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HSBC Bank USA, N.A. v. Rejeki

United States District Court, N.D. Illinois, Eastern Division

October 17, 2014

HSBC BANK USA, N.A., as indenture trustee for PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2005-2, Plaintiff,
v.
REHULINA REJEKI, FERNANDES SEMBIRING, and MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., as a nominee for PEOPLE'S CHOICE HOME LOAN, INC., Defendants.

MEMORANDUM OPINION AND ORDER

MANISH S. SHAH, District Judge.

Defendants Rehulina Rejeki and Fernandes Sembiring defaulted on a loan that was secured by a mortgage on their property. The original lender and mortgagee was People's Choice Home Loan, Inc., but People's Choice is not a party to this suit. People's Choice created a trust, and the plaintiff here, HSBC Bank USA, N.A., is the indenture trustee of that trust. HSBC, which brings this foreclosure suit in its role as trustee, claims that defendants'[1] loan note and mortgage were transferred to the trust. HSBC moved for summary judgment. In opposition, defendants contend that the note and mortgage were never transferred to the trust, so HSBC has no standing to foreclose. As discussed below, defendants' arguments lack merit, so HSBC's motion for summary judgment is granted.

I. Legal Standards

Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining whether a genuine issue of material fact exists, the court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. See CTL ex rel. Trebatoski v. Ashland Sch. Dist., 743 F.3d 524, 528 (7th Cir. 2014).

II. Facts[2]

In January 2005, defendants executed a loan note, payable to People's Choice Home Loan, Inc. PSOF ¶¶ 1-2. The loan was secured by a mortgage on defendants' property. PSOF ¶ 6-8; [20] ¶ 13. The original mortgagee was Mortgage Electronic Registration Systems, Inc. (acting as a nominee for People's Choice and its successors and assigns). [29-3] at 1-2.

In April 2005, People's Choice created a trust to hold and securitize several mortgage loans. PSOF ¶ 15; PSOF Ex. 5. HSBC argues that the trust "came into possession" of defendants' note through the April 2005 contract that created the trust. PSOF ¶ 15. Defendants contend that the transfer of their note to the trust did not comport with the mechanics required by the trust agreement, and was therefore void. PSOF ¶¶ 14-15; [37-3] at 2-4.

Beginning in June 2010, defendants stopped making the required monthly payments. PSOF ¶¶ 12, 16.

On January 25, 2012, MERS (on behalf of People's Choice) assigned the mortgage to HSBC (in its role as trustee). PSOF ¶ 13.[3]

On May 20, 2012, HSBC brought this suit to foreclose on the property. HSBC attached a copy of the note to its complaint. PSOF ¶ 14; [1-4]. Also attached were copies of the mortgage, and mortgage assignment. [1-3], [1-5].

III. Analysis

There is no dispute that defendants defaulted on their loan, which was secured by a mortgage. The only question is whether HSBC (as trustee) is the proper party to bring a foreclosure action. Contending that HSBC is not the proper plaintiff, defendants make three arguments: (1) the note is not endorsed, so HSBC cannot enforce it; (2) the mortgage assignment was invalid because it took place after People's Choice was dissolved; and (3) the transfer of the note to the trust violated the trust agreement, and was therefore void.

A. HSBC Can Enforce the Unendorsed Note.

The note is made payable to People's Choice, and has not been endorsed (either in blank, or to HSBC as trustee). But HSBC is nonetheless entitled to enforce the note if the note was given to HSBC for the purpose of transferring enforcement rights. 810 ILL. COMP. STAT. 5/3-203(a)-(b), 5/3-301. Defendants do not contend that People's Choice never intended to transfer enforcement rights to the trust. And HSBC attached to its complaint (1) a copy of the note[4]; (2) a copy of the mortgage assignment from MERS (on behalf of People's Choice); and (3) a copy of the trust agreement that transferred the note. [1-3], [1-4], [1-5]. HSBC has thereby shown that it is entitled to enforce the note. See Deutsche Bank Nat'l Trust Co. v. Adolfo, 2013 U.S. Dist. LEXIS 122805, *6-7 (N.D. Ill. 2013); Deutsche Bank Nat'l Trust Co. v. Christian, 2013 U.S. Dist. LEXIS 171166, *6-8 (N.D. Ill. 2013); HSBC Bank USA, N.A. v. ...


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