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Mott v. The Bank of New York Mellon

Supreme Court of Delaware

October 2, 2019

GERRY MOTT and DAWN MOTT, Defendants Below, Appellants,
v.
THE BANK OF NEW YORK MELLON f/k/a The Bank of New York as successor to JPMorgan Chase Bank, N.A., as Trustee for the benefit of the Certificateholders of Popular ABS, Inc. Mortgage Pass-Through Certificates Series 2006-C, Plaintiff Below, Appellee.

          Submitted: September 6, 2019

          Court Below-Superior Court of the State of Delaware C.A. No. S17L-05-021

          Before VALIHURA, VAUGHN, and TRAYNOR, Justices.

          ORDER

          GARY F. TRAYNOR, JUSTICE

         After consideration of the parties' briefs and the record in this case, it appears to the Court that:

         (1) In this mortgage foreclosure action, the appellants, Gerry and Dawn Mott, filed this appeal from an order of the Superior Court granting summary judgment to the plaintiff-appellee, The Bank of New York Mellon f/k/a The Bank of New York as successor to JPMorgan Chase Bank, N.A., as Trustee for the benefit of the Certificateholders of Popular ABS, Inc. Mortgage Pass-Through Certificates Series 2006-C (the "Bank"). After careful consideration of the parties' submissions and the record on appeal, we affirm the Superior Court's judgment for the reasons stated below.

         (2) In May 2006, Mr. Mott executed a promissory note (the "Note") for a $500, 000 loan from Equity One, Inc.[1] The Note was secured by a mortgage on a property located in Georgetown, Delaware (the "Mortgage").[2] Both of the Motts signed the Mortgage.[3] The Mortgage provided that if payments were not made on the Note, the mortgagee could, after at least 30 days' notice, accelerate the sum secured by the Mortgage and foreclose on the property.[4] Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for Equity One, was the mortgagee under the Mortgage. As discussed in greater detail below, both the Note and the Mortgage eventually were transferred to the Bank.

         (3) By late 2007, Mr. Mott had fallen behind on the mortgage payments. In February 2009, MERS filed a mortgage foreclosure action against the Motts. In October 2010, MERS requested that the case be placed on the mortgage foreclosure dormant docket, which was established by Superior Court Administrative Directive 2008-3 in response to the substantial uptick in mortgage foreclosure complaints that occurred in 2008. In November 2012, the Superior Court dismissed the MERS complaint in accordance with Administrative Directive 2008-3 because MERS had not taken any action in the case in more than twenty-four months.

         (4) In April 2007, the Motts filed a petition under Chapter 13 of the United States Bankruptcy Code. The Bankruptcy Court entered a discharge order in February 2012.[5] It appears that the parties agree that the bankruptcy discharge eliminated any personal liability of the Motts for amounts due under the Note.

         (5) On August 5, 2014, Ocwen Loan Servicing, LLC, which by that time was the servicer of the loan, sent Mr. Mott a notice of default.[6] The notice provided until September 4, 2014 for Mr. Mott to bring the loan current and indicated that failure to do so might result in the initiation of foreclosure proceedings. The Motts do not dispute that they have not made the mortgage payments since 2007.

         (6) In May 2017, the Bank filed an in rem, scire facias action seeking to foreclose on the property. Counsel for the Motts filed two motions to dismiss in which they argued, among other things, that the Bank lacked standing to prosecute the action, the mortgage was unenforceable because of alleged improprieties at the time of closing, and the Bank had not actually participated in the mandatory foreclosure mediation because only Ocwen, and not the Bank, had a representative present at the mediation. The Superior Court denied the motions to dismiss.

         (7) After the Motts answered the complaint, the Bank moved for summary judgment. The Motts' counsel then moved to withdraw as counsel because the Motts could no longer pay for his services, and the Superior Court granted the motion. The Superior Court held a hearing on the motion for summary judgment on March 15, 2019. At the conclusion of the hearing, the court granted the motion for summary judgment. This appeal followed.

         (8) We review the Superior Court's grant or denial of a motion for summary judgment de novo.[7] On a motion for summary judgment, the movant must demonstrate that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law.[8] "When the evidence shows no genuine issues of material fact in dispute, the burden shifts to the non-moving party to demonstrate that there are genuine issues of material fact in dispute that must be resolved at trial."[9]

         (9) In a mortgage foreclosure action, a mortgagor must establish why the mortgaged property should not be seized and sold to pay the mortgagor's indebtedness.[10] Defenses in a foreclosure action are limited to payment, satisfaction, or a plea in avoidance of the mortgage.[11]

The phrase "plea in avoidance" has sometimes been described as referring to a plea relating "to the validity or illegality of the mortgage documents," . . . but a more apposite description of "plea in avoidance" [is that it refers] to the common law plea known as confession and avoidance. "Such plea admits the allegations of the complaint but asserts matter which destroys the effect of the allegations and defeats the plaintiff's right." "[T]he allegation 'in avoidance' must relate to the subject matter of the complaint." Examples of pleas in confession and avoidance are "act of God, assignment of cause of action, conditional liability, discharge, duress, exception or proviso of statute, forfeiture, fraud, illegality of transaction, nonperformance of condition precedent, ratification, unjust enrichment and waiver."[12]

         (10) The Motts do not assert payment or satisfaction. Rather, their arguments may be summarized as follows: (i) the Bank lacks standing to foreclose because it has not demonstrated that it holds both the Mortgage and the Note; (ii) no attorney was present at the closing; (iii) the Bank is not represented by counsel in this litigation and is not an actual participant in the litigation; (iv) the Bank did not timely comply with this Court's rule governing disclosure of corporate affiliations; (v) the Bank impermissibly moved for summary judgment before the Motts rejected a final loss mitigation offer; (vi) the Bank has not acted in good faith or dealt fairly with the Motts, or it has unclean hands; and (vii) the foreclosure will confer an unfair windfall on the Bank in the form of a tax benefit. For the reasons discussed below, we conclude that none of the Motts' arguments establishes a genuine issue of material fact in dispute, and the Superior Court therefore did not err by granting the Bank's motion for summary judgment.

         (11) First, the Motts assert, on various grounds, that the Bank cannot foreclose because it has not established that it holds both the Mortgage and the Note, as required under Delaware law.[13] The record reflects that Equity One, the initial lender, endorsed the Note to Popular ABS, Inc. and that Popular ABS endorsed the Note to JPMorgan Chase Bank as Trustee for the benefit of the Certificateholders of Popular ABS, Inc. Mortgage Pass-Through Certificates Series 2006-C ("JPMorgan Chase").[14] JPMorgan Chase then transferred the Note to the Bank by an allonge dated September 30, 2010.[15] The record also reflects that MERS, the initial mortgagee, assigned the Mortgage to the Bank by a Corporation Assignment of Mortgage dated August 31, 2010.[16]

         (12) Thus, on their face, the documents in the record indicate that the Bank holds both the Mortgage and the Note, and that it held them at the time that it initiated this foreclosure action in 2017. The Motts' various arguments to the contrary do not create a genuine issue of material fact in dispute. The Bank is not required to produce the original note in order to foreclose, [17] and Ocwen's failure to attach the allonge to the "Lost Note Affidavit" that Ocwen prepared in 2016 does not raise a genuine issue about a material fact, because a copy of the allonge, dated September 30, 2010, is in the record. Whether MERS had "possession or authority to assign the Note"[18] is not a genuine issue of material fact because MERS assigned the Mortgage, not the Note. Similarly, whether Ocwen was "ever a person in possession"[19] of the Note in accordance with 6 Del. C. § 3-309 is not a genuine issue of material fact because Ocwen is not the party seeking enforcement of the Note.[20]

         (13) Second, the Motts argue that the Mortgage and the Note are not enforceable because no attorney was present at the closing.[21] Although the Motts assert that Equity One's closing agent provided unsatisfactory, or even erroneous, answers to questions that they asked at closing, they admit that they proceeded with settlement anyway. And they do not contend that anyone prevented them from retaining counsel in order to obtain legal advice on the terms of the loan. Nor do they contend that they did not understand that foreclosure could result from their failure to make mortgage payments. In these circumstances, there is no basis to invalidate the mortgage simply because no attorney appeared at the settlement.[22]

         (14) Third, the Motts argue that the Superior Court's judgment should be reversed because the Bank is not represented by counsel in this litigation.[23] In the Final Mediation Record that was submitted to the Superior Court, the mediator stated that Ocwen appeared at the mediation as the servicer for the Bank, that the Bank was "not at [the] mediation directly," and that "Plaintiff's counsel's client is Ocwen." Except in limited circumstances that are not applicable here, a corporation or other business entity may proceed in the Delaware courts only through a duly-licensed attorney.[24] The plaintiff-appellee in this case is the Bank. Daniel Conway of Orlans PC and James Carignan of Duane Morris LLP, both of whom are members of the Delaware bar, have entered appearances on behalf of the Bank in this appeal. Mr. Conway and Melanie Thompson, who is also a Delaware attorney, entered appearances on behalf of the Bank in the Superior Court. Mr. Conway has also signed pleadings, briefs, and affidavits stating that he is the "attorney ...


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