Authority of BKR Courts In Question as to Final Orders and Judgments

In the attached white paper, it is clear that many of the findings and judgments of Bankruptcy judges have dubious standing. Once referred to as Referees, and appointed under entirely different rules, subject to removal without tenure etc.., the elevation of the people serving on the bench to the term “Judge” is what is causing the problem. In the Stern case and further discussion in the white paper it is concluded that BKR judges lack jurisdiction or powers that would “Settle” any factual matter regarding property that is indisputably part of the bankruptcy estate. The paper also questions the authority of magistrates, but leaves us wondering whether the Trustees are exceeding their own authority when they fail to protect creditors and the debtor when there are genuine issues of fact regarding ownership of the loan.

Abandoning an interest in real property on which there is no legal encumbrance might well be an abuse of Trustee discretion, and acceptance of it might be beyond the power of the BKR Judge. But confusion abounds. I have personally seen orders granting lift stay motions that recite that the movant was the owner of the loan without any evidentiary hearing or any basis other than proffer by the movant of dubious affidavits or even without any affidavits.

This timely white paper, should be read in its entirety because it opens up a whole panoply of questions, objections that should be made, and the obvious lateral appeal to the supervising district court judge strictly on procedural grounds.

It appears as though the authors lean in the direction of treating BKR Judges as having many procedural powers of a civil court judge but lacking the power to render a verdict or conclusion on contested facts. This possibility then opens the issue of whether disputed facts should be automatically brought before the lifetime appointed district court judge with the BKR Judge deferring until a ruling is given in the proper court.

Reasonable people may differ, but where there are genuine issues of material fact, it seems to be a denial of due process to skip the hurdle of an adversary hearing is conducted by the district court judge subject to the rules of evidence and procedure and putting the burden of proof where it belongs.

All too often the order lifting stay recites that the movant is the owner of the loan and this in turn is taken by both litigants and state judges as res judicata as though the case had been tried. In fact, this is the case even when the Judge doesn’t recite the “finding” that the movant is the owner of the loan. In either case, the burden of proof of “colorable claim” is so low that it could never measure up to a preponderance of the evidence — which would lead to a verdict that this white paper and the Stern case would seem to indicate is beyond the powers of the BKR judge.

SEE W_SternPaper



COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

SEE MANN order_br_cally_so_dist_salazar_vs_us_bank_denying_mfrs_mers_4_11_2011

Bankruptcy Judge Margaret M. Mann GETS IT!

1 Posted by Dan Edstrom on April 12, 2011 at 8:19 pm

Bankruptcy Judge Margaret M. Mann GETS IT!

By Daniel Edstrom
DTC Systems, Inc.

Coming off of the heels of in re: Agard (, the Honorable Judge Mann from the United States Bankruptcy Court Southern District of California took 76 days to review the Motion for Relief From Automatic Stay for the in re: Salazar Chapter 13 bankruptcy (Bankruptcy No: 10-17456-MM13).   The findings of fact and conclusions of law were an amazing reading that confirms many of the issues we have been discussing in regards to loans, securitization and foreclosure.  Like Judge Grossman in the agard case, Judge Mann goes to great lengths to research the details that are applicable to this case.   Here are some highlights:

  • Assignments must be recorded before the foreclosure sale

  • Civil Code Section 2932.5 applies to Deeds of Trust

  • Recorded assignments are necessary despite MERS’ role

  • The Gomes case does not apply [to the Salazar case]

  • US Bank or MERS cannot contract away their obligations to comply with the foreclosure statutes

  • As a matter of law, Salazar’s acknowledgment cannot be read as a waiver of his right to be informed of a change in beneficiary status.

  • MERS System is not an alternative to statutory foreclosure law

  • US Bank as the foreclosing assignee was obligated to record its interest before the sale despite MERS’ initial role under the DOT, and this role cannot be used to bypass Civil Code section 2932.5.  Since US Bank failed to record its interest, Salazar has a valid property interest in his residence that is entitled to protection through the automatic stay

  • Cause does not exist to grant relief from stay

  • Denying relief from stay at this time is the least prejudicial option for both parties


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