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Wells Fargo Bank, NA v. Strong

Court of Chancery of Delaware

November 19, 2014

Wells Fargo Bank, NA
v.
Earl Strong,

Date Submitted: October 24, 2014

Dear Counsel and Mr. Strong:

Before me are the Plaintiff Wells Fargo Bank's exceptions to the final report issued by Master Ayvazian on July 15, 2014 (the ''Master's Report''), which recommends dismissal of the Plaintiffs Complaint seeking the imposition of an equitable lien on real property located at 11 Gooseneck Lane, Smyrna, Delaware 19977 (the ''Property'').

I. BACKGROUND FACTS

The present dispute between the Plaintiff Wells Fargo Bank and the Defendant Earl Strong has surfaced in several iterations in the courts of this State before now landing in the Court of Chancery, and the reader is referred to the opinions of those courts for a thorough factual and procedural background.[1] For the purposes of this Letter Opinion, the relevant facts are limited to the realm of the narrow procedural issue in question.

The Plaintiff alleges that in October of 2004 the Defendant executed a mortgage on the Property with MIT Lending in exchange for a loan of $205, 777, to be repaid in monthly payments of $1, 133.55.[2] After the Defendant failed to make those monthly payments, MIT Lending's nominee under the mortgage agreement, Mortgage Electronic Registration Systems, Inc. (''MERS''), filed a foreclosure action in the Superior Court of Kent County, where it received a default judgment against the Defendant on November 3, 2005. When MERS attempted multiple times to convert its default judgment into a writ of levari facias on the Property, however, the Defendant filed three consecutive pro se petitions for bankruptcy protection, tying the proceedings up in automatic stays over several years. After MERS was able to obtain relief from the last of these automatic stays in 2010, it assigned its rights under the mortgage to the Plaintiff and, subsequently on January 11, 2011, refilled a writ of levari facias in the Plaintiff's name in the Superior Court of Kent County. In that action, Judge Witham directed the attorney for the Plaintiff ''to submit a memorandum detailing the history of the mortgage and explaining the significance of the assignment, '' and informed the Defendant ''that he could file a motion to vacate default judgment if he wished to contest its legitimacy.''[3] Although he saw ''little merit in any of [the] Defendant's claims, '' Judge Witham's review of the agreements provided in the Plaintiff's memorandum alerted him to a ''much more significant issue''—the mortgage and note did ''not appear to be properly sealed.''[4] Noting that ''[a] mortgage must be under seal for it to be enforced at law, '' and that the court ''may raise the issue of subject matter jurisdiction sua sponte, '' Judge Witham ruled sua sponte that the mortgage was not properly sealed and ''[t]hus, under Delaware law . . . can only be enforced at equity.''[5] As a consequence, Judge Witham dismissed the case in the Memorandum Opinion and Order of October 19, 2011 (the ''Superior Court Order''), ''[p]ursuant to Delaware Superior Court Civil Rule 12(h)(3) and 10 Del C. § 1902 . . . without prejudice, to be filed within 60 days of this Order in the Court of Chancery.''[6]

MERS began the process of transferring its case nearly a month later, on November 17, 2011, by filing a written election to transfer to this Court. The Superior Court approved that request on November 18, 2011. However, the Plaintiff did not actually file its Complaint in this Court until a year and a half after the Superior Court Order—on May 8, 2013. In the meantime, on January 9, 2012, the Defendant and his wife brought a pro se action in Superior Court against the Plaintiff and its attorney alleging fraud, forgery, perjury, defamation, conspiracy, malicious prosecution, and deceptive trade practices, all arising out of the foreclosure action. In decisions of July 20, and November 30, 2012, Judge Witham granted a judgment against the Strongs on all counts.[7] After unsuccessfully petitioning Judge Witham to hear reargument, the Strongs appealed to the Supreme Court on January 29, 2013. The Supreme Court never reached the merits of the case, though, as the Strongs and the Plaintiff voluntarily filed a stipulation of dismissal on May 3, 2013, which the Court approved on May 6, 2013. Two days later, on May 8, 2013—more than 18 months after the Superior Court Order dismissed the original foreclosure action—the Plaintiff filed its Complaint in this Court.

In the Chancery Complaint, the Plaintiff, as the assignee of MERS, the nominee for MIT Lending, seeks an equitable foreclosure against the Defendant in the form of a scire facias sur mortgage action. The Defendant moved pro se to dismiss the Complaint under Court of Chancery Rules 12(b)(1)–(6), arguing, among other things, that the Plaintiff had failed to transfer the case according to the Superior Court Order. The Master considered the parties' positions and issued a draft report, adopted with modifications as the final Master's Report, recommending dismissal of the Complaint ''as having been untimely transferred from the Superior Court under 10 Del. C. § 1902.''[8] In the Master's Report, the Master found that:

MERS failed to follow the direct order of the Superior Court dated October 19, 2011, which mandated it to transfer its case to this Court within 60 days. MERS also failed to abide by the plain language of Section 1902, which required it to make the ''usual deposit of costs in the second court'' within 60 days.[9]

The Master noted Section 1902's admonition that the statute must be ''liberally construed to permit and facilitate transfers of proceedings between the courts of this State in the interests of justice, '' and acknowledged the Plaintiff's argument that the equitable foreclosure action should be permitted to move forward notwithstanding the filing delay because ''otherwise Strong would be unjustly enriched at the expense of the mortgage holder, '' but the Master ultimately determined that principles of equity favored upholding the 60-day requirement and dismissing the Complaint.[10] In particular, the Master highlighted the Defendant's letter withdrawing the Supreme Court appeal of his action against the Plaintiff, in which the Defendant made clear that a principal reason he had agreed to abandon the appeal was that the Plaintiff's delay had led him to believe the Plaintiff had also abandoned the foreclosure proceedings. In the Strongs' Motion to Withdraw the Appeal, they stated:

In Judge Witham October 19, 2011 Decision it stated that Mers Attorney had 60 days to file their Supporting Affidavit and statement of the facts to Chancery Court this was never executed . . . . [Due to Plaintiff's] Law firm Refusal to Comply to the Chancery Court Rules against Accepted the Transfer and Never Created a Court docket or number it has been over two years since, The 60 Days' time Allowed Have expired for more than two years. This issue is Mute. And Due to other prior Chancery court Ruling and the Delaware Attorney General Complaint this wouldn't stand a Chance in Chancery Court. …
Wherefore Appellants Earl Strong and Lillie Strong ask this SUPREME COURT to Withdraw Appellants Appeal, we no longer want to pursue this Appeal because Judge Witham is an Honorable Respectable Judge, and As was stated Appellants doesn't want another Piece of the Pie. [11]

Thus, the Master concluded in the Final Report:

It appears from these excerpts that after years of litigation between the parties, Strong voluntarily withdrew his Supreme Court appeal because he believed that Wells Fargo had abandoned its efforts to foreclose on his home. By withdrawing his appeal, Strong gave up the possibility—no matter how remote—of obtaining monetary damages from Wells Fargo and Barnett for what he contended were their fraudulent practices, among other claims of alleged misconduct. Thus, even if I were to ignore the plain language of 10 Del. C. ยง 1902 requiring the transfer of a case to another court to occur within 60 days from the date of the order denying the jurisdiction of the first court, I would have to conclude that it would ...

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