The Bank of New York Mellon v. Adams, et al

Filing 69

ORDER GRANTING IN PART AND DENYING IN PART 48 Defendant's Motion for Summary Judgment; GRANTING 51 Plaintiff's Motion for Partial Summary Judgment; DENYING 56 Defendant's Motion to Strike ; DENYING 57 Defendant's Motion to Strike; and DENYING 60 Plaintiff's Motion for Sanctions. Summary judgment is granted in favor of the defendant on counts IV, V, and VI of the complaint. The court declares that the plaintiff is the owner and holder of the Note and Deed of Trust. The plaintiff is allowed to foreclose on the property in accordance with this order. The court enters judgment against H. Clayton Adams for the unpaid balance of the defaulted note, plus interest and costs in the amount of $251,283.4 4, plus $14.89 per day after February 28, 2014. Plaintiff is awarded attorney's fees in the amount of 15% of the unpaid balance of the note, pluse interest and costs as of the date of entry of this order. Signed by US District Judge Terrence W. Boyle on 7/30/2014. (Fisher, M.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:13-CV-245-BO

THE BANK OF NEW YORK MELLON FIK/A
THE BANK OF NEW YORK AS TRUSTEE FOR
THE CERTIFICATEHOLDERS OF THE
CWALT, INC. ALTERNATIVE LOAN TRUST
2007-0A2 MORTGAGE PASS THROUGH
CERTIFICATES, SERIES 2007-0A2,
Plaintiff,
V.

HANNIA M. ADAMS; H. CLAYTON ADAMS
And ROBERSON PROPERTY ENTERPRISES,
LLC,
Defendants.

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ORDER

This matter is before the Court on defendants' motion for summary judgment [DE 48],
plaintiffs motion for partial summary judgment [DE 51], defendants' motion to strike the
declaration of Brian Tatum [DE 56], defendants' motion to strike affidavit of Lyvonne Jones
[DE 57], and plaintiffs motion for sanctions [DE 60]. A hearing on these matters was held in
Elizabeth City, North Carolina on July 29, 2014 at 3:30 p.m. The motions are now ripe for
adjudication. For the following reasons, plaintiffs motion for summary judgment is GRANTED,
defendants' motion for summary judgment is GRANTED IN PART and DENIED IN PART,
defendants' motions to strike are DENIED, and plaintiffs motion for sanctions is DENIED.

BACKGROUND
The instant action began on April 3, 2013 when plaintiff filed suit in this Court seeking
judicial foreclosure of a deed of trust against real property located in Harnett County, North

Carolina (105 Wade Avenue, Dunn, North Carolina 28334 hereinafter "the Property").
Defendants H. Clayton Adams ("Mr. Adams") and Hannia M. Adams ("Mrs. Adams"), husband
and wife, accepted a loan on December 6, 2006 for $173,500 from First Magnus Financial
Corporation. In consideration for the loan, Mr. Adams executed a promissory note ("the Note")
that was secured by a deed of trust on real property ("the Deed of Trust") owned by both
defendants. Beginning in 2008, Mr. Adams stopped making the required payments on the loan
thereby defaulting under the terms of the Note and Deed of Trust.
Defendants admit that they accepted the loan, that the loan is secured by the Property
they own, and that the loan is now in default under the terms of the Note and Deed of Trust. The
defendants deny only that the plaintiff is the holder of the Note and that mortgage fraud was
committed. Plaintiff seeks summary judgment on its claims for declaratory judgment, judicial
foreclosure, breach of contract (suit on the promissory note), and attorney's fees. Defendants
seek complete summary judgment on all claims.
DISCUSSION

I.

MOTIONS TO STRIKE.

"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." FED. R. CIV. P. 56(c)(4). "Thus,
summary judgment affidavits cannot be conclusory or based upon hearsay." Evans v. Techs.
Apps. & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996) (citations omitted). Affidavits, or portions of

affidavits, may be struck when in violation of these requirements. See id. (discussing and
affirming the lower court's striking of several portions of an affidavit).

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A.

Lyvonne Jones Affidavit.

Plaintiffs appear to object to the Lyvonne Jones affidavit mainly on the grounds that it is
not admissible because Ms. Jones is not able to lay a proper foundation for business records that
were created by companies other than that for which she works. Although there does not appear
to be a Fourth Circuit case directly on point, other courts have found that a company receiving a
document from another business can lay a sufficient foundation where it, acting in the regular
course of its business, integrates the received record into its own business records, relies on it in
its day to day operations and surrounding circumstances indicate trustworthiness. See Beat Bank,
SSB v. Eurich, 831 N.E.2d 909, 914 (Mass. 2005) (concluding that in the context of banks
buying and selling loans it is normal business practice to maintain accurate business records
regarding such loans and to provide them to those acquiring the loan and therefore testimony
from a witness with personal knowledge regarding the maintenance of the predecessors' business
records is unnecessary); Brawner v. Allstate Indem. Co., 591 F.3d 984, 987 (8th Cir. 2010)
(holding a business is not required to produce an individual from the entity that prepared the
record to establish a foundation); United States v. Adefehinti, 510 F.3d 319, 326 (D.C. Cir. 2007)
("a record of which a firm takes custody is thereby 'made' firm within the meaning of [Rule
902(11)]"); Air Land Forwarders, Inc. v. United States, 172 F.3d 1338, 1342-44 (Fed. Cir. 1999)
(allowing admission of records not prepared by business as long as it could provide testimony
that it was the entity's regular practice to obtain information from a third party or that the records
were integrated into the office's records and relied upon in its day to day operations); see also
United States v. Keita, 742 F.3d 184, 190 (4th Cir. 2014) (noting that oftentimes business records
are admissible not because they fall under a hearsay exception, but rather because they are nontestimonial).

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Here plaintiff points to the deposition of Kimberly Harmstead in which she outlined the
process of how a prior lender and servicer's records are incorporated into Ms. Jones's
employer's business records. Thus, the affidavit of Ms. Jones properly lays the foundation for the
records of which she is custodian. Accordingly, the Court denies defendants' motion to strike.
B.

Declaration of Brian Tatum.

Defendants object to the declaration of Brian Tatum because he is the plaintiffs attorney,
has no personal knowledge of the matters at hand, and is not qualified as an expert. Plaintiffs
counsel avows that the purpose of his declaration is simply to inform the Court that he can
present the Note to this Court at a hearing should the Court so desire. The Court notes this
limited purpose, does not consider the declaration to provide anything other than that offer and
declines to strike the declaration. Defendants' motion is denied, but the Court does not consider
the declaration to be evidence in this matter.
II.

MOTION FOR SANCTIONS.

Plaintiff asks for sanctions for defendants' failure to comply with this Court's order [DE
58] granting plaintiffs motion to compel [DE 41]. Defendants have established that they have
complied with this Court's order and have served responses to the interrogatories and requests
for documents at issue. Accordingly, there is no need for sanctions to be imposed upon any
party. Plaintiffs motion is denied.
III.

MOTIONS FOR SUMMARY JUDGMENT.

A motion for summary judgment cannot be granted unless there are no genuine issues of
material fact for trial. FED. R. Clv. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
The moving party must demonstrate the lack of genuine issue of fact for trial and if that burden is
met, the party opposing the motion must "go beyond the pleadings" and come forward with

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evidence of a genuine factual dispute. Celotex, 477 U.S. at 324. The Court must view the facts
and the inferences drawn from the facts in the light most favorable to the non-moving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Conclusory
allegations are insufficient to defeat a motion for summary judgment. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249 (1986) ("[T]he mere existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported motion for summary judgment.")
(emphasis in original).
A.

Plaintiffs Partial Motion for Summary Judgment.

Defendants have admitted that they accepted the loan, that the loan is secured by the
Property, and that the loan is now in default under the terms of the Note and Deed of Trust.
Defendants deny only that plaintiff is the holder of the Note and that mortgage fraud was
committed. As plaintiff does not move for summary judgment on its fraud claims, the Court does
not discuss those claims here. The Court has viewed all of the evidence submitted in this matter
and has held a hearing in which it viewed what plaintiff purports to be the original Note. [DE
68]. The Court finds that plaintiff is the holder of the original Note which is properly indorsed in
blank and the holder of the Deed of Trust. See In re Bass, 738 S.E.2d 173, 176-77 (N.C. 2013)
(discussing the law of North Carolina on who constitutes the holder of a negotiable instrument
and holding that and indorsement "is presumed to be authentic and authorized . . . until some
evidence is introduced which would support a finding that the signature is forged or
unauthorized"). As defendants can cite no evidence to support their position that the
indorsements are invalid, they are presumed to be valid. Further, plaintiff offers evidence of a
valid assignment of the note by Mortgage Electronic Registration Systems, Inc. to plaintiff. See
Porterfield v. JP Morgan Chase Bank, N.A., 2013 U.S. Dist. LEXIS 152318 (E.D.N.C. Oct. 23,

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2013) (holding that "[s]ecuritization merely creates a separate contract, distinct from the
[borrower's] debt obligations under the Note, and does not change the relationship of the parties
in any way").

Thus the Court grants plaintiff's motion for a declaratory judgment. See

Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th Cir. 1996) ("a declaratory judgment

action is appropriate when the judgment will serve a useful purpose in clarifying and settling the
legal relations in issue, and ... when it will terminate and afford relief from the uncertainty,
insecurity, and controversy giving rise to the proceeding." (quotation omitted)).
Plaintiff also asks this Court to issue a judgment and decree of foreclosure as provided by
28 U.S.C. § 2001 et seq. As holder ofthe Note and Deed of Trust, plaintiff has standing to bring
an action on the Note or pursue a foreclosure action. Langston v. Brown, 133 S.E.2d 180, 181
(N.C. 1963); G.E. Capital Mortgage Servs., Inc. v. Neely, 519 S.E.2d 553, 558 (N.C. App. 1999).
Further, plaintiff named all adverse parties claiming interests in the Property to which this action
is determinative. Jones v. Williams, 71 S.E. 222, 225 (N.C. 1911). An acceleration clause in a
mortgage confers a contract right upon the note or mortgage holder which it may elect to enforce
upon default through a foreclosure action. In re Sutton Invest., Inc., 266 S.E.2d 686, 688-89
(N.C. App. 1980). As this Court has already issued a declaratory judgment that plaintiff is the
holder of the Note, plaintiff is entitled to an order allowing the foreclosure of the Property
secured by the Deed of Trust. Further the facts surrounding the default of the Note are not in
dispute. Defendants have been in default for six years and have not attempted to cure the default.
Therefore this Court holds plaintiff is allowed to foreclose the Property pursuant to the Deed of
Trust and declares that plaintiff holds the senior security interest in the Property and all other
claims/interests are inferior/subordinate, and therefore are barred and foreclosed from any right,
title, interest, and equity of redemption and claim in the Property.

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Plaintiff asks the Court to appoint a Special Master or instruct the United States Marshall
to conduct the foreclosure sale. The Court declines to do so. 28 U.S.C. § 2001 ("Such sale shall
be upon such terms and conditions as the court directs."). Instead, the Court instructs plaintiffto
follow the procedures for a special proceeding in Harnett County where the Property is located
and to properly foreclose upon the Property in that venue. Thus the foreclosure should take
place under the procedures laid out in Chapter 45 of the North Carolina General Statutes.
However, the Court notes that the notice provided in these proceedings must comply with the
requirements of 28 U.S.C. § 2002. Accordingly, the Court grants plaintiffs motion for summary
judgment on count II of the complaint.
In count III of the complaint plaintiff asks for a judgment against Mr. Adams for the
unpaid balance of the defaulted Note plus interest and costs in the amount of $251,283.44 as of
February 28, 2014, with interest after February 28, 2014 in the amount of $14.89 per day. [DE
51-5 at 6]. As the Court has held that Mr. Adams is in default on the Note, the Court grants
plaintiffs motion for summary judgment as to count III and enters judgment against Mr. Adams
in the amount of $251,283.44 plus interest in the amount of $14.89 per day after February 28,
2014.
Finally, in count VII of the complaint plaintiff seeks a monetary judgment against
defendants for reasonable attorney's fees under N.C. Gen. Stat. § 6-21.2 and pursuant to
paragraph 22 of the Deed of Trust. As the Court has found for plaintiff on its claims for
foreclosure and suit on the Note, plaintiff is entitled to attorney's fees in the amount of 15% of
the unpaid balance of the defaulted Note. This amount shall be calculated as 15% of the unpaid
balance on the date of entry of this order as appropriately calculated with interest since February
28, 2014. Accordingly, plaintiffs motion for summary judgment is also granted as to count VII.

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B.

Defendants' Motion for Summary Judgment.

As the Court has ruled in plaintiffs favor on counts I, II, III and VII of the complaint,
defendants' motion for summary judgment is denied as to those counts. The only remaining
issues to be discussed are counts IV, V, and VI ofthe complaint. Count IV is only alleged in the
alternative to count III, and as the Court has found in plaintiffs favor on count III, count IV is
hereby dismissed and plaintiffs motion for summary judgment is granted as to count IV.
Count V alleges fraud against Mr. Adams. Plaintiff only cites to Mr. Adams's statement
that he resided at the Property and that he would reside at the Property for a minimum of one
year immediately following the recordation of the Deed of Trust as proof that Mr. Adams
committed mortgage fraud. However, in order to prove fraud it is necessary to establish that the
plaintiff relied upon false statements and was therefore damaged by the alleged false statements.

Rowan Cnty. Bd. of Educ. v. US Gypsum Co., 418 S.E.2d 648, 658-59 (N.C. 1992). It is clear
that here, the lender did not rely on this statement and that the lender was not subsequently
induced to make the loan by the statement. Therefore, defendants are entitled to summary
judgment on count V of the complaint. Further, because count VI relies on this Court ruling in
favor of plaintiff on count V, defendants are also entitled to summary judgment on count VI.
Accordingly defendants' motion for summary judgment is granted in part and denied in
part.
CONCLUSION

For the foregoing reasons, defendants' motions to strike are DENIED and plaintiffs
motion for sanctions is DENIED. Defendants' motion for summary judgment is GRANTED IN
PART AND DENIED IN PART. Summary judgment is granted in defendants' favor on counts
IV, V, and VI of the complaint. Plaintiffs motion for partial summary judgment is GRANTED.

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The Court DECLARES that plaintiff is the owner and holder of the Note and Deed of Trust.
Further, plaintiff is ALLOWED to foreclose on the Property in accordance with this order. The
Court ENTERS JUDGMENT against H. Clayton Adams for the unpaid balance of the defaulted
Note plus interest and costs in the amount of$251,283.44 plus $14.89 per day after February 28,
2014. Plaintiffis AWARDED attorney's fees in the amount of 15% ofthe unpaid balance ofthe
defaulted Note plus interest and costs as of the date of entry of this order.
SO ORDERED.
This the~ day of July, 2014.

T
NCE W. BOYLE
UNITED STATES DISTRICT J

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