Zambrano v. HSBC Bank USA, N.A. et al

Filing 57

MEMORANDUM OPINION in re Motion for Summary Judgment. Signed by District Judge Claude M. Hilton on 5/25/10. (klau, )

IN THE
FOR THE

UNITED

STATES

DISTRICT
OF

COURT

EASTERN DISTRICT

VIRGINIA
n rr--

Alexandria Division

JENNY ZAMBRANO, Plaintiff,
v. HSBC BANK USA, INC. e_t aJL_,

) ) ) )
) )

MAY 2 5 2010
CLERK, U.S. DISTRiCT COURT ALEXANDRIA, VIRGINIA

Civil Action No.#

01:09-cv-996

Defendants.

)

MEMORANDUM

OPINION

This matter comes before

the Court

on Defendants'

Motion for

Summary Judgment. 2009

Plaintiff

complaint 8033

seeks

to void the April

15,

foreclosure and sale of

Lomond South Drive,

Manassas,

Virginia 20110,

her residential property
(the

(the

"Property").
on May 17, 2006

Plaintiff entered into a loan evidenced by a promissory note (the

"Loan")

"Note")

and secured by a deed

of

trust

(the
The

"Deed of Trust")

placing a security interest on the
Fremont Investment Long & Loan & Neyhart,

Property.

loan named Defendant as

Corporation

("Fremont")

the Lender,

Defendant

P.C.

("L&N")

as

the Trustee, Inc.

and Defendant Mortgage Electronic as the Beneficiary. L&N is a
the laws of

Registration Systems, is in the business of

("MERS")

Fremont

originating mortgages.
existing and

professional

corporation

organized under

the

Commonwealth of

Virginia.

MERS'

business

includes

the

electronic

registration and transfer of mortgages,

specifically

including

the

Property.

After executing the
loan payments to Fremont.

loan documents,
Later, she

Plaintiff began making
loan

stopped making her

payments

as

required under

the Note

and Deed.

Plaintiff has not alleged that paid off, released, or canceled.

the

secured Note has been she asserts two claims

Instead,

against Defendants. First,
claim that she is

Plaintiff alleges

in her quiet title

"the only party to this matter that can prove

[a]

legal and equitable ownership interest in the Property."
Plaintiff alleges in her declaratory judgment claim that
foreclosure proceeding against the

Second,

the Defendants

"conducted a

Plaintiff

in violation of

law and contract."

On May 17,

2006,

Plaintiff entered into the Loan with

Fremont evidenced by the Note and secured by the Deed of Trust.
The Deed of the Note, Trust placed a security interest on the Property. In

Plaintiff

explicitly agreed that

the Note was

a fully

negotiable

instrument,

stating

"I understand that

the Lender may this Note by

transfer this Note.

The Lender or anyone who takes

transfer and who is entitled to receive payments under this Note is called the 'Note Holder.'" In the Deed of Trust,
interest

Plaintiff
(together

agreed that the

"Note or a partial

in the Note

with this Security Instrument)
without prior notice to

can be sold one or more times

Borrower."

On or about August

1,

2006,

Fremont negotiated ownership and

-2-

possession of

the Note

to Defendant

HSBC Bank USA,

N.A.

("HSBC"),

as evidenced by paragraph 3

of

the

Declaration of Judy A.

Tidwell,

Senior Litigation Processor for Litton's

legal

department.

HSBC is a bank that buys and sells mortgages.
"in blank" by stamping on the back of

Fremont

endorsed the Note

the Note

"Pay to the Order of

without recourse." The

endorsement was
for Fremont.

signed by Doug Pollock,

Assistant Vice President

On or about August

1,

2006,

Fremont

delivered the original

Deed of Trust bearing Plaintiff's of the Trust,

signatures

to HSBC.

On behalf

HSBC retained possession of

the original Note and
from the date they

Deed bearing Plaintiff's original were transferred by Fremont until

signatures

the original

documents were

given to Glasser & Glasser,
and trustee's sale at issue

P.L.C.
in this

in relation to the
action.

foreclosure

Plaintiff admits that she
obligations under the Note.

"refused to pay"
1, 2007,

her repayment
Plaintiff

On August

defaulted on her loan obligations by failing to make her mortgage
loan payment. Up to the date of this opinion,
was on July 1,

the

last mortgage

loan payment made by Plaintiff On May 7, 2008, Fremont

2007. rights and

transferred

its

obligations as

loan servicer for the loan at issue to Defendant
("Litton"), a limited partnership that 2008, Litton gave

Litton Loan Servicing LP

also buys and sells mortgages.

On December 4,

-3-

Plaintiff notice of
payment of
not

her default and HSBC's
to the Note
date

intent

to accelerate
Plaintiff
Notice of

the

Loan pursuant
the

and Deed.
in the

did

cure her default by

specified

Default.

On March 13,

2009,

HSBC,

through its

loan servicer

Litton,
pursuant

appointed Glasser & Glasser as
to the Deed.

substitute

trustee

HSBC instructed Glasser & Glasser to invoke
sale pursuant to the Deed of Trust

the power of
law.

and Virginia foreclosure

On April
trustee's

1,

2009,

Glasser & Glasser notified Plaintiff of
for April 15, 2009.

the

sale

scheduled

On April
trustee's sale

6 and 13,
of the

2009,

Glasser & Glasser advertised the
scheduled for April 15, 2009 in

Property

the

Washington Examiner newspaper.
foreclosed upon and sold

On April

15,

2009,
a

Glasser &

Glasser
sale.

the

Property via

trustee's

HSBC,

by and through its

loan servicer,

Litton,

produced to

Glasser & Glasser the original Note and original Deed of Trust

bearing Plaintiff's original
endorsement. On May 19, 2009,

signatures and Fremont's blank
Glasser & Glasser executed the the Property from

Trustee's Deed conveying ownership of

Plaintiff.
in the

On July 13,

2009,

Glasser recorded the Trustee's Deed

Prince William County Land Records.

Plaintiff

filed this action on July 31,

2 009,

approximately

three and one-half months after the

foreclosure and trustee's

-4-

sale.

Plaintiff originally County of

filed

this

action

in the Circuit 2009.

Court On

for the

Prince William,

Virginia on July 31,

September 3,

2009,

Defendants

removed the action to this

Court.

On September 23,

2009,

Plaintiff amended her complaint
for (1) violation of

to assert

sixteen separate claims

the Truth in Lending

Act;

(2)

violation of

the Fair Debt

Collection Practices Act; Procedures Act;
(5) unjust gambling

(3)

violation of

the Real Estate Settlement
-wrongful

(4)

declaratory judgment enrichment; (6)

foreclosure; (7)

"illegal

gambling;"

"illegal

accessories,-"

(8)

"pyramid scheme;"
(10) (12)

(9)

violation of Virginia's

false advertising statutes; sales statutes; (11) fraud;

criminal violation of Virginia's negligent title; supervision; (15) (13) and

breach of (16)

fiduciary duty;

(14)

quiet

injunction;

violation of

Plaintiff's

due process

rights under the United 2009, this

States

and Virginia Constitutions.

On November 9,

Court dismissed fourteen of Plaintiff's motion for summary judgment addresses
for quiet

claims.

Defendants'

the two remaining claims

title and declaratory judgment.

Defendants move

for summary judgment pursuant

to Fed.

R.

Civ.

P.

56(b).

Summary judgment should be entered against a party
to establish the case, and on
Celotex

"who fails

to make a showing sufficient

existence of an element essential
which Corp.

to that party's
at

that party will bear the burden of proof v. Catrett, 477 U.S. 317, 322 (1986).

trial."

In such situations,

-5-

there can be complete

"lno genuine

issue as

to any material

fact,'

since a the

failure of proof

concerning an essential element of
all other facts

nonmoving party's

case necessarily renders

immaterial."

Id.

at 323.

As

the Fourth Circuit has held:

Though the burden of proof rests initially with the moving party, when a motion for summary judgment is made and supported as provided in Rule 56, the nonmoving party must produce "specific facts showing that there is a genuine issue for trial," rather than resting upon the bald assertions of his pleadings. Ross v. Comms. Satellite Corp..
omitted)

759

F.2d 355,

364

(4th Cir.
Price

1985)

(internal

citations

rev'd on other grounds.

Waterhouse v.
"affirmative

Hopkins,
obligation

490 U.S.
...

228

(1989).

Trial

judges have an

to prevent

'factually unsupported

claims and defenses'
Humphreys
omitted).

from proceeding to trial."
1128 (4th Cir.

Felty v.

Graves-

Co..

818

F.2d 1126,

1987)

(citations

To survive "'specific
trial.'" Corp..

summary judgment, showing that

Plaintiff must present is a genuine issue for
Ltd. v. Zenith Radio (quoting

facts

there
Indust.

Matsushita Electric U.S. 574, 587

Co..

475

(1986)

(emphasis

in original)

Fed. there at

R. is

Civ.

P.

56(e)).

It

is not

enough as

"simply

[to]

show that Id. or

some metaphysical doubt Nor is the

to the material

facts."

586.

"mere existence of
adequate Corp.

a scintilla of evidence"
a F. summary judgment 2d 872, 875 (4th

"unsupported motion.

speculation" Hospital

to defeat 977

Baber v.

of Am..

Cir.

1992).

The non-moving party must
-6-

"make

a showing sufficient

to establish the party's case"
Wildlife

existence of an element essential Luian v.

to that National
Thoman

to avoid summary judgment.
497 U.S. 871, 883

Federation,

(1990);

Davis v.

Motel

Corp.,

900

F.2d 28,

31

(4th Cir.

1990).

"A trial,

after

all,

is not an entitlement.

It exists to resolve what reasonable
factual disputes."
759 F.2d 355, 364

minds would recognize as real
Communications
1985) .

Ross v.
(4th Cir.

Satellite Corp..

Here,

Plaintiff's assertions

that

(1)

"Plaintiff

is the only

party to this matter that can prove
interest in the Property", and (2) the

legal and equitable ownership
Defendants Plaintiff "conducted a in violation of foreclosure law

foreclosure proceeding against and contract"

are contradictory to Virginia's verified statements

laws

and to Defendants'

and documents presented in

this matter.
Defendants'

Plaintiff has presented no evidence to call
submissions into question.

Plaintiff provides no evidence disputing Defendants' and equitable ownership of
shows that the Defendants,

legal

the Property.
not Plaintiff,

Indeed,
are

the evidence

the only parties

that can demonstrate an equitable and legal ownership of Property. Nor can Plaintiff

the

submit any evidence showing that in

Defendants violated any law or breached any contract
conducting the foreclosure.

Plaintiff

claims

that she is the

"only party that can prove

-7-

[a]

legal and equitable

ownership

interest

in the

Property."

There

is no dispute

that

Plaintiff

entered into the

loan

evidenced by the Note and secured by the Deed of Trust placing a
security interest in the Property. The originating lender was

Fremont. as

After origination,

Fremont negotiated the Note

to HSBC and

trustee

for the Trust by endorsing the Note

"in blank"

delivering physical possession of Persons entitled to enforce
the instrument."

the original Note instrument
As

to HSBC. include
the and

a negotiable
Va. Code §

the

"holder of

8.3A-301.

originating lender,

Fremont was

the holder of

the Note

entitled to enforce
Fremont's "blank

the debt obligation against Plaintiff.
essentially converted the Note into

indorsement"

"bearer paper." Va.

Code

§

8.3A-205(b).

"When indorsed in blank,
negotiated by

an instrument becomes payable

to bearer and may be

transfer of possession alone until
Fremont's blank endorsement

specially indorsed."

Id.
to

and delivery of

the original Note

HSBC rendered HSBC a holder of its terms against At
Trust

the

instrument

entitled to enforce

Plaintiff. time, Fremont delivered the original Deed of
even if Fremont had not conveyed physical

the

same

to HSBC.

However,

possession of

the Deed of Trust

to HSBC,

the negotiation of

the

Note from Fremont to HSBC carried with it the equitable security
of the Deed of Trust. See, e.g., Williams v. Gifford, 139 Va.

779,

784

(1924)

("[I]n Virginia,

as

to common law securities,

the

-8-

law is

that both deeds of

trust and mortgages are

regarded in

equity as mere securities

for the debt and whenever the debt is

assigned the deed of
with it.");

trust or mortgage is assigned or transferred
Bishop. 82 Va. 190, 200-01 (1886) ("It is

Stimpson v.

undoubtedly true that a transfer of a secured debt

carries with

it the security without

formal assignment or delivery.").
secured and HSBC was
Trust, including

The Note continued to be
enforce the terms of the

entitled to
the power to

Deed of

invoke the
face of

sale of

the Property upon Plaintiff's
that the Note has

default.

The
The

the Note

shows

a blank endorsement.

issue of whether Defendants had authority to

foreclose on the

Property is simple.
and, therefore,

HSBC owned and possessed the original Note
the Note. As a

was a holder entitled to enforce HSBC enjoyed the security of

holder of

the Note,

the Deed of

Trust and,
on the

therefore,

was

authorized to initiate the foreclosure
trustee pursuant
laws.

Property through the
foreclosure

to the Deed of Trust

and Virginia's

There is no dispute
mortgage payments. that she

that

Plaintiff stopped paying her
in her Complaint the Note.

In fact,

Plaintiff declares

"refused to pay"

her obligations under

Plaintiff defaulted on the Note by missing the payment due on August 1,
years.

2007.

Plaintiff has remained in default
§ 55-59(7) states

for over two
the

Virginia Code

the authority of

trustee

to foreclose and sell property provided as

security for a

-9-

loan after In the

the borrower event of

is

in default. in the payment of the or debt in the

default

secured,

or any part

thereof,

at maturity,

payment of

interest when due,
the request

or of
of

the breach of any

of

the

covenants entered into or imposed upon the
then at any beneficiary the

grantor,

trustee shall forthwith declare all the debts and obligations secured by the deed of trust at once due
proceed to Va. Code §

and payable and may take possession of the property and sell the same at auction ....
55-59(7).

Furthermore,
agreed that

in the Deed of Trust,
holder would have

Plaintiff explicitly
authority to invoke

the note

foreclosure and sell

the property if

she did not

cure

her

default.

"If

the

[Plaintiff's]

default

is not

cured on or before

the date specified in the
option may require

[acceleration]

notice,
of

Lender at
all sums

its

immediate payment

in full

secured

by this Security Instrument without
the power of
Law."

further demand and may invoke

sale and any other remedies permitted by Applicable

After the April

15,

2009

trustee's

sale,
2009

Glasser & Glasser

executed the Trustee's

Deed on May 19,

conveying ownership

of

the

Property to HSBC.

On July 13,

2009,

Glasser & Glasser

recorded the Trustee's Deed in the
William County.

land records

for Prince

Plaintiff's claim of quiet title
Plaintiff, not Defendants, is unable

is without merit.

Indeed,

to prove any ownership

interest in the Property since her interest has been properly

-10-

transferred to HSBC pursuant
the terms of the Deed of

to Virginia's

foreclosure

laws and

Trust.

Plaintiff
Defendants

seeks

a declaration from the Court
foreclosure proceeding

ruling that
the

(i)

"conducted a

against

Plaintiff

in violation of
the

law and contract;"
was

and

(ii)

the

"initiation of

foreclosure"

"negligent,

wanton or

intentional." 2009 --

The

foreclosure,

however, before

occurred on April Plaintiff

15,

three and one-half months

filed this

action.

Plaintiff's declaratory judgment claim is
facts. Plaintiff asserts that the Defendants

contrary to the

"conducted a

foreclosure proceeding against

the

Plaintiff

in violation of

law

and contract."
Deed of Trust

Under Virginia foreclosure
(i.e., the

law and pursuant to the
at issue), the and

"law and contract" the

Defendants

were

required to provide

following notices

procedures

in order to foreclose on and sell HSBC was

the

Property:

Prior

to acceleration and foreclosure, Plaintiff of default; (c) (a) the the default; not (b)

required to notify

the action required to cure her than 3 0 days from the date the

"date,

less

notice
cured;"

[was]
and

given to
(d) "that

[Plaintiff],
failure

by which the default must be
the default on or before

to cure

the date specified in the notice may result
the sums secured by" the Deed of Trust and

in acceleration of
"sale of the

Property."

-11-

Once

the power of

sale was

invoked,

HSBC or Glasser

&

Glasser was required to give Plaintiff written notice of time, date, and place of the trustee's sale. Va. Code §

the 55-

59.1(A).

The notice must

include a copy of

the

executed and

notarized appointment of
59.1(A); see also § 55-62

substitute

trustee.

Va.

Code

§

55sale).

(permissible

form for notice of

Glasser & Glasser was required to give public notice of the
foreclosure sale by advertising the sale once a week for two

successive weeks

in a newspaper having general
Va. Code §

circulation in
The contents of

Prince William County.

55-59.2(A)(1). Code §

the advertisement are governed by Va.
Here, the Defendants

55-59.3.
for

followed the proper procedures Property. On December 4,

foreclosing and selling

the

2008,

Litton,

as HSBC's authorized loan servicer, The notice informed Plaintiff

notified Plaintiff of of the action required cure the

her default.

to cure her default,

the date by which Plaintiff must

default

(45

days after the notice),
she

and warned her that
failed to cure

the Note

payment would be accelerated if
Plaintiff did not cure

the default.

the default.

On April

1,

2009,

Glasser & Glasser, the foreclosure sale

as

substitute

trustee,

notified Plaintiff of 15, 2009.

scheduled for April of the date,
the notice

The written notice
the

informed Plaintiff
sale.

time,

and location of

trustee's

Furthermore,

included a copy of

the executed and notarized appointment of

-12-

substitute trustee.
Trust,

Pursuant

to Virginia law and the Deed of
the

Glasser & Glasser also gave public notice of

foreclosure by advertising the sale the Washington Examiner,

for two consecutive weeks

in

a newspaper of general circulation in

Prince William County.
The Defendants properly followed the required steps and

procedures

for foreclosing on and selling the Property.

Indeed,

Plaintiff does not allege any impropriety committed by any of the Defendants
claim of

in foreclosing on the Property.
"wrongful foreclosure" fails.

Therefore,

Plaintiff's

Plaintiff has no factual basis declaratory judgment claims.
generally asserts a must come "show me

for her quiet

title and

Plaintiff's Amended Complaint
the note" claim, in which Defendants

to a court of

law and prove

their authority or

"standing"

to

foreclose

on the

secured Property. foreclosure

The laws.

claim is Defendants

contrary to Virginia's non-judicial have now "shown the note"

to Plaintiff and confirmed their the original Note signatures and Deed of Trust

ownership and possession of bearing Plaintiff's endorsement. original

and Fremont's blank do

Accordingly,

Plaintiff's

claim that Defendants issue is

not own and possess
the facts.

the debt obligation at

contrary to

Plaintiff

to asserts

a

"double

recovery"

theory based on an

incorrect understanding of credit default

swaps,

"credit

-13-

enhancements," theory,

and loan securitization. According to Plaintiff's received a credit "payoff" or swap

Defendants may have

upon Plaintiff's default.

Therefore,

the foreclosure on the Plaintiff's double

Property resulted in a double recovery.

recovery theory fails because it is unsupported by any factual
allegations and is contrary to law.

Finally,
regarding the
Note

Plaintiff asserts
"splitting" of

an erroneous

legal

theory

the Note

from the Deed rendering the
Contrary to

unsecured and

the Deed unenforceable.

Plaintiff's

claims,

Virginia

law is clear that

the negotiation of

a note or bond secured by a deed of with it that security. See,
is

trust or mortgage carries 139 Va.
trust

e.g..

Williams.

at

784

("[W]henever the debt

assigned the deed of

or mortgage

is assigned or transferred with it.");
("It is undoubtedly true

Stimpson.

82 Va.

at 200-01

that a transfer of

a secured debt

carries with it the
delivery.").
factual

security without
even if,
has

formal assignment or
asserts without any

Thus,

as

Plaintiff

support,

there

been a

so-called

"split"

between the

Note and the Deed, as trustee,

the purchaser of

the Note,

in this case HSBC

received the debt

in equity as a secured party. "splitting" a note and deed are

Plaintiff's assertions
simply contrary to the

regarding

law and must be dismissed.

-14-

For

these

reasons,

Defendants'

Motion

for Summary Judgment

should be GRANTED.

An appropriate Order shall

issue.

/s/

Claude M. Hilton

United States District Judge

Alexandria,

Virginia

May

IS",

2010

-15-