United States District Court, M.D. Tennessee, Nashville Division
MEMORANDUM & ORDER
ALETA A. TRAUGER, District Judge.
In advance of the discovery deadline, the defendant has filed a Motion for Summary Judgment (Docket No. 15), to which the plaintiffs have filed a Response in opposition with an accompanying request for discovery with a supporting affidavit under Rule 56(d) (Docket No. 18), the defendant has filed a Reply (Docket No. 19), and the plaintiffs filed a Sur-Reply (Docket No. 22). For the reasons stated herein, the motion will be denied without prejudice.
I. Procedural History and Asserted Facts
This case concerns efforts by the defendant, JP Morgan Chase Bank, N.A. ("Chase"), to collect on two mortgage loans on which the plaintiffs defaulted and to foreclose on the plaintiffs' properties. In support of its motion, Chase has filed the Affidavit of John R. Wingo (Docket No. 15, Ex. 1), Chase's counsel, who attaches what purports to be "the loan file relating to each of Plaintiffs' loans[.]" Wingo avers that Chase provided the loan file to him and that he made it available to the plaintiffs for inspection. The record does not contain an affidavit from a knowledgeable Chase official.
Briefly, on December 8, 1998, the plaintiffs executed two Adjustable Rate Notes in favor of Chase (the "Notes") and, as security for the Notes, executed Deeds of Trust in favor of Chase (the "Deeds") relating to two properties that the plaintiffs owned in Hendersonville, Tennessee (the "Properties"). The Notes state that the plaintiffs "understand that the Lender may transfer the Note;" the Deeds state that "[t]he Note or partial interest in the Note (together with this security instrument) may be sold one or more times without prior notice to the borrower."
On December 17, 1998, three Assistant Treasurers for Chase executed an Assignment of Mortgage or Deed of Trust relative to each Property (the "Assignments") ( See Docket No. 1, Ex. 1, State Court Complaint). For nominal consideration, the Assignments convey to Citibank "all of [Chase's] rights, title and interest, as holder hereof, in and to the following described lien in the form of a mortgage or deed of trust, the property therein described and the indebtedness thereby secured" - referring to both Properties - "[t]ogether with the note or obligation described in said lien, endorsed to the Assignee this date, and all moneys due and to become due thereon, with interest." The Assignments also state that "[t]he Assignor hereby constitutes and appoints said Assignee its attorney irrevocable to collect and receive said debt, and to foreclose, enforce, and satisfy said lien the same as it might or could have done were these presents not executed[.]" For reasons that are not clear, the Assignments were not recorded until May 22, 2000.
On an unspecified date (perhaps in connection with the Assignments), an Assistant Treasurer for Chase affixed a signed stamp to each Note, which states as follows:"
On another unspecified date, a Vice President of Chase purported to sign an "Allonge" to each Note (the "Allonges"). Each Allonge purports to be an "[a]llonge to one certain Mortgage Note dated 12/3/1998 in favor of Chase Manhattan Mortgage Corporation, executed by [one or both plaintiffs]." The Allonges state: "Pay to order of: JPMorgan Chase Bank, N.A. [space] Without recourse." The Allonges identify the "Seller" of each Allonge as "JP Morgan Chase Bank, N.A. Attorney in Fact for Citibank National Association as Trustee." The limited record contains no evidence that Chase was authorized to act as Citibank's attorney in fact in connection with this purported transaction. The record contains only a representation by Chase's outside counsel that Chase provided this loan file to him. There is no authenticating testimony from a knowledgeable Chase official about the authenticity of the Allonges, the date on which they were signed, or the circumstances under which they were allegedly executed. Essentially, the court is left with unauthenticated, undated Allonges that, at most, indicate that Chase officials purported to transfer Citibank's rights back to Chase. The record also contains no records from Citibank about Citibank's interests in these notes, other than the Assignments.
II. The Parties' Positions Concerning Chase's Motion
It appears that two relevant transactions purportedly took place: (1) Assignments from Chase to Citibank with associated endorsements of the Notes, and (2) endorsements of the Notes from Citibank back to Chase, which is now in physical possession of the Notes.
In its opening brief, Chase's initial position was that the initial Assignments themselves are irrelevant because Chase is now a valid "holder" of the Notes under Tennessee law, which entitles Chase to enforce the Notes. After the plaintiffs' brief pointed out some legal and factual holes in Chase's initial argument (as explained herein), Chase pivoted in its Reply, contending (for the first time) that (1) the plaintiffs lack standing to challenge the Allonges, and (2) Chase is entitled to enforce the Notes as a "transferee, " regardless of whether it is a "holder" of the Notes. In a Sur-Reply, the plaintiffs argue that they do have standing to challenge the Allonges because they face a risk of double-liability ( i.e., prejudice) and that Chase has not made a requisite showing that it is a "transferee." The plaintiffs argue, with the requisite supporting affidavit under Rule 54(d), that further discovery is required. During the pendency of Chase's motion, the parties agreed to continue with discovery, despite the pending Rule 56 motion. (Docket No. 23.) Subject to a negotiated and approved extension, fact discovery is set to close on November 3, 2014. ( See Docket No. 24.)
Untangling the interests at issue implicates Tennessee's Uniform Commercial Code provisions relating to negotiable instruments. Chase makes essentially three arguments: (1) Chase is a "holder" of the Notes under Tenn. Code Ann. § 47-1-201(b)(21)(A), thereby entitling Chase to enforce them; (2) even if Chase is not a "holder" of the Notes under that provision, it is a valid "transferee" of the Notes under Tenn. Code Ann. § ...