THE STATE OF NEW HAMPSHIRE SUPERIOR COURT

CHESHIRE, SS

213-2011-CV-00173

WILLIAM C. NEWITT AND MARY ELLEN NEWITT

v.
WELLS FARGO BANK, N.A. as TRUSTEE for ABFC 2006-0PT1 TRUST, ABFC ASSET-BACKED CERTIFICATES, SERIES 2006-0PT1

ORDER

The petitioners, William C. Newitt and Mary Ellen Newitt ("Newitts" or "Petitioners"), have filed a petition, seeking to enjoin the respondent, Wells Fargo Bank, N.A. as Trustee for ABFC 2006-0PT1 Trust, ABFC Asset-Backed Certificates, Series 2006-0PT1 ("Wells Fargo" or "Respondent"), from foreclosing on their property. A foreclosure sale is currently scheduled for July 21, 2011. The parties appeared for a hearing on June 24, 2011. For the following reasons, the petition to stay foreclosure is GRANTED. On May 24, 2006, the Newitts executed a mortgage and note in favor of H&R Block Mortgage Corporation ("H&R Block"). Pet. Exh. 1, pp. 3, 10. On the same date, H&R Block assigned the mortgage alone to Option One Mortgage Corporation ("Option One"). ld. p. 23. This assignment was not recorded. On December 20, 2007, H&R Block
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executed another assignment, this time of both the mortgage and the note, also in favor of Option One. Id. Exh. 2, p. 5. This assignment was recorded on March 17,2009. Id. On April30, 2008, Option One sold its residential mortgage servicing business to American Home Mortgage Servicing, Inc. (" AHMSI"). Option One also became known as Sand Canyon Corporation ("Sand Canyon"). Swearing under oath, the President of Sand Canyon said that effective April30, 2008, H&R Block, the parent company of Sand Canyon, sold Option One's "mortgage loan servicing business to American Home Servicing, Inc." 1 Id. Exh. 3, p. 6. He said that "Sand Canyon has no servicing rights" as it is "no longer engaged in the servicing of residential mortgage loans[,]" having "sold its loan servicing assets to an affiliate." Id. p. 7. Although at the hearing, Wells Fargo argued that Sand Canyon sold its servicing rights as opposed to the mortgages themselves, the president of Sand Canyon stated that "Sand Canyon also does not own any residential real estate mortgages." Id. Nevertheless, on February 23, 2010, Sand Canyon f/k/a Option One assigned the note and mortgage to Wells Fargo. Id. Exh. 2, p.
4).
The sworn statements of the president of Sand Canyon appear in a declaration, which was filed in unrelated litigation in Louisiana. Declaration of Dale M. Sugimoto, as President of Sand Canyon Corporation, In re Ron Wilson, Sr. & LaRonda Wilson, No. 07-11862 (U.S. Bankr. E.D. Louisiana, Mar. 18, 2009). The Newitts have previously presented this declaration in a bankruptcy action, which they have instituted in federal court. In the bankruptcy proceedings, Wells Fargo filed a motion for relief from stay on February 16, 2011. In the motion, Wells Fargo asserted that it was the holder of a first mortgage with no other known encumbrances. Pet. Exh. 3. The bankruptcy trustee contacted Wells Fargo on February 28, 2011, questioning Respondent about its interest in the subject property. The trustee made a court filing to this effect on March 9, 2011. On March 16, 2011, Respondent withdrew its motion for relief from stay. Id. Exh. 4. While these events are not determinative in the current matter, they suggest that this is not the first time Wells Fargo's interest in the subject property has been questioned.

The Newitts challenge Respondent's standing to foreclose because Sand Canyon had sold the mortgage and did not have an interest to assign to Wells Fargo when it executed the assignment on February 23, 2010. At best, Sand Canyon had just the note to assign to Wells Fargo. As this Court held in Zecevic v. U.S. Bank National Association, Trustee et al., No. 10-E-096 (Belknap Super Ct., Jan. 20, 2011) (O'Neill, J.), the party seeking to foreclose must hold both the note and mortgage in order to establish standing. [T]o have jurisdiction and authority to foreclose, a party must show that it is also the assignee of the underlying promissory note because "foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity. Zecevic, supra, at 5, quoting U.S. Bank Nat'l Ass'n as Trustee for SG Mortgage Securities Asset Backed Certificates, Series 2006-FRE2 v. Emmanuel, 27 Misc. 3d 1120 (N.Y. App. Div. 2010). Respondent argues that Petitioner may not challenge the assignment, and therefore Wells Fargo's standing as the mortgagee, because RSA 479:25 allows the mortgagee or its assignee to foreclose without judicial authorization by exercising the power of sale. Wells Fargo therefore appears to argue that at no point must the mortgagee, when its power to foreclose is challenged, establish that it obtained its rights to the mortgage pursuant to a valid instrument. This argument is circular: a mortgagee may foreclose because it is the mortgagee, given that RSA 479:25 allows the mortgagee or its assignee to foreclose. Wells Fargo overlooks the caveat that if it never obtained the
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mortgage, i.e. if the February 23, 2010 assignment was invalid, it is not the mortgagee and never qualified for the protections of RSA 479:25. To hold otherwise would be to allow any self-proclaimed mortgagee or assignee to foreclose on any property by invoking RSA 479:25. The procedure set forth in RSA 479:25 spares the mortgagee the need to bring an action for a decree of sale, not the need to establish its status as mortgagee and its right to foreclose. Therefore, actions such as the one brought by the Newitts are by no means precluded by RSA 479:25, as Wells Fargo appears to suggest. Under New Hampshire law, power of sale mortgages permit mortgage foreclosure without any court proceedings. The words "statutory power of sale" shall be understood as giving the mortgagee and his executors, administrators, successors and assignees the right, upon default of any performance of ... any condition contained in the mortgage, to foreclose by sale under the provisions of RSA 479:2527-a inclusive. RSA 477:29, III (1992). RSA 479:25 (1992) further provides that "instead of such suit and decree of sale, the mortgagee or his assignee may, upon breach of the condition, give such notices and do all such acts as are authorized or required by the power, including the giving of a foreclosure deed upon the completion of said foreclosure .... "(emphasis added). In other words, exercising the statutory power of sale is equivalent to, and done instead of, bringing suit for a decree of sale. When a mortgagee attempts to enforce a power of sale mortgage, a mortgagor may assert defenses against the foreclosure by "'petitioning the superior court ... to enjoin the scheduled foreclosure sale."' RSA 479:25, II. This is essentially what plaintiffs have done. However, instead of petitioning the relevant superior court they have petitioned the federal court, asserting defenses under federal statutes. In other words, plaintiffs' suit is a reply to defendant's exercise of the statutory power of sale. The Bolducs, although procedurally plaintiffs, are in fact asserting defenses to the equivalent of a suit by defendant for a decree of sale. This court may, therefore, characterize the Bolducs'
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arguments as affirmative defenses, despite their unusual procedural posture. Bolduc v. Beal Bank, SSB, 994 F. Supp. 82, 90 (D.N.H. 1998). See also U.S. Bank Nat'l Ass'n v. Ibanez, No. SJC-10694, slip op. at *5 (Mass. Jan. 7, 2011) ("Even where there is a dispute as to whether the mortgagor was in default of whether the party claiming to be the mortgage holder is the true mortgage holder, the foreclosure goes forward unless the mortgagor files an action and obtains a court order enjoining the foreclosure."); Zecevic, supra, at 4-5. In arguing that "Wells is the assignee of the mortgagee, and therefore it can foreclose[,]" (De. Obj. p. 2), Respondent assumes that the assignment is valid. In a foreclosure action, the burden rests upon the foreclosing party to establish that it has standing to foreclose. See Zecevic, supra, at 5, holding that the foreclosing party must demonstrate that it holds title to the property, i.e. the mortgage, as well as the note. The opponent homeowner may well question the validity of documents pursuant to which the foreclosing party obtained its right to foreclose. For this reason, the numerous out-of-state cases which Wells Fargo cites are inapplicable in the instant case. For example, in Bridge v. Aames Capital Corp., 2010 WL 3834059 (N.D. Ohio Sept. 29, 2010), the petitioner lacked standing to challenge the mortgagee's assignment because the action, a petition to quiet title, placed the burden upon the petitioner. This is not the case here. The same rationale applies in Rogan v. Bank One, N.A. (In reCook), 457 F.3d 561, 567 (6th Cir. Ky. 2006).
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Similarly, Livonia Prop. Holdings, L.L.C. v. 12840-12976 Farmington Rd. Holdings, L.L.C., 717 F. Supp. 2d 724 (E.D. Mich. 2010) and, drawing upon it, Golliday v. Chase Home Fin., LLC, 1:10-CV-532, 2011 WL 31038, *1 (W.D. Mich. Jan 5, 2011), are inapplicable here because they reject the rationale adopted in this state. In Livonia, the U.S. District Court for the Eastern District of Michigan rejected the rationale of U.S. Bank Nat'l Ass'n v. Ibanez, 17 LCR 679 (Mass. Land Ct. 2009), which this Court adopted in Zecevic, supra. I decline to adopt the reasoning of Ibanez because the Massachusetts law on which it relies differs from Michigan law in two important aspects. First, unlike Massachusetts, Michigan does not follow the "title theory of mortgages." "Under Michigan law, a mortgage is not an estate in land, it is a lien on real property intended to secure performance or payment of an obligation." Prime Financial Services v. Vinton, 279 Mich. App. 245, 761 N.W.2d 694, 703 (Mich. App. 2008) .... Second, unlike in Massachusetts, in Michigan, a mortgage cannot exist separately from the underlying note. Livonia, 717 F. Supp. 2d at 751. The rationale in Livonia does not apply in the instant matter because like Massachusetts, New Hampshire is a so-called "title theory" state. New Hampshire has been considered a "title" state for mortgages, in which the real estate owner is technically considered to be conveying title to the mortgagee conditionally, that is for so long as the mortgage remains unpaid. The modern New Hampshire statutes perpetuate this artificiality, defining a mortgage to be a "conveyance of lands made for the purpose of securing the payment of money or the performance of any other thing in the condition thereof stated." 17 C. Szypszak, New Hampshire Practice: Real Estate 4.01 at 66 (2003), quoting RSA 479:1. For the reasons enumerated and explained in Zecevic, New Hampshire, like Massachusetts, requires the mortgage and note to be conveyed together. Because
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Michigan law differs on this issue, the Michigan cases on which Respondent relies provide little guidance. Lastly, the language on standing contained in In re Almeida, 417 B.R. 140, 149 (Bankr. D. Mass. 2009) is, at most, dicta. These dicta draw on another Massachusetts case, In re Samuels, 415 B.R. 8, 22 (Bankr. D. Mass. 2009). In In re Samuels, the U.S. Bankruptcy Court for the District of Massachusetts rejected the petitioner's challenge to the validity of an assignment not because the petitioner lacked standing to challenge the assignment, but because his argument was both circular and self-defeating: it presumed the validity of the challenged instrument. Next, Respondent appears to argue that the assignment is valid because such a document was necessary to preserve the chain of title. "[] Sand Canyon remained the mortgagee of record, regardless of its relationship to the loan, therefore for title purposes the mortgage had to be assigned by Sand Canyon before any lender could foreclose." De. Obj. p. 4 (emphasis in original). It is unclear, however, why Sand Canyon could not have recorded a transfer of ownership of the note and mortgage to AHMSI, which purchased all of its residential mortgages. Any subsequent assignment to Wells Fargo would have been substantiated by the actual ownership of the assigned interest. The assignment from Sand Canyon to Wells Fargo of an interest which Sand Canyon did not possess no more cured the problem with the chain of title than the lack of any assignment at all. Lastly, Respondent's argument that the mortgage is
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automatically transferred together with the note has been addressed and rejected in Zecevic. Wells Fargo has failed to establish that it holds the mortgage to the subject property and is, as such, the mortgagee or assignee thereof. Based on Sand Canyon's sworn statements, the February 23, 2010 assignment of the mortgage to Respondent may very well have been invalid because the assignor admittedly divested of all residential mortgages in April 2008. Because it has failed to establish its standing to foreclose, the petition to stay foreclosure is GRANTED.
SO ORDERED.

Date

c/;rz~~~

John P. Arnold Presiding Justice