United States District Court, E.D. Pennsylvania
Gerald Austin McHugh United States District Court Judge
Defendant Wells Fargo has renewed a prior Motion to Dismiss Plaintiff’s remaining Unfair Trade Practices and Consumer Protection Law (UTPCPL) claim. Additionally, Defendants Phelan Hallinan, LLP and Courtenay R. Dunn have filed a Motion for Reconsideration pertaining to this Court’s previous denial of their Motion for Judgment on the Pleadings. I address both pending Motions in this Memorandum.
A. Initial Mortgage Transaction
Sonya Hoffman purchased real property in Darby, PA, on August 14, 1998. On the same date, Hoffman obtained a loan from Avstar Mortgage Corporation for $39, 784. Accordingly, Hoffman executed a promissory note to Avstar, its successors and assigns, to evidence her obligation to repay the loan. Hoffman also executed a purchase money mortgage to Avstar, its successors and assigns to secure her obligations under the note, granting Avstar a lien and security interest in the property. The deed and mortgage were recorded in Delaware County on August 17, 2008.
B. The Assignments
Wells Fargo would eventually bring a foreclosure action during which it produced three recorded assignments. The first recorded assignment, dated August 14, 1998, shows Avstar assigning the mortgage to Principal Residential Mortgage, Inc. That assignment was recorded August 17, 1998. The second recorded assignment, dated November 2, 1999, shows Principal Residential Mortgage assigning the mortgage to Fleet Mortgage Corp. That assignment was recorded November 15, 1999. Finally, the mortgage was assigned to Wells Fargo on April 6, 2011, from “the Federal Deposit Insurance Corporation as receiver of Washington Mutual Bank F/K/A Washington Mutual Bank, FA successor in interest to Washington Mutual Home Loans, Inc. successor by merger to Fleet Mortgage Corp.” Fleet had merged with Washington Mutual at some point in the past. Thus the recorded assignments evidence a complete and unbroken chain leading to Wells Fargo.
Hoffman has produced the two unrecorded assignments that were present in the file that Wells Fargo brought to the foreclosure proceeding. The first unrecorded assignment was executed September 1, 1998, and shows Principal Residential Mortgage assigning the mortgage to Government National Mortgage Association (Ginnie Mae). The assignment is signed and notarized. September 1, 1998 is after the date in which Principal Residential Mortage was assigned the mortgage by recorded assignment and before the date in which it assigned away the mortgage via recorded assignment. The second unrecorded assignment was executed on November 2, 1999 and shows Fleet Mortgage Corp. assigning the mortgage again to Ginnie Mae. The assignment is signed and notarized. This assignment took place on the same date that Fleet is shown to have received assignment of the mortgage from Principal Residential Mortgage. While the two unrecorded assignments are feasible in that the entity purported to have assigned the mortgage did indeed have possession of the mortgage at the time, the unrecorded assignments also conflict with each other. Fleet could not have assigned the mortgage in the second unrecorded assignment if Principal had assigned the mortgage in the first unrecorded assignment.
C. Foreclosure Trial and Decision
In February of 2012, Wells Fargo commenced a foreclosure action against Hoffman in the Delaware County Court of Common Pleas, alleging that Hoffman was in default under the Note and the Mortgage. After preliminary objections by Hoffman challenging Wells Fargo’s standing, Wells Fargo filed an amended complaint on May 10, 2012. Wells Fargo alleged that it was the holder of the Mortgage entitled to enforce it, and in support thereof attached copies of the Note, the Mortgage, and the recorded assignments of the Mortgage. Additionally, Wells Fargo alleged that the endorsements to the Note reflect the transfer of ownership of the Note and Mortgage from Avstar to Principal, and then from Principal to Fleet. At that point, Wells Fargo alleged that Fleet endorsed the note “in blank, ” thereby converting the Note to a “bearer instrument” enforceable by the holder. Wells Fargo filed a motion for summary judgment relying on both the recorded assignments and its status as holder in possession of the blank endorsed Note. The Court of Common Pleas denied that motion for summary judgment without issuing an opinion.
A bench trial was held on September 18, 2013 before Judge G. Michael Green of the Delaware County Court of Common Pleas. Wells Fargo had been represented by Courtenay Dunn of Phelan Hallinan at all times, and Hoffman had been represented by David E. Pearson. Pearson continues to be Hoffman’s attorney in this present action based on the foreclosure action. At trial, Dunn had the original Note and Mortgage present. At the outset of the trial, Dunn handed the origination file to Pearson for inspection. Pearson noted that there were documents in the file that were not produced in discovery. Those documents were the two unrecorded assignments at issue in this case.
After Dunn and Wells Fargo had rested their case, Pearson objected to the admission of a copy of the Note. The Judge ruled that Hoffman’s answers to the complaint admitted that Hoffman had executed the note on the date indicated, but also found that Hoffman’s answers explicitly denied that the Note was endorsed in blank. The Judge found that no evidence had been offered as to whether the Note was endorsed in blank, and as such, he would not treat it as having been so endorsed. Transcript at 37-38. Similarly, Pearson objected to the admission of the three recorded assignments on the basis of hearsay. Transcript at 39-44. The Judge determined that there was no hearsay exception that would permit the assignments into evidence, and they were excluded.
Pearson, in making his case, pointed out that the Note was “not endorsed to [Wells Fargo] and it’s not endorsed in blank. They have no basis to enforce the Note.” Transcript at 50. Furthermore, Pearson argued that there was no chain of assignment because the recorded assignments were not admitted. Id. An exchange took place over the unrecorded assignments that were not produced, with Pearson insinuating that they may have been concealed and suggesting sanctions. Transcript at 51. However, in trying to admit the unrecorded assignments, the Judge determined that they could not be admitted for the same reason the three recorded assignments could not be admitted. Transcript at 64-70.
In closing, Dunn argued that, whether the endorsements were admitted or not, possession of the Note entitled Wells Fargo to proceed in the action. Transcript at 75. Pearson disputed this assertion, saying possession in the UCC does not mean merely physical possession. Transcript at 97-98, 101-102. The Judge concluded by requesting briefing from the parties on two topics: (1) standing and (2) the court’s authority in granting an in rem judgment on the facts as proven. Transcript at 103.
The Court of Common Pleas issued its decision on December 18, 2013. Under findings of fact, the Court noted that: (1) none of the assignments were admitted into evidence; (2) the Amended Complaint, Note, and Mortgage were admitted into evidence; (3) the Note was admitted into evidence but not accepted as a document endorsed in blank. The Court also concluded that 13 Pa. C.S.A. § 3301 provides that “person entitled to enforce” an instrument is “the holder of the instrument.” A “holder” is defined as the person in possession of a negotiable instrument that is payable either to the bearer or to an identified person that is the person in possession. This appears to have been the Court’s rejection of Dunn’s argument that physical possession of the note is enough to support standing to foreclose, though Wells Fargo claims in its motion to dismiss that the state court failed to consider whether Wells Fargo’s possession of the original note at the time of trial conferred standing to enforce the note and mortgage as a “nonholder in ...