Shrewsbury v. The Bank of New York Mellon
2017 Del. LEXIS 155
| Del. | 2017Background
- J.M. and Kathy Shrewsbury executed a large mortgage and promissory note in 2007; payments stopped in 2010.
- The mortgage was assigned in 2011 to The Bank of New York Mellon (The Bank); The Bank was not the original mortgagee or necessarily the note holder.
- The Bank sued in 2015 in Delaware Superior Court to foreclose the mortgage; Shrewsburys defended, asserting The Bank did not hold the note and thus lacked the right to foreclose.
- The Superior Court granted summary judgment to The Bank; the record did not show The Bank produced or proved ownership/ability to enforce the note.
- The Delaware Supreme Court reviewed de novo and held that a mortgage assignee must be entitled to enforce the underlying obligation (the note) to foreclose; the case was reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a mortgage assignee must hold the underlying note (or be entitled to enforce it) to foreclose | A mortgagee’s right to foreclose derives from the mortgage record alone; ownership of the note is irrelevant | A mortgage is security for a debt; assignment of the mortgage without the note leaves the assignee without the right to enforce the debt and foreclose | A mortgage assignee must be entitled to enforce the obligation (the note) to foreclose; defense that plaintiff lacks the note is a plea in avoidance |
| Whether challenge to plaintiff’s right to enforce the note is an allowable defense in scire facias foreclosure | Foreclosure defenses are limited; plaintiff argued the defense pleaded was not an allowable plea in avoidance | Shrewsburys argued that lack of right to enforce the note defeats plaintiff’s authority to foreclose | Court held that claiming the foreclosing party is not entitled to enforce the debt is a plea in avoidance and a proper defense |
| Whether plaintiff bears pleading burden to allege note ownership when suing on mortgage | The Bank argued statutory form and practice focus on mortgage record; no new pleading requirement should be imposed | Shrewsburys argued plaintiff must show entitlement to enforce the debt | Court: does not impose new formal pleading requirements but requires foreclosure plaintiff to prove entitlement to enforce the note before summary judgment succeeds |
| What result when record shows a factual dispute about note assignment at summary judgment | The Bank argued mortgage assignment sufficed and summary judgment was appropriate | Shrewsburys produced affidavit showing the note copy lacked assignment notations; factual dispute existed | Court held summary judgment was improper without The Bank showing it had the right to enforce the note; remanded for further proceedings |
Key Cases Cited
- Carpenter v. Longan, 83 U.S. 271 (assignment of mortgage without note is ineffective)
- Iowa-Wisconsin Bridge Co. v. Phoenix Fin. Corp., 25 A.2d 383 (Del. 1942) (a debt is essential to a valid mortgage)
- Gordy v. Preform Bldg. Components, Inc., 310 A.2d 893 (Del. Super. 1973) (describing plea in confession and avoidance as applicable in mortgage foreclosures)
- Merritt v. Bartholick, 36 N.Y. 44 (transfer of mortgage without debt is a nullity)
- Deutsche Bank Nat. Tr. Co. v. Holden, 147 Ohio St.3d 85 (Ohio 2016) (party seeking to foreclose must show entitlement to enforce the note)