U.S. Bank National Association v. Kimball, 2011 VT 81 (Burgess, J.)
Plaintiff US Bank appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice US Bank’s foreclosure complaint for lack of standing. The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.” Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed. Therefore, the court held that US Bank lacked standing to bring the foreclosure action. On appeal, US Bank argues that it had standing to prosecute the foreclosure claim and the court’s dismissal with prejudice was in error. Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney’s fees. We affirm the dismissal and remand for consideration of homeowner’s motion for attorney’s fees. The foreclosure complaint is dismissed and the case is remanded for consideration of defendant’s motion for attorney’s fees.
It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit. Nevertheless, and despite the court’s invocation of “with prejudice” in its dismissal order, US Bank cannot be precluded from pursuing foreclosure on the merits should it be prepared to prove the necessary elements. The court’s dismissal on just jurisdictional grounds was not adjudication on the merits. See V.R.C.P. 41(b)(3).
To foreclose a mortgage, a plaintiff must demonstrate that it has a right to enforce the note, and without such ownership, the plaintiff lacks standing. While a plaintiff in a foreclosure should also have assignment of the mortgage, it is the note that is important because “[w]here a promissory note is secured by a mortgage, the mortgage is an incident to the note.” Under the UCC the Bank had the burden of demonstrating that it was a “ ‘[p]erson entitled to enforce’ ” the note, by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.” 9A V.S.A. § 3-301. On appeal, US Bank asserts that it is entitled to enforce the note under the first category—as a holder of the instrument.
To be a holder, US Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to US Bank. US Bank lacked standing because it has failed to demonstrate either requirement. Initially, US Bank’s suit was based solely on an assignment of the mortgage by MERS. The complaint did not allege that US Bank held the original note. While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement. Fraught with contradictions and evidently lacking information based on personal knowledge, the affidavit was insufficient to establish that US Bank had an interest in the note prior to the time the complaint was filed. Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint.
Plaintiff US Bank appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice US Bank’s foreclosure complaint for lack of standing. The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.” Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed. Therefore, the court held that US Bank lacked standing to bring the foreclosure action. On appeal, US Bank argues that it had standing to prosecute the foreclosure claim and the court’s dismissal with prejudice was in error. Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney’s fees. We affirm the dismissal and remand for consideration of homeowner’s motion for attorney’s fees. The foreclosure complaint is dismissed and the case is remanded for consideration of defendant’s motion for attorney’s fees.
It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit. Nevertheless, and despite the court’s invocation of “with prejudice” in its dismissal order, US Bank cannot be precluded from pursuing foreclosure on the merits should it be prepared to prove the necessary elements. The court’s dismissal on just jurisdictional grounds was not adjudication on the merits. See V.R.C.P. 41(b)(3).
To foreclose a mortgage, a plaintiff must demonstrate that it has a right to enforce the note, and without such ownership, the plaintiff lacks standing. While a plaintiff in a foreclosure should also have assignment of the mortgage, it is the note that is important because “[w]here a promissory note is secured by a mortgage, the mortgage is an incident to the note.” Under the UCC the Bank had the burden of demonstrating that it was a “ ‘[p]erson entitled to enforce’ ” the note, by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.” 9A V.S.A. § 3-301. On appeal, US Bank asserts that it is entitled to enforce the note under the first category—as a holder of the instrument.
To be a holder, US Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to US Bank. US Bank lacked standing because it has failed to demonstrate either requirement. Initially, US Bank’s suit was based solely on an assignment of the mortgage by MERS. The complaint did not allege that US Bank held the original note. While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement. Fraught with contradictions and evidently lacking information based on personal knowledge, the affidavit was insufficient to establish that US Bank had an interest in the note prior to the time the complaint was filed. Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint.
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