Circuit Court for Montgomery County Case # 326936-V
The opinion of the court was delivered by: Harrell, J.
Deutsche Bank National Trust Company as Trustee for the Certificate Holders of ISAC 2006- 5 MTG Pass-Through Certificates and Bank of America, N.A., as Successor by Merger to BAC Home Loans Servicing, LP v. Angela Brock,
No. 55, September Term 2012.
COMMERCIAL LAW - AUTHORITY TO ENFORCE THROUGH FORECLOSURE PROMISSORY NOTE INDORSED IN BLANK
Where there is no gap in the endorsements purporting to transfer a negotiable promissory note, and the last endorsement, made by a holder, is an endorsement in blank, the note may be negotiated by transfer of possession alone. Thus, the person or entity in possession of a negotiable promissory note indorsed in blank is the holder of that note entitled to enforce it, free of any requirement to prove how he, she, or it came into possession of the note. If security for payment of the note in default is real property, the person or entity in possession of the note may authorize foreclosure.
Bell, C.J., Harrell Battaglia Greene Adkins Barbera McDonald, JJ. Opinion by Harrell, J.
This case arises out of a challenge by a borrower, Respondent Angela Brock ("Brock"), to the authority of various individuals and entities to effectuate a valid foreclosure on her residential property. After a foreclosure sale was scheduled in Montgomery County by the substitute foreclosure trustees, Edward S. Cohn, Stephen N. Goldberg, Richard E. Solomon, and Richard J. Rogers (referred to collectively as the "Substitute Trustees"), but before the sale took place, Brock filed a separate action in the Circuit Court for Montgomery County, seeking compensatory damages and declaratory and injunctive relief, against the Substitute Trustees, Deutsche Bank National Trust Company (as Trustee for the Certificate Holders of ISAC 2006-5 MTG Pass-Through Certificates) ("Deutsche Bank"), and BAC Home Loans Servicing LP ("BAC") (now known as Bank of America, N.A.), for alleged defects in the foreclosure process and the authority of the named Defendants to foreclose on her property. Deutsche Bank and BAC (referred to collectively as "Petitioners"*fn1 ) filed a motion for summary judgment in Brock's action, which motion was granted by the Circuit Court, which concluded that no genuine dispute of material fact existed as to the Petitioners' authority to foreclose on the property and dismissed Brock's complaint in its entirety. The Court of Special Appeals reversed, in an unpublished opinion, finding, pursuant to this Court's decision in Anderson v. Burson, 424 Md. 232, 35 A.3d 452 (2011), that Petitioners did not prove they were persons entitled to enforce the promissory note, and thus genuine disputes of material fact existed precluding summary judgment. We are asked here to determine whether, based on the endorsements to the promissory note at issue, Petitioners are entitled to enforce the Note. For the reasons explained below, we determine that BAC is entitled to enforce the Note. Therefore, we reverse the judgment of the Court of Special Appeals.
FACTUAL AND PROCEDURAL BACKGROUND
On 28 September 2006, Brock executed a promissory note in the principal amount of $544,000 to her lender, Amerifund Mortgage Services, LLC ("Amerifund Mortgage"), for the purpose of financing the purchase of improved residential real property located in Silver Spring, Maryland. The promissory note (the "Note") was secured by a deed of trust, signed by Brock that same day, in favor of Amerifund Mortgage.*fn2
Although the loan originated with Amerifund Mortgage, it was sold and securitized thereafter. As we explained in Anderson v. Burson,
[s]ecuritization starts when a mortgage originator sells a mortgage and its note to a buyer, who is typically a subsidiary of an investment bank. The investment bank bundles together the multitude of mortgages it purchased into a "special purpose vehicle," usually in the form of a trust, and sells the income rights to other investors. A pooling and servicing agreement establishes two entities that maintain the trust: a trustee, who manages the loan assets, and a servicer, who communicates with and collects monthly payments from the mortgagors.
424 Md. at 237, 35 A.3d at 455 (internal citations and footnote omitted). A special purpose vehicle "is a business entity that is exclusively a repository for the loans; it does not have any employees, offices, or assets other than the loans it purchases." Id. at 237 n.7, 35 A.3d at 455 n.7 (quoting Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359, 1367 (2010)). Here, although the Note originated with Amerifund Mortgage, it appears that it was sold later. The allonge*fn3 attached to the Note contains the following three endorsements:
American Brokers Conduit WITHOUT RECOURSE,
Amerifund Mortgage Services, LLC
IMPAC FUNDING CORPORATION WITHOUT ...