Arizona

A recent ruling by a U.S. Bankruptcy Court in Tucson, Arizona refused to allow a foreclosing lender’s request to continue with a foreclosure action on the grounds that it failed to establish that it was the real party in interest and lacked standing to prosecute the matter.(1)

For the court’s ruling, see In re: Barry Weisband, Ch. 13, Case No. 4:09-bk-05175-EWH (Bankr. D. Ariz., Tucson Div., 3/29/2010).

(1) The basis for the court’s denial of the foreclosing lender’s ["GMAC"] request addressed the following three points:
GMAC’s failure to demonstrated that it was a holder of the note under under §47-3301 of the Arizona statute (“while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on “a paper affixed to the instrument.” A.R.S. § 47-3204; see also In re Nash, 49 B.R. 254, 261 (Bankr. D. Ariz. 1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.),

The MERS assignment of the deed of trust (ie. mortgage) did not provide GMAC with standing (MERS was named in the deed of trust as a beneficiary, solely as the “nominee” of GreenPoint Mortgage Funding, Inc. (the original lender), holding only “legal title” to the interests granted to the original lender funding the loan secured by the deed of trust. According to the ruling, “a number of cases have held that such language confers no economic benefit on MERS”),

GMAC was unable to establish that it was the servicer of the promissory note (the evidence in this case did not demonstrate that the promissory note and deed of trust were properly transferred to the “special purpose” securitization trust (“Trust”) holding the pool of loans, and, “without that evidence, there is no demonstration that GMAC is the servicer of the Note.” In light of this, the court stated that “it is immaterial that GMAC is the servicer for the Trust.”).

Orlando

A recent ruling by a U.S. Bankruptcy Court in Orlando, Florida refused to allow a foreclosing lender’s request to continue with a foreclosure action on the grounds that it failed to establish that it was the real party in interest and lacked standing to prosecute the matter.(1)

For the court’s ruling, see In re: Jorge Canellas, Ch. 7, Case No. 6:09-bk-12240-ABB (Bankr. M.D. Fla., Orlando Div., 2/9/2010).

(1) The basis for the court’s denial of the foreclosing lender’s (“Movant”) motion follows:
Movant’s Motion, however, is due to be denied because Movant has failed to establish it has standing to seek stay relief. A motion for relief from the automatic stay must be prosecuted in the name of the real party in interest. 11 U.S.C. § 362(d); FED. R. 8 CIV. P. 17(a)(1); FED. R. BANKR. P. 7017. “The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced.” In re Jacobson, 402 B.R. 359, 366 (Bankr. W.D. Wash. 2009). Only the holder of the Note and Mortgage, or its authorized agent, has standing to bring the Motion. Id. at 367.

Movant asserts in its Motion it is the “owner and holder” of the Note and Mortgage, but has presented no evidence substantiating that assertion. The copies of the Note presented do not contain an endorsement evidencing an assignment of the Note. The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of the Note.

The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.

The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.

Movant’s submissions are insufficient to establish it is the owner and holder of the Note and Mortgage or is authorized to act for whoever holds these documents. In re Relka, No. 09-20806, 2009 WL 5149262, at *5 (Bankr. D. Wyo. Dec. 22, 2009) (granting stay relief where movant established possession of note through testimony of witness who personally retrieved note from movant’s vault); In re Jacobson, 402 B.R. at 370 (denying movant’s stay relief motion due to movant’s failure to establish it was holder of note); In re Hayes, 393 B.R. 259, 270 (Bankr. D. Mass. 2008) (denying movant’s stay relief motion and sustaining debtor’s claim objection due to movant’s failure to establish it was holder of note). Movant has not established it has standing to bring the Motion and the Motion is due to be denied.