July 14, 2011

An Iowa District Court has issued a 5-page Order denying Wells Fargo’s (second) Motion for Summary Judgment. Wells Fargo had originally been granted summary judgment against the borrower, who was pro se at the time, in 2005 based upon a sworn affidavit that Wells Fargo was the holder of the note. The borrower had filed an affidavit which stated that she had spoken to Wells Fargo and was told that the “investor” on her loan was Lehman. The case languished in an appellate posture and was continued for various reasons.

Jeff Barnes, Esq. began representing the borrower in early 2010 with local Iowa counsel Christine Sand, Esq., who immediately initiated extensive discovery. The Court ordered Wells Fargo to submit an original of the Note by July 20, 2010. The next day (after the time for compliance with the Court’s Order had already passed), Wells Fargo filed a Motion for additional time to comply with the Order, and a Motion to Substitute Plaintiff which stated that pursuant to a servicing agreement between Wells Fargo and Lehman Brothers Bank FSB that the holder of the note and mortgage was Lehman. The 2005 summary judgment was thus vacated.

Wells Fargo filed a “lost note affidavit” a month later on August 20, 2010 which the Court found did not disclose the specific facts in the “record of account” which was reviewed by the Wells Fargo affiant upon which she based her conclusion. On February 23, 2011, Wells Fargo filed an Amended Foreclosure Petition alleging that Wells Fargo was the owner and holder of the note and that Lehman Brothers Bank, Lehman Brothers Holdings, and a securitized mortgage loan trust of which US Bank was the “trustee” were added “for the purposes of quieting title to subject property and to comply with” Iowa statutory law. The court noted that it was unclear what form of relief was being sought with the addition of these parties.

Wells Fargo filed another affidavit executed by the same Wells Fargo affiant who executed the “lost note” affidavit. This “new” affidavit stated that the original note and mortgage were sent to Wells Fargo’s prior counsel in November 2004 and were lost while in the custody of said counsel. The Court again found that the affiant did not state the facts upon which the affiant relied for her conclusions nor what parts of the file she reviewed upon which she relied.

In its Reply to the borrower’s opposition (which is termed “Resistance” in Iowa) to Wells Fargo’s second Motion for Summary Judgment, Wells Fargo attached a copy of a lost note affidavit which the Court stated was “purportedly” executed by Wells Fargo’s attorney in 2005. Wells Fargo’s current counsel represented to the Court in its Reply that Wells Fargo’s previous counsel filed a lost note affidavit on March 28, 2005. The Court stated that it had reviewed both the docket sheet and the court file and found no evidence that the original of the alleged 2005 lost note affidavit was ever filed.

Based on these matters, the Court found that there were factual issues as to whether or not the note has been lost and whether the note has been “transferred”, and denied summary judgment to Wells Fargo on its foreclosure claim.

Our question to Wells Fargo is, were you lying then or are you lying now? Round and around and around we go, and where Wells Fargo and its attorneys will stop, nobody knows! Note, note, who has the note? Lehman? Lehman Holdings? The USBank securitization? None of the above?

Separately, the Supreme Court of Nevada issued two opinions on July 7, 2011 which finally compel foreclosing parties in Nevada to produce material documentation as to chain of title to the Note and Deed of Trust in order to be permitted to continue with a foreclosure action when mediation is requested. in Leyva v. National Default Servicing et al., No. 55216, 127 Nev. Advance Opinion 40, the Supreme Court held that strict compliance is required with Nevada statutes governing the production of certain documents including any assignment of the Deed of Trust; that a foreclosing party’s failure to do so “is a sanctionable offense; and the district court is prohibited from allowing the foreclosure process to proceed”. Wells Fargo was also the culprit in this case.

Significantly, in discussing the transfer of the Note, the Supreme Court of Nevada cited to the recent In Re Veal decision from the 9th Circuit Bankruptcy Appeals Panel (which was previously discussed on this website), holding that the borrower “has the right to know the identity of the entity that is ‘entitled to enforce’ the mortgage note under Article 3 (of the Uniform Commercial Code).” The Court concluded that Article 3 “clearly requires Wells Fargo to demonstrate more than mere possession of the original note to be able to enforce a negotiable instrument”. The court found that there was no endorsement and no assignment, and reversed the District Court.

The opinion in Leyva cited to the Court’s opinion in Pasillas v. HSBC Bank as Trustee, No. 56393, 127 Nev. Advance Opinion 39 (also decided July 7, 2011), which also reversed the District Court and also cited to Veal , setting forth the requirements for production of evidence of chain of title to the note and Deed of Trust in a foreclosure.

The multiple citations to Veal, which is a Federal Bankruptcy appellate court opinion, by the state Supreme Court of Nevada, is more than important. It demonstrates that simply because a foreclosure issue is decided by a Bankruptcy court does not mean that it is not applicable to a non-Bankruptcy (or non-Federal) foreclosure case. Time and again, when we argue that an issue in a state foreclosure case has already been decided by a Bankruptcy court in the foreclosure context, attorneys representing foreclosing “lenders” and servicers argue “Well, Judge, that was a Bankruptcy case, and we are not in Bankruptcy Court”. Leyva and Pasillas have now put that argument to bed. If a Federal Bankruptcy decision is good enough for the Supreme Court of Nevada in two separate opinions, it should be good enough for any state court.

We thank one of our dedicated readers for alerting us to these two highly significant Nevada decisions.

Jeff Barnes, Esq.,