Phillips et al v. Mortgage Electronic Registration Systems, Inc et al

Filing 65

MEMORANDUM OPINION. Signed by US Magistrate Judge T Michael Putnam on 4/5/2013. (KAM, )

FILED
2013 Apr-05 AM 09:59
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
REX A. PHILLIPS and,
MARY M. PHILLIPS,

)
)
)
Plaintiffs,
)
)
vs.
)
)
MORTGAGE ELECTRONIC
)
REGISTRATION SYSTEMS, INC.;
)
MERSCORP, INC; ONEWEST BANK, FSB, )
)
Defendants
)

Case No. 5:09-cv-2507-TMP

MEMORANDUM OPINION
This cause comes before the court on the motions for summary judgment by both the
plaintiffs and the defendants. Defendants, Mortgage Electronic Registration System, Inc., and
MERSCORP, Inc., (collectively referred to as “MERS”) and OneWest Bank, FSB (“OneWest”),
filed their motion for summary judgment on May 1, 2012 (Docs. 54 and 55), as did the plaintiffs,
Rex and Mary Phillips (Docs. 56 and 57). Both motions have been fully briefed. These parties have
consented to the exercise of dispositive jurisdiction by the undersigned magistrate judge. (Doc. 44).1
I. Summary Judgment Standards
Under Federal Rule of Civil Procedure 56(a), summary judgment is proper “if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment

1

Several defendants named in the original complaint have been dismissed. Defendants
Roger Stotts, Matthew Allen Banaszewski, Laura Hescott and Kal. J. Haines were dismissed by the
court’s order of September 27, 2010 (Doc. 30). Defendants Lender Processing Services, Inc., and
LPS Default Solutions, Inc., were dismissed by agreement of the parties on June 5, 2012 (Doc. 62).
The only parties now remaining in the action are those named above in the text.

as a matter of law.” Fed. R. Civ. P. 56(a). The party asking for summary judgment “always bears
the initial responsibility of informing the district court of the basis for its motion, and identifying
those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting former Fed. R.
Civ. P. 56(c)). The movant can meet this burden by presenting evidence showing there is no dispute
of material fact, or by showing that the nonmoving party has failed to present evidence in support
of some element of its case on which it bears the ultimate burden of proof. Celotex, 477 U.S. at 32223. There is no requirement, however, “that the moving party support its motion with affidavits or
other similar materials negating the opponent’s claim.” Id. at 323.
Once the moving party has met his burden, Rule 56 “requires the nonmoving party to go
beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories,
and admissions of file,’ designate ‘specific facts showing that there is a genuine issue for trial.’” Id.
at 324 (quoting former Fed. R. Civ. P. 56(e)). The nonmoving party need not present evidence in
a form necessary for admission at trial; however, he may not merely rest on his pleadings. Celotex,
477 U.S. at 324. “[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after
adequate time for discovery and upon motion, against a party who fails to make a showing sufficient
to establish the existence of an element essential to that party’s case, and on which that party will
bear the burden of proof at trial.” Id. at 322.
After the plaintiff has properly responded to a proper motion for summary judgment, the
court “shall” grant the motion if there is no genuine issue of material fact, and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The substantive law will identify
2

which facts are material and which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Id. at 248. “[T]he judge’s function is not himself to weigh the evidence
and determine the truth of the matter but to determine whether there is a genuine issue for trial.”
Id. at 249. His guide is the same standard necessary to direct a verdict: “whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law.” Id. at 251-52; see also Bill Johnson’s Restaurants, Inc.
v. N.L.R.B., 461 U.S. 731, 745 n.11 (1983). However, the nonmoving party “must do more than
show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The evidence supporting a claim must be
“substantial,” Marcus v. St. Paul Fire and Marine Ins. Co., 651 F.2d 379 (5th Cir., Unit B, 1981); a
mere scintilla of evidence is not enough to create a genuine issue of fact. Young v. City of Palm
Bay, 358 F.3d 859, 860 (11th Cir. 2004); Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d
1243, 1249-1250 (11th Cir. 2004). If the non-movant’s evidence is so thoroughly discredited by the
rest of the record evidence that no reasonable jury could accept it, the evidence fails to establish the
existence of a genuine issue of fact requiring a jury determination. See Scott v. Harris, 550 U.S. 372,
127 S. Ct. 1769, 1776, 167 L. Ed. 2d 686 (2007) (“Respondent's version of events is so utterly
discredited by the record that no reasonable jury could have believed him. The Court of Appeals
should not have relied on such visible fiction; it should have reviewed the facts in the light depicted
by the videotape.”); Lewis v. City of West Palm Beach, Fla., 561 F.3d 1288, 1290 n. 3 (11th Cir.
2009). If the evidence is merely colorable, or is not significantly probative, summary judgment may
be granted. Anderson, 477 U.S. at 249 (citations omitted); accord Spence v. Zimmerman, 873 F.2d
3

256 (11th Cir. 1989). Furthermore, the court must “view the evidence presented through the prism
of the substantive evidentiary burden,” so there must be sufficient evidence on which the jury could
reasonably find for the plaintiff. Anderson, 477 U.S. at 254; Cottle v. Storer Communication, Inc.,
849 F.2d 570, 575 (11th Cir. 1988). Nevertheless, credibility determinations, the weighing of
evidence, and the drawing of inferences from the facts are the function of the jury, and therefore the
evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in his
favor. Anderson, 477 U.S. at 255. The non-movant need not be given the benefit of every inference
but only of every reasonable inference. Brown v. City of Clewiston, 848 F.2d 1534, 1540 n.12 (11th
Cir. 1988).
II. Admissibility of Marks Affidavit
A preliminary evidentiary issue raised by plaintiffs is whether the affidavit of Rebecca Marks,
attached to the defendants’ motion for summary judgment as Exhibit A, is admissible, or whether
it must be stricken, as plaintiffs argue. Plaintiffs assert that the Marks Affidavit fails to comply with
the Rule 56 requirements for affidavits in that parts of it are not based on the affiant’s personal
knowledge, it offers inadmissible evidence, and it fails to show how the affiant is competent to
testify to the matters in the affidavit. See Fed. R. Civ. P. 56(c)(4).2
At the outset, the Marks Affidavit identifies Rebecca Marks as “the Default Litigation
Manager for OneWest Bank, FSB” and that she was “fully authorized to make this Affidavit on

2

“An affidavit or declaration used to support or oppose a motion must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant
is competent to testify on the matters stated.”
4

behalf of OneWest Bank.” (Doc. 55-1, p. 2 of 10).3 As part of her “job functions, [she is] familiar
with business records maintained by OneWest Bank for the purpose of servicing mortgage loans.”
Further, “[t]hese records (which include data compilations, electronically imaged documents, and
others) are made at or near the time by, or from information provided by, persons with knowledge
of the activity and transactions reflected in such records, and are kept in the course of business
activity conducted regularly by OneWest Bank.” (Id. at pp. 2-3 of 10). Also, she testified that, “It
is the regular practice of OneWest Bank’s mortgage servicing business to make these records. In
connection with making this affidavit, I have personally examined these business records.” (Id. at
p. 3 of 10). Nevertheless, based on her review of the records, throughout the affidavit Marks
testified to events occurring at and involving other entities, such as Quicken Loans, Inc., and
IndyMac Bank, with whom she has no apparent employment or agency relationship. Plaintiffs argue
that Marks’s affidavit, thus, contains testimony about which she has no personal knowledge and is
based only on the records maintained by OneWest Bank, and that such evidence fails to comply with
the Rule 56(c)(4) requirements.
This particular evidentiary issue has been addressed by a number of courts, all of whom have
concluded that when business records pass from a predecessor entity to a successor entity under a
merger or receivership, the successor entity is able to authenticate the business records of its
predecessor. For example, the district court for the Northern District of Illinois, in a case in which
one bank took over the assets of a failed bank through an FDIC receivership, has explained:

3

The numbering refers to both the document number and the page number assigned to the
affidavit by the court’s CM/ECF system at the time the document was electronically filed.
5

The record reflects that although Maxwell [the affiant] did not work for Midwest and
was not a custodian of Midwest’s records, Maxwell would constitute a qualified
witness since the records of Midwest became FirstMerit’s records as the successor
bank. See United States v. Jakobetz, 955 F.2d 786, 801 (2nd Cir.1992) (stating that
“[e]ven if the document is originally created by another entity, its creator need not
testify when the document has been incorporated into the business records of the
testifying entity”). In addition, other courts have held that a successor bank that has
acquired a failed bank through the FDIC can satisfy Rule 803(6) with the declaration
of an employee of the successor bank. See, e.g., U.S. Bank Nat. Ass’n v. American
Screw & Rivet Corp., 2010 WL 3172772, at *3 (N.D.Ill.2010) (holding that witness
from successor bank could authenticate records of bank that went into receivership);
Krawczyk v. Centurion Capital Corp., 2009 WL 395458, at *5 (N.D.Ill.2009)
(indicating that a bank can rely on its predecessor’s business records and that
“[u]ltimately, the primary emphasis of Rule 803(6) is on the reliability or
trustworthiness of the records sought to be introduced”).

FirstMerit Bank, N.A. v. Balin, 2012 WL 4017948, *3 (N.D. Ill. Sept. 11, 2012). As a business
record certified by a custodian under FRE 803(6), the records become self-authenticating under
FRE 902(11).4 This assessment of FRE 803(6) is based on the practical consideration that “it would
be extremely difficult for a successor bank to recover debt owed to a failed bank,..., since the
custodian of the failed bank’s records may no longer be able or willing to participate in efforts to
recover debts owed to the bank that went into receivership. Such a standard would inhibit the FDIC
in its receivership role when it must find solvent banks to take over insolvent banks.” Id. at *4.
More important, this reading of FRE 803(6) has been adopted by the Eleventh Circuit also.
In United States v. Parker, the court of appeals rejected a claim that a “Certificate of Spirits Exported
to the United States of America” was improperly admitted into evidence when no custodian from
the predecessor entity testified to its authenticity. The court reasoned:
4

FRE 902(11) states in pertinent part that a document is self-authenticating if it is “The
original or a copy of a domestic record that meets the requirements of Rule 803(6)(A)-(C), as shown
by a certification of the custodian or another qualified person that complies with a federal statute or
a rule prescribed by the Supreme Court.”
6

Parker’s second contention is that a document identified as a Certificate for Spirits
Exported to the United States of America was improperly admitted under Fed. R.
Evid. 803(6), the business records exception to the hearsay rule. To be admitted
under that exception “the person who actually prepared the documents need not have
testified so long as other circumstantial evidence and testimony suggest their
trustworthiness.” Itel Capital Corp. v. Cups Coal Co., 707 F.2d 1253, 1259 (11th
Cir.1983). See United States v. Veytia-Bravo, 603 F.2d 1187, 1191-92 (5th
Cir.1979), cert. denied, 444 U.S. 1024, 100 S.Ct. 686, 62 L.Ed.2d 658 (1980); United
States v. Flom, 558 F.2d 1179, 1182 (5th Cir.1977). Nor is it required “that the
records be prepared by the business which has custody of them.” Veytia-Bravo, 603
F.2d at 1191.

United States v. Parker, 749 F.2d 628, 633 (11th Cir. 1984). The requirements for meeting the
FRE 803(6) exception to the hearsay rule for business records does not require testimony by some
witness associated with the predecessor entity when the records become part of the records of a
successor entity.
The records identified in Marks’s affidavit are records produced by OneWest Bank,
maintained in the ordinary course of its business. Some of the records came to OneWest after it
acquired IndyMac Bank’s and IndyMac Federal Bank’s assets through the FDIC. To authenticate
these records, “ the proponent must produce evidence sufficient to support a finding that the item
is what the proponent claims it is.” FRE 901. Certainly, Marks, as OneWest’s employee, can testify
on personal knowledge that the business records offered are what they purport to be – OneWest’s
business records. The fact that she can certify (testify under oath) that the records are OneWest’s
business records also authenticates them under FRE 902(11). Under the case authority discussed
above, it does not matter that it is now an employee of OneWest testifying about records it received
by merger or receivership from a predecessor bank.

7

Moreover, the Rule 56(c)(4) requirement of personal knowledge can be met by a review of
the records themselves. “[P]ersonal knowledge can be based on a review of relevant business files
and records.” Duke v. Nationstar Mortgage, L.L.C., 893 F. Supp. 2d 1238 (N.D. Ala. 2012); see also
Mid–Continent Casualty Co. v. Don Brady Construction Co., ___ F.Supp.2d ___, 2012 WL
1598149, at *2 (S.D.Ala. May 7, 2012)(quoting In re Trafford Distribution Center, Inc., 414 B.R.
858, 862 (Bktrcy.S.D.Fla.2009) (“[A]s a matter of law, ‘personal knowledge can come from the
review of the contents of business files and records.’”)). Thus, insofar as Marks testified about what
the records reflect, she is doing so on personal knowledge gained from a review of the records.
It is clear, therefore, that Marks’s affidavit identifying the relevant documents as her
employer’s business records meets both the Rule 56 requirement of personal knowledge and the
FRE 803(6) exception to the hearsay rule. It is not necessary under FRE 803(6) that a custodian
formerly employed by IndyMac or IndyMac Federal or the FDIC testify about the business records
as long as OneWest now incorporates them as part of its own business records. Marks’s affidavit
sufficiently authenticates the records and shows they are records maintained in the ordinary course
of business, and, by reviewing the documents, Marks is able to testify on personal knowledge to what
the records reflect. The plaintiff’s motion to strike is hereby DENIED.
III. Undisputed Facts for Summary Judgment Purposes
Because both the plaintiffs and defendants have filed motions for summary judgment, the
court is required to view the evidence through two different lenses. While addressing the plaintiffs’
motion, the court must view the evidence favorably to the defendants. Likewise, while analyzing
the defendants’ motion, the court must view the evidence favorably to the plaintiffs. Much of the

8

evidence, however, is actually undisputed, and the court will treat it the same in regard to both
motions.
A. Facts Favorably Viewed to Plaintiffs
Taking first the facts and evidence viewed in a light most favorable to the plaintiffs, the
following facts appear to be undisputed.5
Plaintiffs are the owners of a house and real estate located in Crane Hill, Alabama. On
June 27, 2006, plaintiffs executed a promissory note to Quicken Loans, Inc., in the amount of
$156,750.00, payable in a monthly mortgage payments of $1,029.74 to Quicken Loans, Inc.
(Doc. 55-2, p. 2 of 22). To secure the indebtedness, the plaintiffs also executed a mortgage on the
Crane Hill property to defendant Mortgage Electronic Registration Systems, Inc., as nominee for
Quicken Loans, Inc., its successors and assigns, as the mortgagee. (Doc. 55-6, p. 2 of 17). The
mortgage explicitly explained:

(C) “MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate
corporation that is acting solely as a nominee for Lender and Lender’s successors and
assigns. MERS is the mortgagee under this Security Instrument.

The “Lender” was explicitly identified as Quicken Loans, Inc. (Id. at p. 3 of 17). In executing the
mortgage, the plaintiffs “irrevocably mortgage[d], grant[ed] and convey[ed] to MERS (solely as
nominee for Lender and Lender’s successors and assigns) and to the successors and assigns of
5

The record contains two sets of purported stipulations of fact. On October 3, 2011,
defendants filed a unilateral “stipulation” of facts (Doc. 43), but there is no evidence that plaintiffs
ever agreed with these stipulations. Later, on April 6, 2012, the parties jointly file certain
stipulations (Doc. 51) different from those in defendants’ document 43. Insofar as document 51 is
a joint stipulation of facts, it is binding on all parties. Document 43, however, does not appear to
be a true stipulation as there is no evidence the plaintiffs joined it or agreed to it, and the court will
not consider it in the evidence of the case.
9

MERS, with power of sale, the following described property located” in the Cullman County,
Alabama. (Id. at p. 4 of 17). In connection with that transfer of legal title, the mortgage stated
further:

Borrower understands and agrees that MERS holds only legal title to the interests
granted by Borrower in this Security Instrument, but, if necessary to comply with law
or custom, MERS (as nominee for Lender and Lender's successors and assigns) has
the right: to exercise any or all of those interests, including, but not limited to, the
right to foreclose and sell the Property; and to take any action required of Lender
including, but not limited to, releasing and canceling this Security Instrument.

(Id.) (Italics added). Section 22 of the mortgage also reads as follows:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower’s breach of any covenant or agreement in this
Security Instrument (but not prior to acceleration under Section 18 unless Applicable
law provides otherwise). The notice shall specify: (a) the default; (b) the action
required to cure the default; (c) a date, not less than 30 days from the date the notice
is given to Borrower, by which the default must be cured; and (d) that failure to cure
the default on or before the date specified in the notice may result in acceleration of'
the sums secured by this Security Instrument and sale of the Property. The notice
shall further inform Borrower of the right to reinstate after acceleration and the right
to bring a court action to assert the non-existence of a default or any other defense of
Borrower to acceleration and sale. If the default is not cured on or before the date
specified in the notice, Lender at its option may require immediate payment in full
of all sums secured by this Security Instrument without further demand and may
invoke the power of sale and any other remedies permitted by Applicable Law.
Lender shall be entitled to collect all expenses incurred in pursuing the remedies
provided in this Section 22, including, but not limited to, reasonable attorneys’ fees
and costs of title evidence.

Id. at p. 14 of 17). The mortgage was recorded on July 12, 2006, in the Office of the Judge of
Probate of Cullman County.

10

A few weeks later, plaintiffs were sent a notice dated September 5, 2006, informing them that
the loan servicing rights under the promissory note they executed had been transferred from Quicken
Loans, Inc., to a division of IndyMac Bank, effective September 1, 2006. (Doc. 55-2, p. 6 of 22).
Slightly more than a year later, IndyMac Bank sent a notice to the plaintiffs dated November 16,
2007, that the plaintiffs were default under the note. (Doc. 55-2, p. 10 of 22). The notice informed
the plaintiffs that they had to cure the default by paying $3,575.80 by December 18, 2007, to bring
the note current. (Doc. 55-2, p. 10 of 22). On January 24, 2008, an attorney, acting on behalf of
IndyMac Bank, notified the plaintiffs that the note was being accelerated and the entire balance of
debt becoming due in full. The letter stated:

YOU ARE HEREBY NOTIFIED that, pursuant to the terms of the Promissory Note
and Mortgage dated the 27th day of June, 2006, to Mortgage Electronic Registration
Systems Inc. as nominee for Quicken Loans Inc., said mortgage having subsequently
been transferred and assigned to IndyMac Bank, F.S.B. and by virtue of default in the
terms of said Note and Mortgage, IndyMac Bank, F.S.B. hereby accelerates to
maturity the entire remaining unpaid balance of the debt, including attorney’s fees,
accrued interest, and other lawful charges, and the amount due and payable as of this
date is $162,245.48.

(Doc. 55-2, p. 13 of 22). The notice letter went on to inform the plaintiffs that foreclosure
proceedings would begin if the balance was not paid in full by a date certain, with an anticipated
foreclosure sale on February 27, 2008. The notice of the foreclosure sale had yet to be published in
a Cullman County newspaper.
On February 8, 2008, acting over the signature of Laura Hebscott, MERS assigned the
mortgage executed by the plaintiffs to IndyMac Bank, F.S.B. (Doc. 55-2, p. 15 of 22).

The

assignment operated to assign the mortgage and all interests in the property described in the

11

mortgage, “together with the note and indebtedness secured by the Mortgage, and all interest of the
undersigned in and to the property described in said Mortgage.” (Id.) It appears, however, the
assignment was never recorded in the land records of Cullman County, Alabama. The foreclosure
planned for February 27, 2008, never occurred as IndyMac withdrew it when the parties began
negotiating a loan modification.
On April 1, 2008, plaintiffs and IndyMac entered into loan modification agreement, which
lowered the plaintiffs’ monthly mortgage payment to $775.17 for a period of five years, beginning
May 1, 2008. In part, the agreement provided that “6 months of interest and advances will be
capitalized at 6.875% totaling $6,417.20 and the loan re-amortized over 460 months. When
payments resume on May 1, 2008 the new Unpaid Principal Balance will be $161,253.22.”
(Doc. 55-2, p. 17 of 22). The loan modification agreement expressly identified IndyMac Bank as
the “Lender,” even though the parties have stipulated that the indebtedness was owned by Fannie
Mae. (Doc. 51). Further, it provided:

Nothing in this Agreement shall be understood or construed to be a satisfaction or
release in whole or in part of the Note and Security Instrument. Except as otherwise
specifically provided in the Agreement, the Note and Security Instrument will remain
unchanged and the Borrower and Lender will be bound by, and comply with, all of
the terms and provisions thereof, as amended by this Agreement.

Doc. 55-2, p. 18 of 22.
After the loan modification agreement with IndyMac Bank was completed, IndyMac failed
in July 2008 and was taken over by the FDIC. All of IndyMac’s assets were transferred to a new
entity, IndyMac Federal Bank.

12

Notwithstanding the loan modification agreement, the plaintiffs again defaulted on payment
of the original 2006 note. On September 25, 2008, the plaintiffs entered into a HomeSaver Advance
Loan with IndyMac Bank,6 under which IndyMac loaned to plaintiffs $6,194.85, which loan proceeds
were applied “to Borrower’s delinquent first lien loan, IndyMac Loan Number: 3001949902, to fully
reinstate such loan.” (Doc. 55-2, p. 20 of 22). The purpose of this HomeSaver Advance loan was
to bring the mortgage indebtedness current. By its terms, no interest accrued during the first six
months of the HomeSaver Advance loan and no payments on it were due during the first six months.
The only payment the plaintiffs made under the April 1, 2008, loan modification agreement
was on November 17, 2008, in the amount of $1,030.61. Four months later, still in default on
payments under the note, the plaintiffs were sent a second acceleration notice dated March 18, 2009.
(Doc. 55-4, p. 2 of 9). The notice was sent by an attorney acting for IndyMac Federal Bank, and it
informed the plaintiffs that a foreclosure sale was planned for April 22, 2009. The very next day,
March 19, 2009, IndyMac Federal Bank failed and the FDIC transferred its assets to OneWest Bank
in a purchase and assumption agreement. This included the right to service the mortgage loan of the
plaintiffs. Notwithstanding the acceleration notice, plaintiffs were sent a notice dated April 15,
2009, that the mortgage loan servicing had been assigned to OneWest Bank. (Doc. 55-4, p. 4 of 9).
The April 22 foreclosure did not proceed.
On May 1, 2009, MERS again executed another assignment of mortgage, purportedly
assigning MERS’s interest in the plaintiffs’ mortgage to OneWest Bank. (Doc. 55-4, p. 7 of 9). This

6

The HomeSaver Advance loan documents refer to the lender “IndyMac Bank,” except that
an allonge to the loan dated September 26, 2008, is signed in the name of IndyMac Federal Bank.
The court infers that the true lender was IndyMac Federal Bank because it is undisputed that
IndyMac Bank had been liquidated by the FDIC.
13

assignment, identical to the previous assignment, was executed by Roger Stotts as vice president of
MERS. Unlike MERS’s first assignment of the mortgage, this assignment was recorded in the
Cullman County, Alabama, land records.
The parties have stipulated that “[t]he mortgage assignments that were prepared either by
LPS when IndyMac was the servicer of Plaintiffs’ loan or by OWB [OneWest Bank] when OWB
was the servicer of Plaintiffs’ loan occurred when neither IndyMac nor OWB was the owner of the
indebtedness” and “[a]t the time of the mortgage assignments in this case, the owner of the
indebtedness was Fannie Mae.”7
Because the plaintiffs continued to fail to make payments under the note, they remained in
default, and on September 24, 2009, an attorney acting for OneWest Bank mailed yet a third
acceleration notice to the plaintiffs, informing them that the full balance of the note was now due and
that a foreclosure under the mortgage was planned for October 28, 2009. Thereafter, plaintiffs filed
suit in Cullman County Circuit Court, which issued a temporary restraining order to stop the
foreclosure. To date, the plaintiffs’ property has not been foreclosed and they remain in possession
of it even though they have not paid on the mortgage note since November 2008.
IV. Analysis of Defendants’ Motion for Summary Judgment
Defendants MERS and OneWest Bank move for summary judgment with respect to all of
plaintiffs’ claims. In their Amended Complaint (Doc. 29), the plaintiffs allege claims for slander of
title (Count One), trespass (Count Two), negligent or wanton hiring or supervision (Count Three),
7

It is not clear precisely what the parties mean by saying the Fannie Mae was the owner of
the “indebtedness.” The court assumes this means that the original note to Quicken Loans had been
sold or assigned in some way to Fannie Mae and that Fannie Mae was entitled to collection of the
payments under the note. As will be discussed below, the first assignment of the mortgage had a
very different effect.
14

civil conspiracy (Count Five), and wantonness (Count Six).8 Defendants point out that despite all
of the notices and the plaintiffs’ undisputed default in their indebtedness, no actual foreclosure of
the plaintiffs’ property has ever occurred. Plaintiffs remain in possession of the Crane Hill property
even though they have not paid anything toward their debt since November 2008. Defendants
contend that all of the actions they have taken are legal and properly supported by the note and
mortgage documents executed by the plaintiff in 2006.
A. Slander of Title
Turning to each of plaintiffs’ claims in this action, the court must examine whether there is
substantial evidence supporting the elements of each claim pleaded by the plaintiffs. Whether there
is a genuine dispute of a material fact turns on whether there is substantial evidence establishing
each element of a claim. A dispute is not genuine if the evidence is not substantial, that is, is not of
such a quality that a reasonable jury could return a verdict based on it. See Scott v. Harris, 550 U.S.
372, 127 S. Ct. 1769, 1776, 167 L. Ed. 2d 686 (2007). Likewise, a factual dispute is not material
unless it relates to an element of a claim or defense. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).
Under Alabama law, the elements of a slander of title action are the following:

(1) Ownership of the property by plaintiff; (2) falsity of the words
published; (3) malice of defendant in publishing the false statements;
(4) publication to some person other than the owner; (5) the
publication must be in disparagement of plaintiff's property or the title
thereof; and (6) that special damages were the proximate result of
such publication (setting them out in detail).
8

Plaintiffs have expressly abandoned their claim of unjust enrichment in Count Four of the
Amended Complaint. See Plaintiffs’ Opposition to Defendants’ Motion for Summary Judgment,
Doc. 60, p. 12 of 15.
15

Dabbs v. Four Tees, Inc., 36 So. 3d 542, 558 (Ala. Civ. App. 2008) (internal quotation marks
omitted), quoting Folmar v. Empire Fire & Marine Ins. Co., 856 So. 2d 807, 809 (Ala.2003); see also
Merchants Nat'l Bank of Mobile v. Steiner, 404 So.2d 14, 21 (Ala.1981); Womack v. McDonald,
219 Ala. 75, 76-77, 121 So. 57, 59 (1929). The act of the defendant “against which a slander-of-title
action is taken must have been false and malicious when it was performed.” Folmar, 856 So. 2d at
809. Malice “requires ‘proof that [the defendant] intentionally disparaged [the] plaintiff's title to the
property slandered or recklessly disparaged [it] without information sufficient to support a bona fide
belief ’ in the veracity of the disparaging statement.’” Dabbs, 36 So. 2d at 558 (quoting Roden v.
Wright, 646 So.2d 605, 611 (Ala. 1994); see also Harrison v. Mitchell, 391 So.2d 1038, 1041 (Ala.
Civ. App. 1980) (emphasis added). “In other words, ‘if the defendant had probable cause for
believing the statement, there can in law be no malice.’ [Merchants Nat'l Bank of Mobile v.] Steiner,
404 So. 2d [14] at 21 [ (Ala. 1981) ] (emphasis added).” Dabbs, 36 So. 2d at 558 (quoting Roden
v. Wright, 646 So. 2d 605, 611 (Ala. 1994).
None of the actions taken by defendants was with malice for purposes of a slander-of-title
claim. It appears that the “publications” plaintiffs assert slandered their title to the Crane Hill
property were the three notices of foreclosure published in a Cullman County newspaper in February
2008 and April and October 2009. Plaintiffs argue that these notices were both false, in that no one
had the right at those times to invoke the power of sale under the mortgage, and malicious because
the defendants knew they had no lawful right to invoke the power of sale. For the reasons explained
below, the court disagrees
Plaintiffs’ contention that no valid power of sale existed under the mortgage arises from the
position of MERS as the mortgagee. Plaintiffs correctly observe that the promissory note was
16

executed by plaintiffs to Quicken Loans, Inc., while the mortgage securing the note and containing
the power of sale was conveyed to MERS “as nominee for [Quicken Loans, Inc.,] and [its]
successors and assigns.” They contend that Alabama law does not allow the separation or splitting
of the indebtedness and the mortgage securing the indebtedness, and that doing so here rendered the
security of the mortgage and the power of sale invalid.

They acknowledge that the debt

memorialized in the note continues to exist, but assert that no one now has the lawful power to
foreclose under the mortgage.
Defendants point to the case of Crum v. LaSalle Bank, N.A., 55 So. 3d 266 (Ala. Civ. App.
2009), as support for their position that the existence of MERS as Quicken Loans’ nominee
mortgagee was lawful. Crum is an ejectment action following a mortgage foreclosure. There, as in
this case, the plaintiff borrowed money from a lender and executed a promissory note in favor of the
lender. To secure the note, the plaintiff conveyed a mortgage to MERS as the nominee of the lender.
Later, acting as the nominee for the lender, MERS assigned the mortgage to an “assignee (acting as
a trustee of a designated mortgage-loan trust),” Crum v. LaSalle Bank, N.A., 55 So. 3d 266, 268
(Ala. Civ. App. 2009), who then foreclosed on the property. After the foreclosure sale, the plaintiff
refused to vacate the property and the assignee commenced an ejectment action to get possession of
the property.
The Alabama Court of Civil Appeals affirmed the grant of summary judgment in favor of the
assignee, saying:

The borrower, on appeal, does not dispute that she was in default of her repayment
obligations. Rather, in an effort to impugn the validity of the assignee’s title, she
reiterates as her first issue on appeal her contention, first made in the trial court, that
the assignee did not have the power to sell the property in response to her default.
17

Under Ala. Code 1975, § 35–10–12, which superseded Ala. Code 1975, § 35–10–1
(a similarly worded statute), with respect to mortgages executed in 1989 or later, a
power to sell lands given in any mortgage “is part of the security” and may be
exercised “by any person, or the personal representative of any person who, by
assignment or otherwise, becomes entitled to the money thus secured ” (emphasis
added). The borrower contends that because MERS, which was specified in the
mortgage instrument as the lender’s nominee and as the mortgagee, was not shown
to have owned the debt, MERS could not convey any right to the assignee whereby
the assignee would, in the words of the statute, have “become[ ] entitled to the money
... secured” by the mortgage. The borrower cites Carpenter v. First National Bank
of Birmingham, 236 Ala. 213, 215, 181 So. 239, 240 (1938), as supporting the
proposition that “an agent of [a mortgage] holder to whom the mortgage is delivered
merely for the purpose of foreclosure, having no ownership of the debt, is not
authorized to foreclose in his own name, and execute a deed in his name to the purchaser.”
We perceive two factors that distinguish this case from Carpenter. First, in this case,
MERS and the assignee were not delivered a mortgage instrument by a mortgagee
“merely for” the purpose of effecting a “foreclosure,” as was apparently the case in
Carpenter. MERS was instead expressly acknowledged by the borrower in the
mortgage instrument itself as not only having “any or all of [the lender’s] interests”
in the mortgaged property, but also as having the power “to take any action required
of” the lender. The mortgage instrument further expressly provided that the note and
the mortgage could be sold without prior notice to the borrower, and the assignment
by MERS to the assignee of the mortgage, the note, and “all moneys” due was
undertaken for consideration that included a $10 payment to MERS. Thus, taken
together, the pertinent documents indicate (a) that MERS was authorized to perform
any act on the lender’s behalf as to the property, including selling the note and the
mortgage to a third party; and (b) that MERS fully exercised that power in favor of
the assignee for valuable consideration.
Second, the rule of Carpenter assumes that there has been a divergence in the legal
and equitable ownership of a debt and the security for the repayment of the debt.
The generally prevailing common-law rule, however, is that “a transfer of a
mortgage also transfers the obligation the mortgage secures unless the parties
to the transfer agree otherwise.” Restatement (Third) of Property: Mortgages
§ 5.4(b) (1997); see also id. at comment c, illustration 5 (when mortgage assignment
makes no mention of a note, ownership of the note will pass to the assignee with the
mortgage). This principle of law is recognized in Alabama as well. See Seabury v.
Hemley, 174 Ala. 116, 121, 56 So. 530, 531 (1911) (assignment of mortgage held
“broad enough to include the [secured] debt[ ] in the absence of any evidence
showing a separate or different assignment of the note”). Thus, it was stated in
Union Bank & Trust Co. v. Thompson, 202 Ala. 537, 538, 81 So. 39, 40 (1919),
following Seabury, that no party, other than an innocent purchaser of notes
18

evidencing the secured debt, would be in a position to raise the question “whether or
not the debt had been assigned.”

Crum v. LaSalle Bank, N.A., 55 So. 3d 266, 268-70 (Ala. Civ. App. 2009) (internal footnote
omitted). Crum clearly states that Alabama follows the common-law rule that an assignment of the
mortgage, in the absence of language evidencing otherwise, also transfers the debt secured by the
mortgage, except as to innocent purchasers of the note.9
The Alabama Court of Civil Appeals again in 2012 rejected the idea that splitting or
separating the mortgage and the debt evidenced in a note renders the power of sale in the mortgage
void. In Nelson v. Federal National Mortgage Association, 97 So. 3d 770, 775 (Ala. Civ. App.
2012), the court stated plainly, “The Nelsons argue that the power-of-sale provision in the mortgage
instrument was unenforceable because the note and mortgage had been separated. This court has
recently rejected that argument because it does not comport with Alabama law.” The separation of
the note and mortgage does not render either document void, although it may raise complex
questions about what party possesses the right to exercise the power of sale in the mortgage.
The facts in the instant case, shorn of unnecessary complexity, show that the plaintiffs
executed a promissory note to Quicken Loans and a mortgage to MERS, as the nominee of Quicken
Loans, to secure the note indebtedness. At some point in time, the parties have stipulated, the
indebtedness evidenced in the note came to be owned by Fannie Mae. Although Quicken Loans
assigned its servicing rights to IndyMac, it was only servicing rights, not ownership of the note
9

In the instant case, the express language of the mortgage not only gave MERS the power
to do anything “required of [the] lender,” the mortgage assignment also expressly provided that it
transferred the rights in the property described in the mortgage “together with the note and
indebtedness” secured by it. See Doc. 55-2, p. 15 of 22. Thus, the language of the mortgage did not
express other than that the common-law rule of the indebtedness following the mortgage applied.
19

indebtedness. As the servicer, IndyMac Bank notified the plaintiffs on January 24, 2008, that it was
accelerating the maturity of the note due to their default. On February 8, 2008, “for value” MERS
assigned the mortgage “together with the note and indebtedness secured by the Mortgage” to
IndyMac Bank.10 Under the terms of the mortgage, MERS had the power to do anything required
of the “Lender” or its assignees, and it exercised that power by assigning the mortgage and the debt
secured by it to IndyMac Bank. Thus, under Alabama law, the assignment of the mortgage by MERS
operated to assign the note indebtedness as well to IndyMac. See Crum v. LaSalle Bank, supra., at
270.11 On February 8, 2008, IndyMac Bank became the owner of both the indebtedness and the
power of sale in the mortgage. Thereafter, IndyMac’s assets (including the mortgage and note
indebtedness of the plaintiffs) were transferred to IndyMac Federal Bank through the FDIC, and then
from IndyMac Federal Bank to OneWest, where they reside today.

10

The court does not accept the defendants’ argument that the failure to record the mortgage
assignment in the Cullman County land records rendered it effectively inoperative. While the lack
of recordation may create issues of notice and priority, it did not make the assignment a nullity.
MERS’s assignment was fully effective in transferring the mortgage, “together with the note and
indebtedness secured by the Mortgage,” to IndyMac Bank as of February 8, 2008. This does not
change the outcome of the case, however. Under Crum, title and ownership of the mortgage and the
note indebtedness proceeded thereafter through the asset transfers following the failures of IndyMac
Bank and its immediate successor, IndyMac Federal Bank. Ultimately, OneWest received ownership
of both the mortgage and indebtedness by transfer of assets from IndyMac Federal Bank. In any
event, if for some reason the 2008 assignment of the mortgage by MERS was ineffective, the 2009
assignment would have cured the defect. At worst, the 2009 assignment was meaningless as MERS
no longer retained any mortgage rights after the 2008 assignment.
11

“The generally prevailing common-law rule, however, is that ‘a transfer of a mortgage also
transfers the obligation the mortgage secures unless the parties to the transfer agree otherwise.’
Restatement (Third) of Property: Mortgages § 5.4(b) (1997); see also id. at comment c, illustration
5 (when mortgage assignment makes no mention of a note, ownership of the note will pass to the
assignee with the mortgage). This principle of law is recognized in Alabama as well. See Seabury
v. Hemley, 174 Ala. 116, 121, 56 So. 530, 531 (1911) (assignment of mortgage held ‘broad enough
to include the [secured] debt[ ] in the absence of any evidence showing a separate or different
assignment of the note’).”
20

Returning to plaintiffs’ slander-of-title theory, it becomes clear that it fails for several
reasons. First, when the foreclosure notice was first published in February 2008,12 the only party
responsible for the publication was IndyMac Bank, which is now defunct and not a party to this
litigation. Neither MERS nor OneWest were involved in the decision to publish the notice, and they
cannot be liable for the purported falsity of it. Second, even if MERS could be regarded as being
involved (certainly OneWest was not involved), the publication was not malicious — MERS had
probable cause to believe that the planned foreclosure of the plaintiffs’ property was valid and legal.
Plaintiffs were clearly in default of the indebtedness, they had mortgaged their property to secure the
debt, and MERS was the holder of the mortgage entitled to enforce the power of sale. Thus, not only
was the publication — the foreclosure notice — not false, it was not malicious. That remains true
also as to the subsequent notices of foreclosure. Notwithstanding the separation of the note and
mortgage, both MERS and OneWest had a legitimate and bona fide belief that they were entitled to
foreclose the mortgage to collected the defaulted debt of the plaintiffs. Defendants are entitled to
summary judgment on the claim of slander of title.
B. Trespass
Plaintiffs’ Count Two alleges a claim for trespass, in that “[t]he actions of the defendants
constitute a trespass against the plaintiffs and their right to the quiet enjoyment and peaceful
possession of their property.” To prove a trespass to real property, the plaintiffs must offer
substantial evidence that the defendants entered onto their land without permission, causing damage
to the realty. “‘Trespass’ has been defined as ‘[a]ny entry on the land of another without express or
12

Of course the notice letters to the plaintiffs themselves cannot support a slander-of-title
claim because the publication of false information about their land title must be to some other
person, not the plaintiffs. See Dabbs v. Four Tees, Inc., 36 So. 3d 542, 558 (Ala. Civ. App. 2008).
21

implied authority.’” Colbert v. First National Bank of Atmore, 75 So. 3d 145, 148 (Ala. Civ. App.
2011), cert. denied (Aug. 5, 2011), quoting Central Parking Systems of Alabama, Inc. v. Steen, 707
So.2d 226, 228 (Ala.1997)(quoting Foust v. Kinney, 202 Ala. 392, 393, 80 So. 474, 475 (1918)).
There simply is no evidence in this case, substantial or otherwise, that MERS or OneWest, or their
agents, entered onto the plaintiffs’ land.
Plaintiffs contend, citing W.T. Ratliff v. Henley, 405 So. 2d 141 (Ala. 1981), that defendants
caused an “indirect trespass” by commencing the foreclosure proceedings on three occasions. They
assert that “[i]t was at all times reasonably foreseeable that a foreclosure carried to completion would
invade the plaintiffs’ possessory interest and would create substantial damages to the plaintiffs and
their interests.” (Doc. 60, p. 12 of 15). The problem with this argument is that no foreclosure was
ever carried to completion. While foreclosure proceedings were commenced on three occasions,
none was ever completed. The mere fact that foreclosures were commenced cannot amount to an
“indirect trespass,” and Ratliff does not assist plaintiffs in that regard. Ratliff was a case where sand
and gravel from a surface mining operation washed onto the plaintiff’s property. Not surprisingly,
the Alabama Supreme Court held that such was enough to state a claim for trespass even though
none of the defendant’s employees ever went onto the plaintiff’s land. It was enough that the
defendant’s mining operations indirectly caused sand and gravel to wash over onto the plaintiff’s
land, causing damage. That simply does not exist in this case. There is no evidence of any actual
entry onto or damage to the plaintiffs’ land. Defendants are entitled to summary judgment on this
claim.

22

C. Negligent/Wanton Hiring, Supervision, and Training
In Count Three, plaintiffs allege that “Defendant OneWest Bank, FSB in this action
negligently or wantonly hired, trained, supervised or retained the defendant, LPS,” resulting in
damages to the plaintiff. LPS is a former defendant in this action, dismissed voluntarily by the
plaintiffs. There is no evidence, substantial or otherwise, adduced by the plaintiffs in this action
tending to show some improper or illegal action by LPS for which OneWest is responsible. The
evidence simply fails to show what LPS did or failed to do that might be actionable. “[I]n order for
an employer to be liable for the negligent hiring, training, retention, and supervision of its employee,
the plaintiff must also prove ‘wrongful conduct’ on the part of the employee.” Jones Exp., Inc. v.
Jackson, 86 So. 3d 298, 304 (Ala. 2010), citing University Fed. Credit Union v. Grayson, 878 So. 2d
280, 291 (Ala. 2003) (“[A] party alleging negligent supervision and hiring must prove the underlying
wrongful conduct of the defendant's agents.”); Voyager Insurance Cos. v. Whitson, 867 So. 2d 1065,
1073 (Ala. 2003) (“A party alleging negligent or wanton supervision and hiring must also prove the
underlying wrongful conduct of employees.”); Thrasher v. Ivan Leonard Chevrolet, Inc., 195
F.Supp. 2d 1314, 1320 (N.D.Ala. 2002) (“In order to establish a claim against an employer for
negligent supervision, training, and/or retention, the plaintiff must establish that the allegedly
incompetent employee committed ... [a] tort.”). Defendants are entitled to summary judgment on
this claim.
D. Civil Conspiracy
Count Five of the Amended Complaint alleges that these defendants, MERS and OneWest,
participated in a civil conspiracy to fraudulently treat plaintiffs’ note and mortgage as in default and
to increase the charges they were required to pay. In part, Count Five alleges that “[t]he defendants
23

engaged in an unlawful combination and conspiracy to service mortgage loans which they treated
as either in default or not in default in such a manner as would generate to the defendants illegal fees
and charges,” and that “[t]his practiced [sic] resulted in improper and undeserved payments for those
fees and charges added to the accounts of unsuspecting borrowers including the plaintiffs and the
collection of those sums and distribution of those sums to the members of the conspiracy.”
Alabama law defines a cause of action for civil conspiracy as “the combination of two or
more persons to do (a) something that is unlawful, oppressive, or immoral; or (b) something that is
not unlawful, oppressive, or immoral, by unlawful, oppressive, or immoral means; or (c) something
that is unlawful, oppressive, or immoral, by unlawful, oppressive, or immoral means.” Barber v.
Stephenson, 260 Ala. 151, 155, 69 So. 2d 251, 253 (1953). However, “[t]he gist of an action
alleging civil conspiracy is not the conspiracy itself but, rather, the wrong committed.” Keith v. Witt
Auto Sales, Inc., 578 So. 2d 1269, 1274 (Ala. 1991); Hooper v. Columbus Regional Healthcare
System, Inc., 956 So. 2d 1135, 1141 (Ala. 2006). Defendants contend that plaintiffs cannot prove
an underlying “wrong” because the foreclosure notices, accelerations of the note, and the
consequential charges were all lawfully provided by the note and mortgage.
Plaintiffs have not presented evidence otherwise. They have not shown that there is a
genuine dispute as to whether any charges or other actions taken by the defendants were not legal
under the note and mortgage executed by them. While they contend that neither OneWest nor MERS
possessed the power of sale in the mortgage, the court has rejected that assertion because the
mortgage was conveyed to MERS by the plaintiffs, which assigned it to IndyMac Bank, and upon
the failure of IndyMac (and thereafter IndyMac Federal Bank), the asset of the mortgage was
conveyed, assigned, or transferred to OneWest through the FDIC’s receivership of the failed banks.
24

Under Crum, the conveyance or assignment of the mortgage, in the absence of evidence indicating
the parties intended otherwise, carried with it the indebtedness itself, despite the stipulation of the
parties that Fannie Mae was the owner of the debt. Thus, IndyMac Bank, IndyMac Federal Bank,
and OneWest all in turn properly exercised the right to accelerate the debt and foreclose the
mortgage. There was no underlying fraud, illegality, or oppression on which a civil conspiracy could
rest.13 Defendants are entitled to summary judgment on this claim.
E. Wantonness
Lastly, plaintiffs alleged in Count Six of their Amended Complaint that the defendants
engaged in wanton conduct. They pleaded that the defendants, with reckless indifference to whether
their actions would harm the plaintiffs, did the following:

[D]efendants consciously took actions including the production of fraudulent and
forged documents affecting interests in real estate, misrepresented their rights to
foreclose, consciously and deliberately engaged in conduct designed to confuse and
mislead the plaintiffs, claimed legal rights which they lacked and otherwise acted
with malice to obtain possession of the property of the plaintiffs for the purpose of
garnering to themselves the payments of fees and other compensation.

13

The court notes that the amended complaint seems to allege that the civil conspiracy’s
purpose also included the “wrongful foreclosure” of the plaintiffs’ mortgage. Aside from the fact
that plaintiffs have not alleged a substantive claim for “wrongful foreclosure,” the undisputed
evidence simply does not show one under Alabama law. A claim for “wrongful foreclosure” exists
under Alabama law only to the extent that it is alleged and evidence shows that the foreclosure was
undertaken for an improper purpose. For example, the Alabama Supreme Court only last year
confirmed that a claim for wrongful foreclosure is stated only “where ‘a mortgagee uses the power
of sale given under a mortgage for a purpose other than to secure the debt owed by the mortgagor.’”
Jackson v. Wells Fargo Bank, N.A., 90 So. 3d 168, 171 (Ala. 2012)(quoting Reeves Cedarhurst Dev.
Corp. v. First American Fed. Sav. & Loan Ass'n, 607 So. 2d 180, 182 (Ala. 1992)). There is simply
no evidence in this case that the attempted foreclosures were for any purpose other than collection
of the debt owed by the plaintiffs. Thus, there can be no claim for “wrongful foreclosure.”
25

(Doc. 29, ¶ 81, p. 14 of 16). As already explained above, there is no evidence that the note,
mortgage, or any of the assignments or other documents were forged or fraudulent. Although there
was sloppy handling of these financial instruments, there is no evidence of any fraudulent intent.
Plaintiffs do not and cannot dispute that they owed a debt on money they borrowed and that they
mortgage their property to secure the debt. They cannot and do not now dispute that they are in
default on the debt and have been so for several years. Their argument that the separation of the note
and mortgage somehow invalidated the power of sale in the mortgage has been rejected by Alabama
law and this court. Importantly, despite all of the document assignments, failed banks, and
foreclosure notices, the plaintiffs’ property still has not been foreclosed and they remain in
possession of it. They have suffered no injury and, indeed, have experienced a financial windfall in
that they have lived on the Crane Hill property for several years without paying toward the debt owed
on it. There is no evidence that defendants wantonly engaged in any conduct injurious to the
plaintiffs, and they are entitled to summary judgment on this claim.
V. Analysis of Plaintiffs’ Motion for Summary Judgment
Plaintiffs too have filed a motion for summary judgment, contending (1) that the defendants
failed to properly accelerate the note indebtedness and this precludes a proper foreclosure, (2) that
the May 1, 2009, mortgage assignment by MERS to OneWest Bank is defective and cannot empower
OneWest to foreclose the mortgage. The court is unpersuaded by either argument.
A. Defective Acceleration
First, the plaintiffs claim that none of these defendants has properly accelerated the
indebtedness as a condition precedent to foreclosure. But even if that is correct, it does not warrant
a permanent injunction prohibiting the defendants from doing so now or in the future. None of the
26

foreclosures attempted in the past ever came to completion. Whether defendants can correctly do
so in the future is another matter. As to past foreclosure attempts, any ineffectiveness in the
acceleration of the debt is meaningless because no completed foreclosure ever took place. A mere
defective attempt at accelerating the debt, standing alone, does not create a cause of action for
damages nor does it preclude a proper acceleration in the future.
Even so, the court is dubious that the note as not been properly accelerated. The acceleration
provision in the mortgage in this case states the following:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower’s breach of any covenant or agreement in this
Security Instrument (but not prior to acceleration under Section 18 unless Applicable
law provides otherwise). The notice shall specify: (a) the default; (b) the action
required to cure the default; (c) a date, not less than 30 days from the date the notice
is given to Borrower, by which the default must be cured; and (d) that failure to cure
the default on or before the date specified in the notice may result in acceleration of'
the sums secured by this Security Instrument and sale of the Property. The notice
shall further inform Borrower of the right to reinstate after acceleration and the right
to bring a court action to assert the non-existence of a default or any other defense of
Borrower to acceleration and sale. If the default is not cured on or before the date
specified in the notice, Lender at its option may require immediate payment in full
of all sums secured by this Security Instrument without further demand and may
invoke the power of sale and any other remedies permitted by Applicable Law.
Lender shall be entitled to collect all expenses incurred in pursuing the remedies
provided in this Section 22, including, but not limited to, reasonable attorneys’ fees
and costs of title evidence.

On November 16, 2007, IndyMac Bank mailed a notice of default to the plaintiffs. It informed the
plaintiffs that they were in default for non-payment under the note, it told them how to cure the
default, and it gave them until December 18, 2007, to do so. (Doc. 55-2, p. 10 of 22). Additionally,
the notice stated:

27

If you do not cure your default, we will accelerate your mortgage with the full
amount remaining accelerated and becoming due and payable in full, and foreclosure
proceedings will be initiated at that time. Failure to cure your default may result in
the foreclosure and sale of your property. A deficiency judgment may be obtained
against you to collect the balance of your loan.
You may, if required by law, have the right to cure your default after the acceleration
of your payments and prior to the foreclosure sale, by paying all amounts past due
within the time permitted by law. In addition to the past due amounts, you will be
required to pay reasonable fees and costs incurred by IndyMac Bank. You may have
the right to bring a court action to assert the non-existence of a default or any other
defense you may have to acceleration and foreclosure.

It appears that this notice properly complied with all of the acceleration-notice requirements set out
in Section 22 of the mortgage. When the default was not cured, an acceleration notice was then sent
to the plaintiffs on January 24, 2008.
Plaintiffs’ only argument about the sufficiency of this notice appears to be that none of these
defendants (meaning MERS and OneWest) sent the notice of default. Even so, as to the default and
2008 foreclosure proceedings, IndyMac, as the servicer of the mortgage, did so. Although it is true
that the foreclosure did not go forward and the parties negotiated a loan modification agreement,
plaintiffs later defaulted again. No foreclosure has gone forward yet on the now-extant and
undisputed default. Injunctive relief as to past foreclosure efforts is moot. Simply because the
attempted foreclosures by IndyMac Federal Bank and OneWest Bank were never completed and
perhaps even defective, plaintiffs are not entitled to a prospective injunction to prevent the proper
party from beginning the acceleration and foreclosure process anew. Because they are not entitled
to prospective injunctive relief as to a future foreclosure, plaintiffs are not entitled to summary
judgment on this argument.

28

B. No Authority for 2009 Foreclosure
Plaintiffs argue that the October 2009 foreclosure attempt was defective because (1) MERS
lacked any authority on May 1, 2009, to assign the plaintiffs’ mortgage to OneWest for foreclosure,
and (2) OneWest was not the owner of the indebtedness at that time. While the court agrees that,
by May 1, 2009, MERS had already assigned away the power of sale in the mortgage when it
assigned the mortgage in 2008 to IndyMac Bank, it makes no difference. Any injunctive relief that
may have been warranted as to the May 2009 foreclosure is now moot. The May 2009 foreclosure
notices are now long stale and moot, no longer warranting injunctive relief.
Even so, OneWest’s right to exercise the power of sale under the mortgage comes not from
a direct assignment to it by MERS, but from its status as the successor to IndyMac Bank and
IndyMac Federal Bank, through which the mortgage came to OneWest as an asset when each of
these preceding banks failed and the FDIC negotiated an assets sale to OneWest. Under the authority
of Crum v. LaSalle Bank, supra, OneWest also became the owner of the indebtedness, which
followed the mortgage under MERS’s original assignment to IndyMac Bank. That assignment,
under the power given MERS in the mortgage to do whatever was “required of Lender,” expressly
conveyed the mortgage power of sale “together with the note and indebtedness” it secured. When
IndyMac failed, it went to IndyMac Federal Bank. And when IndyMac Federal Bank failed, it went
to OneWest. Thus, based on the documents now before the court, it appears that OneWest holds
both the indebtedness and the mortgage power of sale. Plaintiffs are not entitled to prospective
injunctive relief to prevent OneWest from exercising its rights in the future.14
14

Although not raised as an argument by defendants, the court notes that the equitable
doctrine requiring that a party seeking equity must do equity bars injunctive relief for the plaintiffs.
They are admittedly in default under the note and mortgage. Unless they propose to do equity by
29

VI. Conclusion
Based on the foregoing considerations, the court finds that there is no genuine dispute of
material fact and that the defendants are entitled to judgment as a matter of law. Their motion for
summary judgment will be granted by separate order. The plaintiffs’ motion for summary judgment
will be denied.
A separate order will be entered.
DONE this 5th day of April, 2013.

T. MICHAEL PUTNAM
U.S. MAGISTRATE JUDGE

curing the default, they are not entitled to the equitable remedy of an injunction against future
enforcement of the power of sale.
30