Sep 29 2014, 9:54 am
FOR PUBLICATION
APPELLANT PRO SE: ATTORNEYS FOR APPELLEE:
BRYAN L. GOOD CARL A. GRECI
Elkhart, Indiana ANGELA KELVER HALL
Faegre Baker Daniels, LLP
South Bend, Indiana
SARAH E. SHARP
Faegre Baker Daniels, LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
BRYAN L. GOOD, )
)
Appellant-Defendant, )
)
vs. ) No. 20A03-1401-MF-14
)
WELLS FARGO BANK, NA., )
)
Appellee-Plaintiff. )
APPEAL FROM THE ELKHART CIRCUIT COURT
The Honorable Terry C. Shewmaker, Judge
Cause No. 20C01-1211-MF-896
September 29, 2014
OPINION - FOR PUBLICATION
BARNES, Judge
Case Summary
Bryan Good appeals the trial court’s grant of partial summary judgment in favor of
Wells Fargo Bank, N.A., (“Wells Fargo”) and the subsequent judgment of foreclosure.
We reverse and remand.
Issue
Good raises seven issues. We address the dispositive issue, which we restate as
whether the trial court properly granted partial summary judgment for Wells Fargo on the
basis that Wells Fargo was entitled to enforce the promissory note executed by Good.
Facts
On March 14, 2008, Good purchased real estate in Elkhart. Good executed an
electronic promissory note (“the Note”) in favor of Synergy Mortgage Group, Inc.,
(“Synergy”).1 The Note included the following term:
11. ISSUANCE OF TRANSFERABLE RECORD;
IDENTIFICATON OF NOTE HOLDER; CONVERSION
FROM ELECTRONIC NOTE TO PAPER-BASED
NOTE[2]
*****
(B) Except as indicated in Sections 11(D) and (E) below, the
identity of the Note Holder and any person to whom this
1
Throughout this opinion, we refer to the paper copy of the electronic note designated by Wells Fargo.
In his brief, Good claims to have obtained a copy of a paper note during discovery that does not include
Clause 11 of the note designated by Wells Fargo. Good asserts that he signed that version of the note.
Good acknowledges that the purported paper note is not in the record and, upon request, offers to provide
it to us. However, “Appellate review of summary judgment is limited to evidence designated to the trial
court.” Perdue v. Gargano, 964 N.E.2d 825, 831 (Ind. 2012) (citing Ind. Trial Rule 56(H)). Thus, our
review is limited to the copy of the note designated by Wells Fargo.
2
The Note’s provisions for conversion from an electronic note to a paper-based note are not at issue here
because Wells Fargo contends that it is entitled to enforce an electronic note.
2
Electronic Note is later transferred will be recorded in a
registry maintained by MERSCORP, Inc., a Delaware
corporation or in another registry to which the records are
later transferred (the “Note Holder Registry”). The
authoritative copy of this Electronic Note will be the copy
identified by the Note Holder after loan closing but prior to
registration in the Note Holder Registry. If this Electronic
Note has been registered in the Note Holder Registry, then the
authoritative copy will be the copy identified by the Note
Holder of record in the Note Holder Registry or the Loan
Servicer (as defined in the Security Instrument) acting at the
direction of the Note Holder, as the authoritative copy. The
current identity of the Note Holder and the location of the
authoritative copy, as reflected in the Note Holder Registry,
will be available from the Note Holder or Loan Servicer, as
applicable. The only copy of this Electric Note that is the
authoritative copy is the copy that is within the control of the
person identified as the Note Holder in the Note Holder
Registry (or that person’s designee). No other copy of this
Electronic Note may be the authoritative copy. . . .
Appellee’s App. p. 29 (emphasis added). The loan was secured by a mortgage. The
mortgage identified Synergy as the lender and Mortgage Electronic Registration Systems,
Inc., (“MERS”) as a nominee for the lender.
In 2011, Good stopped making payments on the loan. On November 9, 2011,
MERS, as nominee for Synergy, assigned the mortgage to Wells Fargo. This assignment
was recorded on November 14, 2011.
On November 7, 2012, Wells Fargo filed a complaint to foreclose the mortgage.
Good, acting pro-se, filed an answer alleging that Wells Fargo was not a holder in due
course of the Note and that it lacked standing.
On April 5, 2013, Wells Fargo moved for summary judgment. In support of its
motion, Wells Fargo designated an Affidavit in Support of Judgment (“the Affidavit”) in
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which Shemeka Moye, Wells Fargo’s Vice President of Loan Documentation, stated
Wells Fargo, “directly or through an agent, has possession of the Promissory Note at
issue in the plaintiff’s cause of action. Wells Fargo Bank, N.A., is either the original
payee of the Promissory Note or the Promissory Note has been duly indorsed [sic].” Id.
at 95. Good responded, arguing that Wells Fargo held only a photocopy of the Note
without any endorsements and, without more, did not establish that it was entitled to
enforce the Note.
Wells Fargo replied claiming Good failed to designate evidence that creates a
genuine issues of material fact for trial. Wells Fargo also asserted that it controlled the
electronic note and was entitled to enforce it as the holder pursuant to 15 U.S.C.A. §
7021(d). In support of this argument, Wells Fargo relied on a Certificate of
Authentication (“the Certificate”) in which Assistant Vice President of Wells Fargo,
Thresa Russell, stated:
1. . . . . The Bank acts as a servicer for the Federal
National Mortgage Association (“Fannie Mae”) with respect
to the residential mortgage loan executed on the [sic]
3/14/2008 by BRYAN GOOD, (“Borrowers”) . . . . The
promissory note evidencing the Borrowers’ obligation to
repay the Loan is an electronic record, as authorized by the
federal ESIGN Act, 15 USC §7001 et seq., and in particular
15 USC §7021.
2. As part of its function as servicer, the Bank maintains
a copy of the Borrowers’ electronic promissory note on behalf
of Fannie Mae. I am responsibilities [sic] for overseeing the
process by which the Bank maintains the electronic
promissory notes evidencing residential mortgage loans.
(“Electronic Records”).
4
3. Each Electronic Record is received in accordance with
established procedures and processes for reliable receipt,
storage and management of Electronic Records (the
“Electronic Record Procedures”). The Electronic Record
Procedures provide controls to assure that each Electronic
Record is accurately received as originally executed and
transmitted, and indexed appropriately for later identification
and retrieval. Each Electronic Record is protected against
undetected alteration by industry-standard encryption
techniques and system controls. The Electronic Record is an
official record of the Bank and is readily accessible for later
reference.
4. Each Electronic Record is maintained and stored by
the Bank in the ordinary course of business. The Electronic
Records are maintained and stored by the Bank continuously
from the time of receipt.
5. The paper copy of the Electronic Record attached . . .
is a true and correct copy of the Borrowers’ promissory note
described above, as maintained and stored by the Bank in
accordance with the procedures in Paragraphs 3 and 4 of this
Certificate.
Id. at 130.
After a hearing, the trial court concluded that Wells Fargo had standing to enforce
the Note and mortgage and partially granted Wells Fargo’s motion for summary
judgment as to that issue. The trial court also concluded that there were genuine issues of
material fact regarding the validity of Good’s electronic signature on the Note and the
amount due and owing on the Note. Both parties filed motions to reconsider, which were
discussed at the September 16, 2013 bench trial on the unresolved issues. After the trial,
the trial court reaffirmed its initial ruling on the motion for summary judgment and
concluded in part:
5
11. Plaintiff Wells Fargo Bank presented attached to the
copy of the Promissory Note in its control a Certificate of
Authentication which affirms that the Promissory Note was
accurately received as it was originally executed and
transmitted electronically. Plaintiff also affirmed that the
record was protected against undetected alteration by industry
standard encryption techniques and system controls. In this
respect, the court concludes that Plaintiff maintained control
of the subject Promissory Note which was originally signed
by the Defendant, Bryan Good. Further endorsement of an
electronic promissory note is not required and the promissory
note is self-authenticating pursuant to Ind. Rule of Evidence
902. Accordingly, Defendant is liable on the Promissory
Note and related Mortgage.
Appellant’s App. p. 134. The trial court determined the payoff amount and entered
judgment for Wells Fargo in that amount. The trial court then issued a judgment of
foreclosure. Good now appeals.
Analysis
Among other things, Good appeals the trial court’s entry of partial summary
judgment on the issue of whether Wells Fargo was entitled to enforce the Note. “We
review an appeal of a trial court’s ruling on a motion for summary judgment using the
same standard applicable to the trial court.” Perdue v. Gargano, 964 N.E.2d 825, 831
(Ind. 2012). “Therefore, summary judgment is appropriate only if the designated
evidence reveals ‘no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.’” Id. (quoting Ind. Trial Rule 56(C)). Our
review of summary judgment is limited to evidence designated to the trial court. Id.
(citing T.R. 56(H)). All facts and reasonable inferences drawn from the evidence
6
designated by the parties is construed in a light most favorable to the non-moving party,
and we do not defer to the trial court’s legal determinations. Id.
There is no dispute that the mortgage was assigned from Synergy to Wells Fargo
in 2011. The issue is whether Wells Fargo was entitled to enforce the Note. Regarding
traditional paper notes, “Indiana has adopted Article 3 of the Uniform Commercial Code
(UCC), which governs negotiable instruments, and it is well-established that a
promissory note secured by a mortgage is a negotiable instrument.” Lunsford v.
Deutsche Bank Trust Co. Americas as Tr., 996 N.E.2d 815, 821 (Ind. Ct. App. 2013).
According to the UCC, a negotiable instrument may be enforced by “the holder of the
instrument.” Ind. Code § 26-1-3.1-301(1). The term “holder” means “the person in
possession of a negotiable instrument that is payable either to bearer or to an identified
person if the identified person is in possession of the instrument[.]” I.C. § 26-1-1-
201(20). In this context, “bearer” means the person in possession of a negotiable
instrument “payable to bearer or endorsed in blank.” I.C. § 26-1-1-201(5).
Wells Fargo initially asserted that it had possession of the Note and was either the
original payee or the Note had been duly endorsed. Good responded, challenging Wells
Fargo’s status as holder because the Note designated by Wells Fargo was not endorsed.
In its reply, Wells Fargo asserted that, because the Note was an electronic note, “delivery,
possession, and endorsement of an electronic promissory note are not required pursuant
to federal statute.” Appellee’s App. p. 91. Wells Fargo claimed it controlled the Note
and was entitled to enforce it pursuant to 15 U.S.C. § 7021, which provides:
(a) Definitions
7
For purposes of this section:
(1) Transferable record
The term “transferable record” means an electronic
record that—
(A) would be a note under Article 3 of the
Uniform Commercial Code if the electronic
record were in writing;
(B) the issuer of the electronic record expressly
has agreed is a transferable record; and
(C) relates to a loan secured by real property.
A transferable record may be executed using an
electronic signature.
(2) Other definitions
The terms “electronic record”, “electronic signature”,
and “person” have the same meanings provided in
section 7006 of this title.
(b) Control
A person has control of a transferable record if a system
employed for evidencing the transfer of interests in the
transferable record reliably establishes that person as the
person to which the transferable record was issued or
transferred.
(c) Conditions
A system satisfies subsection (b) of this section, and a person
is deemed to have control of a transferable record, if the
transferable record is created, stored, and assigned in such a
manner that—
(1) a single authoritative copy of the transferable
record exists which is unique, identifiable, and, except
as otherwise provided in paragraphs (4), (5), and (6),
unalterable;
(2) the authoritative copy identifies the person
asserting control as—
8
(A) the person to which the transferable record
was issued; or
(B) if the authoritative copy indicates that the
transferable record has been transferred, the
person to which the transferable record was
most recently transferred;
(3) the authoritative copy is communicated to and
maintained by the person asserting control or its
designated custodian;
(4) copies or revisions that add or change an identified
assignee of the authoritative copy can be made only
with the consent of the person asserting control;
(5) each copy of the authoritative copy and any copy
of a copy is readily identifiable as a copy that is not the
authoritative copy; and
(6) any revision of the authoritative copy is readily
identifiable as authorized or unauthorized.
(d) Status as holder
Except as otherwise agreed, a person having control of a
transferable record is the holder, as defined in section 1-
201(20) of the Uniform Commercial Code, of the transferable
record and has the same rights and defenses as a holder of an
equivalent record or writing under the Uniform Commercial
Code, including, if the applicable statutory requirements
under section 3-302(a), 9-308, or revised section 9-330 of the
Uniform Commercial Code are satisfied, the rights and
defenses of a holder in due course or a purchaser,
respectively. Delivery, possession, and endorsement are not
required to obtain or exercise any of the rights under this
subsection.
(e) Obligor rights
Except as otherwise agreed, an obligor under a transferable
record has the same rights and defenses as an equivalent
obligor under equivalent records or writings under the
Uniform Commercial Code.
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(f) Proof of control
If requested by a person against which enforcement is sought,
the person seeking to enforce the transferable record shall
provide reasonable proof that the person is in control of the
transferable record. Proof may include access to the
authoritative copy of the transferable record and related
business records sufficient to review the terms of the
transferable record and to establish the identity of the person
having control of the transferable record.
(g) UCC references
For purposes of this subsection, all references to the Uniform
Commercial Code are to the Uniform Commercial Code as in
effect in the jurisdiction the law of which governs the
transferable record.
15 U.S.C. § 7021 (emphases added).
Wells Fargo is correct that, pursuant to §7021(d), a person having control of a
transferable record, which includes the Note, is the holder for purposes of the UCC and
that delivery, possession, and endorsement are not required. According to §7021(b), to
show it controlled the note, Wells Fargo was required to designate evidence that a system
employed for evidencing the transfer of interests in the Note reliably established Wells
Fargo as the person to whom the Note was transferred. A system that satisfies the control
requirement is described in §7021(c). Wells Fargo contends that its “possession of the
Note and the recitation of its electronic record keeping procedures in the Certificate
evidences Well Fargo’s control of the Note . . . .”3 Appellee’s Br. p. 15. We disagree.
3
In the argument section of its brief, Wells Fargo claims it acquired the Note for servicing in August
2008. This claim appears to be based on testimony offered during the trial and is not appropriate for
consideration of whether partial summary judgment was proper.
10
Regarding possession, the Affidavit, which does not mention an electronic note,
provides only that that Wells Fargo, directly or through an agent, “has possession of the
Promissory Note at issue in the plaintiff’s cause of action.” Appellee’s App. p. 95.
When considering Wells Fargo’s assertion that the note in its possession was endorsed
and its argument that the endorsement of an electronic note is not required pursuant to
§7021(d), it is not clear from the Affidavit whether Wells Fargo was claiming to have
possession of an endorsed paper copy or the electronic note.4
Even if the Affidavit established that Wells Fargo possessed the electronic note,
control, not possession, is the relevant consideration under §7021, and the Certificate
does not establish that Wells Fargo controlled the Note. The Certificate does establish
that Wells Fargo, as servicer of Good’s mortgage loan for Fannie Mae, “maintains a copy
of [Good’s] promissory note on behalf of Fannie Mae.” Id. at 26. The Certificate also
establishes that Wells Fargo’s electronic records are received, stored, and managed in a
secure manner with controls to assure they are accurately received as originally executed
and protected against alteration. However, the Certificate does not suggest that Wells
Fargo maintains the single authoritative copy of the Note as described in §7021(c)(1).
Even if we were to assume that the copy of the Note maintained by Wells Fargo is the
authoritative copy, it does not indicate that the Note has been transferred or identify
either Wells Fargo or Fannie Mae as the person to whom the Note was most recently
transferred. See 15 U.S.C. §7021(c)(2)(B).
4
There is no claim that Wells Fargo is the original payee as alternatively asserted in the Affidavit.
11
Such a record of transfer is described in the Note, which calls for the recording of
any transfer of the Note in a note holder registry. The Note also specifies, “The only
copy of this Electric Note that is the authoritative copy is the copy that is within the
control of the person identified as the Note Holder in the Note Holder Registry (or that
person’s designee). No other copy of this Electronic Note may be the authoritative
copy.” Id. at 29. Wells Fargo has not designated any evidence of a note holder registry,
let alone evidence showing that Wells Fargo, or even Fannie Mae, is identified as the
note holder in the note holder registry.
Pursuant to statute, upon Good’s request, Wells Fargo was required to provide
“reasonable proof” that it was in control of the Note. 15 U.S.C. §7021(f). “Proof may
include access to the authoritative copy of the transferable record and related business
records sufficient to review the terms of the transferable record and to establish the
identity of the person having control of the transferable record.” Id. Although Good
repeatedly requested such proof, Wells Fargo did not provide any evidence documenting
the transfer or assignment of the Note from Synergy to either Wells Fargo or Fannie Mae.
Thus, Wells Fargo did not demonstrate it controlled the Note by showing that a system
employed for evidencing the transfer of interests in the Note reliably established that the
Note had been transferred to Wells Fargo. See 15 U.S.C. §7021(b).
Because Wells Fargo did not establish that it controlled the Note as described in
§7021, it did not establish that it was the person entitled to enforce the Note as the holder
for purposes of the UCC. See 15 U.S.C. §7021(d); I.C. § 26-1-3.1-301(1). Thus, partial
summary judgment for Wells Fargo on this issue was improper.
12
Wells Fargo goes on to argue that, irrespective of the trial court’s summary
judgment ruling, it presented uncontroverted evidence at the bench trial that it controlled
the Note. Procedurally, however, the issue of Wells Fargo’s right to enforce the Note
was not before the trial court during the bench trial because it had been resolved, albeit
improperly, in the summary judgment proceedings. It would be inappropriate for us to
use evidence from the subsequent trial to justify the judgment when Good did not have
notice that this issue would be relitigated. Regardless, we are not convinced that the trial
testimony establishes that Wells Fargo controlled the Note for purposes of §7021.
Wells Fargo relies on the testimony of Donna Mouzon, a loan verification analyst
for Wells Fargo, who testified at trial that Wells Fargo “acquired” the loan on August 1,
2008. Tr. pp. 17-18. Mouzon was also questioned as follows:
Q. Thank you. Is [Wells Fargo] presently in control of
the electronic note?
A. Yes.
Q. Does [Wells Fargo] currently maintain the electronic
note?
A. Yes.
Q. Does [Wells Fargo] also service the loan?
A. Yes.
*****
Q. Who’s the owner of the note?
A. Fanny Mae.
Q. Who’s the holder of the note?
13
A. Wells Fargo.
Id. at 18.
Given the lack of evidence regarding a transfer or assignment from Synergy to
Wells Fargo or Fannie Mae, Mouzon’s conclusory testimony was not sufficient to
establish that it controlled the Note as defined in §7021. Thus, Mouzon’s trial testimony
did not establish that Wells Fargo is entitled to enforce the note as the holder, and is not a
basis for affirming the judgment of foreclosure.
Conclusion
Wells Fargo has not shown that it controls the Note for purposes of §7021(b) and,
accordingly, has not established its status as holder for purposes of the UCC. Because
Wells Fargo has not established that it was entitled to enforce the Note as its holder, the
trial court’s grant of summary judgment was improper and the resulting judgment must
be set aside. We reverse and remand.
Reversed and remanded.
BRADFORD, J., and BROWN, J., concur.
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