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Monty v. U.S. Bank, N.A.

United States District Court, D. Vermont

October 21, 2015

PETER A. MONTY, JR. and LYNNE M. MONTY, Appellants,
v.
U.S. BANK, N.A., as Trustee for J.P. Morgan Mortgage Acquisition Trust 2006-CW, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., BANK OF AMERICA, N.A., and SELECT PORTFOLIO SERVICING, INC., Appellees.

OPINION AND ORDER (Doc. 1)

GEOFFREY W. CRAWFORD, District Judge.

Debtors Peter A. Monty, Jr. and Lynne M. Monty appeal an April 16, 2015 Adversary Proceeding Order from the United States Bankruptcy Court for the District of Vermont granting summary judgment to U.S. Bank, N.A., as Trustee for J.P. Morgan Mortgage Acquisition Trust 2006-CW ("U.S. Bank"). The Montys contend that the Bankruptcy Court erred when it concluded that U.S. Bank has authority to enforce a promissory note against them. Defendants-Appellees maintain that the Bankruptcy Court's ruling should be affirmed as supported by the undisputed factual record and by the applicable law.

The court heard oral argument on September 16, 2015. For the reasons stated below, the Bankruptcy Court's April 16, 2015 Order is AFFIRMED.

Factual Background

The Bankruptcy Court found the following facts to be undisputed for summary judgment purposes. (Doc. 2-21 at 4-5.) The Montys are the owners of real property in Hinesburg, Vermont. On April 11, 2006, seeking to refinance the loan on that property, the Montys executed an adjustable rate promissory note (the "Note") in the amount of $221, 650 in favor of Countrywide Home Loans, Inc. ("Countrywide"). The Note is indorsed in blank by Countrywide. No date appears next to the Note's blank indorsement. ( See id. at 7.) Also on April 11, 2006, the Montys executed a mortgage (the "Mortgage") granting Mortgage Electronic Registration Systems (MERS), as nominee for Countrywide and its successors and assigns, a lien on the Montys' interest in the Hinesburg property to secure the Montys' obligations under the Note.

On March 1, 2006, prior to the date of the Montys' refinance, Countrywide executed a Master Mortgage Loan Purchase and Servicing Agreement. In that agreement, Countrywide sold to J.P. Morgan Acquisition Corp. all of Countrywide's right, title and interest, excluding servicing rights, in and to certain loans, including future loans. The agreement provides that after the sale of the loans is completed, a "collateral file" containing documents related to each loan, including the original mortgage note, will be delivered to the designated custodian.

On July 1, 2006, J.P. Morgan Acceptance Corp. I (as depositor), J.P. Morgan Acquisition Corp. (as seller), and U.S. Bank, N.A. (as Trustee), executed a Pooling and Servicing Agreement (the "PSA") establishing a mortgage loan trust called the J.P. Morgan Acquisition Trust 2006-CW2 (the "Trust"). Under the PSA, Countrywide was identified as the originator, and Countrywide Home Loans Servicing LP was designated as the servicer of the loans subject to the PSA. Also under the PSA, Wells Fargo Bank is the master servicer and securities administrator. The PSA provides that the Note is to be indorsed in blank or to U.S. Bank, as Trustee.

On April 17, 2006, the original indorsed Note was transferred to the custody of Bank of New York Mellon f/k/a JP Morgan Chase, as the document custodian for the Trust. On April 27, 2009, Countrywide Home Loans Servicing LP changed its name to BAC Home Loans Servicing, LP, and on July 1, 2011, BAC Home Loans Servicing, LP merged with and into Bank of America, N.A.

On December 30, 2011, the Montys filed a petition for relief under Chapter 13 of the Bankruptcy Code. As of that date, Bank of New York Mellon possessed the original collateral file containing the original Note indorsed in blank. On December 3, 2012, the proof of claim was filed on behalf of U.S. Bank, as Trustee for the Trust. A copy of the Note was attached to the proof of claim. Currently, Select Portfolio Servicing, Inc. ("SPS") is in possession of the original collateral file, including the original Note, as servicer for Trustee U.S. Bank.

Procedural History

The Montys commenced the adversary proceeding in the Bankruptcy Court in February 2013, challenging the validity of U.S. Bank's proof of claim. (Doc. 2-2.) They argued that U.S. Bank lacked standing to enforce the mortgage debt because U.S. Bank was not the "holder" of the Note secured by the Mortgage.[1] In response, Defendants filed a motion for summary judgment, maintaining that there were no material facts in dispute and that U.S. Bank was entitled to judgment as a matter of law. (Doc. 2-11.) Defendants supported their motion with, among other things, an August 22, 2014 affidavit signed by a Document Control Officer for SPS. ( Id. at 15-18.) The Montys opposed the motion (Doc. 2-12), Defendants filed a reply (Doc. 2-14), and the parties filed a joint pretrial statement (Doc. 2-13).

The Bankruptcy Court issued an Order making preliminary findings as to the scope of the issues. (Doc. 2-15.) Specifically, the Bankruptcy Court identified two issues for resolution of the Montys'"standing" claim: (1) whether the transferor was a "holder" entitled under the Vermont Uniform Commercial Code to enforce the Note on the date of the Montys' petition; and (2) whether U.S. Bank was entitled to enforce the Note on the date it filed a proof of claim. ( Id. at 4.) The Bankruptcy Court invited the parties to supplement their filings to focus on those two issues. ( Id. ) Defendants subsequently filed a supplemental memorandum of law and supplemental statement of undisputed facts (Doc. 2-17 at 1-12), accompanied by a January 9, 2015 affidavit signed by Suzanne Johnstone (another Document Control Officer for SPS) ( id. at 13-17), as well as several exhibits. The Montys filed a response, asserting that Ms. Johnstone's affidavit raised additional issues of material fact. (Doc. 2-18.) The parties also filed additional supplemental memorandums. (Docs. 2-19; 2-20.) The Montys did not present any evidence in any of their filings opposing summary judgment.[2]

The Bankruptcy Court granted summary judgment to U.S. Bank in an Order dated April 16, 2015. (Doc. 2-21.) The Bankruptcy Court concluded that there were no disputes of material fact as to any of the issues bearing on U.S. Bank's ability to enforce the Note. ( Id. at 6-9.) The Bankruptcy Court specifically concluded that any dispute over whether the Montys' loan was transferred pursuant to the March 1, 2006 PSA was not material because the Defendant's manner of obtaining possession of the Note is not ...


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