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Good v. Wells Fargo Bank, N.A. - 18 N.E.3d 618 (Ind. Ct. App. 2014)

Rule:

Regarding traditional paper notes, Indiana has adopted Article 3 of the Uniform Commercial Code (UCC), which governs negotiable instruments, and it is well-established that a promissory note secured by a mortgage is a negotiable instrument. According to the UCC, a negotiable instrument may be enforced by the holder of the instrument. Ind. Code § 26-1-3.1-301(1). The term "holder" means the person in possession of a negotiable instrument that is payable either to bearer or to an identified person if the identified person is in possession of the instrument. Ind. Code § 26-1-1-201(20). In this context, "bearer" means the person in possession of a negotiable instrument "payable to bearer or endorsed in blank. Ind. Code § 26-1-1-201(5)

Facts:

On March 14, 2008, Bryan Good purchased real estate in Elkhart. Good executed an electronic promissory note ("the Note") in favor of Synergy Mortgage Group, Inc., ("Synergy"). The note stated that the only authoritative copy of the note was the copy within the control of the person the note registry identified as the note holder. The note was secured by a mortgage. The mortgage identified Synergy as the lender and Mortgage Electronic Registration Systems, Inc., ("MERS") as a nominee for the lender. In 2011, Good stopped making payments on the loan. On November 9, 2011, MERS, as nominee for Synergy, assigned the mortgage to Wells Fargo Bank, N.A. (“Wells Fargo”), as servicer for the Federal National Mortgage Association (“Fannie Mae”). Wells Fargo brought a foreclosure suit. Good responded, claiming that Wells Fargo was not the holder of the promissory note and thus did not have standing to foreclose on the mortgage. Wells Fargo claimed to have possession of the note, but Good argued that Wells Fargo had only an unsigned photocopy of the note. Wells Fargo presented a Certificate of Authentication that stated that Wells Fargo maintained a copy of the promissory note on behalf of the lender. Wells Fargo did not provide any evidence of the transfer of the mortgage from Synergy. The trial court granted Wells Fargo’s motion for summary judgment. Good appealed the trial court's grant of partial summary judgment in favor of Wells Fargo and the subsequent judgment of foreclosure.

Issue:

Did the trial court properly grant partial summary judgment for Wells Fargo on the basis that Wells Fargo was entitled to enforce the promissory note executed by Good?

Answer:

No

Conclusion:

The court held that Wells Fargo did not provide any evidence documenting the transfer or assignment of the note from Synergy to Wells Fargo, and thus the company did not show that 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 the company, for purposes of 15 U.S.C.S. § 7021(b). 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 Ind. Code § 26-1-3.1-301(1), and partial summary judgment for Wells Fargo on this issue was improper.

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