While We Were Sleeping, Idaho Took the Lead: In re Sheridan — Real Party Must Have Actual Pecuniary Interest

 

NOW AVAILABLE ON AMAZON KINDLE

“The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced. Even if a servicer or agent has authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer, which must be the moving party, and so identified in the papers and in the electronic docketing done by the moving party’s counsel.”

For 2 years I have been saying “stick with the basics.” Black Letter Law will set you free. But time and again attorneys, pro se litigants and judges go astray and find themselves in never never land. Most attorneys and Judges take preliminary motions with a grain of salt. Virtually all foreclosures would be eliminated if lawyers and judges paid attention to the very beginning of the case. Gator Bradshaw in Florida delivers a nice piece at our seminar on motion practice.

COME TO GARFIELD CONTINUUM SEMINAR NOV 1-2

Your job is to immediately focus the Judge’s attention on the fatal defects presnted by the actions of the intermediaries in the securitization process and more specifically, whoever is attempting to foreclose. By failing to challenge this at the outset you have effectively waived the issue and now face an uphill battle. This case reported below shows that a mere objection from the Trustee in BKR caused the entire claim of the forecloser to completely collapse.

7 months ago, before any of the landmark decisions reported on these pages,  Federal Bankruptcy Judge Myers in Idaho was presented with an objection from the Trustee to  Motion for Relief From stay.  Full pdf version at Sheridan_decision Idaho BKR J Myers

That the Trustee took up the cause is reason enough to note this case. What the Court did with it, in an articulate, well-reasoned memorandum of decision, is nothing short of startling in its clarity. One by one, this Judge takes down the arguments and tactics of the intermediaries in the securitization chain and basically says that none of them has a right to make a claim.

In short, just as in these pages, the Judge doesn’t say say who CAN assert and enforce the claim, he just says that none of these nominees, intermediaries, conduits, bookeepers, servicers, MERS, or pretender lenders has any pecuniary interest in the outcome and therefore they lack standing to be in court. On jurisdictional grounds, therefore, the case is closed and these interlopers are thrown out of court. Will the REAL Lender please stand up? Maybe, maybe not. 

The Judge points out that  “The Motion further alleges that Debtors were indebted at filing “to Movant” and that the debt arose out of a promissory note and a deed of trust dated September 20, 2006 “naming Movant as beneficiary.”

Judge Myers calmly and correctly points out that this was a total lie. When pressed the attorney acknowledged that the movant was not owed any money and that MERS was merely an agent for an undisclosed principal for an undisclosed purpose acting purportedly for the real party in interest. But the Judge says quite clearly and correctly that the rules require the real party in interest to be the movant.

This Judge also addresses the issue of burden of proof, a sticking point for many readers of this blog. He states that the burden is on the movant to prove standing, not on the homeowner or petitioner to prove lack of of standing. In fact, pointing to the rules again, he says that the pleading must  “[p]rovide the details of the underlying obligation or liability upon which the motion is based;” In a stroke of his pen, this Judge ends the issue over who has the burden of proof and even provides grounds BEFORE DISCOVERY for dumping fraudsters out of court. They must plead the allegations, and they must attach documentation that shows their pleadings are true and correct. This Judge is telling fraudsters to stop coming to court with attorney affidavits that are not evidence (see his memorandum) and to stop submitting affidavits, notes, revisions to notes, late indorsements, assingments that don’t match up with the pleadings or the requirements of pleading.

 

 

 

Id.

 

UNITED STATES BANKRUPTCY COURT

DISTRICT OF IDAHO

 

IN RE )

) Case No. 08-20381-TLM

DARRELL ROYCE SHERIDAN, )

SHERRY ANN SHERIDAN, )

) Chapter 7

Debtors. )

________________________________ )

MEMORANDUM OF DECISION

________________________________________

INTRODUCTION

 

In this Chapter 7 case, the trustee, Ford Elsaesser (“Trustee”), objects to a

motion under § 362(d) for relief from the § 362(a) automatic stay.

§ 362(d) are common in bankruptcy cases.

promptly to entry of an order, after proper notice, without any objection.

1 Motions under2 Most stay relief requests proceed3

 

However, changes in mortgage practices over the past several years have

created a number of new issues. The one highlighted in this case is the standing of

 

4

& Kronz

(Bankr. D. Idaho 2008). Debtors indicated in their § 521 statement of intention that they would

(continued…)

There was no objection, and the exemption was therefore allowed.

Taylor v. Freeland, 503 U.S. 638, 643-44 (1992); Rainsdon v. Farson (In re Farson), 387 B.R. 784, 797

 

MEMORANDUM OF DECISION – 2

the moving creditor. Serial assignments of the mortgagee’s interest(s) and the

securitization of mortgages have complicated what was previously a generally

straight-forward standing analysis. Though many creditors provide in their

motions adequate explanation and documentation of their standing to seek relief

on real estate secured debts, Trustee challenges the adequacy of the subject motion

in this case.

Following hearing and consideration of the arguments of the parties, the

Court determines that Trustee’s objection is well taken and the same will be

sustained. The motion for stay relief will be denied.

 

BACKGROUND AND FACTS

 

On June 24, 2008, Darrell and Sherry Ann Sheridan (“Debtors”) filed their

joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a

fee ownership interest in a residence located in Post Falls, Idaho.

at sched. A (the “Property”). Debtors asserted the Property’s value was

$225,000.00.

Servicing” ($197,000.00) and “Citimortgage” ($34,000.00).

While this left no apparent equity in the Property, Debtors nevertheless claimed

the benefit of an Idaho homestead exemption.

See Doc. No. 1Id. They indicated secured claims existed in favor of “Litton LoanId. at sched. D.Id. at sched. C.4

 

4

reaffirm the secured debts on the Property.

(…continued)

 

5

Property as a scheduled but not administered asset,

terminate,

Closing of the case as a no asset chapter 7 would constitute an abandonment of the

see § 554(c), and the automatic stay wouldsee § 362(c)(1).

 

6

to by others and in the case law, as “MERS.”

Mortgage Electronic Registration Systems, Inc. refers to itself, and is generally referred

 

MEMORANDUM OF DECISION – 3

The § 341(a) meeting of creditors occurred on July 31, 2008. Debtors

received a discharge on October 3, 2008. While the case was noticed to creditors

as a “no asset” chapter 7, and though Trustee concedes there will be no anticipated

distribution to creditors, Trustee has not yet filed his final report of no distribution

which would allow the case to close.

5

 

On October 16, 2008, the subject motion for relief from stay was filed.

See

 

Doc. No. 21 (the “Motion”). It was filed by “Mortgage Electronic Registration

Systems, Inc. as nominee HSBC Bank USA, National Association, as Indenture

Trustee of the Fieldstone Mortgage Investment Trust Series 2006-3.”

“Movant”).

Claimant.”

Movant” and that the debt arose out of a promissory note and a deed of trust dated

September 20, 2006 “naming Movant as beneficiary.”

Id. at 1 (the6 The Movant characterized itself as a “secured creditor andId. The Motion further alleges that Debtors were indebted at filing “toId.

 

Attached to the Motion is a promissory note (the “Note”) executed by

Debtors. It is payable to “Fieldstone Mortgage Company” as the “Lender.”

See

 

7

by stipulation of the parties, as “Exhibit 1.”

The documents attached to the Motion were admitted into evidence at the final hearing,

 

8

evidentiary hearing is a result of the presence of material, disputed facts, which under Fed. R.

Bankr. P. 9014(d) requires testimony in the same manner as in an adversary proceeding.

A “final hearing” is contemplated under § 362(d) and (e). That it would be an

 

MEMORANDUM OF DECISION – 4

Ex. 1.

Lender or anyone who takes this Note by transfer and who is entitled to receive

payments . . . is called the Note Holder.”

The Note is secured by a deed of trust dated September 20, 2006 and

recorded in the real property records of Kootenai County, Idaho, on September 22,

2006 (the “Deed of Trust”). The Deed of Trust at paragraph (C) identifies and

defines the “Lender” as “Fieldstone Mortgage Company, a Maryland corporation.”

Paragraph (E) of the Deed of Trust recites:

MERS is a separate corporation that is acting solely as nominee for

Lender and Lender’s successors and assigns. MERS is the beneficiary

under this Security Instrument.

Ex. 1.

Trustee objected to the Motion, contending that the Movant failed to

establish its interest in the Property or its standing to seek stay relief. Doc. No. 23.

At a preliminary hearing on November 4, 2008, the parties requested a final

hearing because the question of standing remained unresolved.

was held on December 16, 2008, at which Trustee and counsel for Movant made

argument, but no evidence was presented other than the documents that, as noted

7 A portion of the Note states: “I understand Lender may transfer this Note.8 A final hearing

 

9

The Code establishes time frames for preliminary hearing, final hearing and ruling.

 

See

§ 362(e)(2), the stay generally “shall terminate on the date that is 60 days after a request is made

by a party in interest” if the case is one under chapters 7, 11 or 13 and the debtor is an individual.

However, that period may be extended by either agreement of the parties or by the Court for good

cause.

December 16, 2008, about the 60th day after the request. This delay was by or with concurrence

of the parties. The Court concludes that additional delay to the date of this Decision was required

to address the contentions of the parties.

§ 362(e)(1), (2). In this case, the Motion was originally filed October 16, 2008. Under

See § 362(e)(2)(B). Here, the scheduling of the hearings resulted in a final hearing on

 

10

equity in such property coupled with a lack of necessity of such property for an effective

reorganization.

light of the fact that this is a chapter 7 liquidation, the Property is not required for reorganization.

Another ground for stay relief with respect to acts against property is an absence of

See § 362(d)(2). The Motion indicated a lack of equity in the Property and, in

 

MEMORANDUM OF DECISION – 5

above, were admitted by agreement.

9

 

DISCUSSION AND DISPOSITION

A. Stay relief requires a motion by a party in interest with standing

 

The Bankruptcy Code, Bankruptcy Rules and this District’s local rules

govern stay relief requests.

Under the Code, relief from the § 362(a) stay is authorized “[o]n request of

a

added).

made by a “party in interest.”) One ground for stay relief is “cause, including the

lack of adequate protection of an interest in property

§ 362(d)(1) (emphasis added). The Motion here alleged “cause” based on

delinquent payments,

though no specific citations to § 362(d)(1) are made.

party in interest and after notice and a hearing, . . . .” See § 362(d) (emphasisSee also § 362(e)(1) and (2), § 362(f), § 362(j) (all referring to requestsof such party in interest[.]”see Doc. No. 21 at 2, thus implicating § 362(d)(1) even10

 

MEMORANDUM OF DECISION – 6

The Rules require that a stay relief request be made by a motion.

R. Bankr. P. 9013 (“A request for an order, except when an application is

authorized by these rules, shall be by written

hearing.”) (emphasis added); Fed. R. Bankr. P. 4001(a)(1) (“A

from an automatic stay provided by the Code . . . shall be made in accordance with

Rule 9014[.]”) (emphasis added).

In addition to the Bankruptcy Rules, this District’s local rules require,

alia

– the request shall be made by a “party in interest” and by “motion;”

– the motion shall “[p]rovide the details of the underlying obligation or

liability upon which the motion is based;” and

– the motion shall have attached “accurate and legible copies of all

documents evidencing the obligation and the basis of perfection of

any lien or security interest[.]”

LBR 4001.2(a), (b)(2), and (b)(5).

See Fed.motion, unless made during amotion for reliefinter, that:

 

1. Party in interest, and standing

 

While the term “party in interest” is not defined by the Code, this Court has

held that such a party must have a “pecuniary interest” in the outcome of the

dispute before the Court.

D. Idaho Aug. 28, 2007) (citing

4705220 (Bankr. D. Idaho 2005), and

MEMORANDUM OF DECISION – 7

D. Idaho 2003)).

18 (9th Cir. BAP 2007) (noting that a “party in interest” may be one who has an

actual pecuniary interest in the case, one who has a practical stake in the outcome

of the case, or one who will be impacted in any significant way in the case).

See In re Simplot, 2007 WL 2479664 at *9 n.45 (Bankr.In re Elias, 05.2 I.B.C.R. 41, 42, 2005 WLIn re Stone, 03.2 I.B.C.R. 134, 135 (Bankr.See also Brown v. Sobczak (In re Sobczak), 369 B.R. 512, 517-

 

Simplot

The question there was whether the J. R. Simplot Company, which was not a

creditor with a claim against the debtor or estate, “had sufficient party in interest

standing to be heard[.]” 2007 WL 2479664 at *9. This Court stated:

not only defined party in interest, it addressed “standing” issues.

 

Hasso v. Mozsgai (In re La Sierra Fin. Servs.)

BAP 2002), explained that the doctrine of standing encompasses both

constitutional limitations on federal court jurisdiction (

controversy requirements of Article III), and prudential limitations on

the court’s exercise of that jurisdiction. Constitutional standing

requires an injury in fact,

interest. 290 B.R. at 726-27. Prudential standing requires that the

party’s assertions fall within the zone of interests protected by the

statute and, further, requires that the litigant assert only its own rights

and not those of another party.

U.S. 154, 162, 167-68 (1997). The party asserting standing exists has

the burden of proving it.

the cases as principles applicable to standing on appeal, the same

propositions apply to a party at the bankruptcy court level.

, 290 B.R. 718 (9th Cir.

i.e., the case orviz. an invasion of a judicially cognizableId. at 727 (citing Bennett v. Spear, 520Id. at 726. Though sometimes articulated in

 

Id.

not assert . . . objections that relate solely to others, or that go to issues that do not

directly and adversely affect them pecuniarily.”

omitted). These same standing requirements were recently highlighted in a stay

relief context by the court in

MEMORANDUM OF DECISION – 8

*5-6 (Bankr. W.D. Wash. Mar. 6, 2009).

(footnote citations omitted). In

Simplot, the Court concluded that “parties mayId. at *10 (footnote citationsIn re Jacobson, ___ B.R. ___, 2009 WL 567188 at

 

2. Real party in interest

 

Under Rule 9014, which by virtue of Rule 4001(a)(1) governs stay relief

requests, certain “Part VII” rules are applicable.

incorporated rules is Rule 7017, which in turn incorporates Fed. R. Civ. P. 17, and

Rule 17(a)(1) provides that “An action must be prosecuted in the name of the real

party in interest.”

See Rule 9014(c). Among those

 

Jacobson

holder of the note, “neither asserts beneficial interest in the note, nor that it could

enforce the note in its own right.” 2009 WL 567188 at *4. It concluded that Fed.

R. Civ. P. 17 applied, requiring the stay relief motion to be brought in the name of

the real party in interest.

Cal. 2008));

notes that its moving party, who claimed to be a servicer for the

Id. (citing In re Hwang, 396 B.R. 757, 767 (Bankr. C.D.see also In re Vargas, 396 B.R. 511, 521 (Bankr. C.D. Cal. 2008). As

 

Jacobson

The real party in interest in relief from stay is whoever is entitled to

enforce the obligation sought to be enforced. Even if a servicer or

agent has authority to bring the motion on behalf of the holder, it is the

holder, rather than the servicer, which must be the moving party, and

so identified in the papers and in the electronic docketing done by the

moving party’s counsel.

summarized:

 

Id.

 

The upshot of these several provisions of the Code, Rules, local rules and

case law is this: to obtain stay relief, a motion must be brought by a party in

interest, with standing. This means the motion must be brought by one who has a

 

11

Cir. 2008) does not require a different conclusion.

did not violate the automatic stay by seeking to foreclose on the debtors’ property after the

bankruptcy court granted the loan servicer’s (Washington Mutual) § 362(d) motion.

62. Although Wachovia did not join in the motion or separately seek stay relief, the court held

that the order entered “as to Washington Mutual” was effective as to Wachovia.

Notably, however, the Reussers never challenged Washington Mutual’s standing in bankruptcy

court; instead, they launched that attack in a subsequently filed district court action.

62. The Ninth Circuit held that “a final order lifting an automatic stay is binding as to the

property or interest in question—the res—and its scope is not limited to the particular parties

before the court.”

standing and, of course, no final order has been entered.

The Ninth Circuit’s recent decision in

Reusser v. Wachovia Bank, 525 F.3d 855 (9thReusser held that a lender, Wachovia Bank,Id. at 861-Id. at 857, 861.Id. at 861-Id. at 861. The difference here is that Trustee has timely objected to Movant’s

 

MEMORANDUM OF DECISION – 9

pecuniary interest in the case and, in connection with secured debts, by the entity

that is entitled to payment from the debtor and to enforce security for such

payment. That entity is the real party in interest. It must bring the motion or, if

the motion is filed by a servicer or nominee or other agent with claimed authority

to bring the motion, the motion must identify and be prosecuted in the name of the

real party in interest.

11

 

B. The present Motion

 

Under the documents attached to the Motion and later admitted at hearing

as Ex. 1, Fieldstone Mortgage Company, a Maryland corporation, would certainly

appear to be a party in interest and have standing. It has an economic interest

according to the Note attached to the Motion and an interest in Debtors’ Property

according to the Deed of Trust that is also attached.

However, the Motion was not brought by Fieldstone Mortgage Company.

 

12

“the person named or otherwise designated in a trust deed as

deed is given, or his successor in interest, and who shall not be the trustee.” Idaho Code § 45-

1502(3) defines trust deed as “a deed executed in conformity with this act and conveying real

property to a trustee in trust

person named in the deed

Idaho Code § 45-1502(1) defines beneficiary for purposes of the trust deed statute as

the person for whose benefit a trustto secure the performance of an obligation of the grantor or otherto a beneficiary.” Id. (emphasis added).

 

MEMORANDUM OF DECISION – 10

 

1. MERS as “nominee” or “beneficiary”

 

Counsel for Movant argues that MERS, given its titular designation of

“beneficiary” under the Deed of Trust, is or should be able to prosecute the

Motion under the Code, Rules and Local Rules. Counsel conceded, however, that

MERS is not an economic “beneficiary” under the Deed of Trust. It is owed and

will collect no money from Debtors under the Note, nor will it realize the value of

the Property through foreclosure of the Deed of Trust in the event the Note is not

paid.

12

 

Further, the Deed of Trust’s designation of MERS as “beneficiary” is

coupled with an explanation that “MERS is . . . acting

Lender and Lender’s successors and assigns.” Ex. 1 (emphasis added). Movant’s

briefing suggests that a “nominee” is synonymous with an “agent.”

26 at 2.

The Motion was filed by MERS “as nominee [for] HSBC Bank USA,

National Association, as Indenture Trustee of the Fieldstone Mortgage Investment

Trust Series 2006-3.” Even assuming that MERS as a “nominee” had sufficient

rights and ability as an agent to advance its principal’s stay relief request, there

solely as nominee forSee Doc. No.

 

13

evident consistency. The Motion commenced as follows:

“COMES NOW Mortgage Electronic Registration Systems, Inc. as nominee

HSBC Bank USA, National Association, as Indenture Trustee of the Fieldstone

Mortgage Investment Trust Series 2006-3, a secured creditor and Claimant

herein, and moves the Court for its Order granting relief from the automatic

stay[.]”

Thus, the “Claimant” and evidently the “Movant” (

moves”) are one and the same, and this entity also purports to be a “secured creditor.” Since

MERS is acting as nominee, the Claimant/Movant and secured creditor appears by these

allegations to be HSBC Bank USA (in its role as indenture trustee for others). The Motion

continues by asserting that “Debtor was on the date of filing the petition herein,

Claimant

Movant as beneficiary

Bank USA or the Fieldstone Mortgage Investment Trust as its beneficiary. Nor is there

explanation of how Debtors came to owe HSBC Bank USA.

The Motion uses several terms (Movant, Claimant, Petitioner) without definition or

i.e., the party who “COMES NOW . . . andindebted toarising out of [the Note] and a Deed of Trust dated September 20, 2006, naming.” Contrary to these assertions, the Deed of Trust does not name HSBC

 

14

Note.

This language appears in the Deed of Trust only. There is no mention of MERS in the

 

MEMORANDUM OF DECISION – 11

remains an insuperable problem. The Motion provides no explanation, much less

documentation or other evidence, to show that the Fieldstone Mortgage

Investment Trust Series 2006-3 (as an entity) or HSBC Bank USA (as that entity’s

“indenture trustee”) has any interest in the subject Note or the subject Deed of

Trust.

13

 

In light of Trustee’s objection on this score, Movant argues that MERS’

role as “nominee for Lender [

successors and assigns” gives it ample authority to assert the stay relief request

under the Deed of Trust for whatever successor in interest or assignee might have

the beneficial interest.

i.e., Fieldstone Mortgage Company] and Lender’s14 Even if the proposition is accepted that the Deed of Trust

 

15

assignments resulting in the movant becoming the holder of the note.

B.R. 259, 269 (Bankr. D. Mass. 2008) (“The Court and the Debtor are entitled to insist that the

moving party establish its standing in a motion for relief from stay through the submission of an

accurate history of the chain of ownership of the mortgage.”);

(Bankr. D. Mass. 2007) (“‘If the claimant acquired the note and mortgage from the original lender

or from another party who acquired it from the original lender, the claimant can meet its burden

through evidence that traces the loan from the original lender to the claimant.’”) (quoting

Some courts have indicated that the stay relief request should explain the serial

See, e.g., In re Hayes, 393In re Maisel, 378 B.R. 19, 22In re

 

(continued…)

 

MEMORANDUM OF DECISION – 12

provisions give MERS the ability to act as an agent (“nominee”) for another, it

acts not on its own account. Its capacity is representative.

 

2. Documentation

 

This District’s Local Bankruptcy Rule 4001.2 requires copies of “all

documents evidencing the obligation and the basis of perfection of any lien or

security interest.” The sole documentation provided with the Motion here

evidences the interests in the Note and Deed of Trust held by Fieldstone Mortgage

Company, a Maryland corporation. This submission does not answer the key

question — Who was the holder of the Note at the time of the Motion?

Several movants for stay relief have argued that the holder of a note secured

by a deed of trust obtains the benefit of the deed of trust even in the absence of an

assignment of the deed of trust, on the theory that the security for the debt follows

the debt. Under this theory, it would appear that when bankruptcy intervenes, and

somewhat like a game of Musical Chairs, the then-current holder of the note is the

only creditor with a pecuniary interest and standing sufficient to pursue payment

and relief from stay.

15

 

15

(…continued)

 

Parrish

“need not here go so far” as to require such tracing, because of the paucity of proof presented in

that case. 2009 WL 567188 at *6. The same is true here. Movant’s proof does not even show

who presently holds the Note. That alone provides sufficient basis to deny the Motion.

, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005)). The court in

Jacobson decided that it

 

MEMORANDUM OF DECISION – 13

The Motion here certainly suggests that the Fieldstone Mortgage

Investment Trust Series 2006-3 (or perhaps HSBC Bank USA in its capacity as

indenture trustee for that trust) was the holder of the note on the June 24, 2008,

petition date. But at the time of the final § 362(e) evidentiary hearing herein, the

parties discussed and Movant ultimately conceded that (I) the Note contained

nothing indicating its transfer by Fieldstone Mortgage Company, (ii) the Motion

was devoid of allegations regarding the details of any such transfer, and (iii) the

record lacked any other documents related to the issue.

 

3. The supplemental affidavit

 

Subsequent to the closing of the hearing and after the Court took the

dispute under advisement, Movant filed a “supplemental affidavit” of its counsel.

 

See

counsel obtained on such date the “original” Note and that the same contains an

indorsement. Counsel states that his “affidavit is presented to supplement the

record herein and for the Court’s consideration in the pending motion[.]”

The filing and consideration of this supplemental affidavit are improper for

several reasons.

Doc. No. 28 (filed January 2, 2009). This affidavit alleges that Movant’s

Id. at 2.

 

16

submissions).

Accord Jacobson, 2009 WL 567188 at *6-8 (discussing inadequacies of evidentiary

 

MEMORANDUM OF DECISION – 14

First, the record was closed, and the Court did not authorize the reopening

of that record, nor did it indicate any post-hearing submissions would be accepted.

Second, Trustee did not have the opportunity to address this “newly

obtained” document at hearing, and nothing shows his consent to the

post hoc

supplementation of the evidentiary record.

Third, disputed factual issues in contested matters may not be resolved

through testimony in “affidavits” but rather require testimony in open court.

See

Fed. R. Bankr. P. 9014(d). Under the circumstances, the identity of the holder of

the Note certainly appears to be a fact in dispute falling within the ambit of this

rule.

Fourth, the affidavit is insufficient to establish that counsel, as affiant, has

the ability to testify regarding or lay the foundation required to admit the

document.

594-95 (Bankr. D. Idaho 2000).

the “original” appears to be based not on the affiant’s (counsel’s) personal

knowledge but on the assertions of someone else.

Fifth, the proffer of this “new” note as the “original” note directly

contradicts Movant’s prior representations that the Note attached to the Motion

See Esposito v. Noyes (In re Lake Country Invs., LLC), 255 B.R. 588,16 The assertion that the newly possessed note is

17

payable to the bearer and may be negotiated by transfer of possession alone until specially

indorsed.”); § 28-3-301 (providing that the holder of the instrument may enforce it). These

provisions make identification of the current holder significant.

See generally Idaho Code § 28-3-205(2) (“When indorsed in blank, an instrument is

MEMORANDUM OF DECISION – 15

was “true and correct” and the operative document in this matter.

at 1.

Sixth, even were it considered, the “new” Note’s asserted indorsement

states: “Pay To The Order Of [

signed by Fieldstone Mortgage Company through a named assistant vice

president. There is no date nor indication of who was or is the transferee.

Fieldstone Mortgage Company may have indorsed the Note in blank, but this

document does not alone establish that either HSBC Bank USA or Fieldstone

Mortgage Investment Trust is the Note’s holder.

See Doc. No. 21blank] Without Recourse” and then purports to be17

Thus, even if a “nominee” such as MERS could properly bring a motion for

stay relief in the name of and on behalf of the real party in interest – the entity that

has rights in and pecuniary interest under the Note secured by the Deed of Trust –

nothing of record adequately establishes who that entity actually is. Under the

evidence submitted at the § 362(e) final hearing, which consists solely of Exhibit

1, the only entity that MERS could conceivably represent as an agent/nominee

would be Fieldstone Mortgage Company. But MERS does not represent that party

according to the Motion and, in fact, its contentions are to the effect that

18

2006) is misplaced.

nominee, had standing to seek stay relief.

continued to hold the note, and the mortgage had not been transferred.

For this reason, Movant’s reliance on

In re Huggins, 357 B.R. 180 (Bankr. D. Mass.Huggins held that MERS, which was named in a mortgage as the lender’sId. at 184-85. But in Huggins, the original lenderId. at 182, 184.

19

presentation constitutes a certification that there has been an “inquiry reasonable under the

circumstances” and that factual allegations made “have evidentiary support or, if specifically so

identified, are likely to have evidentiary support after a reasonable opportunity for further

investigation or discovery”). Trustee here was clear, though, that he asserted no Rule 9011

claims against Movant or its counsel.

See Fed. R. Bankr. P. 9011(b) (providing inter alia that a motion’s filing or other

MEMORANDUM OF DECISION – 16

Fieldstone Mortgage Company is no longer a party in interest.

18

At the time of that final hearing, counsel for Movant conceded that he had

no documentation provided to him by his “client” which indicated the interests

under the Note or Deed of Trust were held by either HSBC Bank USA or the

Fieldstone Mortgage Investment Trust. Counsel filed the Motion and

characterized the Movant’s identity therein based solely on undocumented

representations made to him. This would appear to be a problematic approach

generally.

matter at issue and Movant to its proof.

19 And, in this particular case, Trustee’s objection to the Motion put the

CONCLUSION

When Trustee challenged the Motion’s bare assertions, Movant failed to

provide an adequate record showing it was a party in interest with standing

entitled to seek such relief. On the record presented, the Court finds and

concludes Trustee’s objection is well taken. That objection will be sustained. The

Motion will be denied. The Trustee will provide a form of order for the Court’s

MEMORANDUM OF DECISION – 17

review and entry.

DATED: March 12, 2009

TERRY L. MYERS

CHIEF U. S. BANKRUPTCY JUDGE

 

14 Responses

  1. Hello, yes this article is really good and I have learned lot of things from it regarding blogging.

    thanks.

  2. Drew:

    My state has extra-judicial foreclosure proceedings.

    But in states that allow non-judical or extra-judicial foreclosure, you can always file suit to contest a foreclosure or file suit to stop one.

    When you do, you have the same rights as someone who lives in a state where judicial foreclosures are mandatory.

  3. …one more thing.

    Even though the Case Law is applicable only in Jurisdictions of the Courts, UCC law and Black Letter Property Law is older than the United States itself. Its fundamental to the very sense of what Justice stands for.

    The homeowner needs to stand up in Court and demand these very basic principles of liberty and Constitutional Due Process, and use these CASES as supporting Jurisprudence to help your Argument.

    This is a philosophical battle as well as legal and moral…

  4. Judges are public officials who are aware of this ponzi lending scheme, and have been approving these strawmen sponsored foreclosure suits, simply because the Homeowner walks away 98% of the time, and until a few ballsy Justices (Bufford, Young, Schack, Boyko…) have stood up and said “enough is enough”, the economic crisis is affecting every Court room accross ever municipality, Clerks and Guards are getting cut because funding problems.
    MERS and Pretenders Lender Counsel are in clear Civil Conspiracy to Defraud the Courts, and we need to become more Offensive in our Defense, through Counterclaims, Motions for Sanctions, etc…to make the Judge see the light.

    Judges are aware the public perception on the Foreclosure Crisis has changed, and the Paradigm has shifted, the Global Banks are loosing power in the Courtroom, and we cannot take the pressure off, put on the gloves and go for it!

  5. […] While We Were Sleeping, Idaho Took the Lead: In re Sheridan — Real … […]

  6. There is no such thing as foreclosure by advertisement. There is Judicial And Non -Juditial foreclosure. Non-Judicial foreclosure is by power of sale granted in the mortgage. After meeting the legal requirements an Advertisement is used to notice the foreclosure sale. To foreclose you must be the holder of note and mortgage. To stop the foreclosure the borrower must bring a complaint to a Court and request discovery . The difference is the borrower is the plaintiff and the bank et al is the defendant.

    Most non-judicial state require strict compliance to legal requirements but like most foreclosures the borrower never object or take action so the Foreclosure Mills create phony documents and foreclose.

    And the lesson “NEVER WHILE YOU BREATHE GIVE UP”. J. P. Donleavy

  7. i believe there my be a misunderstanding here.1.case law[other cases decided] is controlling when its [ is from the same appelate district] & maybe cited for a an assist to ruling in your favor.2- persuasive – is only lending insight if the is no [ controlling law or cases decided from same district ] and there is question of how a law or statue can or [ is ] applied to your case.
    but drew is suggestion that the is a different method involved with foreclosure by advertisement, jurisdiction he is referring to is non holder now had the ability to foreclose by the [advertisement ] being the vehicle removing the need to be a holder.. i had or have no idea of this in-practice .
    any real legal eagle please chime in to correct! thx

  8. Drew has a valid point. Cases in other jurisdictions are not controlling. This is even more so when in state courts.

    Quoting, or citing, cases in other states CAN be instructive or educational, but a judge in Oklahoma is under no obligation to rule the same way a judge in Washington previously ruled.

    I would love for my judge to be bound or controlled by the Long decision in Mass, but they are not.

    There are more and more cases, in more and more places, being decided in favor of defendant/borrowers, and they are coming more rapidly. Without question things are looking up and more judges are catching on and catching up. But if you’re in the last state court to “get it” what happens in other jurisdictions really is of no immediate value.

  9. Hey Drew! You sound like some Attorney for the “Lenders”. Take a “hike”, we don’t need your B.S!

  10. […] While We Were Sleeping, Idaho Took the Lead: In re Sheridan — Real Party Must Have Actual Pecuniar… livinglies.wordpress.com/2009/10/26/while-we-were-sleeping-idaho-took-the-lead-in-re-sheridan-real-party-must-have-actual-pecuniary-interest – view page – cached o Foreclosure Defense and Offense: The Evolving Audit Process + Attorneys o FDG Attorney Network Expands to Over 150 Lawyers in 32 States o FLORIDA WORKSHOPS COMING UP – Nov 1-2, 9.5 CLE Credits… (Read more)o Foreclosure Defense and Offense: The Evolving Audit Process + Attorneys o FDG Attorney Network Expands to Over 150 Lawyers in 32 States o FLORIDA WORKSHOPS COMING UP – Nov 1-2, 9.5 CLE Credits Florida Attorneys AND OTHER STATES + Foreclosure Defense Forms o CAUSES OF ACTION AGAINST ALL OR ANY DEFENDANTS # TITLE AGENT LIABILITY FOR ERRORS AND OMISSIONS AND TITLE INSURANCE # Trustees: Deed, Pool, Certificate-Holders, Substitutions and Beneficiaries # MORTGAGE BROKER AND LENDER LIABILITY o Discovery o FAQ o General Tactical Considerations o Letters and Notices o Narratives as background for argument or pleading # The Loan Closing Process o PEOPLE, PLAYERS AND RESOURCES # CASE DECISIONS # MERS — Mortgage Electronic Registration Systems # Regulatory Agencies # SEC Filings on securitized debt and mortgages @ AMERIQUEST @ Bear Stearns @ COUNTRYWIDE @ HSBC @ Lehman — Aurora — BNC — First Alliance et al @ Morgan Stanley @ Quicken Loans @ US BANK @ WELLS FARGO # State Laws @ CALIFORNIA LAWS – Guides @ Florida Laws @ General @ MICHIGAN LAWS @ OREGON LAWS AND FORMS @ Wisconsin Law # Suggested readings # VIDEO RESOURCES o PLEADINGS o RECENT DEFENSIVE MOTIONS FILED BY “LENDERS” o Settlements, Modifications, Short Sales + General Store o About Livinglies # Donate to Help Maintain Livinglies # Glossary & Guidelines # Mission Statement and Introduction: SINGLE TRANSACTION # News @ NEWS AND BLOGS – A President Who Gets It (mostly) – Bank and Investment Bank News = Countrywide = Deutsch Bank = Indymac = Lehman Brothers — Aurora — BNC — First Alliance – News on the Movement: Citizens Revolt Against Debt and Foreclosure @ Studies Conducted–Suggested Readings # Podcasts * Tags audit bailout bankruptcy borrower borrowers Chapter 13 Clinton countrywide credit credit crisis depression disclosure dollar euro Eviction Federal reserve foreclosure foreclosure defense foreclosure offense foreclosures fraud housing inflation lawyers lender Lender Liability lenders lost note McCain money Mortgage mortgage meltdown Obama Paulson predatory lending quiet title recession rescission RESPA RICO securitization TILA TILA audit trustee Wells Fargo * ____________________ Search (Read less) — From the page […]

  11. In my bk case & being pro se.. this very threshold argument was raised
    as the 1st “argument” in my response , I got smoked by the judge for not being an attorney. I should have appealed by it was not the real fight!
    No as an American citizen I believed i was entitled to certain right under the constitution. Unfortunately as others already know this in not so guaranteed under the bank owned judiciary that hold title to a vast portion of the courts & other public offices.

  12. When reading these cases, you have to remember that your state may allow foreclosure by advertisement, which is an extra-judicial proceeding. The traditional requirements of standing do necessarily not apply because there is no court action. Indeed, the first note holder is wiped out in foreclosure by advertisement regardless of the value of the property, and even if the wrong party forecloses. Therefore, a common mistake is to think that cases in other jurisdictions apply with equal weight in your state. Most often, they do not.

  13. They are starting to fall like flies..I can’t wait for these foreclosure mills to be out of business as well…

  14. Every now and then, a little ray of sunshine peaks through the thick cloud cover that has seemingly forever darkened my world.

    Every state needs some rulings like this!

    Lisa E (Pro Se, Florida)
    http://www.ForeclosureHamlet.ning.com
    Lisa Bep @ gmail . com (remove spaces to email)

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