Millon v. JPMorgan Chase Bank, N.A. et al
Filing
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ORDER and OPINION granting 26 motion for summary judgment. Signed on 05/21/2012 by District Judge Ortrie D. Smith. (Will-Fees, Eva)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
DERRICK MILLON,
Plaintiff,
vs.
JPMORGAN CHASE BANK, NA.,
and DEUTSCHE BANK NATIONAL
TRUST COMPANY,
Defendants.
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Case No. 11-0410-CV-W-ODS
ORDER AND OPINION GRANTING MOTION FOR SUMMARY JUDGMENT (DOC. 26)
Defendants move for summary judgment. The motion is granted.
I. BACKGROUND
Plaintiff Derrick Millon resides in Pleasant Hill, Missouri. He financed the
purchase of this residential property with a loan from Long Beach Mortgage Company.
In connection with the loan Millon executed a promissory note dated February
28, 2006, payable to Long Beach Mortgage in the amount of $318,400.00. To secure
the repayment of the note Millon executed a deed of trust granting his residential
property to Trustee Assured Quality Title Company, in trust, with power of sale. The
deed of trust identifies Long Beach as the Lender references the note signed by Millon.
The deed of trust also states the Lender could appoint a Successor Trustee to
Assured Quality Title. On December 31, 2008, an Appointment of Substitute Trustee
was filed with the Cass County Recorder of Deeds. But it was not filed by Long Beach
Mortgage; rather, it was filed by Defendant Deutsche Bank National Trust Company, as
Trustee for Long Beach Mortgage Trust 2006-3. In the document, Deutsche Bank
referenced the note and deed of trust Millon signed, and Deutsche Bank stated it “[was]
the owner and holder of such Note and Deed of Trust.” Deutsche Bank also stated it
was removing Assured Quality Title as Trustee and appointing the law firm of Martin,
Leigh, Laws & Fritzlen, P.C., as Successor Trustee.
On or about January 6, 2011, Martin, Leigh, Laws & Fritzlen sent Millon a Notice
of Trustee’s Sale. The notice stated Millon’s residential property was going to be sold at
9:00 AM on February 7, 2011, "[f]or default" under the deed of trust, as modified by a
Loan Modification Agreement Millon executed in 2009. The sale was to take place at
the Cass County Courthouse in Harrisonville, Missouri.
Approximately 1 hour before his property was to be sold Millon filed this action at
the Cass County Courthouse. Among other things, Millon seeks a declaration that
neither Deutsche Bank nor JP Morgan Chase (Chase) are entitled to foreclose the deed
of trust, and that Martin, Leigh, Laws & Fritzlen cannot act as Successor Trustee.
Defendants removed the action to this Court and have moved for summary judgment.
II. DISCUSSION
"The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(a). The Court addresses six broad issues in
disposing of Defendants’ motion.
(a) Justiciable Controversy
Defendants first argue they are entitled to summary judgment because Millon
cannot demonstrate an actual, justiciable controversy; a requirement for declaratory
judgment actions no less than others. See Hickman v. State of Mo., 144 F.3d 1141,
1142 (8th Cir. 1998). Defendants maintain Millon is essentially asking the Court to "find
an ‘attempted wrongful foreclosure,’" a cause of action rejected in Reese v. First
Missouri Bank and Trust Co. of Creve Coeur, 736 S.W.2d 371 (Mo. 1987). Reese
observed that "Missouri has had a long and good experience with nonjudicial
foreclosure of deeds of trusts (mortgages)" (footnote omitted) and that "authorizing a
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cause of action for wrongful attempted foreclosure would effectively nullify the purposes
for having the expeditious non-judicial foreclosure of deeds of trusts." Id. at 373.
Defendants’ argument is not without some appeal. Declaratory judgment actions
like this one essentially turn nonjudicial foreclosure into judicial foreclosure, exactly what
Reese wanted to avoid.
Defendants do not however cite any on-point authority for their position, and the
Court could find none. And “[p]ower of sale is a matter of contract between the
parties . . . ." Belote v. McLaughlin, 673 S.W.2d 27, 31 (Mo. 1984) (citation omitted).
Only parties with rights under a contract can enforce the contract. See RGB2, Inc. v.
Chestnut Plaza, Inc., 292 S.W.3d 409, 416 (Mo. Ct. App. 2009) (“‘In order to state a
cause of action on a contract, one must be a party to that contract from which the action
arises’” (citations omitted).). Millon is essentially seeking a declaration that
Defendants—which claim a right to foreclose—have no right to enforce the contract.
If Millon is wrong and the foreclosure sale proceeds, he will be divested of legal
title to his residence. See Belote, 673 S.W.2d at 30–31 (noting lien created by deed of
trust does not affect legal title “until the collateral security has been sold” (citation
omitted).). The Court holds this case presents a justiciable controversy. See
Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d 651, 653 (8th Cir. 1996) (defining
generally “actual controversy” as “‘a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment’” (citations omitted).).
(b) Deutsche Bank
Defendants argue Deutsche Bank is the party entitled to foreclose on the deed of
trust executed by Millon. In Missouri "[a] deed of trust securing a negotiable note
passes with it . . . ." Goetz v. Selsor, 628 S.W.2d 404, 405 (Mo. Ct. App. 1982) (citation
omitted). Thus "a party entitled to enforce a note is also entitled to enforce the deed of
trust securing that note, regardless of whether that transfer is recorded." In re
Washington, ___ B.R. ___, 2011 WL 6010247, at *5 (Bankr. W.D. Mo. Dec. 01, 2011).
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Defendants offer several arguments for why they believe Deutsche Bank is
entitled to enforce the note (and consequently the deed of trust). The Court has
focused on the one argument it considers to have merit, which begins with an exhibit
Defendants contend is "[a] color copy of the Note." This factual statement—that the
exhibit is a color copy of the note—is supported by defense counsel’s affidavit, which
further states she received the original note on request and it is being held in her law
firm’s vault.
In his opposition to summary judgment Millon broadly denies Defendants’ factual
statements concerning the purported original note and color copy. Millon relies solely
on his own affidavit to support his broad denial.
Considering first the authenticity of the color copy submitted to the Court, Millon
has not shown a genuine issue of fact as to whether it accurately represents the
document being held by defense counsel in her firm’s vault. Millon states he examined
what Defendants claims to be the original note at defense counsel’s firm on March 28,
2012. His affidavit contains no statements even hinting that the exhibit submitted to the
Court is not a color copy of the document he examined. The Court thus accepts the
exhibit as a true and accurate color copy of that document.
Considering next the authenticity of that document as the original note, Millon
again has failed to show that a genuine issue of fact exists. Millon notably makes no
argument that the document he examined was not the note he signed; he just denies
Defendants’ statement of this fact. Millon admits however that he executed a
promissory note in the amount of $318,400.00 in favor of Long Beach Mortgage on
February 28, 2006, with a loan number of 6684995-7879. All of this information is
reflected in the document being held by defense counsel (as represented by the color
copy submitted to the Court).
Millon does not dispute that the document he examined at defense counsel’s firm
contains what appears to be his signature near the bottom of the last page. Also, Millon
does not dispute that document met the requirements for a negotiable instrument under
Mo. Ann. Stat. § 400.3-104(a) of Missouri’s Uniform Commercial Code; indeed, he
applies Missouri’s law on negotiable instruments in arguing the purported endorsement
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on that document (discussed later) was ineffective.
Because that document was a negotiable instrument, "the authenticity of, and
authority to make, each signature on the instrument is admitted unless specifically
denied in the pleadings." § 400.3-308(a); see also Fed. R. Evid. 902(9) (stating
commercial paper and signatures on it are self-authenticating to extent allowed by
general commercial law). The Court acknowledges Millon may not have had a chance
to "den[y] in the pleadings" the authenticity of that signature; nothing indicates Millon
examined the document in preparing his petition for filing. But even now in his
affidavit—after he has examined the document and when he has the opportunity to
specifically deny the authenticity of that signature—he does not do so. The signature is
thus deemed authentic and authorized. See § 400.3-308(a). The only reasonable
conclusion is that the document being held by defense counsel containing all this
information is the original note, and that is what the Court accepts it to be.
Deutsche Bank is a "‘[p]erson entitled to enforce’" the note if Deutsche Bank is
"the holder of the instrument." § 400.3-301(i). To be a "holder," a person must at least
have possession of the instrument. See § 400.1-201(20). Defense counsel’s
possession of the note on Deutsche Bank’s behalf satisfies this requirement.
But possession alone is only sufficient to make Deutsche Bank a holder of the
note if the note is "payable to bearer" (bearer paper). § 400.1-201(20). When the note
was originally issued by Millon (i.e., when Millon first delivered it to Long Beach
Mortgage after signing it), it stated it was payable "to the order of the Lender." Those
words made the note order paper, not bearer paper. See § 400.3-109(a)–(b).
Defendants contend the note became bearer paper, making Deutsche Bank’s
current possession dispositive of its right to enforce, when Long Beach Mortgage
negotiated it. "Negotiation" occurs when an instrument is transferred by a person (other
than the issuer) to another person who then becomes the holder. § 400.3-201(a).
Order paper (like Millon’s note when it was first issued to Long Beach) can become
bearer paper through negotiation, but it requires a certain type of endorsement. See
§§ 400.3-109(c), 400.3-201(b).
An "‘[e]ndorsement’" generally is a signature made on an instrument for the
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purpose of negotiating it. § 400.3-204(a). The type of endorsement required to
transform order paper to bearer paper is a "‘blank’" endorsement—one that does not
identify the person to whom the instrument is to be paid. § 400.3-205(a)–(b).
On the back of the third and final page of the note (which is the fourth page of the
color copy) appears a partially faded stamp, comprised of words (some illegible) and
two illegible signatures. The signatures appear below the clearly legible words "Pay to
the order of" and an empty blank, and underneath "Long B—— [ ]" and what seems to
be the word "Company." The Court holds this is sufficient evidence of an endorsement
in blank by Long Beach Mortgage.
Millon contends the note was not endorsed in blank by Long Beach. Millon
asserts the document he examined consisted of three unattached pages not pinned
together, with a stamp on the back of the last page that was not dated. Millon cites no
authority requiring attached pages or a date, so the Court dismisses those alleged
defects. Millon also complains the signatures on the stamp are not legible and
"original," and there is no power of attorney provided.
Defendants counter Millon has no standing to complain about the adequacy of
the endorsement. The principal case Defendants rely on is Barker v. Danner, 903
S.W.2d 950, 955 (Mo. Ct. App. 1995), which declared "[t]he validity of an assignment of
a debt cannot be questioned by the debtor in a suit by the assignee unless he can show
prejudice’" (citation omitted). But this of course is not a suit by the assignee of the
instrument. And how can foreclosure by a stranger to the contract (as Millon claims
would happen here) not be prejudicial to the homeowner—even one in default? For
Defendants’ argument to be persuasive, they would need to show how the homeowner
would not be prejudiced if a stranger foreclosed on the property and then the proper
party attempted to foreclose. Defendants have not done this, so their argument is
unpersuasive.
This is not inconsistent with the Court’s Order of dismissal in Singleton v. Wells
Fargo Home Mortgage, No. 4:12-CV-00230-ODS (Doc. 12), cited by Defendants. In
Singleton the plaintiff claimed the defendants were required to show him the promissory
note before they could foreclose the deed of trust. Order, Doc. 12, p. 4. The Court held
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the plaintiff failed to state a claim for relief because nothing in the deed of trust or
Missouri’s statutes required that he be shown the note before foreclosure could
proceed. Id., p. 5. Here the issue is whether the note became bearer paper, which
necessarily implicates what the note shows.
Millon’s arguments against the validity of the endorsement nonetheless lack
merit. He admits there are signatures on the note, and, as noted previously, a signature
on an instrument is presumed to be authentic and authorized. See § 400.3-308(a). The
fact the signatures on the stamp are not legible, "original," or accompanied by a power
of attorney does not rebut this presumption. In addition, any signature on an instrument
constitutes an endorsement unless the circumstances "unambiguously indicate"
otherwise. § 400.3-204(a). (The most common indication of contrary intent is a
signature on the lower right-hand corner of an instrument, which indicates that of an
issuer. See id., comment 1.) Millon points to no circumstances even tending to suggest
the signatures here do not constitute an authentic and authorized blank endorsement.
No genuine issue exists that the note is bearer paper and Deutsche Bank is in
possession of it. Deutsche Bank is thus the holder of the note and entitled to enforce
the deed of trust. See Washington, 2011 WL 6010247, at *5. Millon’s argument that
ownership or holder status of the note cannot be traced through the record of
securitization documents is irrelevant.
(c) Chase
Defendants contend Chase is or was the servicer of Millon’s loan. Millon admits
he acknowledged Chase was the servicer when he executed the Loan Modification
Agreement in 2009, between himself and Deutsche Bank. Millon does not now disavow
that acknowledgment or contend Chase never was the servicer of the loan. Nor does
Millon argue Chase is not now the servicer. (Millon does argue Chase is not a holder of
the note and is a “stranger” to agreements concerning the securitization of the note and
the chain of title.)
There appears to be no dispute to resolve here. The undisputed evidence
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establishes Chase is not the holder of the note; Deutsche Bank is. Chase is (or was)
the servicer and has (or had) whatever rights existing under its servicing agreement.
Chase is entitled to summary judgment.
(d) Martin, Leigh, Laws & Fritzlen
The parties dispute whether Deutsche Bank was authorized to appoint Martin,
Leigh, Laws & Fritzlen as Successor Trustee on December 31, 2008. As proof that
Deutsche Bank did have that authority, Defendants point to an “Assignment of Deed of
Trust” filed in the recorder’s office by Chase on July 22, 2010.
In that document Chase acknowledges its interest in the deed of trust was
assigned to Deutsche Bank “on a date prior to December 8, 2008.” But Chase goes on
to convey the deed of trust again to Deutsche Bank. Chase states this is “consistent
with and to confirm said transfer.”
Not only is the acknowledgment Assignment of Deed of Trust not a sufficient
basis to establish the purported assignment from Chase to Deutsche Bank in 2008, but
the reassignment (in 2010) suggests there was something wrong with the purported first
assignment. Merely being assigned the deed of trust (not the note) moreover would not
have given Deutsche Bank the power to appoint a Successor Trustee; the governing
document (the deed of trust) entitled only the Lender to appoint a Successor Trustee.
Missouri law admittedly requires strict compliance with the deed of trust in
appointing a new trustee. See Ayers v. Myers, 939 S.W.2d 447, 449 (Mo. Ct. App.
1996). But it would be a waste of judicial resources to hold a bench trial on Deutsche
Bank’s holder status in 2008. If the Court found Deutsche Bank was not a holder at that
time, Deutsche Bank could just turn around and appoint the law firm as Successor
Trustee now. The key in this declaratory judgment action is the relationship of the
parties moving forward.
Although Missouri’s statute codifying the doctrine of after-acquired title applies
only to conveyances of indefeasible estates in fee simple, see § 442.430, the Court
finds the doctrine instructive here. Deutsche Bank intended to appoint Martin, Leigh,
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Laws & Fritzlen as the Successor Trustee to hold the foreclosure sale regarding Millon’s
property, and Deutsche Bank has been established to be the current holder of the note.
The Court declares that Martin, Leigh, Laws & Fritzlen has the authority to act as
Successor Trustee under the deed of trust.
(e) Lack of Notice of Default
Millon next contends he never received the notice of default called for under the
deed of trust. This contention is frivolous.
The deed of trust states the “Lender” will send the notices. From July 17, 2006
(just five months after Millon executed the promissory note), to December 3, 2009,
Millon received at his residential address no fewer than 19 notices of default. These
notices were from Chase and another bank, Washington Mutual. As previously noted,
Millon acknowledged Chase was the servicer of his loan when he executed the Loan
Modification Agreement in 2009. In that Agreement Millon also acknowledged that in
2008 Chase had “acquired loans and certain other assets of Washington Mutual Bank
from the Federal Deposit Insurance Corporation acting as receiver.”
Millon is not claiming the notices confused or misled him, only that they did not
come “from any person or entity identified as a “‘Lender.’” This is trivial.
(f) Allegedly Misdescribed Property
Millon lastly contends the legal description of the property is inaccurate and must
be corrected before a sale can take place. Defendants argue summary judgment
should be granted to them because the description meets the standard articulated in
Hamburg Realty Co. v. Woods, 327 S.W.2d 138, 150 (Mo. 1959). Hamburg Realty
noted that generally “any description in a deed is sufficient if it affords the means of
identification of the property” (citation omitted).
Millon does not dispute the Hamburg Realty standard. Nor does he acknowledge
or make any argument opposing Defendants’ contention that the legal description
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satisfies it. Millon simply reasserts that the legal description should be corrected before
a sale occurs.
"It is not the court's responsibility to research the law and construct the parties'
arguments for them." Economy Folding Box Corp. v. Anchor Frozen Foods Corp., 515
F.3d 718, 721 (7th Cir. 2008) (citations omitted). And in the Eighth Circuit "failure to
oppose a basis for summary judgment constitutes waiver of that argument." Satcher v.
University of Arkansas at Pine Bluff Bd. of Trustees, 558 F.3d 731, 735 (8th Cir. 2009).
Millon has thus waived any argument Defendants are not entitled to summary judgment
with respect to the alleged misdescription of his property. The legal description of the
property—if it is erroneous as Millon contends—does not need to be corrected before
the foreclosure sale can occur.
III. CONCLUSION
Defendants’ motion for summary judgment is granted.
IT IS SO ORDERED.
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT
DATE: May 21, 2012
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