Proving You’re The Holder Of The Note

An assignee of a loan (purchaser of a promissory note and mortgage) must establish in any foreclosure action its status as the current holder (owner).  In a foreclosure action, a defendant borrower or guarantor sometimes will defend the case by asserting that the plaintiff assignee lacks standing to enforce the loan.  Collins v. HSBC Bank, 2012 Ind. App. LEXIS 452 (Ind. Ct. App. 2012) provides a road map for plaintiff assignees to defeat such arguments and to obtain summary judgment.

Set up.  In 2004, the borrower in Collins executed and delivered to his original lender a promissory note evidencing a loan for the purchase of real estate.  To secure repayment of the note, borrower executed a mortgage.  The original lender later sold/assigned the loan.  In 2007, borrower stopped making payments, at which time the plaintiff in Collins, as holder (owner) of the note at the time, filed a foreclosure complaint and obtained summary judgment in its favor.  Defendant borrower appealed the trial court’s grant of summary judgment.  The issue in Collins was whether the trial court erred in not concluding that there was a factual question regarding plaintiff’s status as the holder/owner of the promissory note.

Evidence.  The promissory note attached to the plaintiff’s complaint was not endorsed from the original lender to the plaintiff.  In connection with its summary judgment motion, the plaintiff tendered an affidavit, with a copy of the note, but failed to attach an endorsement, allonge or assignment.  However, the plaintiff later submitted an affidavit that attached a copy of the original note, which included an endorsement by the original lender to the plaintiff lender.  In addition, at the summary judgment hearing the plaintiff produced the original promissory note.  (Production of the original loan docs is not required to succeed on summary judgment, but in my view is the ultimate trump card to any standing defense.) 

Law.  Borrower maintained that, among other things, plaintiff’s complaint and first affidavit required the trial court to deny summary judgment and to weigh the evidence at trial as to whether the plaintiff was the owner of the note.  But the record on appeal disclosed that the plaintiff presented the original note, with borrower’s inked signature, together with the endorsement from the original lender to the plaintiff.  According to the Indiana Court of Appeals, that was enough to establish plaintiff’s right to enforce.  See, Ind. Code §§ 26-1-3.1-204(c) and 301(1), and 1- 201(20)(A).  The Court in Collins affirmed the trial court’s summary judgment accordingly: 

The evidence shows not only that [plaintiff] is in possession of the original note but also that the original note was endorsed to [plaintiff].  There exists no better evidence to establish that [plaintiff] is the present holder of the note entitled to enforce the note under Indiana law.

The Collins opinion is good law for assignees attempting to enforce their loans.  The case also highlights the importance for prospective assignees to obtain, in the loan purchase transaction, the original loan documents and assignments.  While that’s not always possible, presentation of the original note and mortgage can be definitive proof that you’re the holder/owner of the loan.