Session Date: November 12, 2014
Appeal from the Circuit Court for Shelby County No. CT00175412, CT0439313 Donna M. Fields, Judge
Robert L.J. Spence, Jr. and Bryan M. Meredith, Memphis, Tennessee, for the appellants, Yvette D. Woody and Simon D. Woody, Jr.
Lawrence W. Kelly, Atlanta, Georgia, for the appellee, Aurora Loan Services, LLC.
J. Steven Stafford, P.J., W.S., delivered the opinion of the Court, in which Brandon O. Gibson, J., and Roger A. Page, Sp. J. joined.
J. STEVEN STAFFORD, JUDGE
This case concerns an unlawful detainer action filed by Plaintiff/Appellee Aurora Loan Services, LLC ("Aurora"), against Defendants/Appellants Yvette D. Woody and Simon D. Woody, Jr. (together, "Appellants") regarding real property located in Collierville, Tennessee. On November 22, 2006, Appellants executed a Promissory Note ("Promissory Note") in favor of First Magnus Financial Corp. ("First Magnus") in the amount of $1, 225, 000.00 for the purchase of the real property at issue. The Promissory Note specifically states that: "Lender may transfer this [Promissory] Note. Lender or anyone who takes this [Promissory] Note by transfer and who is entitled to receive payments under this [Promissory] Note is called the 'Note Holder'." Further, the Promissory Note provides that the borrowers waive their right to presentment under the Promissory Note.
On the same day, the Appellants also signed a Deed of Trust conveying a security interest in the property to First Magnus. The Deed of Trust states that Mortgage Electronic Registration Systems ("MERS") would serve as a nominee and beneficiary and that Mary Allisandratos would serve as Trustee. However, the Deed of Trust also states that the lender may appoint a Substitute Trustee, which is to be recorded by instrument in the county in which the Deed of Trust is recorded. Further, the Deed of Trust states that the Appellants will immediately surrender possession of the property in the event of a foreclosure sale.
At some point, Aurora asserts that the Promissory Note was indorsed from First Magnus to Residential Funding Company, LLC, then to Deutsche Bank Trust Company Americas ("Deutsche Bank"). Around April 1, 2008, Aurora alleges that it was transferred the original Promissory Note and Deed of Trust by Wells Fargo, the custodian of the collateral file, on behalf of Deutsche Bank, for the purpose of servicing the loan. According to Aurora, it remained in possession of the original Promissory Note and Deed of Trust until Aurora "released the documents on July 2, 2012, when servicing of the loan was transferred to Nationstar Mortgage."
On November 18, 2011, the beneficiary under the Deed of Trust, MERS, assigned its interest to Aurora. The instrument of assignment was recorded at Instrument No. 1120766 in the Shelby County Register's Office on December 7, 2011. Prior to the recording of the assignment, however, on May 31, 2010, Aurora executed an appointment of Substitute Trustee naming Nationwide Trustee Services ("Nationwide") as Substitute Trustee of the Appellants' Deed of Trust. The appointment was recorded with the Shelby County Register of Deeds on July 7, 2010. On or around November 29, 2011, Aurora reappointed Nationwide as Substitute Trustee of the Appellants' Deed of Trust. The appointment was again recorded with the Shelby County Register of Deeds on December 7, 2011. The Appointment contained the statement that:
[T]he undersigned beneficiary has appointed the substitute trustee prior to the first notice of the publication as required by T.C.A. Section 35-5-101 and ratifies and confirms all actions taken by the substitute trustee subsequent to said date of substitution and prior to the recording of this substitution.
The reappointment stated that it became effective on August 11, 2011.
The Appellants defaulted on the Promissory Note. Accordingly, Nationwide, as Substitute Trustee, advertised the property for auction on November 10, 17, and 24, 2011 in a daily newspaper. Nationwide sold the property at public auction on January 5, 2012. Aurora purchased the property. The sale is evidenced by a Substitute Trustee's Deed recorded in the Shelby County Register's office.
After the sale, on January 20, 2012, Aurora filed an unlawful detainer action against the Appellants for possession of the property in the Shelby County General Sessions Court. The General Sessions Court entered judgment in favor of Aurora on April 4, 2012. The Appellants filed a timely notice of appeal to the Shelby County Circuit Court. While the case was pending, the Appellants filed a separate case in a different division of Shelby County Circuit Court for a Declaratory Judgment and Permanent Injunction. The two cases, the declaratory judgment action and the detainer action, were later consolidated.
Aurora filed a motion for summary judgment in the detainer action on May 8, 2012, along with a Statement of Undisputed Material Facts. The Statement of Undisputed Facts disclosed the assignment of interest in the Deed of Trust, but did not discuss the alleged transfer of the Promissory Note and Deed of Trust file to Aurora from Wells Fargo.
Appellants filed a response in opposition to the motion for summary judgment. Appellants argued that the assignment of the Deed of Trust was a nullity if there was no proof that the Promissory Note was also assigned to Aurora. According to Appellants, Aurora "must prove ownership by presenting the original Promissory Note and Deed of Trust dated November 22, 2006 as evidence that both recorded documents were acquired simultaneously on November 18, 2011 in its assignment, if valid, from MERS, which [Aurora] has failed to do." Further, Appellants asserted that "[t]here is no evidence that [Aurora] . . . is now or ever was in physical possession of Defendants' recorded Promissory Note and Deed of Trust on November 18, 2011, the date of [Aurora's] assignment, if valid, from MERS."
Aurora filed a reply to Appellants' response on July 5, 2012, arguing that the Appellants' argument was barred by the doctrine of res judicata. According to Aurora, Appellants' arguments had previously been raised and adjudicated in a separate lawsuit in Shelby County Circuit Court. Thus, Aurora argued that Appellants were precluded from re-litigating this issue. Further, Aurora argued that Appellants failed to comply with the requirements of Rule 56.06 of the Tennessee Rules of Civil Procedure, in that they failed to set forth specific facts showing a genuine issue for trial.
On July 12, 2012, Appellants filed a supplemental response to Aurora's motion for summary judgment. Appellants argued that res judicata did not apply because the other Shelby County Circuit Court case was still pending. Further, Appellants argued that the issue of ownership of the Promissory Note was at issue in the case, and that Appellants had a right to question Aurora's purported interest. The Appellants also submitted the affidavit of Jeffrey Olson, which asserted that the Promissory Note and Deed of Trust had been sold to another party in 2007, and never assigned to Aurora. According to his affidavit, Mr. Olson is a certified Forensic and Securitization Residential and Commercial Loan Auditor in the State of Illinois. Mr. Olson's affidavit was accompanied by several public records purporting to support Mr. Olson's assertions. Because Appellants asserted that Aurora had no ownership interest in the Promissory Note, Appellants argued that Aurora lacked standing to prosecute the unlawful detainer action. Finally, the Appellants filed a response to Aurora's Statement of Undisputed Facts, denying the material allegations contained therein, and pointing to Mr. Olson's affidavit.
A hearing on Aurora's motion for summary judgment was scheduled for June 2012. On July 13, 2012, the trial court entered an order continuing the hearing on the motion for summary judgment, but requiring Appellants to pay $300.00 in legal fees to Aurora in connection with the Appellants' failure to attend the scheduled hearing. A second hearing on the summary judgment motion was held on July 13, 2012; however, the hearing was not concluded. Instead, the trial court ordered the hearing continued to allow the parties to file supplemental responses. The trial court further ordered that the Appellants would be required to post a bond in the amount of $65, 715.00 pursuant to Tennessee Code Annotated Section 29-18-130(b)(2). On August 10, 2012, the Appellants filed a notice that they had deposited the required cash bond with the Circuit Court Clerk.
On May 16, 2013, Appellants filed their own motion for summary judgment, seeking a declaration that the foreclosure was a nullity because Aurora did not have the right to foreclose on the property. In support of its motion, Appellants included a Statement of Undisputed Facts, all of which were supported by the affidavit of Mr. Olson. On the same day, Appellants propounded written discovery and requests for production of documents to Aurora concerning Aurora's possession and ownership interest in the Promissory Note.
Aurora responded to Appellants' discovery requests on August 7, 2013. Specifically at issue was Interrogatory No. 4: "Identify the date(s) that [Aurora] purchased the debt, the Deed of Trust, and Promissory Note at issue in this proceeding." Aurora responded that: "Aurora became the servicer of the loan on or about April 1, 2008. The Promissory Note was indorsed from First Magnus Financial Corporation to Residential Funding Company, LLC and then from Residential Funding Company, LLC to Deutsche Bank Trust Company Americas as Trustee." When asked to "[i]dentify by date transferor, and transferee any and all transfers of the [P]romissory Note at issue in this proceeding, " Aurora cited its above response. In addition, Appellants requested that Aurora produce "the original Promissory Note and Deed of Trust at issue in this proceeding." Aurora responded that: "The original [P]romissory Note and Deed of Trust are in the collateral file which is now in the possession of the current servicer, Nationstar Mortgage." Although Aurora asserted that copies of the Promissory Note and Deed of Trust were attached to their response, it does not appear that the attached Promissory Note is included in the record., 
On November 18, 2013, Aurora responded in opposition to Appellants' motion for summary judgment, again arguing that Appellants' claim was barred by res judicata, that Appellants' motion did not comply with Rule 56.03 of the Tennessee Rules of Civil Procedure because Mr. Olson was not competent to testify as to those matters, and that Appellants had no standing to raise arguments regarding the securitization of loans. Aurora also filed a response to Appellants' Statement of Undisputed Facts, arguing that Mr. Olson's affidavit should be struck, and any facts relying on the affidavit not considered by the court. To that end, Aurora also filed a motion to strike the affidavit of Mr. Olson.
On November 25, 2013, Aurora filed a motion to release the bond held by the Circuit Court clerk "[p]resupposing a favorable ruling" on Aurora's motion for summary judgment. On December 2, 2013, Appellants filed a Second Supplemental Memorandum in opposition to Aurora's motion for summary judgment. In their Memorandum, Appellants argued that the Substitute Trustee that conducted the foreclosure sale was not properly appointed because: 1) Aurora had no ownership interest in the Promissory Note and, therefore, no right to appoint a Substitute Trustee; and 2) the purported appointment of Nationwide as the Substitute Trustee did not occur prior to Nationwide initiating foreclosure proceedings. On December 3, 2013, Appellants also responded in opposition to Aurora's motion to strike the affidavit of Mr. Olson.
On January 10, 2014, the Appellants' Declaratory Judgment Action was transferred to Division VII and consolidated by agreement with the detainer action. Also on January 10, 2014, Aurora filed the affidavit of Laura McCann, Vice President of Aurora, and a custodian of its records. Ms. McCann's affidavit stated, in pertinent part:
3. Aurora maintained, and continues to maintain, the [Appellants'] loan records at the office where I am employed.
7. On or about April 1, 2008, Aurora became servicer of the [Appellants'] loan.
8. On May 31, 2010, Angela Martinez, Asst. Vice President, Aurora Loan Services, LLC, executed an Appointment of Substitute Trustee ("Appointment") naming Nationwide . . . as the Substitute Trustee of the [Appellants'] Deed of Trust. The Appointment was recorded in the Register of Deeds Office of Shelby County, Tennessee . . . on July 2, 2010. Aurora was the holder of the [Appellants' Promissory] Note.
9. Aurora remained in possession of the original [Promissory] Note and Deed of Trust of the [Appellants'] until they released the documents on July 2, 2012, when servicing of the loan was transferred to Nationstar Mortgage.
Hearing on the summary judgment motion was again continued. On February 20, 2014, Aurora filed a supplemental response to the Appellant's written discovery requests. In its response, Aurora included a "collateral file history" of the Appellants' loan. The first entry in the collateral file history is on April 2008, and indicates the location history for that date as Wells Fargo, the custodian of the file. In addition, Aurora supplemented its prior interrogatory responses. Specifically at issue, with regard to the question: "Identify ...