¶ 1. Defendant Randy J. Rouleau appeals the decision of the Washington Civil Division holding that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Securities Corp., Commer
¶ 2. The civil division’s findings may be summarized as follows. In November 2000, R&G Properties, Inc. (R&G) borrowed $2.15 million from Column Financial, Inc. (Column). Defendant, as R&G’s president and agent, signed a promissory note memorializing the loan, which was secured by a mortgage on five mobile home parks owned by R&G. Attached to the note is an allonge, entitled “First Allonge to Promissory Note,” assigning the note to Wells Fargo. The allonge states, “Pay to the order of *, without recourse or warranty,” below which, stamped in ink, appears Wells Fargo’s name next to an asterisk. Another document, entitled “Assignment of Mortgage,” similarly assigns the mortgage on each of R&G’s five properties to Wells Fargo. Defendant also executed a personal guaranty, entitled “Exceptions to Non-Recourse Obligations of Borrower Agreement,” stipulating that defendant would be personally liable for “the entire Secured Indebtedness ... if the Property or any part thereof shall become an asset in [a bankruptcy proceeding].”
¶ 3. Column granted R&G’s loan intending that it become part of a larger transaction known as securitization. Securitization involves the pooling of many similar loans into a trust, which the trustee manages for the benefit of individual investors. This process requires assignment of the loans to the trustee. To that end, at the time of the loan, Column prepared a General Assignment in blank warranting that it had not previously as
¶4. The exact date on which R&G’s promissory note was assigned to Wells Fargo is unknown. By June 2002, however, the securitization was “largely complete.”
¶ 5. In addition to the court’s findings, the following facts form the background of this case. In September 2008, R&G filed for bankruptcy, triggering defendant’s liability pursuant to the guaranty.
¶ 7. We first address defendant’s claim that the civil division erred in treating assignment of the note as sufficient to prove assignment of the guaranty. We consider de novo whether the assignment of a personal guaranty follows, as a matter of law, the assignment of a promissory note. In re Vill. Assocs. Act 250 Land Use Permit, 2010 VT 42A, ¶ 7,
¶8. Defendant, in contrast, argues that because the guaranty is an independent contract, Wells Fargo needed to prove that it was assigned not just the note and the mortgage, but also the guaranty itself. Defendant submits that negotiable instruments, like the note, must be distinguished from nonnegotiable instruments, like the guaranty, in that negotiable instruments may be assigned in blank, while nonnegotiable instruments may not. As such, defendant asserts that Wells Fargo needed, but failed, to prove that it was expressly assigned the guaranty. We hold that proof of the assignment of a promissory note and mortgage is sufficient as a matter of law to establish assignment of a personal guaranty.
¶ 9. Personal guaranties are contacts governed by general principles of contract law. See Restatement (Third) of Suretyship and Guaranty § 7 (stating that principles of contract formation apply to formation of secondary obligations). Under contract law, “[a]n assignment agreement must clearly reflect an intent to assign the right in question.” Desrochers v. Desrochers,
¶ 10. Because of a guaranty’s link to the principal obligation, it follows that an obligee’s assignment of the principal obligation is sufficient to manifest the requisite intent to assign the guaranty. Restatement (Third) of Suretyship and Guaranty § 13(5). As explained in the Restatement:
A secondary obligation, like a security interest, has value only as an adjunct to an underlying obligation. It can usually be assumed that a person assigning an underlying obligation intends to assign along with it any secondary obligation supporting it. Thus, unless there is agreement to the contrary or assignment is prohibited . . . , assignment of the underlying obligation also assigns the secondary obligation.
Id. § 13 cmt. f. The court correctly resolved this question, therefore, by concluding whether Wells Fargo was assigned the guaranty in this case depended on whether it was assigned the note and mortgage.
¶ 11. We next consider defendant’s main argument that the civil division erred in ruling that Wells Fargo has standing to enforce the guaranty. Defendant argues that Wells Fargo lacks standing because it cannot prove that the loan documents were deposited into the REMIC. In other words, defendant claims that Wells Fargo cannot prove that it was assigned the note and mortgage. Defendant’s argument implies that Vermont law requires proof of chain of title to enforce a personal guaranty, a question we consider de novo. In re Vill. Assocs. Act 250 Land Use Permit, 2010 VT 42A, ¶ 7. We hold that a plaintiff to whom a promissory note or mortgage was not originally issued need not prove chain of title to enforce a personal guaranty of these principal obligations. Rather, a plaintiff in an enforcement action establishes its standing if it is in possession of the original note and mortgage at the time the complaint is filed and the instruments are made payable to the plaintiff.
¶ 13. To enforce a promissory note or mortgage under § 3-301Q, therefore, a person must be in possession of the instrument at the time that the enforcement action is filed and the instrument must be made payable to the person or to the order of the person. See Kimball,
The plaintiff shall attach to the complaint copies of the original note and mortgage deed and proof of ownership thereof, including copies of all original endorsements and assignments of the note and mortgage deed. The plaintiff shall plead in its complaint that the originals are in the possession and control of the plaintiff or that the plaintiff is otherwise entitled to enforce the mortgage note pursuant to the Uniform Commercial Code.
V.R.C.P. 80.1(b)(1) (emphasis added). Contrary to defendant’s argument, then, Vermont law does not require a plaintiff seeking to enforce a note or mortgage to prove chain of title to establish standing to enforce the instrument.
¶ 14. Reaching this conclusion on the basis of Vermont statutory law and case precedent, we note that the primary cases relied on
¶ 15. Having decided that the guaranty follows the note and that Wells Fargo need not establish chain of title under § 3-301(i), the question of Wells Fargo’s standing becomes a deferential review of the civil division’s simple legal syllogism. Under § 3-301(i), the holder of the note and mortgage can enforce the guaranty. The civil division found that Wells Fargo is the holder and therefore can enforce the guaranty. Argued below, this case turned on this second, factual premise, which Wells Fargo needed to prove only by a preponderance of the evidence. See 9A V.S.A. § 1-201(8) (providing that in cases governed by Uniform Commercial Code “‘[b]urden of establishing a fact’ means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence”). On appeal, we will uphold the court’s findings unless clearly erroneous and affirm its conclusions “as long as they are reasonably supported by the findings.” Waterbury Feed Co. v. O’Neil,
¶ 17. The record in this case supports the civil division’s finding that Wells Fargo had been assigned the note and the mortgage prior to the filing of the enforcement action. The evidence on this question came primarily from the testimony of Tommy Floyd, an employee of the loan’s special servicer, Berkadia. At trial, Mr. Floyd was the authority on the way the securitization process works generally and, based on his in-court examination of the loan documents related to R&G’s loan, he also testified as to how the securitization process worked in this case. He testified that because R&G’s loan was intended from the start to be securitized — again, grouped with a larger number of loans and transferred to a trustee — the note and mortgage, like those in many other cases where securitization takes place, were originally assigned in blank and then specifically assigned to Wells Fargo as trustee. The assignment of the note and mortgage then occurred, as it normally would have, at the point when securitization was complete, in this case by October 2003, upon the recording of the mortgage on the last of R&G’s properties. In short, Mr. Floyd testified:
[I]t’s very common that when these secured type loans are made the lender would make a number of these loans, then hold those loans to be securitized some time in the future. Such as this one, [Column] made this loan plus numerous other loans. . . . And then they bundle those up into a securitization at a later time and that’s when this assignment was recorded.
Mr. Floyd’s testimony was supported by, and largely based on, the original loan documents in this case, including the note, allonge, and assignment of mortgage, each of which Wells Fargo produced at trial. The allonge and assignment of mortgage name Wells Fargo as the assignee of the note and mortgage, respectively.
Affirmed.
Notes
The allonge, by which the note was transferred, was signed and witnessed, but not dated.
Prior to this case, defendant and Column argued before this Court regarding defendant’s attempt to sell one of its mortgaged mobile home park properties. See R&G Props., Inc. v. Column Fin., Inc.,
Defendant argues in his brief that there is “undisputed evidence that Column transferred the original loan documents to Bank One Mortgage Warehouse” on November 13, 2000. According to Mr. Floyd’s testimony, this transaction was based on a “custodial agreement between Bank One Trust Company and [Column],” under which Bank One Mortgage Warehouse would “hold the documents for [Column].” The civil division, however, interpreted this as evidence on the “irrelevant” issue of which entity had “physical possession of the documents in accord with a custody agreement at the inception of the loan.” It is undisputed that Wells Fargo possessed originals of the loan documents at trial. That Bank One Mortgage Warehouse may have played a role as keeper of the loan documents early in the securitization process casts no doubt on Wells Fargo’s right to enforce the guaranty and raises no specter of some unknown third party with substantive rights to the note and mortgage.