Good v. Wells Fargo Bank, N.A.

18 N.E.3d 618

Bryan L. GOOD, Appellant–Defendant

v.WELLS FARGO BANK, N.A., Appellee–Plaintiff.

No. 20A03–1401–MF–14.

Court of Appeals of Indiana.

Sept. 29, 2014.

Bryan L. Good, Elkhart, IN, Appellant Pro Se.

Carl A. Greci, Angela Kelver Hall, Sarah E. Sharp, Faegre Baker Daniels, LLP, South Bend, IN, Attorneys for Appellee.

OPINION

BARNES, Judge.

Case Summary

Bryan Good appeals the trial court's grant of partial summary judgment in favor of Wells Fargo Bank, N.A., (“Wells Fargo”) and the subsequent judgment of foreclosure. We reverse and remand.

Issue

Good raises seven issues. We address the dispositive issue, which we restate as whether the trial court properly granted partial summary judgment for Wells Fargo on the basis that Wells Fargo was entitled to enforce the promissory note executed by Good.

Facts

On March 14, 2008, Good purchased real estate in Elkhart. Good executed an electronic promissory note (“the Note”) in favor of Synergy Mortgage Group, Inc., (“Synergy”).¹ The Note included the following term:

11. ISSUANCE OF TRANSFERABLE RECORD; IDENTIFICATION OF NOTE HOLDER; CONVERSION FROM ELECTRONIC NOTE TO PAPER–BASED NOTE^{[ 2 ]}

* * * * *

(B) Except as indicated in Sections 11(D) and (E) below, the identity of the Note Holder and any person to whom this Electronic Note is later transferred will be recorded in a registry maintained by MERS CORP, Inc., a Delaware corporation or in another registry to which the records are later transferred (the “Note Holder Registry”). The authoritative copy of this Electronic Note will be the copy identified by the Note Holder after loan closing but prior to registration in the Note Holder Registry. If this Electronic Note has been registered in the Note Holder Registry, then the authoritative copy will be the copy identified by the Note Holder of record in the Note Holder Registry or the Loan Servicer (as defined in the Security Instrument) acting at the direction of the Note Holder, as the authoritative copy. The current identity of the Note Holder and the location of the authoritative copy, as reflected in the Note Holder Registry, will be available from the Note Holder or Loan Servicer, as applicable. The only copy of this Electric Note that is the authoritative copy is the copy that is within the control of the person identified as the Note Holder in the Note Holder Registry (or that person's designee). No other copy of this Electronic Note may be the authoritative copy. ...

Appellee's App. p. 29 (emphasis added). The loan was secured by a mortgage. The mortgage identified Synergy as the lender and Mortgage Electronic Registration Systems, Inc., (“MERS”) as a nominee for the lender.

In 2011, Good stopped making payments on the loan. On November 9, 2011, MERS, as nominee for Synergy, assigned the mortgage to Wells Fargo. This assignment was recorded on November 14, 2011.

On November 7, 2012, Wells Fargo filed a complaint to foreclose the mortgage. Good, acting pro-se, filed an answer alleging that Wells Fargo was not a holder in due course of the Note and that it lacked standing.

On April 5, 2013, Wells Fargo moved for summary judgment. In support of its motion, Wells Fargo designated an Affidavit in Support of Judgment (“the Affidavit”) in which Shemeka Moye, Wells Fargo's Vice President of Loan Documentation, stated Wells Fargo, “directly or through an agent, has possession of the Promissory Note at issue in the plaintiff's cause of action. Wells Fargo Bank, N.A., is either the original payee of the Promissory Note or the Promissory Note has been duly indorsed [sic].” Id. at 95. Good responded, arguing that Wells Fargo held only a photocopy of the Note without any endorsements and, without more, did not establish that it was entitled to enforce the Note.

Wells Fargo replied claiming Good failed to designate evidence that creates a genuine issues of material fact for trial. Wells Fargo also asserted that it controlled the electronic note and was entitled to enforce it as the holder pursuant to 15 U.S.C.A. § 7021(d). In support of this argument, Wells Fargo relied on a Certificate of Authentication (“the Certificate”) in which Assistant Vice President of Wells Fargo, Thresa Russell, stated:

1. .... The Bank acts as a servicer for the Federal National Mortgage Association (“Fannie Mae”) with respect to the residential mortgage loan executed on the [sic] 3/14/2008 by BRYAN GOOD, (“Borrowers”).... The promissory note evidencing the Borrowers' obligation to repay the Loan is an electronic record, as authorized by the federal ESIGN Act, 15 USC § 7001 et seq., and in particular 15 USC § 7021.

2. As part of its function as servicer, the Bank maintains a copy of the Borrowers' electronic promissory note on behalf of Fannie Mae. I am responsibilities [sic] for overseeing the process by which the Bank maintains the electronic promissory notes evidencing residential mortgage loans. (“Electronic Records”).

3. Each Electronic Record is received in accordance with established procedures and processes for reliable receipt, storage and management of Electronic Records (the “Electronic Record Procedures”). The Electronic Record Procedures provide controls to assure that each Electronic Record is accurately received as originally executed and transmitted, and indexed appropriately for later identification and retrieval. Each Electronic Record is protected against undetected alteration by industry-standard encryption techniques and system controls. The Electronic Record is an official record of the Bank and is readily accessible for later reference.

4. Each Electronic Record is maintained and stored by the Bank in the ordinary course of business. The Electronic Records are maintained and stored by the Bank continuously from the time of receipt.

5. The paper copy of the Electronic Record attached ... is a true and correct copy of the Borrowers' promissory note described above, as maintained and stored by the Bank in accordance with the procedures in Paragraphs 3 and 4 of this Certificate.

Id. at 130.

After a hearing, the trial court concluded that Wells Fargo had standing to enforce the Note and mortgage and partially granted Wells Fargo's motion for summary judgment as to that issue. The trial court also concluded that there were genuine issues of material fact regarding the validity of Good's electronic signature on the Note and the amount due and owing on the Note. Both parties filed motions to reconsider, which were discussed at the September 16, 2013 bench trial on the unresolved issues. After the trial, the trial court reaffirmed its initial ruling on the motion for summary judgment and concluded in part:

11. Plaintiff Wells Fargo Bank presented attached to the copy of the Promissory Note in its control a Certificate of Authentication which affirms that the Promissory Note was accurately received as it was originally executed and transmitted electronically. Plaintiff also affirmed that the record was protected against undetected alteration by industry standard encryption techniques and system controls. In this respect, the court concludes that Plaintiff maintained control of the subject Promissory Note which was originally signed by the Defendant, Bryan Good. Further endorsement of an electronic promissory note is not required and the promissory note is self-authenticating pursuant to Ind. Rule of Evidence 902. Accordingly, Defendant is liable on the Promissory Note and related Mortgage.

Appellant's App. p. 134. The trial court determined the payoff amount and entered judgment for Wells Fargo in that amount. The trial court then issued a judgment of foreclosure. Good now appeals.

Analysis

Among other things, Good appeals the trial court's entry of partial summary judgment on the issue of whether Wells Fargo was entitled to enforce the Note. “We review an appeal of a trial court's ruling on a motion for summary judgment using the same standard applicable to the trial court.” Perdue v. Gargano, 964 N.E.2d 825, 831 (Ind.2012). “Therefore, summary judgment is appropriate only if the designated evidence reveals ‘no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Id. (quoting Ind. Trial Rule 56(C) ). Our review of summary judgment is limited to evidence designated to the trial court. Id. (citing T.R. 56(H) ). All facts and reasonable inferences drawn from the evidence designated by the parties is construed in a light most favorable to the non-moving party, and we do not defer to the trial court's legal determinations. Id.

There is no dispute that the mortgage was assigned from Synergy to Wells Fargo in 2011. The issue is whether Wells Fargo was entitled to enforce the Note. Regarding traditional paper notes, “Indiana has adopted Article 3 of the Uniform Commercial Code (UCC), which governs negotiable instruments, and it is well-established that a promissory note secured by a mortgage is a negotiable instrument.” Lunsford v. Deutsche Bank Trust Co. Americas as Tr., 996 N.E.2d 815, 821 (Ind.Ct.App.2013). According to the UCC, a negotiable instrument may be enforced by “the holder of the instrument.” Ind.Code § 26–1–3.1–301(1). The term “holder” means “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person if the identified person is in possession of the instrument[.]” I.C. § 26–1–1–201(20). In this context, “bearer” means the person in possession of a negotiable instrument “payable to bearer or endorsed in blank.” I.C. § 26–1–1–201(5).

Wells Fargo initially asserted that it had possession of the Note and was either the original payee or the Note had been duly endorsed. Good responded, challenging Wells Fargo's status as holder because the Note designated by Wells Fargo was not endorsed. In its reply, Wells Fargo asserted that, because the Note was an electronic note, “delivery, possession, and endorsement of an electronic promissory note are not required pursuant to federal statute.”...