Fundamentals-Lacking Trial Judge's Grant Of Default Judgment To Standing-Lacking Lender In Oklahoma Foreclosure Action Lacked Rational Basis

The Oklahoma Supreme Court recently added to its growing list of lower court reversals in foreclosure cases(1) in another ruling finding that the foreclosing bankster lacked standing to foreclose. The court said that the bankster failed to establish that, at the time of the filing of the foreclosure action, it was in possession of the promissory note it was attempting to enforce, and was not otherwise able to establish that it was the proper entity entitled to enforce the note. Attempts by the bankster to cure its screw-up subsequent to the filing of the action were unavailing.

Among other things, the Oklahoma high court made the following observation regarding the apparently snoozing trial judge's granting of a default judgment in favor of the bankster:

• The trial court's granting of a default judgment in favor of Appellee could not have been rationally based upon the evidence or Oklahoma law. Therefore, we find that the trial court abused its discretion by dismissing the Appellants Petition to Vacate the default judgment.

In concluding its opinion, the court makes the following statement summarizing, in a nutshell, what is expected from parties initiating foreclosure actions (and adds an admonition to homeowners reminding them that if they think they just won a free house because of a lender's procedural screw-up, they should think again!):

• It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note, and to have the proper supporting documentation in hand when filing suit, showing the history of the Note, so that the defendant is duly apprised of the rights of the plaintiff.
  
  This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418.
  
  Likewise, for the homeowners, absent adjudication on the underlying indebtedness, today's decision to reverse the dismissal of the petition and motion to vacate cannot cancel their obligation arising from an authenticated Note, or insulate them from foreclosure proceedings based on proven delinquency. This Court's decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball, 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

For the ruling, see U.S. Bank v. Moore, 2012 OK 32, __ P.3d __ (Ok. April 10, 2012).

(1) See Oklahoma High Court Means Business In Booting Back Foreclosure Judgments Based On Unindorsed Notes, Dubious Assignments, Lack Of Standing.