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COA reverses foreclosure because bank can’t prove it holds the note

September 29, 2014

The Indiana Court of Appeals has reversed the foreclosure of an Elkhart man’s home, holding the bank that sought the foreclosure did not establish it was entitled to enforce the promissory note as its holder.

Bryan L. Good executed a mortgage with Synergy Mortgage Group in March 2008, where he signed an electronic promissory note. In 2011, he stopped paying the mortgage and the mortgage was assigned to Wells Fargo Bank N.A. In 2012, Wells Fargo sought to foreclose on the property; Good, acting pro-se, claimed the bank was not a holder in due course of the note and lacked standing.

The trial court granted partial summary judgment to Wells Fargo, finding it had standing to enforce the note and mortgage. It later issued a judgment of foreclosure.

Wells Fargo correctly 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,” and it was entitled to enforce it pursuant to 15 U.S.C. Section 7021. But the bank did not designate evidence that a system employed for evidencing the transfer of interests in the note reliably established it as the person or entity to whom the note was transferred, Judge Michael Barnes wrote. It had relied on a certificate of authentication from its Assistant Vice President, Thresa Russell.

“Pursuant to statute, upon Good’s request, Wells Fargo was required to provide ‘reasonable proof’ that it was in control of the Note,” Barnes wrote. “Although Good repeatedly requested such proof, Wells Fargo did not provide any evidence documenting the transfer or assignment of the Note from Synergy to either Wells Fargo or Fannie Mae. Thus, Wells Fargo did not demonstrate it controlled the Note by showing that a system employed for evidencing the transfer of interests in the Note reliably established that the Note had been transferred to Wells Fargo.

“Because Wells Fargo did not establish that it controlled the Note as described in §7021, it did not establish that it was the person entitled to enforce the Note as the holder for purposes of the (Uniform Commercial Code). Thus, partial summary judgment for Wells Fargo on this issue was improper.”

Because of this lack of evidence, the trial court should not have granted the bank’s motion to foreclose, the judges ruled. The case, Bryan L. Good v. Wells Fargo Bank, NA., 20A03-1401-MF-14, is remanded for further proceedings.
 

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