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Bank of New York Mellon v. Shrewsbury

Superior Court of Delaware

October 12, 2018

The Bank of New York Mellon FKA The Bank of New York, as Trustee for the Certificateholders of CWMBS, Inc., CHL Mortgage Pass-Through Trust 2007-9, Mortgage Pass-Through Certificates, Series 2007-9, Plaintiff(s),
v.
J.M. Shrewsbury aka J. Michael Shrewsbury and Kathy Shrewsbury, The United States of America, Defendants.

          Date Submitted: September 12, 2018

         On Plaintiff The Bank of New York Mellon's Motion for Summary Judgment. DENIED.

          Melanie J. Thompson, Esquire, Orlans PC, Attorney for Plaintiff.

          Cynthia L. Carroll, Esquire, Cynthia L. Carroll, Attorney for Defendants.

          OPINION

          Calvin L. Scott, Jr. Judge

          The issue presented to the Court is whether in a scire facias sur mortgage action Plaintiff has shown it has the right to enforce the mortgage and associated promissory note when Defendants have raised issues as to the validity of the assignment of the mortgage and the note as well as questions as to the authenticity of the note in possession of the Plaintiff.

         Background

         On May 15, 2007, J.M. Shrewsbury signed a promissory note in favor of Countrywide Home Loans, Inc. in the amount of $653, 553.26. At the same time, J.M. Shrewsbury and Kathy Shrewsbury granted a mortgage to secure the debt upon the property they owned at 9 Barnesdale Drive, Middletown, Delaware (the property). The Mortgagee was Mortgage Electronic Registration Systems, Inc. (MERS) acting solely as nominee for Countrywide Home Loans.

         On June 6, 2011, MERS assigned all of its interest to The Bank as Trustee for the Certificateholders of CWMBS, Inc., CHL Mortgage Pass Through Trust 2007-9, Mortgage Pass-Through Certificates, Series 2007-9. The assigned mortgage was filed and recorded in the real property records of New Castle County, Delaware.

         In July of 2010, the Shrewsburys stopped making payments on the mortgage. On March 20, 2015, Plaintiff filed a scire facias sur mortgage complaint against Defendants seeking foreclosure of Plaintiff s interest in the Property. Defendants argued that The Bank did not show that it held the note as well as the mortgage, and therefore was not a proper party entitled to enforce the note.

         The Supreme Court overturned Summary Judgment in favor of The Bank holding, "a question of fact existed which should have resulted in denial of The Bank's Motion for Summary Judgment until it showed that it had the right to enforce the note."[1]

         The Supreme Court determined the Shrewsburys provided a valid plea in avoidance in that The Bank was not entitled to foreclose on the mortgage because it was not a party entitled to enforce the underlying obligation.[2] The Supreme Court held, "if the holder of the mortgage is not the one entitled to enforce the underlying debt ("mortgage money"), the mortgage holder suffers no injury by the mortgagor's nonperformance." The Court determined Summary Judgment was improper where The Bank has not produced the note, claimed to be the holder of the note, or claimed to be entitled to enforce the note.[3]

         Standard of Review

         The Court may grant summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law."[4] The moving party bears the initial burden of showing that no material issues of fact are present.[5] Once such a showing is made, the burden shifts to the non-moving party to demonstrate that there are material issues of fact in dispute.[6] In considering a motion for summary judgment, the Court must view the record in a light most favorable to the non-moving party.[7] The Court will not grant summary judgment if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law.[8]

         Discussion

         Under the Delaware Uniform Commercial Code (DUCC) a promissory note is a negotiable instrument because it is a promise to pay a specific amount.[9] Under DUCC negotiation is a "transfer of possession, whether voluntary or involuntary, [of][10] an instrument by a person other than the issuer to a person who thereby becomes its holder."[11] "If an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder."[12] A note is transferred when a party who is not the issuer delivers the note to another for the purpose of giving the transferee the right to enforce the note, including any rights as a holder in due course.[13] When a note is transferred any right the transferor had to enforce the instrument vests in the transferee.[14]

         A "Person entitled to enforce" a negotiable instrument includes (ii) a nonholder in possession of the instrument who has the rights of a holder.[15] A nonholder in possession of an instrument includes a person that acquired rights of a holder [... Junder Section 3-203(a) and any other person who under applicable law is a successor to the holder or otherwise acquires the holder's rights.[16] When an instrument is indorsed ...


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