IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
BROWNSVILLE DIVISION

IN RE:
GILBERTO SALDIVAR, SANDRA
CANALES SALDIVAR,

CHAPTER 13

Debtor(s). JUDGE ISGUR

GILBERTO T SALDIVAR, et al
Plaintiff(s),
vs.

JPMORGAN CHASE BANK, N.A., et al
Defendant(s).

MEMORANDUM OPINION

EXCERPT:

Standing

As a threshold matter, the Court must first address Chase and Deutsche Bank’s assertion that
the Saldivars lack standing to challenge the validity of the assignment of their mortgage to the Trust.
A. Under New York Trust Law, is an ultra vires act void or merely voidable?
A third party generally lacks standing to challenge the validity of an assignment. Bank of
American Nat’l Assoc. v. Bassman FBT, L.L.C., et al. 981 N.E.2d 1, 7 (Ill. App. Ct. 2012). A
borrower may however raise a defense to an assignment, if that defense renders the assignment void.

[…]

N.Y. Est. Powers & Trusts Law § 7-2.4.The Bassman court holds that despite the plain
language of § 7-2.4, under various circumstances a trustee’s ultra vires acts are voidable and not
void. Bassman, 981 N.E.2d. at 9. The Bassman court cites New York cases that hold that
beneficiaries of a trust can ratify a trustee’s ultra vires acts. See Gregan v. Buchanan, et al, 37
N.Y.S. 83, 85 (N.Y. Sup. Ct. 1896); see also Hine v. Huntington, et al. 103 N.Y.S. 535, 540 (N.Y.
App. Div. 1907); Birnbaum v. Birnbaum, et al., 503 N.Y.S.2d 451 (N.Y. App. Div. 1986). The
Bassman court holds that the ability to ratify a trustee’s ultra vires act is equivalent to finding that a
trustee’s ultra vires act is merely voidable and not void.

Under 28 U.S.C. § 1652, this Court has the duty to apply New York law in accordance with
the controlling decision of the highest state court. Royal Bank of Canada v. Trentham Corp., 665
F.2d 515, 516 (5th Cir. 1981). While the Court finds no applicable New York Court of Appeals
decision, a recent New York Supreme Court decision is factually similar to the case before the Court.
See Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799 (N.Y. Sup. Ct. April 29, 2013). In
Erobobo, defendants argued that plaintiff (a REMIC trust) was not the owner of the note because
plaintiff obtained the note and mortgage after the trust had closed in violation of the terms of the PSA
governing the trust, rendering plaintiff’s acquisition of the note void. Id. at *2. The Erobobo court
held that under § 7-2.4, any conveyance in contravention of the PSA is void; this meant that
acceptance of the note and mortgage by the trustee after the date the trust closed rendered the transfer
void. Id. at 8.

Based on the Erobobo decision and the plain language of N.Y. Est. Powers & Trusts Law
§ 7-2.4, the Court finds that under New York law, assignment of the Saldivars’ Note after the start up
day is void ab initio. As such, none of the Saldivars’ claims will be dismissed for lack of standing.
The Court expresses no view on the effect of any subsequent ratification, if any. It is sufficient that a
claim has been stated.

[…]

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