The following decision affects all mortgage foreclosure proceedings in the state of Delaware
whether proceeding on the mortgage, the note or both. Plaintiff’s counsel must now include a
statement in the pleading confirming that the Plaintiff is the current holder of the note at the
time the complaint is filed. This requires the Plaintiff to provide counsel with a copy of the
note and/or any allonge so that Plaintiff’s counsel can confirm the note is either endorsed to
the Plaintiff or endorsed enblank and that the Plaintiff is the holder of the note with the right
Shrewsbury v. The Bank of New York Mellon
Before the Delaware Supreme Court – No. 306, 2016
Decided April 17, 2017
This was a mortgage foreclosure action brought by The Bank of New York Mellon (the “Bank”)
against a husband and wife couple, the Shrewsburys. The Shrewsburys signed a promissory
note in the amount of $653,553.26 in favor of Countrywide Home Loans, Inc. The couple also
executed and delivered a mortgage to secure the debt upon their real property in
Middletown, Delaware. The mortgagee was Mortgage Electronic Registration Systems, Inc.
In July 2010, the Shrewsburys stopped making payments on their mortgage, and have not
made payments since that time. They still reside in the property. In June 2011, MERS assigned
the mortgage to the Bank. In 2013, the borrowers had requested a copy of the note from their
mortgage servicer. The servicer provided a copy of the note as it was originally signed. There
were no notations or indications that the note had been assigned to the Bank.
The Bank commenced the foreclosure action in the Superior Court in March 2015. The
Shrewsburys answered the complaint, and claimed that the Bank must show that it holds the
note, in addition to the mortgage, in order to foreclose on the mortgage. The Bank moved for
summary judgment, and argued that the Shrewsburys did not plead an allowable defense.
Specifically, the only allowable defenses to a mortgage proceeding in Delaware are payment,
satisfaction, or a plea in avoidance of the mortgage. Citing Wells Fargo Bank NA v. Nickel,
the Bank argued that a plea in avoidance of the mortgage “must relate to the mortgage sued
upon, i.e. must relate to the validity or illegality of the mortgage documents.” The Superior
Court agreed with the Ban k and the Shrewsbury’s appealed.
The Delaware Supreme Court sided with the Shrewsburys, and found their defense to be
valid. In agreeing with the borrowers, the Court stated “[i]t has long been recognized in this
State that ‘a mortgage is merely security for a debt, or for the performance of some other
obligation.’ . . . A mortgage does not create a debt or obligation, it merely secures one.”
In so observing, the Court noted its holding in Iowa-Wisconsin Bridge Co. v. Phoenix
Finance Corporation. In that matter, the Delaware Supreme Court noted that a debt is “an
essential requisite of a mortgage.” The Court also observed that the United States Supreme
Court has had the opportunity to look at this issue in Carpenter v. Longan. The United
States Supreme Court observed that the “note 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.” (emphasis added). The Delaware
Supreme Court was also persuaded by several other opinions in other jurisdictions that hold
the same (New York, Florida, New Jersey, Oklahoma, Connecticut, Michigan, Ohio, South
Carolina and North Carolina).
Further, the Court held that the Shrewsburys defense was within the definition of a “plea in
avoidance.” The fact that the Bank was not assigned the note related to its ability to foreclose
on the mortgage. The Shrewsburys admitted that the essential allegations of the complaint
but asserted a defense, which if true, would defeat the Bank’s right to foreclose.
While the Court felt that it did not impose new pleading requirements upon foreclosure
plaintiffs going forward, the Court encouraged plaintiff’s counsel to do so. “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, 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.”
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