The opinion of the court was delivered by: Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Plaintiff Bank of New York Mellon Trust Company, National Association, as grantor trustee of the Protium Master Grantor Trust (the "Bank of NY"), brought suit against Defendants Jack and Patricia Rangel (the "Defendants") to foreclose a Mortgage on the Defendants' residential property. The Defendants filed their Answer to the Bank's Complaint, in which they disputed the Bank's standing to foreclose. (Doc. 18). The Bank of NY then filed a Motion for Summary Judgment presently before the Court. (Doc. 21). For the following reasons, the Court grants the Bank of NY's Motion for Summary Judgment.
I. MATERIAL UNDISPUTED FACTS
On March 13, 2008, the Defendants received a loan from Equifirst Corporation of approximately $345,990 in exchange for a Note in favor of Equifirst.*fn1 (NY ¶¶1-15; Ex. 1). The Defendants agreed to make monthly payments to reimburse the principal plus interest at a yearly rate of 9.875% as an adjustable rate floor. (Ex. 1). The Note states that the Defendants "understand that the Lender may transfer this Note" and that the "Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the 'Note Holder.'" (Doc. 22-1, Ex. 1, p. 1). On March 24, 2008, Equifirst secured its interest in the Note with a Mortgage on the Defendants' property in Chicago, Illinois, which Equifirst's nominee Mortgage Election Registration System, Inc. ("MERS") filed with the Cook County Recorder. (NY ¶¶6-8; Ex. 2). The Mortgage secured to Equifirst "the repayment of the debt evidenced by the Note . . . and the performance of Borrower's covenants and agreements under this Security Instrument and the Note." (Ex. 2, p. 3).
On January 22, 2009, MERS, as nominee for Equifirst, executed a written assignment that "grants, assigns and transfers to Sutton Funding LLC all the rights, title and interest of [MERS] in and to that certain real estate mortgage dated 3/13/2008 executed by [the Defendants] to Equifirst Corporation." (NY ¶ 11; Doc. 22-3, Ex. 3). This first assignment was "[t]ogether with the note or notes therein described or referred to, the money due and to become due thereon with interest, and all rights accrued or to accrue under said Real Estate Mortgage." (Doc. 22-3, Ex. 3). In turn, on November 17, 2011, Sutton Funding LLC executed a written assignment that "assigns to [the Bank of NY] the mortgage executed by [the Defendants] and also transfers and endorses, to said assignee all obligations secured by said mortgage." (NY ¶12; Doc. 22-4, Ex. 4).
On August 1, 2010, the Defendants failed to send their monthly payment and have failed to make any payments since that time. (NY ¶13). The Bank of NY brought the present foreclosure action on September 15, 2011, seeking a judgment of foreclosure of the Defendants' property pursuant to the Illinois Mortgage Foreclosure Law. See 735 ILCS 5/15-1504. The Bank of NY seeks an award for the principal balance plus accrued interest, foreclosure costs, late charges, advances, expenses and attorneys' fees, as permitted by the terms of the Mortgage. (Doc. 1). On February 14, 2011, the Defendants filed their Answer to the Bank's Complaint, in which they disputed the Bank's standing to foreclose by arguing that Complaint lacked an assignment of the Mortgage to the Bank of NY. (Def. ¶3; Doc. 18). As of November 14, 2011, there remains an outstanding principal balance of approximately $375,000, with interest accruing. (NY ¶14).
Federal courts exercising diversity jurisdiction apply state law to contract disputes and employ the choice-of-law principles used by the forum state. See United States Textiles, Inc. v. Anheuser-Busch Cos., 911 F.2d 1261, 1269 (7th Cir. 1990). The parties do not dispute that the Mortgage contains a governing Illinois law provision, that the property in dispute is located in Illinois and that Illinois contract law applies. See Belleville Toyota v. Toyota Motor Sales, U.S.A., 199 Ill. 2d 325 (2002) ("Generally, choice of law provisions will be honored."). Consequently this Court will apply Illinois law to this contract dispute. See Auto-Owners Ins. Co. v. Webslov Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009).
Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In determining whether a genuine issue of fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The Court, however, will "limit its analysis of the facts on summary judgment to evidence that is properly identified and supported in the parties' [Local Rule 56.1] statement." Bordelon v. Chicago Sch. Reform Bd. of Trustees, 233 F.3d 524, 529 (7th Cir. 2000). Where a proposed statement of fact is supported by the record and not adequately rebutted, the court will accept that statement as true for purposes of summary judgment. An adequate rebuttal requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir. 2001); Drake v. Minn. Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998) ("'Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter[;] rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.'").
Factual disputes "are genuine only if the evidence is such that a reasonable jury could return a verdict for the non-movant." CAE, Inc. v. Clean Air Engineering, Inc., 267 F.3d 660, 676 (7th Cir. 2001) (quoting Anderson, 477 U.S. at 248) (citations omitted). The existence of a materially disputed issue of fact will be sufficient to avoid summary judgment only if the disputed fact is determinative of the outcome under the applicable law. See Montgomery v. American Airlines, Inc., 626 F.3d 382, 389 (7th Cir. 2010). Contractual disputes are well suited to resolution by way of summary judgment because such disputes essentially involve only contract interpretation and thus liability often presents solely legal questions. See Zemco Mfg., Inc. v. Navistar Intern. Transp. Corp., 270 F.3d 1117, 1123 (7th Cir. 2001); Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1388 (7th Cir. 1993). The Court may resolve a dispute on summary judgment where the parties do not dispute the facts that actually occurred, but merely dispute the legal significance of those facts. That the parties differ on the legal ramifications to be drawn from the undisputed facts in the record is not a bar to summary judgment.
The Defendants do not dispute that they were required to make monthly payments under the contractual terms of the Note, that they have failed to make any payments since July 2010, and that there remains an outstanding balance on their loan that continues to accrue interest. Nor do they dispute that the Bank of NY has possession of the Note or that the Note is authentic. The Defendants only argue that a genuine issue of material fact exists as to whether the Bank of NY is in fact the lender or the holder or has capacity to foreclose the Mortgage. To support their argument, the Defendants point to the Mortgage and Note naming Equifirst as the lender and Note holder and naming MERS as the mortgagee--and not naming the Bank of NY. The Defendants also argue that the Bank of NY failed to file with its Complaint either a supporting affidavit or deposition testimony to establish that the Bank of NY owns the Note. This is a factual issue, they argue, that indicates the Bank of NY's lack of standing to bring the foreclosure action, which would preclude summary judgment.
The Bank of NY argues that its possession of the Note, albeit unendorsed, is sufficient to confer standing to foreclose on the Note, citing century-old Illinois law. See Martin v. Martin, 174 Ill. 371, 374 (1898) ("The right to the possession and full beneficial interest in an unendorsed negotiable paper may pass by manual delivery of the paper, and in the absence of testimony tending to disprove that the notes were delivered the presumption will obtain that one in the possession of such paper came rightfully into possession.").
In general, under Illinois law, a negotiable instrument like a note may be enforced by either (1) the holder of the instrument, or (2) a non-holder in possession of the instrument who has the rights of a holder. See 810 ILCS 5/3-301. To qualify as a "holder," one must receive the note through "negotiation" from the original issuer. See 810 ILCS 5/3-201(a). Where, as here, a note is payable to the order of a specific individual or entity, negotiation requires both the transfer of possession and the endorsement of the note by the named entity. See 810 ILCS 5/3-201(b). The Note that the Bank of NY has in its possession is not endorsed to a named entity nor is it endorsed in blank. When the Bank of NY filed its initial Complaint, it attached the second assignment of the Mortgage from Sutton Funding LLC to the Bank of NY but did not attached the first assignment of the Mortgage from Equifirst to Sutton Funding LLC. Therefore, at the time of filing its Complaint, the Bank of NY had not presented evidence that it was the legal holder of the Note. However, "a non-holder in possession of the instrument who has the rights of a holder" may also enforce the Note. 810 ILCS 5/3-301(ii); see Cogswell v. CitiFinancial Mortg. Co., Inc., 624 F.3d 395, 404 (7th Cir. 2010) (citing Locks v. N. Towne Nat'l Bank of Rockford, 115 Ill.App.3d 729 (1983)). The Bank of NY can qualify as a non-holder in possession if "under applicable law [it] is a successor to the holder or otherwise [acquired] the holder's rights." 810 ILCS 5/3-301 Official Comment. Furthermore, Illinois law defines "mortgagee" more broadly than just the holder of a note of indebtedness to include "any person designated or authorized to act on behalf of such holder." 735 ILCS 5/15-1208; accord Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill. App. 3d 1, 7(1st Dist. 2010). In Barnes, the Illinois Appellate Court held that the plaintiff, MERS, had standing to bring its foreclosure action against the defendants, even though MERS did not own the note at issue, because the mortgage identified MERS as the mortgagee and provided that it was acting as the nominee for the lender and had the authority to foreclose and sell the property. 406 Ill. App. 3d at 7-8. In effect, Illinois law permits a plaintiff to ...