Max Gardner on the Legal Implications of In re Veal




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Max Gardner on the Legal Implications of In re Veal
Today, June 19, 2011, 1 hour ago | Editor
Max’s comments on In re Veal:

The remarkable aspect of the Veal decision is that the Bankruptcy
Appellate Panel discusses almost every issue that comes into play when
an alleged secured residential mortgage creditor is seeking to assert
a claim or secure relief in a consumer’s Chapter 13 bankruptcy case.
For example, the Court discusses the issues of Constitutional
standing, prudential standing, the real party in interest issue, the
relationship of both Articles 3 and 9 of the Uniform Commercial Code
to the sale and transfer of mortgage notes, and then brings all of
these theories together under the central concept of who is the
“person entitled to enforce the note.”

The Court also applies some basic evidentiary rules to the facts of
this case and dismisses as it should have the argument that by listing
American Home on the sworn schedules the debtors some how admitted
that American Home was the “party or the designated agent of the party
entitled to enforce the note.”  And, the truly bizarre aspect of the
evidence presented by American Home, was that its attorneys believe
that an unauthenticated and non-sworn letter would withstand any type
of evidentiary objection.

The legal implications of the decision arise out to the fact that the
Court held that the Servicer (American Home) failed to prove that it
held any legal rights to even file a sworn proof of claim for the
party “entitled to enforce the note.”  The Court also noted that the
contested case created by the Veals’ filing of an Objection to the
proof of claim could result in a binding final decision on whether or
not the party entitled to enforce the note held or did not hold a
“secured claim” in bankruptcy or outside of the bankruptcy case.  The
legal impact of a successful objection by the Veals would be to turn
this claim from a loan secured by a mortgage on their home to a
general unsecured claim that might not even be allowable in their
bankruptcy case.  The lack of evidence submitted by American Home in
this case is appalling to say the least but typical of what is
normally filed by mortgage servicers in consumer bankruptcy cases.

The truly extraordinary thing about the decision, however, is that the
the motion for relief from the bankruptcy case so as to proceed with a
state court foreclosure was not filed by the mortgage servicer but by
the mortgage-backed securitized trust that allegedly held and owned
the Veals’ mortgage note (Wells Fargo Bank, N.A., as Trustee for
Option One Mortgage Loan Trust 2006-3 Asset-Backed Certificates,
Series 2006-3).  And, in reversing the Bankruptcy Courts order
granting such relief, the Appellate Panel held that the Trust had
failed to provide even minimal proof that it was the “person entitled
to enforce the note” and therefore did not have standing to seek
relief from the bankruptcy case.

The legal representation provided to the Veals in this case by Joe
Volin and his law firm demonstrated a high level of knowledge in the
complex law of mortgage securitization as well as a solid understating
of the rules of evidence and standing in federal court proceedings.
It is not an easy proposition to secure the reversal of a bankruptcy
court ruling on an objection to proof of claim and it is rare to
secure a reversal of a relief from stay ruling in the same case.

12 Responses

  1. Full disclosure of the “type’ of loan that we were signing was NOT GIVEN. THAT SHOULD VOID IT.

  2. How, pray tell, does Judge Haines’ decision square with the opinion of Magistrate David L. Martin’s opinion which seems to be the exact opposite? Martin seems to think it’s none of the borrower’s business what takes place after closing.

    That flies in the face of the OCC’s opinion that the borrower is an essential party to a securitized loan transaction.

  3. Send this to ri fed magistrate martin he is lost

  4. Why would anyone think this is persuasive…

    Standing is an interesting concept. Looks like the BAP said to the BK court figure it out again…

    But, nothing here is anything new…

    Read it thoroughly. They want to know who is entitled to enforce and foreclose…not that the note is gone….

    read page 44-46 and you can see where the BAP was coming from…
    Game over? No, they just want to know who can enforce…

    You realize there was no factual findings here….Thats left again to the BK court…

    Nothing here unfortunately….but a good dissertation on the procedural reqt of UCC 3 and 9

  5. Does anyone have any info on these two BOA Robosigners?: Yolanda Smith, Asst. VP, and Rhoena Rice, VP

  6. This is the part of the Veal case that struck me as needing to go viral on the Internet. ALL homeowners should know this, but instead some homeowners who are still current on mortgage payments are hitting Web sites, still hating those who are staying in their homes and paying no payment.

    Our battle is far from fighting to get a “free house” on a technicality (though some still seem to think that is possible…a grave mistake and fruitless effort, in my opinion.) The crux of our fight is because of the homeowner-relevant truth in this well-articulated section of the Veal decision:


    …A thorough understanding of the concept of a “person entitled to enforce” is KEY to sorting out the relative rights and obligations of the various parties to a mortgage transaction. In particular, the person obligated on the note – a “maker” in the argot of Article 3 – MUST PAY the obligation represented by the note to the “person entitled to enforce” it.
    UCC § 3-412.

    Further, if a maker pays a “person entitled to enforce” the note, the maker’s obligations are discharged to the extent of the amount paid. UCC § 3-602(a).

    Put another way, if a maker makes a payment to a “person entitled to enforce,” the obligation is satisfied on a dollar for dollar basis, and the maker never has to pay that amount again. Id. See also UCC § 3-602(c).

    If, HOWEVER, the maker pays someone other than a “person entitled to enforce” – *EVEN IF that person physically possesses the note the maker signed* – the payment generally has NO EFFECT on the obligations under the note. The maker STILL OWES the money to the “person entitled to enforce,” (Miller & Harrell, supra, ¶ 6.03[6] [b] [ii]), and, at best, has ONLY an action in restitution to recover the mistaken payment. See UCC § 3-418(b) (Emphasis added.)


    Let’s join together and post this section from Veal on blogs where we come across homeowners and reporters who don’t get it yet. The last count I read, Neil had over four million hits on this site, so that should be a good start to find people in the know who can force this UCC explanation into the viral world. It’s simple enough for even those who have not spent many hours on the Internet researching what went down with the banks and the Fed. It is staggering to read that some still believe this is simply about deadbeats or “squatters,” technicalities, and robo-signed documents.


    Watch this from today’s Dylan Ratigan show–it’s AWESOME!!!
    Finally—publicity on a national TV media show about what is REALLY going on—this is fantastic…the “wall” is cracking!!!

    Neil—can’t you get on his show???

  8. An East-Coast (PA) loss for a pretender-lender in bankruptcy; good agency law discussion (as well as other things):

  9. The Veal decision and related matters should be followed closely by all of us involved in this foreclosure mess. A very significant victory. Way to go Max Gardner.

  10. Now that the other side knows what to avoid will there be any opportunity for the borrower to profit by this elucidation? The UCC explanation was very valuable, in general, and greatly appreciated.

  11. Perhaps this is truly the only way to get the fraud monkey off your back. Claiming the mortgage as non secured with proof of such is going to be the clearing in the jungle. This way, they cannot appeal or contest. I am just praying this gets to the headlines and is the way to prove once and for all who does not have any standing. We didn’t start this journey to obtain a “free house”. We all started out wanting our loans modified ….but that’s not our problem now–because the banks CAN’T modify a loan it doesn’t own. Way to go Max. It is a shame however that we the people will all have to use this as a method to show the clear path of lies deceit and rape. We are not going to take this any more. Its time to bring them all down and show america who really owns the note…..we do! And no one else. I am sorry the investors got psydo fuked but that was their choice and if I would have considered investing in this charade, I would have read the prospectus and RAN. Where are all the tax consequences??? That will be really fun to see when that next batch of shit hits the fan. Remember how they finally arrested AL Capone?? Tax evasion…..thanks again Max for never giving up and for being the man u r —one of integrity and dedication. Bless you and may u stay safe and healthy and energized. Debi. 5613899339

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