In a foreclosure case filed by Wells Fargo Bank, N.A., the New Jersey Superior Court, Appellate Division, articulated stringent standing requirements for residential foreclosure plaintiffs that did not originate the loans, but obtained them after origination. The court held that such lenders must authenticate the note and mortgage based on personal knowledge, and that the particulars of the transfer of those documents must also be set forth by someone with personal knowledge.
Although this decision may be perceived as establishing a significant road block to obtaining a final judgment of foreclosure in New Jersey, it should not be seen as such.
Rather, lenders should understand that, while courts will be strict in deciding the issue of standing, a well-crafted affidavit, based on personal knowledge, should be sufficient to demonstrate to the court that the lender has standing and is entitled to judgment.
The case concerned an appeal from an order granting summary judgment to Wells, which had taken an assignment of the note and accompanying mortgage from the originating lender, Argent Mortgage Co., shortly after it was made. In support of its motion for summary judgment, Wells Fargo submitted the certification of Josh Baxley, who identified himself as “Supervisor of Fidelity National as an attorney in face for HomEq Servicing Corporation as an attorney in fact for” Wells Fargo.
The certification stated that Baxley had knowledge of the amount due Wells Fargo, that Wells Fargo was the holder and owner of the note and mortgage at issue, and that true copies of those documents were attached to the certification. The certification did not state the basis for Baxley’s knowledge regarding the loan and loan documents. Nor did it attach the assignment of mortgage from Argent to Wells Fargo.
The defendant, Sandra A. Ford, opposed Wells Fargo’s motion and cross-moved for summary judgment. She submitted a certification in which she alleged that many of the documents Wells Fargo had produced in discovery were forgeries and that Argent had charged excessive fees, contrary to its prior representations.
In granting Wells Fargo’s motion, the trial court found that, although the allegations against Argent were “serious” and “disturbing,” Wells Fargo was a holder in due course by virtue of, among other things, an “Assignment of Mortgage,” attached to Wells Fargo’s reply brief.
Ford appealed the trial court’s order entering summary judgment. On appeal, the court concluded that Wells Fargo lacked standing to pursue the action. The court began its analysis with N.J.S.A. 12A:3-301, which provides that the following are persons entitled to enforce a negotiable instrument, such as a promissory note: (1) the holder of the instrument; (2) a non-holder in possession who has the rights of the holder; and (3) a person not in possession of the note, but who is entitled to enforce the note.
To become a holder, a transferee must receive an indorsement of the instrument. The court found that, because there was no evidence of an indorsement of the note from Argent to Wells Fargo, Wells Fargo could not be a holder and thus did not fit within the first category. The court noted that the third category also did not apply.
Accordingly, the court analyzed whether Wells Fargo could be deemed to fall within the second category of “a non-holder in possession of the instrument who has the rights of a holder.” Delivery of a note (even absent indorsement), with the purpose of giving enforcement rights, constitutes a transfer enabling the transferee to exercise all rights of the original holder. The court noted that Wells Fargo had presented a note, mortgage and assignment which, if properly authenticated, could establish Wells Fargo was entitled to enforce the note.
The court found, however, that the documents were not properly authenticated.
Documents in support of summary judgment must be based on personal knowledge. The court found “Baxley’s certification does not allege that he has personal knowledge that Wells Fargo is the holder and owner of the note. In fact, the certification does not give any indication how Baxley obtained this knowledge. The certification also does not indicate the source of Baxley’s alleged knowledge that the attached mortgage and note are ‘true copies.'” The court further found the assignment was not authenticated in any manner, as it was simply attached to a reply brief, and should not have been considered at all by the trial court. The Appellate Division also noted that the assignment was referenced in Wells Fargo’s complaint, but that, at the time of the complaint, it had not yet been recorded.
The court thus found Wells Fargo lacked standing, and reversed summary judgment.
This decision continues the recent trend of courts across the country, including New Jersey, setting a high bar for a lender to establish standing. It must be understood in context, however.
Notably, the appeal in Ford was heard several years after it was filed because of a bankruptcy stay that was eventually lifted. Accordingly, the summary judgment affidavit in that case was submitted in 2006, and not in the current economic climate, where lenders are on notice that their pleadings must be detailed and will be strictly scrutinized. In fact, the individual who signed the certification was not a Wells Fargo employee but, rather, an employee of an “attorney-in-fact” for Wells Fargo’s “attorney-in-fact.”
The certification also failed to attach or mention the assignment of the mortgage.
Additionally, it is unclear from the decision whether the assignment was ever recorded. Thus, the Baxley certification suffered from substantial deficiencies less likely to occur in 2011.
Importantly, the court set forth a blue print for conforming affidavits:
- (a) they must authenticate all of the documents at issue,
- (b) they must set forth that they are made based on personal knowledge, and
- (c) they must establish the basis for the affiant’s personal knowledge.
Foreclosing lenders should thus obtain and submit an affidavit from an individual who is employed by the lender, and either possesses direct knowledge as to the particulars of the loan documents or has access to the lender’s institutional knowledge as to the origination and history of the receipt and maintenance of the referenced documents.
Wells Fargo Bank, N.A. v. Ford.
Case No. A-3627-06, N.J. Super., (App. Div. Jan. 28, 2011).
