With bank mergers and takeovers, we sometimes see cases where the name of the plaintiff lender will not be the same as that reflected in the note and mortgage. This is because, normally, there are not loan assignment documents like those we see when loans are bought and sold. When lenders are bought or sold, generally speaking, the corporate existence of each bank, and ownership of assets like loans, automatically continue in the receiving entity. Without the benefit of traditional assignment documents showing the chain of ownership of a loan, how can the successor bank prove that it holds the predecessor’s note and mortgage? CFS v. Bank of America, 962 N.E.2d 151 (Ind. Ct. App. 2012), settles this question in Indiana.
Procedural history. CFS involved a borrower’s appeal of the trial court’s summary judgment in favor of a lender - Bank of America, successor-in-interest to LaSalle Bank Midwest National Association. In 2007, the borrower executed a promissory note and mortgage in exchange for a loan from LaSalle. In 2009, Bank of America filed a complaint to foreclose the mortgage, and then moved for summary judgment. In an affidavit supporting the summary judgment motion, a Bank of America representative testified that Bank of America was the successor-in-interest to LaSalle. But, Bank of America did not produce any documentation to support or verify that fact. The borrower objected to the motion on the basis that Bank of America had failed to demonstrate its ownership of the LaSalle note and mortgage, but the borrower didn’t file any evidence to contradict the bank’s affidavit.
Shift of burden of proof. The borrower in CFS argued that Bank of America did not sufficiently prove it was entitled to enforce the loan originally held by LaSalle. (I.C. § 26-1-3.1-301 defines a “person entitled to enforce.”) The Court disagreed and reasoned that the borrower failed to identify an issue of fact or otherwise designate evidence to show that Bank of America was not the successor of LaSalle. The law did not require the trial court to consider a certificate of merger or some other document supporting the LaSalle/Bank of America transaction. “Whether the merger took place was not a disputed issue of material fact.”
Legal issue. As to the law regarding whether a successor bank surviving after merger can enforce a note and mortgage of the predecessor, the Court relied upon 12 U.S.C. § 215(a)(e), which states in part:
The corporate existence of each of the merging banks or banking associations participating in such merger shall be merged into and continued in the receiving association and such receiving association shall be deemed to be the same corporation as each bank or banking association participating in the merger. All rights, franchises and interests of the individual merging banks or banking associations in and to every type of property (real, personal, and mixed) and choses in action shall be transferred to and vested in the receiving association by virtue of such merger without any deed or other transfer. The receiving association, upon the merger and without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property.
Bank of America, as the successor after merger, acquired the rights to LaSalle’s property (i.e. the subject loan) by operation of law.
No assignment necessary. CFS was a different scenario from one in which a loan had been sold, and thus assigned, from one existing lender to another existing lender. As I noted in November of 2007 and again this past November, an institution filing a foreclosure suit must have proof that it owned the note and held the mortgage on the date of the filing of the foreclosure complaint. When loans are transferred, the plaintiff must produce chain of assignment documents linking the original lender/mortgagee to the holder of the debt at the time. Without such documentation, the plaintiff lacks standing to file suit. In CFS, the original lender merged into another lender. Proof of standing did not involve loan assignment documents but rather testimony that there had been a merger. CFS therefore supports the idea that a predecessor need not assign its loans to the successor. Such a transfer occurs by virtue of the merger/acquisition itself pursuant to 12 U.S.C. § 215(a)(e).
Lenders faced with the problem of suing upon loan documents that identify a predecessor-in-interest need not worry in Indiana. As long as there is testimony to show that the named plaintiff is indeed the successor-in-interest by merger, then the plaintiff should have the right to foreclose. Absent evidence submitted by the defendant calling into question whether a merger occurred, certificates or other voluminous documents verifying the merger are not necessary.