Bank of New York Mellon v. Rogers
2016 IL App (2d) 150712
| Ill. App. Ct. | 2016Background
- 2003: Borrowers (David & Pamela Meixner and the Rogerses) obtained a mortgage and promissory note; note was later indorsed and an allonge with a blank indorsement was attached converting it to bearer paper. Washington Mutual later held the loan.
- 2005: Borrowers executed a Modification Agreement with Washington Mutual that stated it “amends and supplements” the original note and mortgage and increased the indebtedness.
- Loan servicing later transferred to Wells Fargo; BNY Mellon became holder of the (blank-indorsed) original note and filed foreclosure in 2011 after Borrowers defaulted.
- At summary judgment BNY Mellon produced the original note, Feaster’s affidavit (Wells Fargo business records) and argued possession of the blank-indorsed original note established standing; Borrowers argued the Modification Agreement was a negotiable instrument not indorsed to BNY Mellon and challenged the business‑record foundation.
- Trial court granted summary judgment, entered foreclosure and confirmed the sale; Borrowers appealed, raising (1) lack of foundation/authentication for the Wells Fargo computerized records and (2) that the Modification Agreement was negotiable and therefore required indorsement to establish BNY Mellon’s standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BNY Mellon had standing to foreclose | BNY Mellon possessed the original note indorsed in blank; possession of bearer paper establishes title and standing | Modification Agreement amended/superseded the original note and is a negotiable instrument payable to Washington Mutual and was not indorsed to BNY Mellon, so BNY Mellon lacked standing | Held for BNY Mellon: it was a holder in due course of the original blank‑indorsed note; the Modification Agreement is not a negotiable instrument, so lack of indorsement of the Modification is irrelevant |
| Whether the Modification Agreement is a negotiable instrument under UCC Article 3 | Not negotiable: it expressly amends/supplements the note and mortgage, incorporates mortgage covenants, and is therefore conditional/not an unconditional promise to pay | Borrowers: statutory language of UCC §3‑104 supports negotiability; Modification stands alone and governs terms | Held: Modification is not negotiable—its language (amends/supplements, incorporates covenants) makes it conditional and not an unconditional promise to pay |
| Whether computerized business records and Feaster’s affidavit had proper foundation/authentication | Feaster’s affidavit and attached Wells Fargo records were made and kept in ordinary course, laid sufficient foundation under Rule 236 and business‑records exceptions | Borrowers: records lacked foundational testimony about the software/recording process and Washington Mutual records should have been used; foundational objection raised only post‑judgment | Held: Borrowers forfeited foundational objection by not timely raising it at summary‑judgment hearing; trial court did not abuse discretion admitting the records |
| Whether Borrowers’ procedural arguments (e.g., missing indorsement/allonge issues) barred foreclosure | BNY Mellon produced the original blank‑indorsed note to the court and relied on prima facie proof attaching the note to the complaint | Borrowers claimed the allonge/indorsement were defective and that the Modification superseded the note | Held: Appellate court refused to consider new/allonge arguments forfeited on appeal; possession of original blank‑indorsed note sufficed for standing |
Key Cases Cited
- Solon v. Midwest Medical Records Association, Inc., 236 Ill. 2d 443 (Illinois Supreme Court) (statutory construction principles; courts avoid rendering statutory language meaningless)
- Wexler v. Wirtz Corp., 211 Ill. 2d 18 (Illinois Supreme Court) (plaintiff’s lack of standing negates the cause of action)
- Haudrich v. Howmedica, 169 Ill. 2d 525 (Illinois Supreme Court) (issues not raised in the trial court are forfeited on appeal)
- Sturgis Nat’l Bank v. Harris Trust & Sav. Bank, 351 Ill. 465 (Illinois Supreme Court) (reference to security instrument may not destroy negotiability where problem is questionable)
- Burns v. Resolution Trust Corp., 880 S.W.2d 149 (Tex. App. 1994) (loan modification may be negotiable in proper circumstances; negotiability primarily determined by note's terms)
- Guniganti v. Kalvakuntla, 346 S.W.3d 242 (Tex. App. 2011) (loan modification that incorporates and depends on original loan documents is not negotiable)
- Dasma Investments, LLC v. Realty Assocs. Fund III, L.P., 459 F. Supp. 2d 1294 (S.D. Fla.) (modification that incorporates original promissory note cannot stand alone as a negotiable instrument)
- Bank of New York v. Romero, 320 P.3d 1 (N.M. 2014) (possession of a note payable to a third party without proper indorsement does not establish right to enforce)