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Wells Fargo Bank, N.A. v. Ford

418 N.J. Super. 592, 15 A.3d 327 (App. Div. 2011)

FORECLOSURE; MORTGAGES — A foreclosing lender’s failure to show that it was entitled to enforce a note as if it were its holder or so that it owned the note, is a defense for a foreclosure action.

A borrower executed a negotiable note and a mortgage. Five days later, the lender allegedly assigned the mortgage and note to a bank. When the borrower stopped making payments, the bank, claiming that it had acquired the status of a holder in due course, filed a mortgage foreclosure action. The bank later asserted that the original lender had assigned the mortgage and note, but the assignment had yet to be recorded. The borrower filed an answer and counterclaim, alleging the original lender had engaged in various predatory and fraudulent acts in connection with the transaction. In the foreclosure action, in response to a document request, the bank produced copies of the mortgage, note, and purported assignment. The bank subsequently filed a motion for summary judgment, supported by a certification from an attorney, but the certification failed to support the assertion that the bank was the holder and owner of the note and mortgage. It also failed to attach the purported assignment of the mortgage. The borrower defended the motion by asserting the documents were forgeries.

The lower court granted the bank’s motion for summary judgment and concluded that the borrower’s allegations were not a defense to the bank’s foreclosure action because the bank was a holder in due course of the note. It struck the borrower’s answer, transferred the case to the Foreclosure Unit and it then entered a final judgment of foreclosure. The borrower appealed, and received a stay of a scheduled sheriff’s sale pending the outcome of its appeal.

In the appeal, the Appellate Division reversed and remanded, finding the bank had failed to establish its standing to pursue the foreclosure action because it had failed to prove it owned or controlled the underlying negotiable note. First, the bank failed to prove that the note had been transferred to it by way of an indorsement from the original lender. Second, the bank failed to show that it was entitled to enforce the note as if it were a holder because the certification submitted on its summary judgment motion was not authenticated by an individual with personal knowledge that the bank was the owner of the note and had received the note by assignment of the mortgage. The Court advised that, on remand, the borrower could conduct appropriate discovery, including taking the deposition of the individual who prepared the bank’s certification and of the person who allegedly conveyed the assignment of the mortgage and note to the bank on behalf of the original lender.

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