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BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more

BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more


BANK OF AMERICA, NA v. KABBA
2012 OK 23
Case Number: 109660
Decided: 03/06/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 

BANK OF AMERICA, NA, Plaintiff/Appellee,

v.

MOMODU AHMED KABBA, Defendant/Appellant,
and
HUMU HAWAH KABBA, JOHN DOE and JANE DOE, Defendants.

ON APPEAL FROM THE DISTRICT COURT
OF CLEVELAND COUNTY
HONORABLE TOM A. LUCAS, DISTRICT JUDGE

¶0 Appeal of a June 13, 2011, summary judgment granted in favor of Bank of America, NA, against Momodu Ahmed Kabba (hereinafter Kabba) and his wife Humu Hawah Kabba (defendant below). This Court retained the matter on August 18, 2011. Kabba appeals the granting of Summary Judgment asserting Bank of America, NA, did not have standing to bring the action.

REVERSED AND REMANDED WITH INSTRUCTIONS

A. Grant Schwabe, KIVELL, RAYMENT AND FRANCIS, Tulsa, Oklahoma, for Plaintiff/Appellee.
James P. Cates, BAER TIMBERLAKE COULSON & CATES, PC, Oklahoma City, Oklahoma, for Plaintiff/Appellee.
J.R. Matthews, J R MATTHEWS LLC, Oklahoma City, Oklahoma, for Defendant/Appellants.

COMBS, J.

FACTUAL AND PROCURAL HISTORY

¶1 In a petition filed on March 11, 2010, Bank of America, NA, claiming to be the present holder of the note (hereinafter Bank of America) initiated a foreclosure action against Kabba and his wife. Bank of America claimed, at that time, to hold the note and mortgage as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. A review of the note shows a blank indorsement. This blank indorsement was filed with the lower court for the first time in the motion for summary judgment. The blank indorsement was not mentioned or referenced in the original petition.

BNC Mortgage, Inc., was the original lender. Bank of America filed with the Court Clerk of Cleveland County, a document entitled “Assignment of Real Estate Mortgage” on January 17, 2011, therein claiming the assignment to be effective as of February 9, 2010. This was nine months after the filing of the petition to foreclose. Additionally, this “Assignment of Mortgage,” signed by Mortgage Electronic Registrations Systems, Inc. (hereinafter MERS), as nominee for BNC Mortgage, Inc., and its successors and assigns, merely named Bank of America as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. There was no mention of the note in this “Assignment of Mortgage”. On June 13, 2011, Summary judgment was granted and memorialized by a Final Journal Entry of Judgment order in Bank of America’s favor, against Kabba and his wife. Kabba appeals this summary judgment asserting Bank of America failed to demonstrate standing.

STANDARD OF REVIEW

¶2 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶3 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, there is nothing in the record that shows when Appellee became the holder. The face of the note indicates it was indorsed in blank. However, this indorsement was not filed with the petition but with the motion for summary judgment. The purported “Assignment of Mortgage” was filed after the filing of the foreclosure proceedings and was signed by MERS, and not BNC Mortgage, Inc. The “Assignment of Mortgage” at no time mentioned the note.

¶4 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit; . . .” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).1

¶5 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.2 An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note. BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. A foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶6 To demonstrate you are the “holder” of the note you must establish you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).3 Therefore, both possession of the note and an indorsement on the note or attached allonge4 are required in order for one to be a “holder” of the note.

¶7 To be a “nonholder in possession who has the rights of a holder” you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement. Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held, without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶8 In the present case, Appellee has only presented evidence of an indorsed-in-blank note and an “Assignment of Mortgage.” Appellee must prove that it is the holder of the note or the nonholder in possession who has the rights of a holder prior to the filing of the foreclosure proceeding. In the present matter the timeliness of the transfer is in question. Since Bank of America did not file the blank indorsement until it filed its motion for summary judgment it is impossible to determine from the record when Bank of America acquired its interest in the underlying note.

¶9 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish they are a nonholder in possession who has the rights of a holder they must bear the burden of establishing their status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the “Assignment of Mortgage” in order to establish the purpose of delivery. The “Assignment of Mortgage” purports to transfer “[f]or value received, the undersigned, Mortgage Electronic Registration Systems, Inc., as nominee for BNC Mortgage, Inc., and its successors and assigns does hereby assign, transfer and set over unto Bank of America, National Association as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust Agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2, that certain real estate mortgage dated August 30, 2004, granted by Momodu Ahmed Kabba and Humu Hawah Kabba, husband and wife….” This language has been determined by other jurisdictions to not effect an assignment of a note but to be useful only in identifying the mortgage. Therefore, this language is neither proof of transfer of the note nor proof of the purpose of any alleged transfer. See, In re Veal, 450 B.R. 897, 905 (B.A.P. 9th Cir. 2011).

¶10 Appellee must show it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. In the present case, there is a question of fact as to when and if this occurred and summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If it is determined Bank of America became a person entitled to enforce the note, as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶11 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, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency and therefore, 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).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶12 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, JJ.

¶13 DISSENT: WINCHESTER (JOINS GURICH, J.), GURICH (BY SEPARATE WRITING), JJ.

¶14 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 The dissenting opinion in this matter relies upon Justice Opala’s concurring opinion in Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906, for the proposition that standing is not a jurisdictional question. Justice Opala’s concurring opinion was not the majority opinion of this Court and as such “a minority opinion has no binding, precedential value.” 20 Am.Jur. 2d Courts §138.

2 This opinion was promulgated prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

3 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205.

4 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

 

GURICH, J., with whom WINCHESTER, J. joins dissenting:

¶1 I respectfully dissent. In this case, the record indicates that attached to Plaintiff’s Motion for Summary Judgment was an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff was the holder of the note and mortgage.1 Because the Plaintiff was the proper party to pursue the foreclosure and because the Plaintiff presented the proper documentation at summary judgment to prove such, I would affirm the trial court.

¶2 The majority states that “[t]o commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note, and absent a showing of ownership, the plaintiff lacks standing,” citing Gill v. First Nat. Bank & Trust Co., 1945 OK 181, 159 P.2d 717.2 See Majority Op. ¶ 5. I agree that in any foreclosure action a party must demonstrate it is the proper party to request adjudication of the issues. However, the issue of whether a party is the proper party to request adjudication of the issues is a real-party-in-interest issue, not an issue of “standing,” as the majority frames it. See Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring). Justice Opala framed the issue correctly in Toxic Waste Impact Group:

Standing in the federal legal system is imbued with a constitutional/jurisdictional dimension, while in the body of state law it fits under the rubric of ordinary procedure. The U.S. Constitution, Article III, has long been held to require that a “case” or “controversy” is essential to invoke federal judicial jurisdiction and that a person’s competence to bring an action is a core component of standing in a case-or-controversy inquiry. It is for this reason that standing is an integral part of the mechanism for invoking the federal judiciary’s power.

Oklahoma’s fundamental law places no restraint on the judiciary’s power analogous to the federal case-or-controversy requirement. Under the earlier Code of Civil Procedure the suit had to be brought by the real party in interest. That requirement has always been non-jurisdictional. If a state court proceeded to adjudicate a claim pressed by one not in that status, its decision was not fraught with jurisdictional infirmity but rather regarded as erroneous for want of proof to establish an important element of the claim. An error in this category is waivable at the option of the defendant; and, if not asserted on appeal, the reviewing court may reach the merits of the case despite a plaintiff’s apparent lack of standing at nisi prius.

Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring, ¶¶ 2-3) (emphasis added); see also Black Hawk Oil Co. v. Exxon, 1998 OK 70, ¶ 24, 969 P.2d 337, 344 (“Using the term ‘standing’ to designate real-party-in-interest issues tempts courts to apply standing principles outside the context in which they were developed. . . . A defendant is entitled to have the suit against him prosecuted by the ‘real party in interest’ but ‘his concern ends when a judgment for or against the nominal plaintiff would protect defendant from any action on same demand by another.”) (Watt, J., Majority Op.)

¶3 The majority in this case cites Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234 and Fent v. Contingency Review Board, 2007 OK 27, n.19, 163 P.3d 512, 519 for the proposition that “standing may be raised at any stage of the judicial process or by the court on its own motion.” See Majority Op. ¶ 4. Those cases cite Matter of the Estate of Doan, 1986 OK 15, ¶ 7, 7272 P.2d 574, as authority for this proposition. Arguably, however, Doan misstates the law:

Ever since the Code of Civil Procedure was replaced in 1984 by the Pleading Code, our nomenclature for identifying the party entitled to sue, which began to follow that of federal jurisprudence, has used “standing” as if it were a functional equivalent of the earlier procedural terms of art–real party in interest, one with appealable interest, one occupying the aggrieved-party or pecuniary-interest status. It was during this transition that one of our opinions inadvertently referred to “standing” in terms of a jurisdictional requirement, thus creating the misimpression that the term has a jurisdictional dimension. Oklahoma’s constitution has no case-or-controversy clause. Standing is hence to be viewed as an adjective-law concept. The inadvertent reference to the contrary should be treated as ineffective to alter standing’s true character in the body of our procedural law.

. . . .

I concur in today’s opinion and in the disposition of the cause. If I were writing for the court, I would additionally declare that Doan’s inadvertent reference to federal law is to be viewed as withdrawn. Lujan’s tripartite standing test, which we adopt today, must be treated as having been received sans its federal jurisdictional baggage.

See Toxic Waste Impact Group, 1994 OK 148 (Opala, J., concurring ¶ 4).

¶4 Additionally, both Hendrick and Fent were original actions in this Court. As such, “standing” could have been raised at any point by this Court sua sponte. However, in a proceeding in District Court, because it is a non-jurisdictional issue, failure to assert that the Plaintiff is not the real party in interest may be waived. See Liddell v. Heavner, 2008 OK 6, n.5, 180 P.3d 1191 (Opala, J., Majority Op.); see also 12 O.S. 2012 § 2008(D).

¶5 In this case, the facts demonstrate that the Defendant argued below that Plaintiff did not have a stake in the foreclosure and was not the real party in interest. As such, the issue was properly appealed. However, the facts also demonstrate that the Plaintiff was in fact the real party in interest and was the proper party to pursue the foreclosure. 12 O.S. 2012 § 2017. As such, I would affirm the trial court.

¶6 The majority also holds that a foreclosing party must have the “proper supporting documentation in hand when filing suit.” See Majority Op. ¶ 10 (emphasis added). Oklahoma pleading procedure does not require a plaintiff to have all evidence necessary to prevail on its claim at the time of the filing. Rather, what is required is a “short and plain statement of the claim showing that the pleader is entitled to relief.” 12 O.S. 2012 § 2008(A)(1). Additionally, 12 O.S.2012 § 2011(B)(3) provides that an attorney filing anything with the court certifies that to “the best of the person’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances . . . the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.” 12 O.S. 2012 § 2011(B)(3) (emphasis added).3

¶7 Mortgage foreclosures, like other civil actions, allow the parties to continue to investigate and discover evidence up until the time of judgment. In this case, the Plaintiff continued to investigate its claim up until the time of summary judgment. At the time of summary judgment it offered sufficient proof to the trial court that it had the right to foreclose on the mortgage.4

¶8 Plaintiff satisfied its burden of proof, and the trial court was correct in sustaining the motion and granting judgment to the Plaintiff. On appeal where no evidence indicates otherwise, there is a presumption that the judgment of the trial court conforms to the proof present at the trial. Gilkes v. Gilkes, 1964 OK 28, 389 P.2d 503. I cannot agree with the majority’s holding that the plaintiff must have the “proper supporting documentation in hand when filing suit” because no authority states such and the Oklahoma pleading code requires otherwise. The procedure imposed by the majority in this case will result in delay, will not affect the inevitable outcome of foreclosure, and will increase the homeowner’s debt. 5

FOOTNOTES

1 The record also indicates that the Defendant filed an answer and counterclaim pro se, but was later represented by counsel who filed a Combined Response and Objections to Plaintiff’s Motion for Summary Judgment and a Counter-Motion for Summary Judgment. At the hearing on the motions, the trial judge considered arguments of Counsel for the parties and reviewed the evidentiary materials offered, including the original note, the original mortgage, the assignment of the mortgage, and the affidavit.

2 In Gill, the plaintiff brought an action to foreclose a mortgage on real property. There was no discussion in the case of whether the plaintiff had standing to bring the action or whether the plaintiff was the real party in interest. In fact, the case was tried to the Court, and the appeal turned on the sufficiency of evidence presented at trial. The Gill decision stands for the proposition that the assignment of the note carries with it an assignment of the mortgage. It is not relevant to the standing analysis, nor does it stand for the proposition that the plaintiff must prove at the time of filing that it has a right to enforce the note.

3 Likewise, while I agree that the UCC applies in this case because the note is a negotiable instrument, the UCC does not require that a foreclosing entity prove at the time of filing that it is the person entitled to enforce the instrument.

4 Rule 13 of the Rules for District Courts permits a party to file evidentiary material with a motion for summary judgment. In this case, Plaintiff offered an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff as the holder of the note and mortgage.

5 On remand, rather than dismiss the petition, the trial court may allow the Plaintiff to amend its petition. HSBC Bank USA v. Lyon, 2012 OK 10, ¶ 1, __ P.3d __.

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In Re: LIPPOLD | NY Bankruptcy Court Delivers TKO to MERS, US BANK

In Re: LIPPOLD | NY Bankruptcy Court Delivers TKO to MERS, US BANK


IN RE LIPPOLD

In re: MARK RICHARD LIPPOLD, Chapter 7, Debtor.

Case No. 11-12300 (MG).

United States Bankruptcy Court, S.D. New York.

September 6, 2011.

A P P E A R A N C E S:
SHELDON MAY & ASSOCIATES, P.C.

Attorneys for U.S. Bank, N.A.
255 Merrick Road
Rockville Centre, New York 11570
By: Brian P. Nelson, Esq.

MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR
RELIEF FROM THE AUTOMATIC STAY

In this chapter 7 case of debtor Mark Richard Lippold (the “Debtor”), U.S. Bank National Association (“U.S. Bank”), as trustee, on behalf of the holders of the Asset Backed Securities Corporation Home Equity Loan Trust (the “Trust”), Series AEG 2006-HE1 Asset Backed Pass-Through Certificates, Series AEG 2006-HEI, moves to vacate the automatic stay pursuant to section 362(d)(2) of the Bankruptcy Code to permit it to proceed with foreclosure of the Debtor’s primary residence (the “Property”) located at 3171 Fairmont Avenue, Bronx, NY 10465 (the “Motion”).1 (ECF Doc. #16.)

The issues discussed in this Opinion are neither novel nor complex, but highlight a well-publicized and persistent problem with inadequate mortgage foreclosure documentation. The failure to properly document the transfer of the note and mortgage raises the question whether the movant has standing to seek relief—here, an order vacating the automatic stay, but, if successful here, then a judgment of foreclosure in state court. Neither the Debtor’s counsel nor the Chapter 7 trustee filed an objection to the Motion. But the lack of objection does not relieve U.S. Bank from the burden of establishing its right to relief. The Court denies the Motion because U.S. Bank has not established its standing for stay relief.

BACKGROUND

On May 16, 2011, the Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code (the “Petition”). (ECF Doc. #1.) The Debtor’s schedules disclose $352,617.00 in assets and $708,237.75 in liabilities. Schedule D shows the Property is encumbered by two mortgages, aggregating $461,616.00. Schedule A values the Property at only $350,000.00, admitting the Debtor’s lack of equity in the Property.2 The Debtor’s Statement of Intention states the Debtor’s intent to pursue a loan modification with respect to the Property.3

Aegis Funding Corporation (“Aegis”) was the original mortgage lender. The promissory note (the “Note”) names Aegis as the lender. The accompanying mortgage (the “Mortgage”) lists Mortgage Electronic Registration Systems, Inc. (“MERS”) as the mortgagee solely in its capacity as “nominee” for Aegis and its successors in interest. (Motion Ex. B, at 3.) The Mortgage further provides that MERS “holds only legal title to the rights granted by [Debtor] in [the Mortgage,]” and that “[f]or purposes of recording [the Mortgage],” MERS is the “mortgagee of record.” (Id. at 1, 3.) “MERS (as nominee for [Aegis] and [Aegis’s] successors and successors and assigns) has the right:

(A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and

(B) to take any action required of [Aegis] including, but not limited to, releasing and canceling [the Mortgage].”

(Id. at 3.)

The Note provides for the Debtor to pay Aegis principal in the amount of $344,000.00 plus interest. (Motion Ex. A.) Unlike the Mortgage, however, Aegis did not confer any rights in MERS with respect to the Note. (Id.)

The Motion is supported by a Corporate Assignment of Mortgage (the “Assignment”), whereby MERS, “as nominee for [Aegis] its successors and assigns at c/o [Select Portfolio Servicing,]” assigned to U.S. Bank, in its capacity as trustee of the Trust, the said Mortgage together with other evidence of indebtedness, said Mortgage having an original principal sum of $344,000.00 with interest, secured thereby, together with all moneys now owing or that may hereafter become due or owing in respect thereof, and the full benefit of all powers and of all the covenants and provisos therein contained, and the said Assignor hereby grants and conveys onto [U.S. Bank], [MERS’s] beneficial interest under the Mortgage.

(Motion Ex. C.)

The Assignment from MERS to U.S. Bank purports to transfer MERS’s rights in the Note; but it does not answer the question of what, if any, rights MERS has in the Note. At an August 30, 2011 hearing on the Motion (the “Hearing”), U.S. Bank’s counsel acknowledged that other than the Assignment, the record contains no evidence of U.S. Bank’s purported ownership of the Note.

DISCUSSION

A. U.S. Bank is Not a “Party in Interest” Under 11 U.S.C. § 362(d)(2)

Section 362(a) of the Bankruptcy Code provides an automatic stay on all litigation against the Debtor, as well as “any act to create, perfect, or enforce any lien against property of the estate.” 11 U.S.C. § 362(a). Under section 362(d)(2) of the Bankruptcy Code—the operative provision relied on by U.S. Bank in seeking relief—”[o]n request of a party in interest . . . the court shall grant relief from the stay . . . if—(A) the debtor does not have an equity in such property; and (B) such property is not necessary to an effective reorganization.” 11 U.S.C. § 362(d)(2) (emphasis added).

In In re Mims, 438 B.R. 52, 55 (Bankr. S.D.N.Y. 2010), this Court explained that the term “party in interest” is not defined in the Bankruptcy Code. Under Second Circuit law, however, “in order to invoke the court’s jurisdiction to obtain relief from the automatic stay, the moving party [must] be either a creditor or a debtor.” Id. (citing In re Comcoach, 698 F.2d 571, 573 (2d Cir. 1983)); see also Agard, 444 B.R. at 245. It follows that U.S. Bank must be a “creditor” to seek relief from the automatic stay.4 Mims, 438 B.R. at 55.

Section 101(10) of the Bankruptcy Code defines a “creditor,” in part, as an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.” 11 U.S.C. § 101(10)(A) (emphasis added). A “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured or unsecured.” Id. § 101(5)(A) (emphasis added).

Despite the Bankruptcy Code’s broad definition of a “claim,” U.S. Bank “has not demonstrated its `right to payment’ because . . . it lacks the ability to seek the state law remedy of foreclosure.” Mims, 438 B.R. at 56 (citing Johnson v. Home State Bank, 501 U.S. 78, 81 (1991) (finding that a mortgage foreclosure was a “right to payment” against the debtor)).

B. U.S. Bank Lacks Standing to Foreclose on the Property

“Standing is a threshold issue for a court to resolve.” Agard, 444 B.R. at 245. State law governs the determination of property rights in a bankruptcy proceeding. See Butner v. United States, 440 U.S. 48, 54 (1979) (noting that absent an actual conflict with federal bankruptcy law, Congress “has generally left the determination of property rights in the assets of a bankrupt’s estate to state law”); In re Morton, 866 F.2d 561, 563 (2d Cir. 1989). Under New York law, a plaintiff has standing to commence a mortgage foreclosure action “where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced.” Bank of N.Y. v. Silverberg, 926 N.Y.S.2d 532, 536 (2d Dept. 2011) (citing cases). “[F]oreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity.” Kluge v. Fugazy, 145 A.D.2d 537, 538 (2d Dept. 1988) (citing cases); see also HSBC Bank USA, Nat. Ass’n v. Miller, 26 Misc.3d 407, 411-12 (N.Y. Sup. Ct., Sullivan County 2009).

While the transfer of the mortgage without the promissory note is a nullity, once a promissory note is transferred from assignor to assignee, “the mortgage passes as an incident to the note.” Id. at 537; see also In re Escobar, Nos. 11-71114-ast, 11-71135-ast, 2011 WL 3667550, at *9 (Bankr. E.D.N.Y. Aug. 22, 2011) (Trust, J.). An assignment of the note and mortgage can be effectuated by a written instrument or by physical transfer of the instrument from assignor to assignee. Mims, 438 B.R. at 56. In Mims, this Court held that the movant, Wells Fargo Bank, N.A. (“Wells Fargo”), failed to supply proof that it was the owner of a promissory note given as part of a home mortgage loan. Id. Wells Fargo could not show that the note was either physically delivered or assigned pursuant to a written agreement. Id. Wells Fargo supported its motion with a written assignment, but the document only assigned the mortgage, not the underlying debt. Id. at 56-57. Stay relief was denied—since Wells Fargo failed to prove it owned the note, it “failed to establish that it [had] standing to pursue its state law remedies with regard to the Mortgage and Property.” Id. at 57; see also Escobar, 2011 WL 3667550, at *8 (“[A] note or mortgage assignee must demonstrate rights to proceed under state law as against the property at issue to have bankruptcy standing.”) (emphasis added).

Furthermore, the facts of this case are remarkably similar to two cases decided after Mims. In Agard, U.S. Bank, through its servicer, moved for relief from the automatic stay. 444 B.R. at 237. U.S. Bank submitted (i) a note executed by the debtor as borrower, and First Franklin, a Division of Na. City Bank of In. (“First Franklin”), as lender, and (ii) a mortgage executed by the debtor listing First Franklin as lender, and MERS as nominee for First Franklin and its successors and assigns. Id. While MERS was named as a party to the mortgage, it was not a party to the note. Id. at 246. U.S. Bank supplied an assignment of mortgage listing MERS as nominee for First Franklin, as assignor, and U.S. Bank, in its capacity as trustee for a mortgage loan trust, as assignee. Id. Judge Grossman found that U.S. Bank failed to meet its burden of showing that it was the holder of the note by an assignment from First Franklin: MERS was “not a party to the Note” and no evidence was produced demonstrating MERS’s “authority to take any action with respect to the Note.” Id. at 246. Moreover, U.S. Bank did not establish that it retained physical possession of the note to evidence a valid transfer.5 Id.

More recently, in Silverberg, the Appellate Division for the Second Department held that since MERS was not the lawful holder of notes identified in a mortgage and note consolidation agreement, MERS did not have the authority to assign the power to foreclose. 926 N.Y.S.2d at 538. The borrowers had entered into two loan agreements with Countrywide Home Loans, Inc. (“Countrywide”) to purchase residential real property—each loan included a promissory note and a mortgage securing the borrowers’ obligations under the note. Id. at 533-34. The borrowers subsequently executed a consolidation agreement, merging the two notes and mortgages into one obligation in favor of MERS, as mortgagee and nominee of Countrywide. Id. at 534. But Countrywide alone was the named lender and note holder. Id. The consolidation agreement recited that MERS was “acting solely as a nominee for [Countrywide] and [Countrywide’s] successors and assigns. . . . For purposes of recording this agreement, MERS is the mortgagee of record.” Id. Countrywide was not a party to the consolidation agreement. Id. Several months later, MERS, as Countrywide’s nominee, assigned the consolidation agreement to the Bank of New York. Id. When the borrowers defaulted, the Bank of New York commenced a foreclosure action in state court. Id. On appeal, the Second Department concluded that while the consolidation agreement gave MERS the right to assign the mortgages, it did not give MERS the authority to transfer the underlying notes. Id. at 538. MERS’s authority, as “nominee,” was “limited to only those powers which were specifically conferred to it and authorized by the lender.” Id. Since MERS could not transfer the notes, any such assignment exceeded MERS’s authority as the lender’s nominee.6 Id.

In this case, the Mortgage transferred “those rights that are stated in [the Mortgage]” to MERS, solely as Aegis’s nominee, so that “MERS [holds] only legal title to the rights granted by [Debtor] in [the Mortgage].” (Motion Ex. B, at 3.) According to the Mortgage, MERS is the “mortgagee of record[,]” and has the right, inter alia, to foreclose on the Property. (Id. at 1, 3). This language mirrors the terms of the consolidation agreement in Silverberg. At the Hearing, U.S. Bank’s counsel conceded that the facts of this case were “on all fours” with Silverberg.

The language of the Assignment in this case purports to transfer both the Mortgage and the Note to U.S. Bank. But MERS, as the purported assignor, could not legally assign the Note; it only had legal rights with respect to the Mortgage. Aegis did not confer any rights on MERS in the Note—MERS is not a party to the Note nor is there any indication that MERS was authorized to take any action with respect to the Note. See Agard, 444 B.R. at 246. Thus, “assignment of the note[] [is] . . . beyond MERS’s authority as nominee or agent of the lender.” Silverberg, 926 N.Y.S.2d at 538. There is also no evidence in the record showing that U.S. Bank received physical delivery of the Note, or that U.S. Bank is in possession of the Note. Since U.S. Bank failed to “provide satisfactory proof of its status as the owner or holder of the note at issue,” see Escobar, 2011 WL 3667550, at *9, the Court concludes that U.S. Bank does not have standing to obtain stay relief.7

CONCLUSION

For the reasons explained above, U.S. Bank’s motion to lift the automatic stay is denied without prejudice.

IT IS SO ORDERED

Footnotes

1. As an initial matter, the identity of the movant is unclear. In the papers submitted with the Motion, the movant is referred to as either U.S. Bank or Select Portfolio Servicing, Inc. (“Select Portfolio Servicing”)—U.S. Bank’s servicer. For purposes of this Opinion, the Court shall refer to U.S. Bank as the movant. Even if Select Portfolio Servicing is the movant, it is well-established that a mortgage servicer has standing to seek relief from the automatic stay, see, e.g., In re Agard, 444 B.R. 231, 235 n.1 (Bankr. E.D.N.Y. 2011) (citing cases), presuming, however, that the servicer is acting on behalf of a lender that has standing to seek stay relief. Id.

2. U.S. Bank’s lift-stay worksheet (Motion Ex. E), see Local Rule 4001-1(c), lists the value of the Property as $450,000.00.

3. This case does not present the issue whether the same standing analysis should be applied if a debtor’s stated intention is to surrender the property. In such a case the mortgagee can also pretermit the standing analysis with a stipulation to lift the stay with the debtor and any chapter 7 or 13 trustee.The docket does not show that the Debtor ever sought to take advantage of this Court’s Loss Mitigation Program. See SOUTHERN DISTRICT OF NEW YORK LOSS MITIGATION PROGRAM PROCEDURES (available at www.nysb.uscourts.gov).

4. A creditor’s authorized agent, such as a loan servicer, may also seek stay relief. See supra n.1.

5. The Agard court nevertheless granted U.S. Bank’s motion to vacate the automatic stay—the court held that the Rooker-Feldman doctrine applied, barring the debtor’s challenge to U.S. Bank’s standing, because of an earlier state court determination that U.S. Bank was a secured creditor. 44 B.R. at 233-34. But Judge Grossman concluded “in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court.” Id. at 254.

6. In In re Veal, 450 B.R. 897 (9th Cir. B.A.P. 2011), the court’s ruling substantially mirrors this Court’s ruling in Mims as well as the legal principles stated in Agard and Silverberg—namely, that in order to have standing to obtain stay relief, the moving party must establish ownership or an interest in the note. Id. at 917. The Ninth Circuit Bankruptcy Appellate Panel addressed whether the party seeking stay relief “established its standing as a real party in interest to pursue [relief from the automatic stay].” Id. at 902. The Veal court stated “a party seeking stay relief need only establish that it has a colorable claim to enforce a right against property of the estate.” Id. at 914-15. In order to show a “colorable claim” against the property, the movant “had to show that it had some interest in the Note, either as a holder, as some other `person entitled to enforce [under applicable UCC Art. 3 law],’ or that it was someone who held some ownership or other interest in the Note.” Id. at 917. The court concluded that the movant lacked standing because:without any evidence tending to show it was a `person entitled to enforce’ the Note, or that it has an interest in the Note, [the movant] has shown no right to enforce the Mortgage securing the Note. Without these rights, [the movant] cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.

Id. at 918.

7. U.S. Bank cannot argue that it has standing because the Mortgage states that MERS is the mortgagee of record for purposes of recording. (Motion Ex. B, at 1.) The Silverberg court rejected that very same argument— such language “cannot overcome the requirement that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced.” Silverberg, 926 N.Y.S.2d at 539. Also, since U.S. Bank offered no evidence that it owns any interest in the Note, by assignment, transfer or delivery, this case does not present the issue discussed in Escobar, 2011 WL 3667550, at *7, about the evidentiary threshold for lifting the automatic stay, leaving the issue for state court whether the evidence is sufficient to support granting a foreclosure judgment.

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Northern MI Judge Throws Out Foreclosure Says Note Wasn’t Assigned By MERS

Northern MI Judge Throws Out Foreclosure Says Note Wasn’t Assigned By MERS


MFI-Miami-

An interesting ruling came down from the nether regions of Northern Michigan today.  Houghton County Circuit Judge Charles Goodman ruled that a note holder lacked legal standing to execute both a foreclosure and the subsequent eviction because the originating lender Ameriquest only transferred their rights as mortgagee to MERS not their rights under the note.  Therefore, because the mortgage and note have been separated and only the mortgage was assigned, the foreclosing entity, Household Finance who MERS assigned the mortgage to, lacked the legal standing to execute the foreclosure and eviction because they did not hold the promissory note.

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NYSC Gives EMC The Boot For Not Having Standing, Vacates Judgment of Foreclosure, Sale Due To Retroactive Assignment

NYSC Gives EMC The Boot For Not Having Standing, Vacates Judgment of Foreclosure, Sale Due To Retroactive Assignment


NEW YORK SUPREME COURT – QUEENS COUNTY

EMC MORTGAGE CORP.,

v.

JEANETTA TOUSSAINT

excerpt:

In order to commence a foreclosure action, plaintiff must have a legal and equitable interest in the subject mortgage (Wells Fargo Bank v Machine 69 AD3rd 204). Here, the subject mortgage was not assigned until October 2, 2007, which was after the action was commenced on October 1, 2007. A retroactive assignment to September 25, 2007 cannot be used to confer standing upon the foreclosure action commenced prior to the execution of the assignment. (Countrywide Home Loans v Giess 68 AD3rd 709).

<SNIP>

The plaintiff, not being the holder of the assignment at the time the action was commenced, it did not have standing to commence this action. Accordingly, the Court vacates the Judgment of Foreclosure and Sale, which the County Clerks minutes indicate was executed on April 9, 2009 and dismisses the complaint.

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KENTUCKY APPEALS COURT VACATES SJ “DEUTSCHE BANK DID NOT HAVE STANDING” AUGENSTEIN v. DEUTSCHE BANK

KENTUCKY APPEALS COURT VACATES SJ “DEUTSCHE BANK DID NOT HAVE STANDING” AUGENSTEIN v. DEUTSCHE BANK


Commonwealth of Kentucky
Court of Appeals

NO. 2009-CA-000058-MR

GLENN D. AUGENSTEIN

v.

DEUTSCHE BANK NATIONAL
TRUST COMPANY
, AS TRUSTEE
FOR THE CERTIFICATEHOLDERS
OF SOUNDVIEW HOME LOAN TRUST
2005-OPT4, ASSET BACKED
CERTIFICATES, SERIES 2005-OPT4;
PAMELA FOREE; AND
DONALD T. PRATHER

OPINION
VACATING AND REMANDING

** ** ** ** **
BEFORE: DIXON AND MOORE, JUDGES; ISAAC,1 SENIOR JUDGE.

excerpt:

In light of our analysis, we vacate the entry of summary judgment because Deutsche Bank did not have standing to commence this action when it did.

This matter is therefore remanded to the circuit court for the purpose of entering an order consistent with this opinion removing this case from its docket.

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OHIO APPEALS COURT REVERSED “AFFIDAVIT = NO PROOF YOU OWN NOTE” DEUTSCHE BANK v. TRIPLETT

OHIO APPEALS COURT REVERSED “AFFIDAVIT = NO PROOF YOU OWN NOTE” DEUTSCHE BANK v. TRIPLETT


Deutsche Bank National Trust Co. Plaintiff-Appellee,
v.
Chanel Triplett, et al., Defendants-Appellants.

No. 94924.

Court of Appeals of Ohio, Eighth District, Cuyahoga County. RELEASED AND JOURNALIZED: February 3, 2011.

Appellant
Chanel Triplett, Pro Se, 2982 East 59th Street, Cleveland, Ohio 44127
Attorneys for Appellees
Mathew P. Curry, Manley DEAS Kochalski, LLC, P. O. Box 165028, Columbus, Ohio 43216-5028, Ted A. Humbert, Jason A. Whitacre, Kathryn M. Eyster, The Law Offices of John D. Clunk, Co., L.P.A., 4500 Courthouse Blvd., Suite 400, Stow, Ohio 44224, Nova Star Mortgage, Inc., 6200 Oak Tree Blvd., Third Floor, Independence, Ohio 44131, Stewart Lender Services, 9700 Bissonet Suite 1500, Mail Stop 27, Houston, Texas 77036,
——
Before: Blackmon, P.J., Sweeney, J., and Gallagher, J.
excerpt:

{¶ 7} Deutsche Bank also attached an affidavit from Renee Hertzler, an officer of Countrywide Home Loans, its loan servicing agent. Hertzler averred that Triplett’s loan account was under her supervision and that there was a principal balance due in the amount of $80,504.77 with interest thereon at 9.1% per year from August 1, 2007. Hertzler also averred that Triplett’s loan remained in default.
<SNIP>

{¶ 17} In U.S. Bank Natl. Assn. v. Duvall, Cuyahoga App. No. 94714, 2010-Ohio-6478, this Court’s recent decision affirming the trial court’s dismissal of a foreclosure complaint involving facts substantially similar to the present case, we rejected an affidavit that stated the plaintiff acquired the note and mortgage prior to the filing of the complaint. Likewise, Deutsche Bank’s affidavit of ownership, sworn out more than a year after the foreclosure complaint was filed, is insufficient to vest the bank with standing to file and maintain the action. Thus, if Deutsche Bank had offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law. Jordan, ¶¶ 22-23. Accordingly, we reverse the trial court’s decision because Deutsche Bank lacks standing.

Judgment reversed.

Continue to order below…

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NJ Appeals Court Reverses SJ “Failed To Have Standing” WELLS FARGO v. SANDRA A. FORD

NJ Appeals Court Reverses SJ “Failed To Have Standing” WELLS FARGO v. SANDRA A. FORD


NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION

DOCKET NO. A-3627-06T1

WELLS FARGO BANK, N.A.,
as Trustee,
Plaintiff-Respondent,
v.
SANDRA A. FORD,
Defendant-Appellant.

Argued October 5, 2010 – Decided

Before Judges Skillman, Yannotti and Espinosa.

On appeal from Superior Court of New Jersey,
Chancery Division, Bergen County, Docket
No. F-12259-06.

Margaret Lambe Jurow argued the cause for
appellant (Legal Services of New Jersey,
Inc., attorneys; Ms. Jurow and Rebecca
Schore, on the brief).

Robert F. Thomas argued the cause for
respondent (Pluese, Becker & Saltzman,
attorneys; Mr. Thomas and Rob Saltzman, on
the brief).

The opinion of the court was delivered by
SKILLMAN, P.J.A.D.

January 28, 2011

For these reasons, the summary judgment granted to Wells Fargo must be reversed and the case remanded to the trial court because Wells Fargo did not establish its standing to pursue this foreclosure action by competent evidence. On the remand, defendant may conduct appropriate discovery, including taking the deposition of Baxley and the person who purported to assign the mortgage and note to Wells Fargo on behalf of Argent.

Our conclusion that the summary judgment must be reversed because Wells Fargo failed to establish its standing to maintain this action makes it unnecessary to address defendant’s other arguments. However, for the guidance of the trial court in the event Wells Fargo is able to establish its standing on remand, we note that even though Wells Fargo could become a “holder” of the note under N.J.S.A. 12A:3-201(b) if Argent indorsed the note to Wells Fargo even at this late date, see UCC Comment 3 to N.J.S.A. 12A:3-203, Wells Fargo would not thereby become a “holder in due course” that could avoid whatever defenses defendant would have to a claim by Argent because Wells Fargo is now aware of those defenses. See N.J.S.A. 12A:3-203(c); UCC Comment 4 to N.J.S.A. 12A:3-203; see generally 6 William D.
Hawkland & Larry Lawrence, Hawkland and Lawrence UCC Series [Rev.] § 3-203:7 (2010); 6B Anderson on the Uniform Commercial Code, supra, § 3-203:14R. Consequently, if Wells Fargo produces an indorsed copy of the note on the remand, the date of that indorsement would be a critical factual issue in determining whether Wells Fargo is a holder in due course.

Accordingly, the summary judgment in favor of Wells Fargo is reversed and the case is remanded to the trial court for further proceedings in conformity with this opinion.

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NY 2nd Appellate Div. “NO STANDING” US Bank Natl. Assn. v Madero

NY 2nd Appellate Div. “NO STANDING” US Bank Natl. Assn. v Madero


Decided on January 25, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT
JOSEPH COVELLO, J.P.
THOMAS A. DICKERSON
L. PRISCILLA HALL
PLUMMER E. LOTT, JJ.
2010-02046
(Index No. 102965/08)

[*1]US Bank National Association, as Trustee, respondent,

v

Miguel Madero, et al., appellants, et al., defendants.

DeGuerre Law Firm, P.C., Staten Island, N.Y. (Anthony DeGuerre
of counsel), for appellants.
Hogan Lovells US LLP, New York, N.Y. (Allison J. Schoenthal
and Michael E. Blaine of counsel), for
respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendants Miguel Madero and Martha Madero appeal, as limited by their brief, from so much of an order of the Supreme Court, Richmond County (Maltese, J.), dated January 5, 2010, as granted those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against them and for an order of reference and, in effect, denied those branches of their cross motion which were for summary judgment dismissing the complaint insofar as asserted against them, or for a framed-issue hearing.

ORDERED that the order is modified, on the law, by deleting the first, second, seventh, eighth, and ninth decretal paragraphs thereof granting those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against them and for an order of reference, and substituting therefor a provision denying those branches of the plaintiff’s motion; as so modified, the order is affirmed insofar as appealed from, with one bill of costs to the appellants.

The defendants Miguel Madero and Martha Madero (hereinafter together the Maderos) owned and resided in a home located on Victory Boulevard in Staten Island since 1995. On October 20, 2005, Miguel Madero executed a note and, in return for a loan he received, promised to pay the sum of $570,000 plus interest to the lender, Mortgage Lenders Network USA, Inc. (hereinafter the lender). The note was secured by a mortgage on the Maderos’ home. The mortgage states that the Maderos mortgaged their home to Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), and its successors in interest solely as nominee for the lender and its successors in interest. In or around April 2008, the Maderos allegedly defaulted in paying their mortgage.

The mortgage was assigned by MERS, as nominee for the lender, its successors and assigns, to the plaintiff, US Bank National Association, as Trustee, by assignment of mortgage dated July 7, 2008, and recorded July 28, 2008.

On or about July 12, 2008, the plaintiff commenced this action against, among others, the Maderos to foreclose on the mortgage. The Maderos answered and alleged lack of standing as an affirmative defense. Thereafter, the plaintiff moved, inter alia, for summary judgment on the complaint as to the Maderos, and the Maderos cross-moved, among other things, for summary judgment [*2]dismissing the complaint insofar as asserted against them, or for a framed-issue hearing to determine whether the terms of the note and mortgage were unconscionable. In the order appealed from, the Supreme Court, inter alia, granted those branches of the plaintiff’s motion which were for summary judgment on the complaint as to the Maderos and for an order of reference and, in effect, denied those branches of the Maderos’ cross motion which were for summary judgment dismissing the complaint insofar as asserted against them and for a framed-issue hearing. The Maderos appeal. We modify.

Where, as here, a plaintiff’s standing is put into issue by the defendants, the plaintiff must prove its standing to be entitled to relief (see U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242). “In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced” (U.S. Bank, N.A. v Collymore, 68 AD3d at 753). “Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity” (id. at 754). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident” (id.; see LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912). Here, the plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law because it did not establish that it had standing, as the lawful holder or assignee of the subject note on the date it commenced this action, to commence the action (see U.S. Bank, N.A. v Collymore, 68 AD3d 752; see also Suraleb, Inc. v International Trade Club, Inc., 13 AD3d 612; Tawil v Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55). Accordingly, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment on the complaint as to the Maderos and for an order of reference.

The Supreme Court properly denied those branches of the Maderos’ cross motion which were for summary judgment dismissing the complaint insofar as asserted against them (cf. U.S. Bank, N.A. v Collymore, 68 AD3d 752), or for a framed-issue hearing (see Gillman v Chase Manhattan Bank, 73 NY2d 1).

In light of our determination, we need not reach the Maderos’ remaining contentions.
COVELLO, J.P., DICKERSON, HALL and LOTT, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court

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OHIO WELLS FARGO QUIET TITLE FAIL | GROVE COURT CONDOMINIUM UNIT OWNERS’ASSN. v. Hartman

OHIO WELLS FARGO QUIET TITLE FAIL | GROVE COURT CONDOMINIUM UNIT OWNERS’ASSN. v. Hartman


2011 Ohio 218
Grove Court Condominium Unit Owners’ Association, Plaintiff-Appellee,
v.
Dorothy M. Hartman, et al., Defendants-Appellees,
[Appeal by Appellant Wells Fargo Bank, N.A.]

No. 94910.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

RELEASED AND JOURNALIZED: January 20, 2011.

Deanna C. Stoutenborough, Romi T. Fox, M. Elizabeth Hils, Lerner, Sampson & Rothfuss, 120 E. Fourth Street, 8th Floor, Cincinnati, OH 45202, For Wells Fargo Bank, N.A. Scott A. King, Terry W. Posey, Jr., Thompson Hine LLP, P.O. Box 8801, 2000 Courthouse Plaza, N.E., Dayton, OH 45401-8801, Dale S. Smith, Thompson Hine LLP, 3900 Key Center, 127 Public Square, Cleveland, OH 44114, Attorneys for Appellant.

James C. Wrentmore, Singerman, Mills, Desberg & Kauntz Co., LPA, 3401 Enterprise Parkway, Suite 200, Beachwood, OH 44122, For Grove Court Condominium Unit Owners’ Association, Kevin M. Fields, Darcy Mehling Good, Robert E. Kmiecik, Kimberly L. Strauss, Kaman & Cusimano, LLC, 50 Public Square, Suite 2000, Cleveland, OH 44113, Elizabeth A. Meers, 1370 Ontario Street, Suite 2000, Cleveland, OH 44113-1726, For Dorothy M. Hartman, et al., Jason P. Hager, Douglass & Associates Co., LPA, 4725 Grayton Road, Cleveland, OH 44135, For Plymouth Park Tax Services, Alexander E. Goetsch, Megan R. Miller, Cavitch, Familo & Durkin Co., LPA, 1300 East Ninth Street, 20th Floor, Cleveland, OH 44114, For Dino Selvaggio, Third Federal Savings & Loan Association, Legal Department, 7007 Broadway Avenue, Cleveland, OH 44105, For Third Federal Savings & Loan Association, Attorneys for Appellees.

Before: Gallagher, P.J., Kilbane, A.J., and Celebrezze, J.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, P.J.

{¶ 1} Appellant Wells Fargo Bank, N.A. (“Wells Fargo”) appeals the judgment of the Cuyahoga County Court of Common Pleas that denied its emergency motion to intervene. For the reasons stated herein, we affirm.

{¶ 2} This is a foreclosure action that was instituted by plaintiff Grove Court Condominium Owners’ Association, Inc. (“Grove Court”), on December 28, 2006. At the time the action was filed, defendants Dorothy and Richard Hartman (“the Hartmans”) owned two condominiums, units 307 and 405, in the Grove Court condominium development, located at 1900 Grove Court in Cleveland. They acquired ownership to the units in 1986 through separate and distinct instruments. Unit 405 is the subject property in this matter.

{¶ 3} After purchasing the units, the Hartmans added an internal stairway to connect the units in accordance with Grove Court’s declaration and Ohio law. They did not combine the units into a single unit for legal and tax purposes. Rather, the units retained their separate addresses and parcel numbers.

{¶ 4} In 2005, the Hartmans obtained refinancing from Wells Fargo. The legal description on the mortgage and title commitment only included unit 307. There was no recorded interest on unit 405.

{¶ 5} On December 28, 2006, Grove Court filed this foreclosure action against the Hartmans. Grove Court sought to foreclose on a certificate of lien recorded against unit 405, for unpaid maintenance fees and condominium assessments. The parties named in the action were consistent with the preliminary judicial report, which did not show any mortgages of record on unit 405.

{¶ 6} On August 7, 2007, Grove Court filed an unopposed motion for summary judgment against the Hartmans. On October 22, 2007, the trial court adopted a magistrate’s decision, granted Grove Court judgment against the Hartmans, and issued a decree of foreclosure.

{¶ 7} In the meantime, Wells Fargo had initiated foreclosure proceedings on unit 307 on June 8, 2007. After discovering this action, Wells Fargo filed an emergency motion to intervene, motion for relief from judgment and to vacate sale, and motion to quiet title. The motion was filed two months after judgment had been granted to Grove Court, four days prior to the scheduled foreclosure sale, and almost a year after the case had commenced. Wells Fargo did not attach any pleading to the motion to intervene.

{¶ 8} In its motion, Wells Fargo asserted that it had issued a refinance loan to the Hartmans in October 2005, that the parties intended the loan to be secured by both units 307 and 405, and that as a result of a scrivener’s error, only unit 307 was identified in the legal description on the mortgage. Wells Fargo sought an order recognizing that it had a superior lien interest in unit 405.

{¶ 9} Before the motion was ruled upon, unit 405 was sold at a sheriff’s sale to Dino Selvaggio for $76,667. Thereafter, a court magistrate issued an order denying Wells Fargo’s motion to intervene. The trial court confirmed the sale on June 6, 2008.

{¶ 10} Various distributions were made from the proceeds of the sale, including $10,256.49 to Grove Court in satisfaction of its judgment. A portion of the funds remain pending with the clerk of court.

{¶ 11} Wells Fargo filed objections to the magistrate’s decision. On February 26, 2010, the trial court overruled the objections, adopted the magistrate’s decision, and denied Wells Fargo’s motion to intervene. The trial court, through the adopted decision, found that Wells Fargo’s motion failed to attach a pleading detailing its claim as required by Civ.R. 24(C). The court further found the motion raised a number of new liability issues that would operate to severely prejudice the ability of Grove Court to satisfy its judgment, that Wells Fargo did not maintain an interest in the subject property, and that the motion was untimely.

{¶ 12} Wells Fargo has appealed the trial court’s decision. In its sole assignment of error, Wells Fargo claims “[t]he trial court erred in denying the motion to intervene.”

{¶ 13} Wells Fargo asserts that it had a right to intervene in this action pursuant to Civ.R. 24(A)(2), which provides for intervention of right in civil cases. The rule provides as follows: “Upon timely application anyone shall be permitted to intervene in an action: * * * (2) when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.” Civ.R. 24(A)(2).[1]

{¶ 14} The rule is to be liberally construed in favor of intervention. State ex rel. Watkins v. Eighth Dist. Court of Appeals, 82 Ohio St.3d 532, 534, 1998-Ohio-190, 696 N.E.2d 1079. Nevertheless, the putative intervenor still bears the burden of establishing the right to intervene.

{¶ 15} In this case, Wells Fargo claims that it has an interest in the subject property. Although its alleged interest was not recorded and does not appear of record, Wells Fargo asserts that this was the result of a scrivener’s error and that it has a legal or equitable lien on the property that is superior to other interests.

{¶ 16} In interpreting analogous Fed.R.Civ.P. 24(a)(2), federal courts have stated that intervention of right requires the interest to be “direct, substantial, and legally protectable.” U.S. v. Vasi (Mar. 6, 1991), N.D. Ohio Nos. 5:90 CV 1167 and 5:90 CV 1168; Grubbs v. Norris (C.A. 6, 1989), 870 F.2d 343, 346. Ohio courts have found the same requirements implicit in Civ.R. 24(A)(2). Duryee v. PIE Mut. Ins. Co. (Dec. 1, 1998), Franklin App. No. 98AP-535; Fairview Gen. Hosp. v. Fletcher (1990), 69 Ohio App.3d 827, 591 N.E.2d 1312. Further, the Ohio Supreme Court specifically has stated that the claimed interest under Civ.R. 24(A)(2) must be one that is “legally protectable.” State ex rel. Dispatch Printing Co. v. Columbus, 90 Ohio St.3d 39, 2000-Ohio-8, 734 N.E.2d 797; In re Schmidt (1986), 25 Ohio St.3d 331, 336, 496 N.E.2d 952.

{¶ 17} In this case, the trial court determined that the documentation provided by Wells Fargo only demonstrates that its mortgage encumbers a wholly different parcel than the parcel at issue in this matter. The court found that without the exercise of the court’s equitable power of reformation, Wells Fargo has no interest in the subject property.

{¶ 18} We recognize that Wells Fargo does not have a present interest in the property and that its claimed interest is contingent on a determination of the merits of the issues it seeks to raise in the action.[2] However, even assuming that Wells Fargo’s claimed interest is a direct, substantial and legally protectable interest, we still find that the trial court did not error in denying the motion to intervene on the grounds that a required pleading was not attached to the motion and the motion was untimely.

{¶ 19} Civ.R. 24(C) mandates that the motion to intervene “shall be accompanied by a pleading, as defined in Civ.R. 7(A) setting forth the claim or defense for which intervention is sought.” Civ.R. 7(A) defines a pleading as a complaint, an answer, a reply to a counterclaim, an answer to a cross-claim, a third-party complaint, or a third-party answer. No such pleading accompanied the motion to intervene filed by Wells Fargo.

{¶ 20} The Ohio Supreme Court has repeatedly held that a motion to intervene is properly denied when the “motion is not accompanied by a pleading setting forth the claim or defense for which intervention is sought” as mandated by Civ.R. 24(C). State ex rel. Sawicki v. Court of Common Pleas of Lucas Cty., 121 Ohio St.3d 507, 2009-Ohio-1523, 905 N.E.2d 1192, ¶ 21; State ex rel. Polo v. Cuyahoga Cty. Bd. of Elections, 74 Ohio St.3d 143, 144, 1995-Ohio-269, 656 N.E.2d 1277.[3] Thus, we do not find that the trial court erred in denying the motion on this ground.

{¶ 21} “The timeliness of a motion to intervene pursuant to Civ.R. 24(A) is a matter within the sound discretion of the trial judge.” Univ. Hosps. of Cleveland, Inc. v. Lynch, 96 Ohio St.3d 118, 2002-Ohio-3748, 772 N.E.2d 105, ¶ 47. When determining the timeliness of the motion, the court should consider the following factors: “(1) the point to which the suit has progressed, (2) the purpose for which intervention is sought, (3) the length of time preceding the application during which the proposed intervenor knew or reasonably should have known of his interest in the case, (4) the prejudice to the original parties due to the proposed intervenor’s failure after he or she knew or reasonably should have known of his or her interest in the case to apply promptly for intervention, and (5) the existence of unusual circumstances militating against or in favor of intervention.” Id., quoting Triax Co. v. TRW, Inc. (C.A.6, 1984), 724 F.2d 1224, 1228.

{¶ 22} “Intervention after final judgment has been entered is unusual and ordinarily will not be granted.” Meagher, 82 Ohio St.3d at 504, 1998-Ohio-192, 696 N.E.2d 1058. However, intervention after final judgment may be allowed when the intervenor has no other alternative remedy and intervention is the only way to protect the intervenor’s rights. See Owens v. Wright (Feb. 18, 1993), Cuyahoga App. No. 64031; Likover v. Cleveland (1978), 60 Ohio App.2d 154, 159, 396 N.E.2d 491. Ultimately, the determination of whether a Civ.R. 24 motion to intervene is timely depends on the facts and circumstances of the case. Meagher, 82 Ohio St.3d at 503, 1998-Ohio-192, 696 N.E.2d 1058.

{¶ 23} In this case, Wells Fargo did not observe the alleged scrivener’s error at the time it received the title commitment or when the mortgage was recorded. It did not seek to intervene in this action until nearly a year after the case was filed, two months after final judgment was granted to Grove Court, and only four days before a scheduled sheriff’s sale of the subject property. Also, the motion was filed six months after Wells Fargo had filed its own foreclosure action against only unit 307. Wells Fargo sought to vacate the judgment, to interject newly contested issues into the matter, and to claim a potential superior interest in the subject property that would require the court to exercise its equitable powers to reform Wells Fargo’s mortgage. As a judgment had already been imposed, with priority interests established, allowing intervention would operate to prejudice the original parties. Further, the subject property was sold to Mr. Selvaggio.

{¶ 24} Considering the facts and circumstances of this case, we find the trial court did not abuse its discretion in denying Wells Fargo’s motion to intervene after judgment.[4] Accordingly, Wells Fargo’s sole assignment of error is overruled.

Judgment affirmed.

It is ordered that appellees recover from appellant costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution. Case remanded to the trial court for execution of sentence.

Mary Eileen Kilbane, A.J., and Frank D. Celebrezze, Jr., J., concur.

[1] The Ohio Supreme Court has recognized that “Ohio courts have applied an abuse of discretion standard for all of the Civ.R. 24(A)(2) intervention of right requirements.” State ex rel. First New Shiloh Baptist Church v. Meagher, 82 Ohio St.3d 501, 503 fn. 1, 1998-Ohio-192, 696 N.E.2d 1058. However, we observe that there is in fact some split in authority as to whether the review for intervention of right is de novo.

[2] We note that “equity will allow reformation of a written instrument for the erroneous omission of a material provision so that the instrument will evince the actual intention of the parties.” Berardi v. Ohio Turnpike Comm. (1965), 1 Ohio App.2d 365, 368, 205 N.E.2d 23.

[3] Insofar as this court found that the failure to attach a pleading was not fatal to intervention in Crittenden Court Apt. Assoc. v. Jacobson/Reliance, Cuyahoga App. Nos. 85395 and 85452, 2005-Ohio-1993, that case is distinguishable. In that case, the purpose for intervention “did not include the addition of any new liability or damages issues to the litigation,” and the proposed intervenor explained in its motion its reason for not attaching an intervening complaint as follows: “`Because [proposed intervenor] has no separate and independent claims to assert in this litigation, it is neither necessary or appropriate that it submit a pleading in conjunction with this motion as described in [Civ.R. 24(C)].'” Id. at ¶ 6. These are not the circumstances presented herein.

[4] The facts and circumstances in Rokakis v. Martin, 180 Ohio App.3d 696, 2009-Ohio-369, 906 N.E.2d 1200, a case relied on by Wells Fargo, were different from this matter. In Martin, the intervenor was a valid lienholder with a junior interest in the property to those already named in the action, its interest could be paid out of the excess sale proceeds remaining on deposit with the court, and its intervention would not operate to prejudice the original parties to the foreclosure action.

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WA STATE | In Re: JACOBSON “No Real Party In Interest, No Standing” RELIEF FROM STAY DENIED

WA STATE | In Re: JACOBSON “No Real Party In Interest, No Standing” RELIEF FROM STAY DENIED


Via: BankClassActions

UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON

FOR PUBLICATION
In re:
PETER A. JACOBSON and
MARIA E. JACOBSON,

Debtors.

No. 08-45120

DECISION ON RELIEF FROM STAY

Excerpts:

Before the court is a motion for relief from the automatic stay of § 362(a)2 to enforce a deed of trust on the Debtors’ residence. As it was neither brought in the name of the real party in interest, nor by anyone with standing, the motion for relief from stay will be DENIED.

<SNIP>

Assuming the exhibits to the motion are authentic and are the same as those intended to have been attached to the declaration, the note is indorsed in blank. Without more, that and possession (rather than mere custody) suggests that Wells Fargo is the holder of the note. RCW 62A.3-20114 and 3-30115. Nothing in the record establishes on whose behalf (if other than its own) Wells Fargo Document Custody possesses the note; that (and verification of current possession and present ability to produce the original, if required) would have to come from Wells Fargo.

Nor does anything in the record establish UBS AG’s authority to enforce the Debtors’ note, for whomever holds it; and thus to foreclose the deed of trust. The declaration states that UBS AG is “servicing agent,” a term with no uniform meaning, and no definition cited. At a minimum, there must be an unambiguous representation or declaration setting forth the servicer’s authority from the present holder of the note to collect on the note and enforce the deed of trust. If questioned, the servicer must be able to produce and authenticate that authority.

UBS AG has not shown that it has standing to bring the motion for relief from stay or authority to act for whomever does.

Continue below…

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[NYSC] MERS HAS NO INTEREST, STANDING, OFFICER AFFIDAVIT HAS NO PROVATIVE VALUE

[NYSC] MERS HAS NO INTEREST, STANDING, OFFICER AFFIDAVIT HAS NO PROVATIVE VALUE


SUPREME COURT – STATE OF NEW YORK

IAS PART 6 – SUFFOLK COUNTY

P R E S E N T :
Hon. RALPH. T. GAZZILLO
Justice of the Supreme Court

MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.
c/ 0 Wells Fargo Bank, NA
3470 Stateview Boulevard
Ft, Mill, SC 2971 5

v.

THOMAS STANDFORD, UNITED STATES
OF AMERICA ACTING THROUGH THE IRS

EXCERPT:

Based up0n the submissions herein, it appears that plaintiff “MERS” had no standing to
commence the present action as it was not the owner of the mortgage and note when the action was
commenced.
As of January 28,2005, “MERS” had already relinquished its interest in the note and
mortgage and at no subsequent lime did it regain an interest in the subject mortgage and note. In
addition, the affidavit of merit that is attached in support of the moving papers as Exhibit C, was
executed b) “Certifying Officer” Carolyn Brown of “MERS” on February 13,2009. “MERS” had no
demonstrable interest or standing
in this matter on Feb.l3,2009 and, accordingly, the affidavit of its
of officer has no probative value.

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[NYSC] Standing is a threshold issue, pathway to the courthouse is blocked: WELLS FARGO v. CAMPBELL

[NYSC] Standing is a threshold issue, pathway to the courthouse is blocked: WELLS FARGO v. CAMPBELL


NEW YORK STATE SUPREME COURT – QUEENS COUNTY
Present:
Honorable JAMES J. GOLIA
Justice
Index No: 13555/07

WELLS FARGO BANK, N.A., D/B/A
AMERICA’S SERVICING COMPANY
,

against

ROXANNE CAMPBELL, AMERICA’S SERVICING
COMPANY, MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC. AS NOMINEE
FOR WILMINGTON FINANCE, INC., NEW
YORK CITY ENVIRONMENTAL CONTROL BOARD,
NEW YORK CITY PARKING VIOLATIONS
BUREAU, NEW YORK CITY TRANSIT
ADJUDICATION BUREAU, MR. KANE,

Excerpt:

Standing is a threshold issue. If standing is denied, the pathway to the courthouse is blocked.(Saratoga County Chamber of Commerce, Inc. v. Pataki, 100 N.Y.2d 801A[ 2003]) Therefore, the court first considers the issue of plaintiff’s standing.

A plaintiff has standing to maintain an action upon alleging an injury in fact that falls within its zone of interest” (Silver v Pataki, 96 NY2d 532, 539 [2001]). The requirement that a litigant asserting a claim have an injury in fact — an actual stake in the matter being adjudicated — ensures that a person seeking judicial review has some concrete interest in prosecuting the action, which casts the dispute in a form capable of judicial resolution (Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 772, 573 N.E.2d 1034, 570 NYS2d 778 [1991]).

To have standing in an action for foreclosure of a mortgage the action must be brought by one who has title to it (Kluge v Fugazy, 145 AD2d 537 [2d Dept 1988]) and an assignee of a mortgage does not have standing unless the assignment is complete at the time the action is commenced. (See U.S. Bank, N.A. v Collymore, 68 AD3d 752 [2d Dept 2009]; Countrywide Home Loans, Inc. v Gress, 68 AD3d 709 [2d Dept 2009]). A retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action commenced prior to the execution of an assignment.” (Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 210, 887 N.Y.S.2d 615 [2d Dept 2009]).

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‘MERS’ HAS NO STANDING: A Judge Who sees the TRUTH

‘MERS’ HAS NO STANDING: A Judge Who sees the TRUTH


This Judge sees it exactly what it is:

LARRY A. JONES, J., DISSENTS (WITH SEPARATE OPINION)
LARRY A. JONES, J., DISSENTING:

{¶ 70} I respectfully dissent from my learned colleagues in the majority.
I believe there is evidence in the record to support reversal.

{¶ 71} In Wells Fargo Bank, N.A. v. Jordan, Cuyahoga App. No. 91675,
2009-Ohio-1092, this court held that Civ.R. 17 is not applicable when the
plaintiff is not the proper party to bring the case, and thus does not have
standing to do so. Id. at 21, citing Northland Ins. Co. v. Illuminating Co.,
Ashtabula App. Nos. 2002-A-0058 and 2002-A-0066, 2004-Ohio-1529, at ¶17.

{¶ 72} In Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App.3d 285,
2008-Ohio-4603, Wells Fargo, the plaintiff, filed a complaint for foreclosure on
January 23, 2007. Id. at ¶2. In Byrd, as in the case at bar, Wells Fargo
stated in the complaint that it was the holder and owner of the mortgage and
the Note. Id. Wells Fargo was assigned the Note and mortgage on March 2,
2007, after the complaint had been filed. Id. at ¶3. The Byrd court
concluded, “[u]nless a party has some real interest in the subject matter of
the action, that party will lack standing to invoke the jurisdiction of the
court.” (Emphasis added.) Id. at ¶10.

{¶ 73} Here, MERS, as nominee, filed its complaint on May 21, 2004.
MERS filed an assignment on July 2, 2004, which was signed on May 26,
2004. The facts in this matter fit squarely with the facts in both the Byrd
and Jordan opinions. Byrd and Jordan held that a party must, at the time
of filing, have a bona fide interest in the litigation in order to invoke the
court’s jurisdiction. The only interest MERS had at the time of filing in this
case was its “nominee” status under the mortgage. MERS attempted to
correct this by an assignment of the Note after the date of filing the
complaint. However, MERS was never the Note holder. See, R.C.
1303.22(A); R.C. 1303.31.

{¶ 74} After the alleged assignment was signed, MERS was only a
nominal party. After the loan closed, and long before litigation commenced,
Bank One sold the loan to Fannie Mae. MERS did not bear the loss upon
default. In fact, MERS is not the beneficial owner of the Note and only
stands in the shoes as servicer. If the Property were to be sold at a sheriff’s
sale, MERS would have no right to determine the amount of the bid, nor
would it be able to take title.

{¶ 75} Appellants did not waive their right to argue standing, and
plaintiff filed the assignment after it filed the complaint. Indeed, appellee
admits that the Note was not assigned until May 26, 2004, five days after
MERS commenced suit.

{¶ 76} MERS did not maintain a bona fide interest in the real property
or litigation and is therefore not the real party in interest. Accordingly, I
would find MERS lacked standing and could not properly invoke jurisdiction.

{¶ 77} Accordingly, I would sustain appellants’ first assignment of error.

Appendix A

Appellants’ Assignments of Error:

I. “The trial court erred as a matter of law and to the prejudice of appellants in
finding that MERS maintained standing to properly invoke the trial court’s
jurisdiction.”

II. “The trial court erred as a matter of law and to the prejudice of appellants in
failing to conduct an independent review of the evidence as mandated under
Civ.R. 53 and therefore abused its discretion in adopting the magistrate’s
decision.”

III. “The trial court erred as a matter of law and to the prejudice of appellants in
granting judgment to MERS and against appellants on their counterclaims.”

IV. “The trial court erred as a matter of law and abused its discretion in its
determination of the admissibility of evidence

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Tracking Loans Through a Firm That Holds Millions: MERS

Tracking Loans Through a Firm That Holds Millions: MERS


Kevin P. Casey for The New York Times: Darlene and Robert Blendheim of Seattle are struggling to keep their home after their subprime lender went out of business.

By MIKE McINTIRE NYTimes
Published: April 23, 2009

Judge Walt Logan had seen enough. As a county judge in Florida, he had 28 cases pending in which an entity called MERS wanted to foreclose on homeowners even though it had never lent them any money.

Into the Mortgage NetherworldGraphicInto the Mortgage Netherworld

MERS, a tiny data-management company, claimed the right to foreclose, but would not explain how it came to possess the mortgage notes originally issued by banks. Judge Logan summoned a MERS lawyer to the Pinellas County courthouse and insisted that that fundamental question be answered before he permitted the drastic step of seizing someone’s home.

Daniel Rosenbaum for The New York Times R. K. Arnold, MERS president, said the company helped reduce mortgage fraud and imposed order on the industry.

“You don’t think that’s reasonable?” the judge asked.

“I don’t,” the lawyer replied. “And in fact, not only do I think it’s not reasonable, often that’s going to be impossible.”

Judge Logan had entered the murky realm of MERS. Although the average person has never heard of it, MERS — short for Mortgage Electronic Registration Systems — holds 60 million mortgages on American homes, through a legal maneuver that has saved banks more than $1 billion over the last decade but made life maddeningly difficult for some troubled homeowners.

Created by lenders seeking to save millions of dollars on paperwork and public recording fees every time a loan changes hands, MERS is a confidential computer registry for trading mortgage loans. From an office in the Washington suburbs, it played an integral, if unsung, role in the proliferation of mortgage-backed securities that fueled the housing boom. But with the collapse of the housing market, the name of MERS has been popping up on foreclosure notices and on court dockets across the country, raising many questions about the way this controversial but legal process obscures the tortuous paths of mortgage ownership.

If MERS began as a convenience, it has, in effect, become a corporate cloak: no matter how many times a mortgage is bundled, sliced up or resold, the public record often begins and ends with MERS. In the last few years, banks have initiated tens of thousands of foreclosures in the name of MERS — about 13,000 in the New York region alone since 2005 — confounding homeowners seeking relief directly from lenders and judges trying to help borrowers untangle loan ownership. What is more, the way MERS obscures loan ownership makes it difficult for communities to identify predatory lenders whose practices led to the high foreclosure rates that have blighted some neighborhoods.

In Brooklyn, an elderly homeowner pursuing fraud claims had to go to court to learn the identity of the bank holding his mortgage note, which was concealed in the MERS system. In distressed neighborhoods of Atlanta, where MERS appeared as the most frequent filer of foreclosures, advocates wanting to engage lenders “face a challenge even finding someone with whom to begin the conversation,” according to a report by NeighborWorks America, a community development group.

To a number of critics, MERS has served to cushion banks from the fallout of their reckless lending practices.

“I’m convinced that part of the scheme here is to exhaust the resources of consumers and their advocates,” said Marie McDonnell, a mortgage analyst in Orleans, Mass., who is a consultant for lawyers suing lenders. “This system removes transparency over what’s happening to these mortgage obligations and sows confusion, which can only benefit the banks.”

A recent visitor to the MERS offices in Reston, Va., found the receptionist answering a telephone call from a befuddled borrower: “I’m sorry, ma’am, we can’t help you with your loan.” MERS officials say they frequently get such calls, and they offer a phone line and Web page where homeowners can look up the actual servicer of their mortgage.

In an interview, the president of MERS, R. K. Arnold, said that his company had benefited not only banks, but also millions of borrowers who could not have obtained loans without the money-saving efficiencies it brought to the mortgage trade. He said that far from posing a hurdle for homeowners, MERS had helped reduce mortgage fraud and imposed order on a sprawling industry where, in the past, lenders might have gone out of business and left no contact information for borrowers seeking assistance.

“We’re not this big bad animal,” Mr. Arnold said. “This crisis that we’ve had in the mortgage business would have been a lot worse without MERS.”

About 3,000 financial services firms pay annual fees for access to MERS, which has 44 employees and is owned by two dozen of the nation’s largest lenders, including Citigroup, JPMorgan Chase and Wells Fargo. It was the brainchild of the Mortgage Bankers Association, along with Fannie MaeFreddie Mac and Ginnie Mae, the mortgage finance giants, who produced a white paper in 1993 on the need to modernize the trading of mortgages.

At the time, the secondary market was gaining momentum, and Wall Street banks and institutional investors were making millions of dollars from the creative bundling and reselling of loans. But unlike common stocks, whose ownership has traditionally been hidden, mortgage-backed securities are based on loans whose details were long available in public land records kept by county clerks, who collect fees for each filing. The “tyranny of these forms,” the white paper said, was costing the industry $164 million a year.

“Before MERS,” said John A. Courson, president of the Mortgage Bankers Association, “the problem was that every time those documents or a file changed hands, you had to file a paper assignment, and that becomes terribly debilitating.”

Although several courts have raised questions over the years about the secrecy afforded mortgage owners by MERS, the legality has ultimately been upheld. The issue has surfaced again because so many homeowners facing foreclosure are dealing with MERS.

Advocates for borrowers complain that the system’s secrecy makes it impossible to seek help from the unidentified investors who own their loans. Avi Shenkar, whose company, the GMA Modification Corporation in North Miami Beach, Fla., helps homeowners renegotiate mortgages, said loan servicers frequently argued that “investor guidelines” prevented them from modifying loan terms.

“But when you ask what those guidelines are, or who the investor is so you can talk to them directly, you can’t find out,” he said.

MERS has considered making information about secondary ownership of mortgages available to borrowers, Mr. Arnold said, but he expressed doubts that it would be useful. Banks appoint a servicer to manage individual mortgages so “investors are not in the business of dealing with borrowers,” he said. “It seems like anything that bypasses the servicer is counterproductive,” he added.

When foreclosures do occur, MERS becomes responsible for initiating them as the mortgage holder of record. But because MERS occupies that role in name only, the bank actually servicing the loan deputizes its employees to act for MERS and has its lawyers file foreclosures in the name of MERS.

The potential for confusion is multiplied when the high-tech MERS system collides with the paper-driven foreclosure process. Banks using MERS to consummate mortgage trades with “electronic handshakes” must later prove their legal standing to foreclose. But without the chain of title that MERS removed from the public record, banks sometimes recreate paper assignments long after the fact or try to replace mortgage notes lost in the securitization process.

This maneuvering has been attacked by judges, who say it reflects a cavalier attitude toward legal safeguards for property owners, and exploited by borrowers hoping to delay foreclosure. Judge Logan in Florida, among the first to raise questions about the role of MERS, stopped accepting MERS foreclosures in 2005 after his colloquy with the company lawyer. MERS appealed and won two years later, although it has asked banks not to foreclose in its name in Florida because of lingering concerns.

Last February, a State Supreme Court justice in Brooklyn, Arthur M. Schack, rejected a foreclosure based on a document in which a Bank of New York executive identified herself as a vice president of MERS. Calling her “a milliner’s delight by virtue of the number of hats she wears,” Judge Schack wondered if the banker was “engaged in a subterfuge.”

In Seattle, Ms. McDonnell has raised similar questions about bankers with dual identities and sloppily prepared documents, helping to delay foreclosure on the home of Darlene and Robert Blendheim, whose subprime lender went out of business and left a confusing paper trail.

“I had never heard of MERS until this happened,” Mrs. Blendheim said. “It became an issue with us, because the bank didn’t have the paperwork to prove they owned the mortgage and basically recreated what they needed.”

The avalanche of foreclosures — three million last year, up 81 percent from 2007 — has also caused unforeseen problems for the people who run MERS, who take obvious pride in their unheralded role as a fulcrum of the American mortgage industry.

In Delaware, MERS is facing a class-action lawsuit by homeowners who contend it should be held accountable for fraudulent fees charged by banks that foreclose in MERS’s name.

Sometimes, banks have held title to foreclosed homes in the name of MERS, rather than their own. When local officials call and complain about vacant properties falling into disrepair, MERS tries to track down the lender for them, and has also created a registry to locate property managers responsible for foreclosed homes.

“But at the end of the day,” said Mr. Arnold, president of MERS, “if that lawn is not getting mowed and we cannot find the party who’s responsible for that, I have to get out there and mow that lawn.”

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Homeowners strike back at banks: The Daily Tribune

Homeowners strike back at banks: The Daily Tribune


“None of the named defendants have the right or authority to foreclose under (state law) or by contractual right,” he says in the lawsuit.

Published: Tuesday, May 11, 2010

By Jameson Cook, Daily Tribune Staff Writer

Lawsuits filed in maneuver to try to stop foreclosure, recover losses from alleged overpayments, improper approval.

About 90 homeowners in Oakland and Macomb counties have accused more than two dozen banks of deceptive lending and other wrongdoing by approving loans far exceeding the plaintiffs’ ability to pay and charging excessive fees, among other allegations.

The accusations are levied in two lawsuits filed in each county’s circuit court within the past two weeks through the Troy-based Michigan Loan Compliance Advisory Group Inc., created to help homeowners in trouble with their mortgages. A third lawsuit with about 10 plaintiffs is expected to be filed in Wayne County Circuit Court this week.

The lawsuits represent an emerging tactic nationwide for struggling homeowners in their attempt to fight off potential foreclosure and gain relief on stifling mortgages from some of the country’s largest banks.

Continue reading … The Daily Tribune

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