower i n i t i a t e d a l a w s u i t a g a i n s t the mortgagee s e e k i n g a d e t e r m i n a t i o n t h a t i t l a c k e d a u t h o r i t y t o e n f o r c e t h e s u b j e c t n o t e and m o r t g a g e o r w r o n g f u l l y f o r e c l o s e d on t h e m o r t g a g e . Other d e c i s i o n s emanate f r o m b a n k r u p t c y p r o c e e d i n g s i n which the debtor either initiated affirmative a d v e r s a r y p r o c e e d i n g s a g a i n s t the mortgagee r a i s i n g s i m i l a r c l a i m s , o b j e c t e d t o the mortgagee's p r o o f of c l a i m , or c h a l l e n g e d the mortgagee's r i g h t t o seek r e l i e f from the a u t o m a t i c s t a y . " 15 619, 149 2101153 In re Walker, 466 B.R. 271, 285 (Bankr. E.D. Pa. (emphasis added; f o o t n o t e s o m i t t e d ) . We defendant-mortgagor a c t i o n must "standing" in an requirement ejectment i n order q u e s t i o n whether Hawaii, v. W i l l i a m s , March 29, 2012) ( C i v . No. (noting p l a i n t i f f ' s requirement," satisfy to a s s e r t a defense c l a i m s b r o u g h t by t h e p l a i n t i f f - m o r t g a g e e . N a t ' l T r u s t Co. 2012) See a against D e u t s c h e Bank 11-00632 JMS/RLP) that the "'[s]tanding' is (D. a and r e a s o n i n g t h a t when a l e n d e r i s t h e p l a i n t i f f s e e k i n g t o have t h e c o u r t d e c l a r e t h e validity o f a j u d i c i a l f o r e c l o s u r e , t h e l e n d e r must p r o v e i t s s t a n d i n g , but t h a t when l e n d e r s are defending t h e m s e l v e s i n an action b r o u g h t by b o r r o w e r , l e n d e r s n e e d n o t " e s t a b l i s h ' s t a n d i n g ' t o defend themselves"). We need prohibited not decide, (either contract) principles of standing or privity of v i o l a t i o n s d i d not a f f e c t the t r u s t e e ' s r i g h t t o e n f o r c e the note. Paragraph provides: federal "This law and 15 of the security the law such violations Thomases' m o r t g a g e instrument of the 16 shall be jurisdiction of are the that violations Thomases occurred, assuming alleged the PSA even asserting whether the because, from by however, specifically governed i n which by the 2101153 property is located." property generally Restatement method for interests discussed had in governs the the land of a law of the t o f o r e c l o s e on Thomases the § 229 that because i t d i d not r e p r e s e n t secured on See (1971) ("The and the foreclosure the land are situs."). Thus, the as trustee property. N e g o t i a b i l i t y of the contend of proceedings. mortgage r e s u l t i n g from local situs i n P a r t I I . B . , i n f r a , under Alabama law, B. pay of foreclosure foreclosure the by standing The law (Second) o f C o n f l i c t s o f Law the determined The the Note note was nonnegotiable "an u n c o n d i t i o n a l p r o m i s e ... to a f i x e d amount o f money" w i t h o u t r e q u i r i n g an " a d d i t i o n a l undertaking." See Thomases m a i n t a i n requires "5. Ala. that Code the an u n d e r t a k i n g Borrower's Right § 7-3-104(a)(3). following provision other to 1975, i n the t h a n t h e payment o f money: Prepay. " I have t h e r i g h t t o make payments o f p r i n c i p a l a t any t i m e b e f o r e t h e y a r e due. A prepayment of all the unpaid p r i n c i p a l i s known as a 'full prepayment.' A prepayment of o n l y p a r t of the u n p a i d p r i n c i p a l i s known as a ' p a r t i a l p r e p a y m e n t . ' When I make a f u l l p r e p a y m e n t o r p a r t i a l p r e p a y m e n t , I w i l l t e l l t h e n o t e h o l d e r i n w r i t i n g t h a t I am doing so." (Emphasis added.) 17 The note 2101153 Citing Supp. Lyons Savings 1313 (N.D. N a t i o n a l Ass'n, Ill. 261 N.Y. v. & Loan A s s ' n 1986), 212, Banking & T r u s t Co. (1980), t h e Thomases a r g u e Persky 185 N.E. Creasy, v. 301 v. 77 N.C. Geode Co., Bank of 269 t h a t the o b l i g a t i o n addition to the payment n e g o t i a b i l i t y of the note. of money" Branch S.E.2d 117 i m p o s e d upon them t o s e n d w r i t t e n n o t i c e w i t h any p r e p a y m e n t o f c o n s t i t u t e s "an u n d e r t a k i n g o r i n s t r u c t i o n F. America ( 1 9 3 3 ) , and 44, 641 principal ... t o do an a c t i n that destroys the None o f t h e d e c i s i o n s c i t e d by t h e Thomases a d d r e s s e s w h e t h e r a r e q u i r e m e n t t o n o t i f y t h e l e n d e r of a prepayment of p r i n c i p a l d e s t r o y s the n e g o t i a b i l i t y of the note. However, t h e United States Bankruptcy Court f o r the E a s t e r n D i s t r i c t of P e n n s y l v a n i a addressed t h a t p r e c i s e i s s u e in In re Walker, supra: "'The r i g h t o f d e f e n d a n t s , u n d e r t h e n o t e , t o p r e p a y p a r t o f t h e p r i n c i p a l does n o t c o n s t i t u t e an "additional undertaking or instruction" that a d v e r s e l y a f f e c t s the n e g o t i a b i l i t y of the note. Q u i t e the o p p o s i t e , the r i g h t of prepayment i s a voluntary o p t i o n t h a t defendants may elect to exercise s o l e l y at t h e i r d i s c r e t i o n . Indeed, such an a l l o w a n c e c o n f e r s a b e n e f i t , n o t a b u r d e n , upon d e f e n d a n t s , who can f r e e l y c h o o s e t o d e c l i n e t h e o p p o r t u n i t y . The f a c t t h a t d e f e n d a n t s must n o t i f y the l e n d e r i n the event they opt f o r prepayment i m p o s e s no a d d i t i o n a l l i a b i l i t y on them and i s n o t a c o n d i t i o n p l a c e d on d e f e n d a n t s ' p r o m i s e t o pay. Rather, n o t i f i c a t i o n i s s i m p l y a requirement of the 18 2101153 e x e r c i s e o f t h e r i g h t o f p r e p a y m e n t w h i c h , as n o t e d , d e f e n d a n t s a r e f r e e t o r e j e c t . T h i s r e q u i r e m e n t does not render the note i n i s s u e n o n - n e g o t i a b l e . ' " 466 B.R. a t 283-84 ( q u o t i n g HSBC Bank USA, N.A. U.C.C. Rep. S e r v . 2d 226 17, 2010) v. Gouda, 73 ( N . J . S u p e r . C t . App. D i v . , December (not r e p o r t e d i n A . 3 d ) ) . Under A l a b a m a l a w , t h e n o t e i s a negotiable instrument and i s , t h e r e f o r e , s u b j e c t t o A l a b a m a ' s v e r s i o n o f t h e U n i f o r m C o m m e r c i a l Code. 301, A l a . Code instrument See A l a . Code 1975, § 7-3-104. 1975, a "[p]erson entitled Under § 7-3¬ to enforce" an i s d e f i n e d as " ( i ) the holder of the instrument, ( i i ) a nonholder i n p o s s e s s i o n o f t h e i n s t r u m e n t who has t h e r i g h t s of a h o l d e r , or ( i i i ) a person not i n p o s s e s s i o n of the instrument who i s entitled to enforce the instrument pursuant t o S e c t i o n 7-3-309 o r 7-34 1 8 ( d ) . A p e r s o n may be a p e r s o n e n t i t l e d t o e n f o r c e the i n s t r u m e n t even though t h e person i s n o t t h e owner o f t h e i n s t r u m e n t o r i s i n w r o n g f u l p o s s e s s i o n of the i n s t r u m e n t . " (Emphasis added.) "holder" payable With means a p e r s o n to bearer. negotiable instrument Thomases' n o t e respect to a negotiable i n possession A l a . Code has been i f the instrument i s 1975, § indorsed had been, t h e i n s t r u m e n t instrument, 7-1-201(21). i n blank, If a as t h e "becomes p a y a b l e ' b e a r e r ' a n d may be n e g o t i a t e d b y t r a n s f e r o f p o s s e s s i o n 19 to alone 2101153 Ala. Code 1975, § 7-3-205(b). Possession of a note p a y a b l e t o o r d e r and i n d o r s e d i n b l a n k i s p r i m a f a c i e e v i d e n c e of ownership. So. 806, See B e r n e y v. S t e i n e r , 108 807 trustee, (1896). by v i r t u e Based A l a . 111, on t h e f o r e g o i n g of i t s p o s s e s s i o n 116, 19 a u t h o r i t y , the o f t h e Thomases' n o t e , was e n t i t l e d t o c o n d u c t f o r e c l o s u r e p r o c e e d i n g s and, by v i r t u e o f i t s f o r e c l o s u r e deed, was from the p r o p e r t y . note and a u t h o r i z e d t o e j e c t t h e Thomases Accordingly, mortgage did not t h e f a c t t h a t t h e Thomases' contain complete chains of i n d o r s e m e n t s o r a s s i g n m e n t s -- d e f e c t s t h a t a l l e g e d l y v i o l a t e d the PSA action. -- was not a See P e t e r s o n - P r i c e No. 09-495 ADM/JSM, May in F. Supp. endorsement' 2d) to the v. U.S. 4, 2010) (holding trustee's ejectment Bank N a t ' l A s s ' n , (D. M i n n . 2010) that, when (Civil (not r e p o r t e d "'the chain of o f t h e n o t e and m o r t g a g e d i d n o t c o n f o r m t o t h e c h a i n of endorsement did defense s p e c i f i e d i n t h e PSA," the nonconformity n o t a f f e c t l e n d e r ' s r i g h t s u n d e r M i n n e s o t a l a w ) ; see a l s o Anderson v. MJD/JJG, A p r i l Countrywide 8, 2011) Home Loans, (D. M i n n . Supp. 2 d ) . 20 2011) (Civil No. 10-2685 (not r e p o r t e d i n F. 2101153 By t h e same t o k e n , t h e f a c t t h a t t h e Thomases' file containing trust the note may have by t h e o r i g i n a t o r , r a t h e r been than collateral transferred to the by t h e d e p o s i t o r , v i o l a t i o n o f t h e t e r m s o f t h e PSA i s o f no c o n s e q u e n c e . I n r e S a m u e l s , 415 B.R. 8 ( B a n k r . D. Mass. 2009) . the debtor argued in See I n Samuels, that "the PSA r e q u i r e d that a l l mortgages acquired t h e r e u n d e r t o be f u n n e l e d t o [ t h e ] p o o l t r u s t e e , through the e n t i t y designated b y t h e PSA as 'depositor,' A failure to follow this protocol -- s u c h as b y d i r e c t a s s i g n m e n t o f t h e m o r t g a g e f r o m the loan o r i g i n a t o r t o the p o o l t r u s t e e , b y p a s s i n g the depositor -- w o u l d , the Debtor contends, constitute a breach o f t h e PSA, a b r e a c h o f f i d u c i a r y o b l i g a t i o n s u n d e r t h e PSA t o i n v e s t o r s , a b r e a c h o f f e d e r a l r e g u l a t i o n s , a n d an a c t g i v i n g rise to unfavorable t a x consequences f o r the investors." 415 B.R. a t 22. R e j e c t i n g t h e d e b t o r ' s argument t h a t a d i r e c t a s s i g n m e n t b y p a s s i n g t h e d e p o s i t o r was i n v a l i d , t h e b a n k r u p t c y court stated: " T h i s argument f a l l s f a r s h o r t o f i t s g o a l . Even i f t h i s d i r e c t a s s i g n m e n t were somehow v i o l a t i v e o f t h e PSA, g i v i n g r i s e t o unfavorable tax, regulatory, c o n t r a c t u a l , a n d t o r t c o n s e q u e n c e s , n e i t h e r t h e PSA nor t h o s e consequences would r e n d e r t h e assignment i t s e l f i n v a l i d . I n f a c t , u n d e r t h e D e b t o r ' s own argument, t h e u n f a v o r a b l e consequences c o u l d and w o u l d a r i s e o n l y i f , and p r e c i s e l y b e c a u s e , t h e a s s i g n m e n t were v a l i d a n d e f f e c t i v e . " Id. (footnote omitted). 21 2101153 III. On appeal, invalid the Loss M i t i g a t i o n Thomases a r g u e t h a t because, they say, the foreclosure they reached Option a loan- One that cured their modification agreement default. The Thomases have w a i v e d t h i s argument b e c a u s e , i n the t r i a l court, t h e i r counsel stipulated withdrew that any no claim with had was such or (Ala. Civ. open c o u r t App. IV. The to hold R. had based a hearing on d e n i e d by Civ. P. on (stating upon t h e that be reached purported oral So. loan2d 496, agreements their court erred i n in operation the that o f law p u r s u a n t t o R u l e A l a . R. Civ. p a r t i e s have had Initially, failing postjudgment motion before P., we note power o f t h e p a r t i e s t o p r e v e n t t h e 22 that 59.1, provides that r u l e d upon by ( s u b j e c t to the p r o v i s i o n s of Rule 59.1), but thereon." and Postjudgment Hearing Rule 59(g), r u l e d upon u n t i l heard a counsel) parties). postjudgment motions "remain pending u n t i l court been E z e l l v. C h i l d s , 497 Thomases a r g u e t h a t t h e t r i a l m o t i o n was Ala. See 1985) are b i n d i n g i s not a p p e l l a t e agreement defense m o d i f i c a t i o n agreement. 498 (who shall opportunity to i t is within the not be the d e n i a l of a postjudgment 2101153 m o t i o n by o p e r a t i o n been h e l d . R u l e 59.1 express consent the o f law b e f o r e states that the on t h e m o t i o n p a r t i e s may, by ( w h i c h c o n s e n t must a p p e a r o f r e c o r d ) , t i m e f o r r u l i n g on appellate a hearing court. appears of r e c o r d t h e m o t i o n o r move f o r r e l i e f No such in this consent or has their extend from appellate-court an order case. "Harmless e r r o r o c c u r s , w i t h i n the c o n t e x t of a Rule 59(g) m o t i o n , where t h e r e i s e i t h e r no p r o b a b l e m e r i t i n the grounds a s s e r t e d i n the motion, or where t h e appellate court resolves the issues p r e s e n t e d t h e r e i n , as a m a t t e r o f l a w , a d v e r s e l y t o t h e movant, by a p p l i c a t i o n o f t h e same o b j e c t i v e standard o f r e v i e w as t h a t a p p l i e d i n t h e trial court." G r e e n e v. Thompson, 554 In the failure to So. p r e s e n t c a s e , we conduct a p o s t j u d g m e n t m o t i o n was t r u s t had mortgage a c c o r d i n g that t r u s t e e had had already to the wrongfully on trial the and foreclosed presented acquired the Y o r k law and both of Thomases' m o t i o n f o r a summary j u d g m e n t . The Thomases submitted of trial which b r i e f e d i n the support the New the and in to Thomases' In t h a t motion, not p r o p e r l y PSA court's court also been ( A l a . 1989). hearing harmless e r r o r . n o t e and issues 381 conclude t h a t the timely Thomases a r g u e d t h a t t h e the 2d 376, their motion e x h i b i t s a l l e g e d to c o n s t i t u t e newly d i s c o v e r e d evidence: 23 three (1) 2101153 an A p r i l of 13, 2011, Governors Deposit of the Insurance of the Currency, April 6, 2011, consent o r d e r i n v o l v i n g LPS Federal Reserve and System, the C o r p o r a t i o n , the O f f i c e of the and t h e O f f i c e o f T h r i f t the Board Federal Comptroller S u p e r v i s i o n ; (2) o r d e r e n t e r e d by t h e U n i t e d S t a t e s Bankruptcy Court f o r the E a s t e r n D i s t r i c t of L o u i s i a n a , d e t e r m i n i n g O p t i o n One false and LPS had affidavits; c o m m i t t e d f r a u d on t h e c o u r t by and (3) a March R u s s e l l C i r c u i t C o u r t i n Case No. Bank N a t i o n a l A s s ' n , trustee 25, 2011, on order comply attempting with to m o r t g a g e , " and the terms a debtor's of determining b e n e f i c i a r y of the the securitization p r o p e r t y , based i t s PSA o b t a i n assignment filing of t h e c i r c u i t c o u r t ' s d e t e r m i n a t i o n t h a t t h e t r u s t e e had to that CV-08-362, H o r a c e v. L a S a l l e permanently e n j o i n i n g a from f o r e c l o s i n g an of and New York [the d e b t o r ' s ] t h a t t h e d e b t o r was a upon failed Law "in note and third-party PSA. B e c a u s e t h e Thomases r a i s e no i s s u e on a p p e a l w i t h r e g a r d t o t h e summary j u d g m e n t i n f a v o r o f LPS, we t h e e f f e c t o f t h e A p r i l 13, 2011, order i n v o l v i n g LPS. order determining that The bankruptcy O p t i o n One court's A p r i l and LPS had 6, consent 2011, need not consider c o m m i t t e d f r a u d on t h e c o u r t by 24 filing 2101153 false affidavits property. had The has no bankruptcy court negligently to the Thomases had default occurred. wrongly declared In the whether the property. t r u s t e e was The differed from question of order the of present authorized the law, does and case, the Thomases sole question to foreclose on their which Court, Circuit Court's ruling constitute no the Circuit not LPS debtor's Russell Montgomery their a d e f a u l t when, i n f a c t , a c k n o w l e d g e d t h a t t h e y were i n d e f a u l t and was or f o u n d t h a t O p t i o n One o r w a n t o n l y f a i l e d t o document t h e payments and had relation newly on a discovered evidence. Conclusion The trustee established that, before physical possession i n s t r u m e n t t h a t was of the indorsed virtue of in actual Thomases' i n blank. no e v i d e n c e t o t h e c o n t r a r y . by initiated 2007, i t was f o r e c l o s u r e p r o c e e d i n g s on November 14, i t i t s foreclosure The that a negotiable Thomases s u b m i t t e d trustee further deed, 25 The note, i t was established, entitled to 2101153 eject t h e Thomases f r o m t h e p r o p e r t y . c o u r t ' s j u d g m e n t i s due t o be Therefore, the t r i a l affirmed. AFFIRMED. B r y a n , Thomas, and M o o r e , J J . , c o n c u r . Thompson, P . J . , c o n c u r s i n t h e r e s u l t , w i t h o u t w r i t i n g . Pittman, J . , recuses h i m s e l f . 26

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