MEMORANDUM OPINION ADDRESSING DEFENDANT WELLS FARGO BANK, N.A.'S MOTION FOR SUMMARY JUDGMENT

Related Document No. 57.

JEFFERY A. DELLER, Chief Bankruptcy Judge.

The matter before the Court is the Wells Fargo Bank, National Association's Motion for Summary Judgment (the "Wells Fargo Motion")1 filed by the Defendant, Wells Fargo Bank, N.A. ("Wells Fargo"). This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) and 157(b)(2)(C) and this Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334. This Court conducted argument on the Wells Fargo Motion on March 8, 2017,2 and upon review of the record and various post-argument submissions by the parties, and upon due consideration following the June 30, 2017 status conference held in this case, this Adversary Proceeding is ripe for adjudication. For the reasons set forth below, the Wells Fargo Motion is granted and an order shall be entered that dismisses this Adversary Proceeding.3

I.

Wells Fargo filed its Proof of Claim in the Plaintiffs' Bankruptcy Case (the "Wells Fargo Claim"), wherein Wells Fargo asserted a secured claim in the amount of $155,478.64. The record reflects that the Wells Fargo Claim is evidenced by a Note dated May 11, 2001 between the Plaintiffs and North American Mortgage Company (the "Note"), and is secured by a mortgage on the Plaintiffs' residence located in Cambria County, Pennsylvania, also dated May 11, 2001 (the "Mortgage").4 The record further reflects that the Mortgage was recorded in the Recorder's Office for Cambria County, Pennsylvania, on May 17, 2001.5 Both parties agree that the Note and Mortgage are documents that were signed by the Plaintiffs in consideration for a loan they requested (the "May 11, 2001 Loan").6 The parties also do not dispute that the May 11, 2001 Loan was a refinance of a 1998 loan that the Plaintiffs had with North American Mortgage Company.7 Pursuant to a Settlement Statement, signed by the Plaintiffs on May 11, 2001, the May 11, 2001 Loan was to be funded on May 16, 2001.8

On January 18, 2007, Wells Fargo notified the Plaintiffs that beginning on February 1, 2007, it would become the servicer of the May 11, 2001 Loan.9 Wells Fargo received the Note and Mortgage from Washington Mutual,10 a prior servicer of North American Mortgage Company.11 As a result of the transfer from Washington Mutual to Wells Fargo, the May 11, 2001 Loan balance on the records of Washington Mutual was reduced to "$0.00."12 Additionally, an Assignment of the Mortgage evidencing the transfer to Wells Fargo was recorded with the Recorder's Office of Cambria County, Pennsylvania, on February 10, 2011.13

The record reflects that the Plaintiffs made payments to Wells Fargo after the 2007 transfer on account of the May 11, 2001 Loan, but ceased making payments in November 2010.14 Accordingly, Wells Fargo referred the May 11, 2001 Loan to foreclosure on December 31, 2010.15 Wells Fargo then instituted an action in foreclosure in 2011, which was pending when the Plaintiffs filed their Chapter 13 Petition in 2015.16

In addition to the Note and Mortgage, the Wells Fargo Claim also includes as exhibits an "Escrow Account Disclosure Statement" detailing the May 11, 2001 Loan escrow account history from January 2011 to August 2016, and a "Statement of Amount Due," all of which were submitted to this Court under penalty of perjury.

In their Second Amended Complaint,17 the Plaintiffs seek relief with respect to the Note and Mortgage upon which Wells Fargo asserts the Wells Fargo Claim. The Plaintiffs maintain that the May 11, 2001 Loan was "paid in full"18 by a subsequent, "unauthorized May 16, 2001 loan" as evidenced by certain loan records (discussed infra). While the Complaint contains many allegations including irregularities in the creation of the May 11, 2001 Loan, the crux of the Plaintiffs' Complaint is that the "Defendant and predecessors in interest regularly attempted to collect on the unauthorized loan dated May 16, 2001, rather than the loan that was paid off [the May 11, 2001 Loan] pursuant to the records supplied by the Defendant." Plaintiffs' Motion for Summary Judgment, at ¶ 7.

Stated in other words, the Complaint does not allege that the Plaintiffs in-fact directly paid off the May 11, 2001 Loan. Rather, they contend that the Defendant improperly booked a second loan on May 16, 2001 without the knowledge or consent of the Plaintiffs, and that the loan proceeds of this second loan allegedly paid off or satisfied the May 11, 2001 Loan. The Plaintiffs' also appear to contend that since they never consented to this alleged "second" loan, they have no liability to Wells Fargo on account of the same since it was "unauthorized."

The Complaint consists of three counts, requesting the following relief: (1) a finding by this Court that the Note and Mortgage are insufficient to establish a security interest in favor of Wells Fargo; (2) a finding that the Wells Fargo Claim is totally unsecured; and (3) that pursuant to 13 Pa. Cons. Stat. §§ 3302 and 3305, a finding that the Plaintiffs are entitled to recoup all money that they previously paid to Wells Fargo, and, among other requests, an award of actual and punitive damages.

Wells Fargo maintains that there has only been one loan and that the Wells Fargo Claim is for sums due on account of the May 11, 2001 Loan. Wells Fargo further contends that the record does not support the Plaintiffs' contention that the May 11, 2001 Loan has been satisfied by the unilateral creation of a second "unauthorized" loan. Wells Fargo maintains that at the inception of the Plaintiffs' Chapter 13 case, it was owed $155,478.64 on account of the May 11, 2001 Loan, with the last payment having been received on November 16, 2010.19 It has therefore moved for summary judgment with respect each of the three counts of the Plaintiffs' Complaint, contending that the Plaintiffs have not met their burden of production and/or persuasion.

II.

Section 502(a) of the Bankruptcy Code provides that "[a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects." 11 U.S.C. § 502(a). In the face of an objection to a proof of claim, the Third Circuit Court of Appeals has held that if the proof of claim alleges facts sufficient to support the legal liability asserted, the claimant's initial obligation to go forward is satisfied, i.e., the proof of claim itself makes out a prima facie case. The burden of production then shifts to the objector to offer evidence sufficient to negate the prima facie validity of the filed claim. In re Allegheny Int'l, Inc., 954 F.2d 167, 173-74 (3d Cir. 1992). Accordingly, an objector to a proof of claim must "produce evidence equal in force to the prima facie case" presented by the claimant. Id. at 174. (citing In re Holm, 931 F.2d 620, 623 (9th Cir. 1991)).

Here, the record reflects that Wells Fargo Claim does alleges facts sufficient to support the legal liability asserted and Wells Fargo's initial obligation to go forward has been satisfied, i.e., the Wells Fargo Claim itself makes out a prima facie case. Therefore, for the Court to grant the Wells Fargo Motion, the record must show that the Plaintiffs failed to produce material factual evidence from which a reasonable person would conclude: (a) that the Wells Fargo Claim had been paid in full or otherwise satisfied; or (b) that Wells Fargo is not entitled to enforce the Note or Mortgage; or (c) fraud induced the Plaintiffs to sign the Note and Mortgage with neither knowledge nor reasonable opportunity to learn of its character or its essential terms. This Court will examine these issues through the lens of the summary judgment rules formulated by the applicable rules of procedure.

III.

Pursuant to Fed. R. Civ. P. 56(a), made applicable to bankruptcy proceedings by Fed. R. Bankr. P. 7056, in order to prevail on a motion for summary judgment, Wells Fargo must demonstrate that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

Pearson v. Prison Health Serv., 2017 U.S. App. LEXIS 4003, *8-9 (3d Cir. Pa. Mar. 7, 2017)(internal quotation marks and citations omitted).

"A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record, . . . or showing that the materials cited do not establish the absence or presence of a genuine dispute or that an adverse party cannot produce admissible evidence to support a fact." Fed. R. Civ. P. 56(c)(1). "An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matter stated." Fed. R. Civ. Pro. 56(c)(4).

Fed. Deposit Ins. Corp. v. Musser, No. CV 12-7231, 2017 WL 878208, at *2-3 (E.D. Pa. Mar. 6, 2017).

In support of its Motion for Summary Judgment, Wells Fargo filed, among other papers, a Statement of Undisputed Material Facts,20 Memorandum of Law,21 Appendix,22 Supplemental Declaration of Affiant Jones,23 and Reply to Plaintiffs' Amended Memorandum of Law in Opposition to Summary Judgment in Favor of Wells Fargo.24 In opposition to Wells Fargo's Motion for Summary Judgment, the Plaintiffs filed, among other papers, an Objection to Motion for Summary Judgment filed by Defendant Wells Fargo ("Objection"),25 Amended Statement of Undisputed Material Facts in Opposition,26 Amended Memorandum of Law in Opposition,27 a copy of an "FFIEC Fraud Investigation Symposium White Paper" regarding fraud in the home mortgage industry,28 and a Response to Wells Fargo's Reply to the Plaintiffs' Amended Memorandum of Law in Opposition to Summary Judgment in Favor of Wells Fargo for the Purpose of Correcting Blatant Mischaracterization of Evidence.29 Additionally, the Plaintiffs filed and relied upon two Affidavits of Amelia Reaux.30

In addressing the Wells Fargo Motion, the Court considered the entire record and below summarizes what it believes are the pertinent parts of the record and arguments. The Court also sets forth its analysis and conclusions as to the claims made by the Plaintiffs.

A. The Affiants

1. Defendant's Affiant Megan A. Jones

In support of its Motion for Summary Judgment, Wells Fargo submits the affidavits of Megan A. Jones. In her Affidavits, Affiant Jones states that she is a "Vice President Loan Documentation of Wells Fargo Bank . . . [and prior positions at Wells Fargo included] Loan Servicing Specialists 3, Verification Analyst and Consumer Underwriter."31 Affiant Jones states that as part of her experience at Wells Fargo, she is "familiar with the ordinary and customary method and manner of the preparation and maintenance of Wells Fargo's business records," and "[e]xcept as otherwise indicated" in her Affidavit, "all facts set forth in [her] declaration are based on [her] review of Wells Fargo's business records and [her] experience, knowledge, and information concerning Wells Fargo's business records and the mortgage servicing industry generally."32 As to the Jones Affidavits, the Court finds they are "made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4).

2. Plaintiffs' Affiant Amelia Reaux

In support of their Motion for Summary Judgment and Objection to the Wells Fargo Motion, the Plaintiffs' submit the Reaux Affidavits. Ms. Amelia Reaux states she is a "Graphic Artist with many years of experience and in that capacity, [she would] testify as an Expert, if called to do so in this case."33 In her second Affidavit, Ms. Reaux also states that "[f]or more than nine (9) years I have examined thousands of documents, and researched all different aspects of recorded documents: . . .,"34 but she does not state whether she was employed to conduct these examinations or if she has any background that would enable her to evaluate her document reviews. Further, she states that she had examined and "reexamined the . . . Discovery documents . . . submitted in the context of this case. In this capacity, [she would] testify as a Fact witness if called upon to do so in this case."35 She has never worked in a bank or lending institution, and has no professional experience in the mortgage servicing industry.36

In its responsive papers, Wells Fargo challenges Ms. Reaux's qualifications to testify as an expert.37 Additionally, Wells Fargo argues that "Ms. Reaux's speculation as to what various loan documents mean, which is not based on any first-hand knowledge or industry experience" should preclude the Court's reliance thereon.38

As set forth above, Rule 56 requires that "[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. Pro. 56(c)(4).

Pursuant to the rules of Evidence, particularly Fed.R.Evid 401 and Fed.R.Evid 701,

Corner Pocket, Inc. v. Travelers Indem. Co., 2014 U.S. Dist. LEXIS 22368, *2-4 (W.D. Pa. Feb. 23, 2014).

Apotex, Inc. v. Cephalon, Inc., No. 2:06-CV-2768, 2014 WL 4931273, at *4 (E.D. Pa. Oct. 1, 2014).

The record reflects that Ms. Reaux lacks any personal knowledge of the truth of the content of the documents attached to the Reaux Affidavits, and she admittedly has no experience in the lending and/or loan servicing industry.39 As such, her lay witness opinion testimony is not rationally based upon any first-hand experience and knowledge or perception and is therefore not admissible.

3. The Record of the May 11, 2001 Loan and Mortgage and the Alleged May 16, 2001 Event

Both parties agree that the May 11, 2001 Loan and Mortgage are documents that were signed by the Plaintiffs in consideration of the Plaintiffs receiving the May 11, 2001 Loan.40 Wells Fargo maintains that the May 11, 2001 Loan was funded on May 16, 2001, and that the May 16 date is referred to as the "settlement" date as was indicated on the Settlement Statement signed by the Plaintiffs.41 The Plaintiffs have not directed the Court's attention to any evidence that the May 11, 2001 Loan was funded on May 11, 2001 or any date other than May 16, 2001. The record further reflects that once the May 11, 2001 Loan was funded, the May 11, 2001 Loan was booked on May 16, 2001.42

The Plaintiffs argue that the May 16, 2001 settlement entries of the mortgagee evidence both the payment in full of the May 11, 2001 Loan and the creation of a new loan, without the knowledge or consent of the Plaintiffs.43 The Plaintiffs, however, have not produced any evidence that they made all payments necessary to satisfy the May 11, 2001 Loan.44 Nor have they produced a note or mortgage dated May 16, 2001 that they claim replaced the May 11, 2001 Mortgage and Note.

Wells Fargo's explanation of the May 16, 2001 account entries—the funding and booking of the disbursement of the May 11, 2001 Loan proceeds on May 16, 2001—is evidence for which no genuine dispute has been presented and which contradicts the Plaintiffs' conclusion that the May 11, 2001 Loan was "paid in full" and replaced with a non-censual new loan.45

The Court emphasizes that it viewed the alleged facts of this case and drew all reasonable inferences in the light most favorable to the nonmovant. The facts summarized above, however are material facts with which there is no "genuine" dispute because the Court finds that the evidence proffered by the Plaintiff is virtually non-existent and/or is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party.46

B. Multiple May 11, 2001 Loan Numbers, Multiple Loans

The Plaintiffs do argue that the use of inconsistent loan identification numbers by the various servicers or lenders in the chain of title to the May 11, 2001 Loan supports their position that there must be fraud, or that the May 11, 2001 Loan must have been paid, or that multiple loans were opened under the Plaintiffs' names.47

Again, Wells Fargo disputes there are multiple loans.48 The undisputed record is that Wells Fargo did not originate the May 11, 2001 Loan; it was originated by North American Mortgage Company, who assigned it to Washington Mutual,49 who then assigned it to Wells Fargo. Additionally, Fannie Mae and MERS had roles with respect to the May 11, 2001 Loan. Wells Fargo provided the Court with a list of the loan identification numbers used by the various entities, and no real dispute has been lodged by the Plaintiffs with respect to the same.50

Another of Plaintiffs' defenses to the Wells Fargo Claim in support of their multiple loan theory, is the timing of the transfer of the May 11, 2001 Loan to Wells Fargo.51 The Court has scrutinized the exhibits referenced by the Plaintiffs,52 and finds them to be consistent with one another and consistent with the inception of Wells Fargo's servicing of the Plaintiffs May 11, 2001 Loan.53

Further, the Plaintiffs draw the Court's attention to a "blow-up" of a document produced by Wells Fargo from 2010, which they argue supports their position that the May 11, 2001 Loan was paid. Specifically, the Plaintiffs allege: "In addition to the payments in paragraph 26 [of the Complaint indicating that the May 16, 2001 entry reflected the payment in full of the May 111, 2001 Loan], a payment of $103,000.00 was made by some unknown entity on May 24, 2010 . . . ." (emphasis added). See Complaint, ¶ 27. The Court reviewed the document referenced, Exhibit B to the first amended complaint (ECF No. 10),54 and finds that the alleged "payment of $103,000 . . . on May 24, 2010" was not have been an actual payment, but a reference to some other internal accounting entry by the creditor occasioned by the attempted foreclosure of the loan,55 as it did not reduce the balance due on account of the May 11, 2001 Loan, as evidenced by the very same Exhibit B relief upon by the Plaintiffs.

Additionally, the Plaintiffs argue that a letter sent by Wells Fargo in 2013 indicates that there is no debt due Wells Fargo.56 Wells Fargo provided a copy of this letter,57 which states that Wells Fargo attempted to pay property taxes on the property secured by the Mortgage. It does not, either expressly or impliedly, state that the May 11, 2001 Loan had been paid in full.58

Again, as required, the Court views these facts and draws all reasonable inferences in the light most favorable to the nonmovant. The Court finds that it is reasonable to conclude that financial institutions supply their own loan identification numbers for record-keeping and do not adopt loan account numbers supplied by its assignor or transferor. Therefore, as indicated by the Jones Affidavits, the fact that multiple institutions that owned or serviced the May 11, 2001 Loan used different loan identification numbers does not mean that the May 11, 2001 Loan was paid or that new, unauthorized loans were created. Furthermore, the other points raised by the Plaintiffs and addressed above do not provide evidence to support the Plaintiffs' position regarding either the payment in full of the May 11, 2001 Loan or the creation of fraudulent loans. Accordingly, the Court finds that the dispute regarding these material facts is not genuine, and therefore the evidence is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party.

C. Multiple Mortgages

Plaintiffs also suggest in several places in the record that while Wells Fargo asserts that a "true and correct copy of the Mortgage (which has been redacted to protect the Plaintiffs' personally identifiable information) is attached to [Wells Fargo] declaration,"59 "Wells Fargo is deceiving the Court because the Mortgage filed at Cambria County does not match [the copy] certified by Wells Fargo or attached to the Wells Fargo Proof of Claim."60 The Plaintiffs make the same arguments regarding the Wells Fargo's representation regarding the Note.61 Upon inspection, the Court finds the pages produced are in-fact identical but for various assignment notations, recording indexing information, redactions, and that an exhibit to the Mortgage containing the property description is attached to one copy and not the other copy. The Court therefore finds the Plaintiffs' contentions to be without because the Court would expect to find these "differences" when comparing a document in the original form, to the same document subsequent to its recording, assignment, or redaction. Therefore, the Court believes that there is no genuine dispute that a copy of the mortgage instrument filed in Cambria County is attached to the Wells Fargo Claim.

D. Holder in Due Course and/or Fraudulent Activity—Recoupment

In Count III, Plaintiffs assert a cause of action, pursuant to 13 Pa. Cons. Stat. § 3305, to "allow [the Plaintiffs] to Recoup all money previously paid to the Defendant." While the Complaint is lacking in clarity with respect to, inter alia, Count III, the Plaintiffs' Memorandum of Law in Opposition to Summary Judgment in Favor of Wells Fargo,62 provides more detail:

Id. at 7-8 (quoted exactly as it appears; emphasis added in bold). This argument against granting summary judgment in favor of Wells Fargo is repeated verbatim in the Plaintiffs' post-argument Amended Plaintiffs Memorandum of Law in Opposigtion [sic] to Summary Judgment in Favor of Wells Fargo Bank, N.A., with one exception—the reference to "WF-5822" is provided a citation to "Reaux Exhibit L."63

Under Pennsylvania law, "the right to enforce the obligation of a party to pay an instrument is subject to . . . a defense of the obligor based on . . . fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms." 13 Pa. Cons. Stat. § 3305(a)(1)(iii). The Plaintiffs allege that: (1) an inflated appraisal and inflated borrower income were used in the origination of the Mortgage; (2) Plaintiffs had no opportunity to read the documents they signed during closing; and (3) they had no knowledge of the requirements for the closing of the loan.64

As stated above, the parties agree that the May 11, 2001 Loan and Mortgage are documents that were signed by the Plaintiffs in consideration of the Plaintiffs receiving the loan proceeds to refinance an existing loan obtained in 1998.65 By refinancing the 1998 loan, the Plaintiffs understood they were incurring a new loan that they would have to repay.66 Without evidence that the Plaintiffs did not understand that they were signing the May 11, 2001 Loan, they have failed to make a prima facie case that they are entitled to recoupment pursuant to 13 Pa. Cons. Stat. § 3305.67 Plaintiffs even admit this in their Memoranda of Law, as above cited.68

Instead, the Plaintiffs argue that they "make their claim based on the subsequent use of the documents to generate additional loans to which the Plaintiffs did not agree and which were unknown to them at the time."69 This argument is without merit. Again, as set forth above, the Wells Fargo Claim is based on the May 11, 2001 Loan and Mortgage and not any other obligation. And as previously discussed above, the evidence proffered by the Plaintiffs is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party (i.e., the Court finds no evidence of the payoff of the May 11, 2001 Loan and the creation of subsequent unauthorized loans).

Additionally, the Plaintiffs also argue that because Wells Fargo acquired the May 11, 2001 Loan as part of a "batch purchase," it is not entitled to be a holder in due course.70 This argument is contrary to the legal authority cited by the Plaintiffs and applicable case law. See, e.g., In re Carmichael, 443 B.R. 698 (Bankr. E.D. Pa. 2011); see also Potoczny v. Aurora May 11, 2001 Loan Services, 636 F. App'x. 115, 118 (3d Cir. 2015) ("Under Pennsylvania's Uniform Commercial Code, a `[p]erson entitled to enforce' an instrument includes the holder of the instrument, a nonholder in possession of the instrument who has the rights of a holder, or even a person who is `not the owner of the instrument or is in wrongful possession of the instrument.' 13 Pa. Cons. Stat. § 3301.").

Potoczny v. Aurora Loan Servs., 636 F. App'x 115, 118 (3d Cir. 2015).

The record reflects that the Note was endorsed in blank71 and the Plaintiffs do not dispute that Wells Fargo has possession of the Note.72 The Assignment of the Mortgage, with Wells Fargo as the assignee, was recorded.73 Therefore, Wells Fargo is a holder in due course entitled to enforce the Note and Mortgage.

Finally, "a claim in recoupment of the obligor" against "a transferee of the instrument" may only be asserted "to reduce the amount owing on the instrument at the time the action is brought,"74 and not against a holder in due course.75 The Plaintiffs have not provided material evidence to support its claims that Wells Fargo is not a holder in due course, or that they are entitled to damages under 13 Pa. Cons. Stat. § 3305. Summary judgment should therefore be issued in favor of Wells Fargo and dismissing Count III of the Complaint.

IV.

The evidence presented clearly establishes that (a) Wells Fargo is the holder of the Note and assignee of the Mortgage, and (b) the Note has not been paid in full or otherwise satisfied. As to Count I, the Plaintiffs ask for a finding by this Court that the documents in the Proof of Claim are insufficient to establish a security interest in favor of Wells Fargo. For the reasons set forth above, the Court believes that the evidence is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party, and grants summary judgment in favor of Wells Fargo as to Count I. In Count II, Plaintiffs seek a ruling that that the claim of Wells Fargo is totally unsecured. For the reasons set forth above, the Court believes that the evidence is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party, and grants summary judgment in favor of Wells Fargo as to Count II. In Count III, Plaintiffs request that the Court find that, pursuant to 13 Pa. Cons. Stat. §§ 3302, 3305, the Plaintiffs are entitled to recoup all money they previously paid to Wells Fargo, and, among other requests, award actual and punitive damages. For the reasons set forth above, the Court believes that the evidence is not sufficient to permit a reasonable jury to return a verdict for the nonmoving party, and grants summary judgment in favor of Wells Fargo as to Count III.

For the reasons stated herein, Wells Fargo Bank, National Association's Motion for Summary Judgment is granted. An Order consistent with this Opinion will be entered.