Court Opinion

ID: 4160802
Source: CourtListenerOpinion
Date Created: 2017-04-17 20:06:05.575952+00
Date Added: 2024-06-11T14:38:13.508046
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

J.M. SHREWSBURY, a/k/a             §
J. MICHAEL SHREWSBURY, and         §
KATHY SHREWSBURY,                  §
                                   §         No. 306, 2016
       Defendants Below-           §
       Appellants,                 §         Court Below: Superior Court
                                   §         of the State of Delaware
       v.                          §
                                   §         CA No. N15L-03-108
THE BANK OF NEW YORK               §
MELLON, f/k/a THE BANK OF NEW §
YORK, as Trustee for the           §
Certificateholders of CWMBS, Inc., §
CHL Mortgage Pass-Through Trust    §
2007-9, Mortgage Pass-Through      §
Certificates, Series 2007-9.       §
                                   §
       Plaintiff Below-            §
       Appellee.                   §

                           Submitted: February 8, 2017
                            Decided: April 17, 2017

Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, and
SEITZ, Justices, constituting the Court en Banc.

Upon appeal from the Superior Court.   REVERSED AND REMANDED

Cynthia L. Carroll, Esquire, Cynthia L. Carroll, P.A., Newark, Delaware, for
Appellants, J.M. Shrewsbury, a/k/a J. Michael Shrewsbury and Kathy Shrewsbury.

Melanie J. Thompson, Esquire, Atlantic Law Group, LLC, Wilmington, Delaware,
for Appellee, The Bank of New York Mellon, f/k/a The Bank of New York, as
Trustee for the Certificateholders of CWMBS, Inc., CHL Mortgage Pass-Through
Trust 2007-9, Mortgage Pass-Through Certificates, Series 2007-9.

VAUGHN, Justice, for the Majority:
      This is a mortgage foreclosure action brought by Appellee The Bank of New

York Mellon, f/k/a The Bank of New York (AThe Bank@) against Appellants J.M.

Shrewsbury and Kathy Shrewsbury. The Bank is not the original mortgagee. It

received the Shrewsbury mortgage by an assignment from the original mortgagee.

The Shrewsburys filed an answer to the complaint asserting that the note

representing the debt secured by the mortgage had not been assigned to The Bank.

They further asserted that since the note had not been assigned to The Bank, it did

not have the right to enforce the underlying debt and, therefore, did not have the

right to foreclose on the mortgage. The Superior Court rejected the Shrewsburys=

argument and granted summary judgment to The Bank. The narrow question

presented on appeal is whether a party holding a mortgage must have the right to

enforce the obligation secured by the mortgage in order to conduct a foreclosure

proceeding. For the reasons which follow, we hold that a mortgage assignee must

be entitled to enforce the underlying obligation which the mortgage secures in order

to foreclose on the mortgage.

                   FACTS AND PROCEDURAL HISTORY

      On May 15, 2007 J.M. Shrewsbury signed a promissory note in favor of

Countrywide Home Loans, Inc. in the amount of $653,553.26. At the same time,

J.M. Shrewsbury and Kathy Shrewsbury granted a mortgage to secure the debt upon

                                         2
property they owned at 9 Barnesdale Drive, Middletown, Delaware.                   The

mortgagee was Mortgage Electronic Registration Systems, Inc., acting solely as a

nominee for Countrywide Home Loans.

      On June 6, 2011, Mortgage Electronic Registration Systems, Inc. assigned the

mortgage to The Bank as Trustee for the Certificateholders of CWMBS, Inc., CHL

Mortgage Pass Through Trust 2007-9, Mortgage Pass-Through Certificates, Series

2007-9.

      On or about July 1, 2010, the Shrewsburys stopped making payments on the

mortgage. It is undisputed that the Shrewsburys have not made payments on the

mortgage since then, or at least that no payments have been made for a substantial

period of time.

      The Bank commenced this mortgage foreclosure on March 20, 2015. As

mentioned, the Shrewsburys filed an answer in which they asserted as a defense that

the bank must show that it held the note, as well as the mortgage, in order to foreclose

on the mortgage. After statutorily required mediation efforts proved unsuccessful,

The Bank filed a motion for summary judgment. In their response to the motion,

the Shrewsburys repeated their argument that The Bank must show that it held the

note as well as the mortgage in order to conduct the foreclosure action. Attached to

their response to the motion was an affidavit of Mr. Shrewsbury stating that in 2013

                                           3
he requested and received a copy of the note from Residential Credit Solutions, Inc.,

the company servicing the loan. The note provided to Mr. Shrewsbury was a copy

of the original note given to Countrywide Home Loans, Inc. with no notation or

indication of any assignment.

       In support of the motion, The Bank argued that the Shrewsburys had not pled

an allowable defense. Relying upon the case of Wells Fargo Bank, N.A. v. Nickel

and other Delaware precedents, The Bank argued that the limited, allowable

defenses in a mortgage foreclosure action were payment, satisfaction or a plea in

avoidance of the mortgage, and that a plea in avoidance Amust relate to the mortgage

sued upon, i.e. must relate to the validity or illegality of the mortgage documents.@1

The defense pled by the Shrewsburys, The Bank contended, did not satisfy that

criteria.

       The Superior Court rejected the Shrewsburys= argument, reasoning that The

Bank need only show that it had a valid assignment of the mortgage, and that as a

valid assignee of the mortgage, The Bank was the proper party to enforce the note.

1
   2011 WL 6000787, at *2 (Del. Super. Nov. 18, 2011) (quoting Am. Nat=l Ins. Co. v. G-
Wilmington Assocs., L.P., 2002 WL 31383924, at *2 (Del. Super. Oct. 18, 2002)); see also LaSalle
Nat=l Bank v. Ingram, 2006 WL 1679418, at *2 (Del. May 16, 2006); Christiana Falls, L.P. v.
First Fed. Sav. & Loan Ass=n of Norwalk, 1986 WL 18356, at *1 (Del. Dec. 30, 1986); Wilmington
Trust Co. v. Bethany Group Ltd. P=ship, 1993 WL 258686, at *2 (Del. Super. June 3, 1993); Gordy
v. Preform Bldg. Components, Inc., 310 A.2d 893, 895 (Del. Super. 1973).

                                               4
It appears that in the proceedings in the Superior Court The Bank did not produce

the note, claim to be the holder of the note, or claim to be entitled to enforce the

note.2

                                        DISCUSSION

         AThis Court reviews de novo the Superior Court=s grant or denial of summary

judgment >to determine whether, viewing the facts in the light most favorable to the

nonmoving party, the moving party has demonstrated that there are no material

issues of fact in dispute and that the moving party is entitled to judgment as a matter

of law.=@3

         On appeal, The Bank contends that it has been consistently held under

Delaware law that a mortgagee=s right to foreclose emanates from the mortgage, not

the note.4 Ownership of the related promissory note, which confers separate rights

2
  In its Statement of Facts in its brief on appeal, The Bank states that A[o]n an unknown date, the
Note was endorsed by Countrywide Home Loans, Inc. in blank.@ Appellee=s Answering Br. at 4.
A copy of the note containing such an endorsement is in The Bank=s appendix in this appeal. App.
to Appellee=s Answering Br. at 28-30. The Bank makes no argument on appeal concerning the
note contained in its appendix. Under Delaware Supreme Court Rule 9, we hear an appeal on the
record created in the trial court. Accordingly, we do not consider the Note contained in The
Bank=s appendix.
3
  Brown v. United Water Del., Inc., 3 A.3d 272, 275 (Del. 2010) (quoting Estate of Rae v. Murphy,
956 A.2d 1266, 1269-70 (Del. 2008)).
4
  The Bank cites the following Superior Court cases in support of its contention: M&T Bank v.
Watkins, 2016 WL 4123903, at *2 (Del. Super. July 29, 2016) (citing Deutsche Bank Nat=l Trust
Co. v. Moss, 2016 WL 355017, at *3 (Del. Super. Jan. 26, 2016) (quoting HSBC Mortg. Corp.
(USA) v. Bendfeldt, 2014 WL 600233, *2 (Del. Super. Feb. 4, 2014), aff=d 2014 WL 4978666 (Del.
Oct. 7, 2014))); Davis v. 913 N. Mkt. St. P=ship, 1996 WL 769326, at *1 (Del. Super. Dec. 12,

                                                5
and remedies to its holder, it contends, is irrelevant to a mortgage holder=s right to

foreclose on the mortgage. It relies upon well-established authorities in this State

which hold that a mortgage foreclosure action is an action based on a record, the

record being the mortgage, with limited available defenses.5

       Subject to statutory requirements not relevant here, the statute governing the

commencement of a mortgage foreclosure proceeding provides, in pertinent part:

               [U]pon breach of the condition of the mortgage . . . by
               nonpayment of the mortgage money . . . the mortgagee . .
               . or [the mortgagee=s] assigns may . . . sue out of the
               Superior Court . . . a writ of scire facias . . . commanding
               the sheriff to make known to the mortgagor . . . that the
               mortgagor . . . appear before the Court to show cause . . .
               why the mortgaged premises ought not to be seized and
               taken in execution for payment of the mortgage money.6

       The term “mortgage money” in the statute is a synonym for the note (debt)

that is secured by the mortgage.

               A complaint on a sci fa sur mortgage puts the existence of
               the mortgage debt in issue and orders the mortgagor to
               show cause why the mortgaged premises should not be
               taken in execution and sold to satisfy the debt. See 2

1996) (AThe [] note and the mortgage confer separate rights and obligations. Thus, the [] note is
a separate matter and is not part of the foreclosure action on the mortgage.@); Ryan v. Ryan, 1989
WL 135711, at *1 (Del. Super. Nov. 2, 1989).
5
  2 VICTOR B. WOOLLEY, WOOLLEY ON DELAWARE PRACTICE, ' 1358 at 918, ' 1371 at 926 (WM.
W. Gaunt and Sons, Inc. 1985).
6
  10 Del. C. ' 5061.

                                                6
              Woolley § 1358, at 918-19; id. § 1371; Skelly, 38 B.R. at
              1002 n 4; 10 Del. C. § 5061. The sci fa proceeding may
              appear simple, because the facts are usually undisputed,
              but it is mortgagor’s chance to litigate the existence of the
              debt and present any defenses. See Gordy v. Preform
              Building Components, Inc., 310 A.2d 893, 895-96 (Del.
              Super. 1973).7

       Until 1953, a Delaware statute defined the defenses that were available in a

mortgage foreclosure proceeding.8 The statute read as follows:

              The defendant in a scire facias on a mortgage, may plead
              satisfaction, or payment, of all, or any part of the mortgage
              money, or any other lawful plea in avoidance of the deed
              as the case may require.9

       The statute was omitted from the code in 1953, but thereafter case law

continued to recognize that the only defenses available in a mortgage foreclosure

action were payment of the “mortgage money”, satisfaction or a plea in avoidance

of the mortgage.10 The phrase Aplea in avoidance@ has sometimes been described

as referring to a plea relating Ato the validity or illegality or the mortgage

documents,@ as reflected in the quotation set forth above from Wells Fargo Bank,

7
   Matter of Celeste Court Apartments, Inc., 47 B.R. 470, 474 (D. Del. 1985).
8
   Gordy, 310 A.2d at 895.
9
   Id. (citing Revised Code of Delaware, 1935, par. 4859, Ch. 133, & 68).
10
    See cases cited supra note 1.

                                                7
N.A. v. Nickel set forth above, 11 but a more apposite description of Aplea in

avoidance@ appears in Gordy v. Preform Building Components, Inc., where the

phrase is described as referring to the common law plea known as confession and

avoidance.12 ASuch plea admits the allegations of the complaint but asserts matter

which destroys the effect of the allegations and defeats the plaintiff=s right.@ 13

A[T]he allegation >in avoidance= must relate to the subject matter of the complaint.@14

Examples of pleas in confession and avoidance are Aact of God, assignment of cause

of action, conditional liability, discharge, duress, exception or proviso of statute,

forfeiture, fraud, illegality of transaction, nonperformance of condition precedent,

ratification, unjust enrichment and waiver.@15 We consider the question presented

in the framework of these well-established principles.

         It has long been recognized in this State that Aa mortgage is merely security

for a debt, or for the performance of some other obligation.@16 The Delaware statute

characterizes that debt as “mortgage money.” A mortgage does not create a debt or

obligation, it merely secures one.           It has also long been recognized that an

11
     2011 WL 6000787, at *2.
12
     310 A.2d 893, 895 (Del. Super. 1973).
13
     Id.
14
     Id.
15
     Id. at 895-96.
16
     WOOLLEY, supra note 4, ' 1353 at 914.

                                               8
underlying debt or obligation is essential to a mortgage=s enforceability. In Iowa-

Wisconsin Bridge Co. v. Phoenix Finance Corporation, this Court observed that a

Adebt, either in being, or created at the time or contracted to be created, is an essential

requisite of a mortgage.@17 The Court supported this observation with a citation to

Carpenter v. Longan, a United States Supreme Court case. 18 In Carpenter, the

Supreme Court discussed the consequences of an assignment of a mortgage without

an assignment of the underlying debt.19 It observed that the Anote and mortgage are

inseparable; the former as essential, the latter as an incident. An assignment of the

note carries the mortgage with it, while an assignment of the latter alone is a

nullity.@20

         Other respected authorities have also recognized that the holder of a mortgage

must have an interest in the underlying debt or obligation to enforce the mortgage.

In Powell on Real Property, the rule is bluntly stated as follows;

                It must be remembered that the mortgagee has two
                interests: (1) the debt or obligation which is owed to him,
                and (2) the security interest in land represented by the
                mortgage. . . . In fact, the primary interest is the personalty
                debt obligation. The interest in land which is available in
                case security is necessary because of the debtor=s default
                is considered a collateral interest. Much trouble has been

17
     25 A.2d 383, 389 (Del. 1942).
18
     83 U.S. 271 (1872).
19
     Id.
20
     Id. at 274.

                                              9
              caused by mortgagees attempting to transfer only one of
              these two interests.        Where the mortgagee has
              Atransferred@ only the mortgage, the transaction is a nullity
              and his Aassignee,@ having received no interest in the
              underlying debt or obligation, has a worthless piece of
              paper.21

       The Restatement Third of Property (Mortgages) Section 5.4(c) provides that

Aa mortgage may only be enforced by or on behalf of a person who is entitled to

enforce the obligation.@22 American Jurisprudence, Second Edition provides that

Aonly the rightful owner of the note has the right to enforce the mortgage.@23

       Courts in other jurisdictions have reached the same conclusion: Merritt v.

Bartholick (AAs a mortgage is but an incident to the debt which it is intended to

secure . . . the logical conclusion is that a transfer of the mortgage without the debt

is a nullity, and no interest is assigned by it. This is a necessary legal conclusion,

and recognized as the rule by a long course of judicial decisions.@); 24 Vidal v.

21
   4 RICHARD R. POWELL, POWELL ON REAL PROPERTY ' 37.27[2] at 37-178 (Michael Allan Wolf
ed., 2000).
22
   RESTATEMENT (THIRD) OF PROPERTY (MORTGAGES) ' 5.4(c) (1997). Section 5.4(a) states AA
transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to
the transfer agree otherwise.@ This Athe mortgage follows the note@ principle is supported by
substantial authority. Section 5.4(b) states AExcept as otherwise required by the Uniform
Commercial Code, a transfer of a mortgage also transfers the obligation the mortgage secures
unless the parties to the transfer agree otherwise.@ The Reporter=s Note acknowledges that there
is Asubstantial contrary authority, holding that an assignment of the mortgage without the
obligation is a nullity.@
23
   55 AM. JUR. 2D Mortgages ' 584 (2017).
24
   36 N.Y. 44 (1867) (internal citations omitted).

                                               10
Liquidation Properties, Inc. (AWe have held that the one who owns or holds the note

is entitled to foreclose on the mortgage.@);25 Bank of New York v. Raftogianis (AAs

a general proposition, a party seeking to foreclose a mortgage must own or control

the underlying debt.@); 26 Deutsch Bank National Trust v. Brumbaugh (AAppellee

must demonstrate it is a person entitled to enforce the note.@); 27 Bankers Trust

Company of California, N.A. v. Vaneck (AThe [Conn.] statute codifies the common

law principle of long standing that >the mortgage follows the note,= pursuant to which

only the rightful owner of the note has the right to enforce the mortgage.@);28 In re

Atlantic Mortgage Corporation v. Adamo (AIn Michigan law, a mortgage which has

been severed from the corresponding promissory note does not entitle the mortgage

holder to collect the indebtedness or to take possession of the real property.@);29

Deutsche Bank National Trust Company, Trustee, v. Holden (ADeutsche Bank must

still show that it is the holder of the note that establishes the debt in order to

foreclose.@); 30 South Carolina National Bank v. Halter (AThe assignment of a

mortgage as distinct from the debt it secures is nugatory and confers no rights upon

25
     104 So.3d 1274, 1276 (Fla. Dist. Ct. App. 2013).
26
     13 A.3d 435, 438 (N.J. Super. Ct. Ch. Div. 2010).
27
     270 P.3d 151, 153 (Okla. 2012).
28
     899 A.2d 41, 42 (Conn. App. Ct. 2006).
29
     69 B.R. 321, 325 (Bankr. E.D. Mich. 1987).
30
     60 N.E.3d 1243, 1250 (Ohio 2016).

                                                 11
the transferee, absent some indication that the parties also intended to transfer the

debt.@); 31 McKeighan v. Citizens Commercial & Savings Bank of Flint (AThe

assignment of the mortgage by Schlee, the mortgagee, to Selenik, after Schlee had

indorsed the mortgage note over to the bank, was a nullity.@);32 Walston v. Twiford

(AA mortgage which purports to secure the payment of a debt has no validity if the

debt has no existence.@).33

       We find these authorities persuasive and consistent with our observation in

Iowa-Wisconsin Bridge Co. v. Phoenix Finance Corporation that a debt is an

essential requisite to a mortgage. 34 The logic of the rule that the holder of a

mortgage must have the right to enforce the underlying obligation in order to

foreclose on the mortgage is clear. That is why the Delaware mortgage foreclosure

statute requires the mortgagor “to show cause, if there is any, why the mortgaged

premises ought not to be seized and taken in execution for payment of the mortgage

money with interest . . .”35 If the holder of the mortgage is not the one entitled to

enforce the underlying debt (“mortgage money”), the mortgage holder suffers no

injury by the mortgagor=s nonperformance.

31
   359 S.E.2d 74, 77 (S.C. Ct. App. 1987) (internal citations omitted).
32
   5 N.W.2d 524, 526 (Mich. 1942).
33
   105 S.E.2d 62, 64 (N.C. 1958).
34
   25 A.2d 383 (Del. 1942).
35
   10 Del. C. § 5061(a).

                                                12
      For the foregoing reasons, we hold that a mortgage holder must be a party

entitled to enforce the obligation, mortgage money, which the mortgage secures in

order to foreclose on the mortgage.

      We also believe that a claim that a mortgage holder is not entitled to foreclose

on the mortgage because it is not the party entitled to enforce the underlying

obligation falls within the scope of a plea in avoidance. It relates to the plaintiff=s

legal ability to foreclose on the mortgage. It admits the essential allegations of the

complaint but asserts a matter which, if true, defeats the plaintiff=s right to foreclose.

      The mortgage was assigned to The Bank in 2011. In 2013, two years after

the mortgage was assigned, Mr. Shrewsbury requested and obtained from the

company servicing the mortgage a copy of the note.              The copy he received

contained no notation or indication that the note had been assigned.                 The

Shrewsburys asserted their defense in their answer and in their response to the

motion for summary judgment. In the Superior Court, it appears that The Bank did

not produce the note, claim to be the holder of the note, or claim to be entitled to

enforce the note. Under these circumstances, a question of fact existed which

should have resulted in denial of The Bank=s motion for summary judgment until it

showed that it had the right to enforce the note.

      We do not view the holding we reach in this case as imposing new pleading

                                           13
requirements which must be contained in a mortgage foreclosure complaint.               10

Del. C. ' 5061 has not been interpreted as requiring an averment concerning the

note. The Superior Court Civil Rules include an appendix of approved forms. Form

13 illustrates, in its simplest form, a sufficient mortgage foreclosure complaint,

subject to the various requirements found in other statutes enacted after the form was

adopted. The second paragraph of the form of complaint is an allegation that

ADefendant owes plaintiff the principal amount of the mortgage with interest from

_______.@ That form must be construed in accordance with the language of the

statute. Therefore, the second paragraph of the form should be read: “the defendant

owes the principle amount of the mortgage money with interest . . .” 36

       The complaint in this case alleged that ADefendant(s) owe to plaintiff the

principal sum of the amount remaining on the mortgage with interest . . .@ Our

ruling simply recognizes that one of the possible pleas in avoidance of this allegation

is that the money is not owed to the plaintiff because it does not have the right to

enforce the debt which the mortgage secures. We also note that where a mortgage

has been assigned, plaintiff=s counsel is free, if counsel chooses, to expand the

averment that the mortgage has been assigned to include an averment that the note,

36
  We recommend that the Superior Court consider amending the form to specifically say
“mortgage money” rather than just “mortgage.”

                                             14
as well as the mortgage, was assigned to the plaintiff. In fact, the best practice

would be for the plaintiff’s counsel to do so.

       For the foregoing reasons, the judgment of the Superior Court is reversed and

the matter is remanded for further proceedings consistent with this opinion.37

37
   The dissent characterizes the Majority=s opinion as being based upon sympathy, and cautions
against Amandating as judges, not legislators, an increase in the costs to lenders of enforcing their
rights when that is not necessary to protect the legitimate rights of borrowers.@ Yet, the Dissent
acknowledges that the Majority Amight have a point where an unfortunate homeowner could have
her home foreclosed upon by a mortgage holder and later have a separate note holder show up and
demand payment.” But that is exactly the point. Our Dissenting colleague would force upon
such a homeowner the costs of chasing down the mortgage holder and suing to establish that the
note had already been paid.    To the extent that decisions of this Court are contrary to our holding
herein, they are hereby overruled.

                                                 15
STRINE, Chief Justice, dissenting:

       Although I understand and respect the approach my friends in the Majority

take to address the difficult problem this case presents, I respectfully disagree with

their conclusion about what the foreclosure statute requires and would affirm the

Superior Court’s well-reasoned orders resolving this case.38 In this case, however

sympathetic we may be to anyone facing foreclosure, the Shrewsburys have been

living in a house for nearly seven years without making any mortgage payments, and

one thing is therefore clear, that they are in no equitable position to continue to

occupy the house, as they now owe in excess of $800,000 including unpaid principal,

interest, and late charges,39 according to The Bank, and have not even so much as

made any good faith payment on the mortgage since July 2010. 40 There are, of

course, complexities to the current mortgage system, but those complexities have

also increased the pool of capital funding affordable mortgages for ordinary

38
   The Superior Court’s decision accords with its earlier decisions on this topic that holding the
mortgage was sufficient to confer standing on a foreclosing plaintiff. See, e.g., Deutsche Bank
National Trust Company v. Moss, 2016 WL 355017, at *1, *2 (Del Super. Jan. 26, 2016), aff’d
sub nom. Moss v. Deutsche Bank National Trust Company, 148 A.3d 1170, 2016 WL 5660265
(Del. Sept. 30, 2016) (TABLE) (finding foreclosing plaintiff had standing to foreclose because it
held validly assigned mortgage); HSBC Mortgage Corp. (USA) v. Bendfeldt, 2014 WL 600233, at
*2 (Del. Super. Feb. 4, 2014), aff’d sub nom. Bendfeldt v. HSBC Mortgage Corp. (USA), 2014 WL
4978666 (Del. Oct. 7, 2014) (same).
39
   Appellant’s Corrected App. at A69 (Complaint, Ex. D § 5062D(b)(2) Affidavit in Support of
Amounts Due (Docket No. 1, C.A. No. N15L-03-108)).
40
   Id. at A24 (Complaint (Docket No. 1, C.A. No. N15L-03-108)).

                                               16
Americans. We should be careful about mandating as judges, not legislators, an

increase in the costs to lenders of enforcing their rights when that is not necessary to

protect the legitimate rights of borrowers. Costs that are above what is truly

necessary to protect borrowers from inequitable conduct by lenders will be

ultimately borne by all borrowers and especially the vast bulk of those who prudently

borrow and make their loan payments. Because 10 Del. C. § 5061’s language

plainly allows foreclosure by the mortgage holder, I would not, by judicial act, add

the requirement that a bank must also prove it owns the note.

         The mortgage that the Shrewsburys executed states that if the Shrewsburys

failed to pay their obligations when due, the loan would be in default, and the lender

could accelerate the remaining sum due and foreclose on the property.              The

mortgage also states “all payments accepted and applied by Lender shall be applied

in the following order of priority: (a) Interest due under the Note; (b) principal due

under the Note; (c) amounts due under Section 3 [escrow].”41

         Delaware recognizes both statutory and equitable foreclosure methods. 42

Here, The Bank used the statutory method. 10 Del. C. § 5061 provides: “[s]ubject

to the provisions of §§ 5062A, 5062B, 5062C and 5062D . . . upon breach of the

41
     App. to Appellee’s Answering Br. on Appeal at B6 (Mortgage).
42
     Monroe v. Metropolitan Life Ins. Co., 457 A.2d 734, 736 (Del. 1983).

                                                17
condition of a mortgage of real estate . . . the mortgagee’s heirs, executors,

administrators, successors or assigns may . . . sue out of the Superior Court

[corresponding to the property’s location] a writ of scire facias upon such

mortgage . . . .”43 Actions based on scire facias writs for mortgages have a long

history in Delaware and receive extensive treatment in Woolley’s Practice in Civil

Actions. Woolley says that plaintiffs in a scire facias sur mortgage action “should

have a legal interest in the mortgage sued upon.” 44 Additionally, scire facias

actions in general are “founded upon a record, the record in [scire facias sur

mortgage], of course, being the mortgage.”45

         The language of § 5061 also supports the idea that holding the mortgage is

sufficient to confer standing.        Section 5061 only refers to mortgagors and

mortgagees and doesn’t refer to a note or note holder. Other parts of the Delaware

Code, including other parts of Title 10, acknowledge the existence of notes as

distinct from mortgages.46 The General Assembly could have referred to both or

only note holders if it so desired, especially against a backdrop of invoking a writ

with an extensive history of use for in rem proceedings. This is especially true

43
     10 Del. C. § 5061.
44
     WOOLLEY, supra note 5, at 919.
45
     Id. at 918.
46
     E.g., 10 Del. C. § 3912.

                                           18
given that the General Assembly amended § 5061 in 2012 to add a series of

provisions protecting homeowners in foreclosure proceedings.47

       Thus, we are faced with a situation where the most natural reading of the

statute as well as the history of the action codified in it identify the mortgage holder

as the person who is entitled to bring a foreclosure action, not the person holding

both the note and mortgage. The Shrewsburys argue that allowing foreclosure

based only on a mortgage opens the door to a dire scenario where an unfortunate

homeowner could have her home foreclosed on by a mortgage holder and later have

a separate note holder show up and demand payment. Were that a likely or even

plausible result, the Shrewsburys might have a point.                But, the reality is that

homeowners in the Shrewsburys’ position are well protected against double

collection.

       For one thing, the mortgage itself provides that all payments have to be

applied to the interest and principal due “under the Note.” 48 Thus, a mortgage

holder would be obligated to put any money it receives from a judgment sale toward

47
   The 2012 amendment added provisions mandating that defendants in foreclosure actions “must
have an opportunity to apply for relief under a federal loss mitigation program,” 10 Del. C.
§ 5062A, must receive specific information about foreclosures, id. § 5062B, have the right to pre-
foreclosure mediation, id. § 5062C, and also required foreclosure complaints to contain statements
of how the foreclosing plaintiff complied with the new provisions, id. § 5062D.
48
   App. to Appellee’s Answering Br. on Appeal at B6 (Mortgage).

                                               19
satisfaction of the note. For another thing, the statute protects the homeowners. 10

Del. C. § 5067, which is part of the Delaware Code’s subchapter on scire facias sur

mortgage states “any surplus of the proceeds of sale of mortgaged premises, after

satisfying the principal debt in the mortgage, with interest and costs, shall be

rendered to the owner of the premises at the time of sale. Until the surplus is so

rendered, the officer making the sale shall not be discharged upon the record of the

court to which the sale is returnable.”49 So, the sheriff who was appointed by the

Superior Court to conduct the sale is responsible for ensuring the proceeds go to

satisfy the mortgage debt. Finally, in Delaware, any foreclosure proceedings occur

under judicial supervision and so a homeowner in the Shrewsburys’ situation could

always raise the defense of satisfaction of the mortgage in a future proceeding.50

       The Majority also may introduce unnecessary complication into the way the

Superior Court will analyze its jurisdiction in future cases like this one. The

Shrewsburys’ argument all along has been that The Bank’s inability to produce the

note was a defect in The Bank’s standing. The Shrewsburys’ characterization of

the issue, if not their ultimate conclusion, is correct. “The issue of standing is

49
   10 Del. C. § 5067.
50
   Indeed, this State requires mortgagees to update mortgage records within sixty days of the
mortgage’s satisfaction, 25 Del. C. § 2111, and also provides a procedure to compel mortgagees
to enter satisfaction if they otherwise fail to do so, id. § 2115.

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concerned ‘only with the question of who is entitled to mount a legal challenge and

not with the merits of the subject matter in controversy.’” 51 My friends in the

Majority, though, state that their holding does not impose “new pleading

requirements which must be contained in a mortgage foreclosure complaint”52 and,

instead, it is up to the defendant to assert that a foreclosing plaintiff is not entitled to

foreclose because the plaintiff lacks the note. But, this sits uncomfortably with the

normal proposition that “[t]he party invoking the jurisdiction of a court bears the

burden of establishing the elements of standing.” 53          That is, if the Majority’s

position is correct, to establish standing, the foreclosing plaintiff should be obliged

to plead that it holds both the mortgage and the note. And, because any defendant

faced with a complaint that does not do this will invoke the Majority’s decision and

ask for dismissal for the failure of the plaintiff to do so, the Majority rule will in fact

by necessity drive the form of foreclosing plaintiffs’ pleadings. The Majority

acknowledges this when they urge counsel for foreclosing plaintiffs to include “an

averment that the note, as well was the mortgage, was assigned to the plaintiff.”54

And, the only evidence the Shrewsburys here cited that The Bank did not possess

51
   Dover Historical Soc. v. City of Dover Planning Comm’n, 838 A.2d 1103, 1110 (Del. 2003)
(quoting Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991)).
52
   Majority Op. at 15.
53
   Dover Historical Soc., 838 A.2d at 1109.
54
   Majority Op. at 15–16.

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the note was a version of the note from 2013, almost two years before the foreclosure

complaint was filed. Because notes like these are freely transferable, if this is

evidence sufficient to meet a defendant’s burden to provide a factual basis that the

foreclosing plaintiff does not hold the note, then the practical burden of the

Majority’s rule is on a foreclosing plaintiff to plead this affirmatively. If these are

the practical realities flowing from the Majority’s decision, it is probably best for all

concerned to state this and to require a foreclosing plaintiff to plead the required

elements up front so that the delays that have resulted in this case do not ensue in

future cases.55

55
   The litigation that continues to be generated in this area suggests another possible reality. It
could be that the perpetuation of procedural practices that were designed at a time in our history
when capital markets and commercial practices were far different is inefficient. In a year that
would have been the subject of science fiction in the period when the print was still fresh on the
first edition of Woolley’s, it is likely not optimal to continue using a writ lawyers often refer to as
“sci fi” and other procedural practices and writs no longer fit to purpose. A comprehensive look
at statutory and rule provisions to simplify and make plain what is required would likely aid all
parties to disputes like this, and in other important areas of law such as landlord-tenant disputes,
where cases involving someone’s ability to avoid eviction can turn on whether there was a
narrowly defined error on the face of the record allowing a party to invoke a writ with a Latin
name.

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