MERS v. LISA MARIE CHONG

Posted on December 9, 2009. Filed under: bankruptcy, Case Law, Foreclosure Defense, Mortgage Law | Tags: , , , , , , |

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

Dist. Ct. Case No. 2:09-CV-00661-KJD-LRL
Bankr. Ct. Case No. BK-S-07-16645-LBR

Presently before the Court is Appellant’s Appeal under 28 U.S.C. § 158(a) from the Bankruptcy Court’s Order Denying Motion to Lift Stay entered in the Adversary Proceeding No. BKS- 07-16645-LBR, docket no. 49, March 31, 2009.

Having considered the briefs and the record on appeal, including the arguments of parties at the consolidated hearing on November 10, 2009, the Court affirms the Order of the Bankruptcy Court

Procedural History and Facts

On April 14, 2009, Appellant Mortgage Electronic Registration Systems, Inc. (“MERS”) filed Notice of Appeal (#1) appealing the Bankruptcy Court’s order denying Appellant’s motion for relief from stay. This appeal is one of approximately eighteen (18) similar cases in which the Bankruptcy Court ruled that Appellant lacked standing to bring the motion.

In the underlying bankruptcy action, MERS filed its Motion for Relief from Stay (“the Motion”) pursuant to Federal Rule of Bankruptcy Practice (“Rule”) 4001 on January 14, 2008 seeking to have the automatic stay lifted so that MERS could conduct a non-judicial foreclosure saleon debtor’s real property because the debtor lacked the ability to make payments and could not provide adequate security. Trustee Lenard E. Schwartzer (“Trustee”) filed objections to the Motion claiming that MERS did not have standing as a real party in interest under the Rules to file the motion. (Appellant’s Appendix (“Appx.”) Doc. No. 12, p. 34).

In response, Appellant filed the Declaration of Faatima Straggans, an employee of Homecomings Financial, LLC the authorized servicing agent for MERS, attempting to authenticate a copy of the original Deed of Trust (“Deed”) and Note. (Appx. 36–38). The Deed described MERS as beneficiary and identified MERS as the nominee of the original lender, FMC Capital LLC. Id. However, the Declaration identified neither the current owner of the beneficial interest in the Note, nor any of the successors or assignees of the Deed of Trust. The Declaration also failed to assert that MERS, FMC Capital LLC or Homecomings Financial, LLC held the Note.

Due to the similar issues raised regarding motions for relief from stay in approximately twenty-seven (27) cases involving MERS, the Bankruptcy Court set a joint hearing for all twenty seven cases. (Appx. 113–18). The Bankruptcy Court also ordered consolidated briefing for all cases to be filed in Case No. 07-16226-LBR, In re Mitchell, the “lead case”. Id. In a majority of the cases, including the present case, Appellant attempted to withdraw the Motion but was procedurally unable to do so, because the Trustee would not consent. (Appx. 1383, 1902-1904, 1907-1909). MERS informed the Bankruptcy Court that it had attempted to withdraw the Motion, because it had been filed contrary to its own corporate procedures. (Appx. 432). Particularly in this case, MERS was unable to show that a MERS Certifying Officer was in physical possession of the Note at the time the Motion was filed. (Appx. 624).

A final hearing was held on August 19, 2008. (Appx. 650-729). On March 31, 2009, the Bankruptcy Court issued Memorandum Opinions and Orders denying MERS’ motions for relief from stay in Mitchell and two other cases. (Appx. 740-54, 1581-95, 1959-72). In the remaining cases, including the present case, the Bankruptcy Court denied the motions for relief from stay by incorporating the reasoning from the Mitchell Memorandum Opinion. (Appx.46). The Bankruptcy Court held that MERS lacked standing because it was not a real party in interest as required by the Rules. (Appx. 740-54). Specifically, the court found that “[w]hile MERS may have standing to prosecute the motion in the name of its Member as nominee, there is no evidence that the named nominee is entitled to enforce the note or that MERS is the agent of the note’s holder.” (Appx. 753).

The court further held that MERS’ asserted interest as beneficiary under the contract terms did not confer standing because MERS had no actual beneficial interest in the note and, therefore, was not a beneficiary. (Appx. 745-48). MERS now appeals that order asserting that the Bankruptcy Court erred as a matter of law when it determined that MERS may not be a beneficiary under the deeds of trust at issue in the eighteen consolidated cases where the express language of the deeds of trust provide that MERS is the beneficiary. The Trustee continues to assert that MERS lacks standing because it is not a real party in interest. II. Standard of Review

This Court has jurisdiction pursuant to 28 U.S.C. § 158(a) and reviews the Bankruptcy Court’s findings under the same standard that the court of appeals would review a district court’s findings in a civil matter. 28 U.S.C. § 158(c)(2). Therefore, the Court reviews the Bankruptcy Court’s factual findings under a clearly erroneous standard, and conclusions of law de novo. See In re Healthcentral.com, 504 F.3d 775, 783 (9th Cir. 2007); In re First Magnus Fin. Corp., 403 B.R. 659, 663 (D. Ariz. 2009). III. Analysis This appeal arises from eighteen cases in which MERS filed motions for relief from stay in the Bankruptcy Court. In each case, either a party or the Bankruptcy Court raised the issue of whether MERS had standing to bring the motion.

In holding that MERS did not have standing as the real party in interest to bring the motion for relief from stay, the Bankruptcy Court determined that MERS was not a beneficiary in spite of language that designated MERS as such in the Deed of Trust at issue. MERS seeks to overturn the Bankruptcy Court’s determination that it is not a beneficiary. However, the Court must affirm the Bankruptcy Court’s order under the facts presented because MERS failed to present sufficient evidence demonstrating that it is a real party in interest.

A motion for relief from stay is a contested matter under the Bankruptcy Code. See Fed. R. Bankr. P. 4001(a); 9014(c). Bankruptcy Rule 7017 applies in contested matters. Rule 7017 incorporates Federal Rule of Civil Procedure 17(a)(1) which requires that “[a]n action must be prosecuted in the name of the real party in interest.” See also, In re Jacobson, 402 B.R. 359, 365-66 (Bankr. W.D. Wash. 2009); In re Hwang, 396 B.R. 757, 766-67 (Bankr. C.D. Cal. 2008). Thus, while MERS argues the bankruptcy court erred when it determined that MERS was not a beneficiary under the deeds of trust, MERS only has standing in the context of the motion to lift stay under the Rules if it is the real party in interest. See Fed. R. Bankr. P. 7017. Since MERS admits that it does not actually receive or forfeit money when borrowers fail to make their payments, MERS must at least provide evidence of its alleged agency relationship with the real party in interest in order to have standing to seek relief from stay. See Jacobson, 402 B.R. at 366, n.7 (quoting Hwang, 396 B.R. at 767 (“the right to enforce a note on behalf of a noteholder does not convert the noteholder’s agent into a real party in interest”)).

An agent for the purpose of bringing suit is “viewed as a nominal rather than a real party in interest and will be required to litigate in the name of his principal rather than his own name.” Hwang, 396 B.R. at 767. This is particularly important in the District of Nevada where the Local Rules of Bankruptcy Practice require parties to communicate in good faith regarding resolution of a motion for relief from stay before it is In other cases movant did not seek to withdraw the Motion, but similarly produced no evidence that it held the note or acted as the agent of the noteholder. filed. LR 4001(a)(3). The parties cannot come to a resolution if those with a beneficial interest in the note have not been identified and engaged in the communication.

In the context of a motion for relief from stay, the movant, MERS in this case, bears the burden of proving it is a real party in interest. In re Wilhelm, 407 B.R. 392, 400 (Bankr. D. Idaho 2009)(citing In re Hayes, 393 B.R. 259, 267 (Bankr. D.Mass. 2008)(“To have standing to seek relief from the automatic stay, [movant] was required to establish that it is a party in interest and that its rights are not those of another entity”)).

Initially, a movant seeking relief from stay may rely upon its motion. Id. However, if a trustee or debtor objects based upon standing, the movant must come forward with evidence of standing. Id.; Jacobson, 402 B.R. at 367 (requiring movant at least demonstrate who presently holds the note at issue or the source of movant’s authority). Instead of presenting the evidence to the Bankruptcy Court, MERS attempted to withdraw the Motion from the Bankruptcy Court’s consideration, citing the failure of a MERS Certifying Officer to demonstrate that a member was in physical possession of the promissory note at the time the motion was filed.1 The only evidence provided by MERS was a declaration that MERS had been identified as a beneficiary in the deed of trust and that it had been named nominee for the original lender.

Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing. Accordingly, the order of the Bankruptcy Court must be affirmed. This holding is limited to the specific facts and procedural posture of the instant case. Since the Bankruptcy Court denied the Motion without prejudice nothing prevents Appellant from refilling the Motion in Bankruptcy Court providing the evidence it admits should be readily available in its system. The Court makes no finding that MERS would not be able to establish itself as a real party in interest had it identified the holder of the note or provided sufficient evidence of the source of its authority. IV.

Conclusion

Accordingly, IT IS HEREBY ORDERED that the Order of the Bankruptcy Court entered March 31, 2009 is AFFIRMED. DATED this 4th day of December 2009.

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Deutsche Bank v. Debra Abbate Etal.

Posted on October 23, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , , , |

Deutsche Bank National Trust Company, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CARRINGTON MORTGAGE LOAN TRUST 2005-OPT2, ASSET-BACKED CERTIFICATES, SERIES 2005-OPT2, Plaintiff

against

Debra Abbate, CARMELA ABBATE, KIM FIORENTINO, BOCCE COURT HOMEOWNERS ASSOCIATION, INC., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK CITY PARKING VIOLATIONS BUREAU, and “JOHN DOE No. 1″ through “JOHN DOE #10,” the last ten names being fictitious and unknown to the plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the Mortgaged premises described in the Complaint, Defendants.

100893/07

Plaintiff was represented by the law firm of Frenkel Lambert Weiss & Weisman.

Defendant was represented by Robert E. Brown, Esq.

Joseph J. Maltese, J.

The defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate’s motion to dismiss the plaintiff’s complaint is granted in its entirety.

This is an action to foreclose a mortgage dated February 24, 2005, upon the property located at 25 Bocce Court, Staten Island, New York. The mortgage was originated by Suntrust Mortgage Inc. (”Suntrust”) and was recorded in the Office of the Clerk of Richmond County on April 26, 2005. The plaintiff filed the Summons, Complaint, and Notice of Pendency on March [*2]1, 2007.[FN1] However, Suntrust assigned the first mortgage on this property to Option One Mortgage Corporation, which was executed on July 6, 2007. Another assignment to plaintiff Deutsche Bank National Trust Company (”Deutsche Bank”) was executed on March 7, 2007. Both assignments, which were recorded on July 23, 2007, contained a clause expressing their intention to be retroactively effective: the first one to date back to February 24, 2005, and the second one to February 28, 2007.[FN2] On November 19, 2007, this court issued an order of foreclosure and sale on the subject property. This court also granted two orders to show cause to stay the foreclosure on January 9, 2008 and April 8, 2008.[FN3]

Discussion

The Appellate Division, Second Department ruled and reiterated in Kluge v. Kugazy the well established law that “foreclosure of a mortgage may not be brought by one who has no title to it . . . .”[FN4] The Appellate Division, Third Department has similarly ruled that an assignee of a mortgage does not have a right or standing to foreclose a mortgage unless the assignment is complete at the time of commencing the action.[FN5] An assignment takes the form of a writing or occurs through the physical delivery of the mortgage.[FN6] Absent such transfer, the assignment of the mortgage is a nullity.[FN7]

Retroactive Assignments of a Mortgage are Invalid
The first issue this court must resolve is whether the clauses in the July 6, 2007 and March 7, 2007 assignments setting the effective date of the assignment to February 24, 2005 and February 28, 2007 respectively are permissible. This court rules that, absent a physical or written transfer before the filing of a complaint, retroactive assignments are invalid.

Recently, trial courts have been faced with the situation where the plaintiff commenced a [*3]foreclosure action before the assignment of the mortgage.[FN8] In those cases the trial courts have held,

. . . where there is no evidence that plaintiff, prior to commencing the foreclosure action, was the holder of the mortgage and note, took physical delivery of the mortgage and note, or was conveyed the mortgage and note by written assignment, an assignment’s language purporting to give it retroactive effect prior to the date of the commencement of the action is insufficient to establish the plaintiff’s requisite standing. . .[FN9]

In this case, the plaintiff failed to offer any admissible evidence demonstrating that they became assignees to the mortgage on or before March 1, 2007; as such, this court agrees with its sister courts and finds that the retroactive language contained in the July 26, 2007 and March 7, 2007 assignments are ineffective. This court therefore rules that it lacks jurisdiction over the subject matter when the plaintiff has no title to the mortgage at the time that it commenced the action.

The next issue this court must resolve is whether the defendants waived subject matter jurisdiction because they did not raise that issue in their prior applications to this court.

Affirmative Defense of Standing

At the outset of any litigation, the court must ascertain that the proper party requests an adjudication of a dispute.[FN10] As the first step of justiciability, “standing to sue is critical to the proper functioning of the judicial system.”[FN11] Standing is a threshold issue; if it is denied, “the pathway to the courthouse is blocked.” [FN12]

The doctrine of standing is designed to “ensure that a party seeking relief has a sufficiently cognizable stake in the outcome so as to present a court with a dispute that is capable [*4]of judicial resolution.”[FN13] “Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.”[FN14] Where the plaintiff has no legal or equitable interest in a mortgage, the plaintiff has no foundation in law or in fact.[FN15]

A plaintiff who has no standing in an action is subject to a jurisdictional dismissal since (1) courts have jurisdiction only over controversies that involve the plaintiff, (2) a plaintiff found to lack “standing is not involved in a controversy, and (3) the courts therefore have no jurisdiction of the case when such plaintiff purports to bring it.”[FN16]

On November 7, 2005, in the case of Wells Fargo Bank Minn. N.A. v. Mastropaolo [“Mastropaolo”], this court found that “Insofar as the plaintiff was not the legal titleholder to the mortgage at the time the action was commenced, [the Bank] had no standing to bring the action and it must be dismissed.”[FN17] Erroneously, this court “[o]rdered, that the plaintiff’s summary judgment motion is denied in its entirety and that this action is dismissed with prejudice.”[FN18]

This Court should have ordered that this matter was dismissed without prejudice, which would have given the plaintiff the right to start the action again after it had acquired title to the note and mortgage. Unfortunately, the plaintiff, did not seek a motion to reargue that error, which would have been corrected promptly. Instead, the plaintiff appealed the decision to the Appellate Division, Second Department, which rightfully reversed the decision 18 months later on May 29, 2007 based upon the dismissal with prejudice as opposed to a dismissal without prejudice to refile the action. However, in what appears to be dicta, the court went on to discuss whether lack of standing is tantamount to lack of subject matter jurisdiction. The court further stated that the failure of the initial pro se defendant to make a pre-answer motion or a motion to dismiss, the defense of lack of standing would be waived. But the Appellate Division did not address the issue of subject matter jurisdiction, which may not be waived. [*5]

In the instant case, this court is again faced with similar facts, which raise the issue that the Bank must have title to the mortgage before it can sue the defendant. Clearly, having title to the subject matter (the mortgage) is a condition precedent to the right to sue on that mortgage. This has always been the case, but since the Appellate Division, Second Department’s comments in Mastropaolo, that issue has been clouded.

At the time that the plaintiff improperly commenced the action, the pathway to the Courthouse should have been blocked. Deutsche Bank had no legal foundation to foreclose a mortgage in which it had no interest at the time of filing the summons and complaint. Lack of a plaintiff’s interest at the beginning of the action strips the court’s power to adjudicate over the action.[FN19] Lack of interest and controversy is protected by the umbrella of subject matter jurisdiction. Whenever a court lacks jurisdiction, a defense can be raised at any time and is not waivable.[FN20] In other words, for there to be a cause of action, there needs to be an injury. At the time that the action was commenced, the instant plaintiff suffered no injury and had no interest in the controversy. Since the plaintiff filed this action to foreclose the mortgage before it had title to it, there was no controversy between the existing parties when the action commenced. Therefore, the court lacked subject matter jurisdiction to adjudicate the present case. The defendants are consequently entitled to a dismissal without prejudice because the court lacked jurisdiction over a non-existent controversy.

Accordingly, it is hereby:

ORDERED, that the defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate’s motion to dismiss the plaintiff’s complaint is granted, without prejudice to the plaintiff having the right to refile within the time provided by the Statute of Limitations; and it is further

ORDERED, that the parties and counsel shall appear before this court to further conference this matter on November 20, 2009 at 11:00AM.

ENTER,

DATED: October 6, 2009

Joseph J. Maltese

Justice of the Supreme Court

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Washington Mutual v. Raymond & Rhonda Payne

Posted on July 8, 2009. Filed under: Case Law, Foreclosure Defense, Housing, Mortgage Law | Tags: , , , , , , , , , , , , , , , , |

WASHINGTON MUTUAL BANK, NA, Plaintiff,
v.
RAYMOND R. PAYNE AND RHONDA K. PAYNE, Defendants.

Supreme Court, Suffolk County.
Decided June 15, 2009.
Shapiro & DiCaro, LLP, Rochester, NY, Attys. for Plaintiff.
David Gevanter, ESQ., Hicksville, NY, Attys. for Defendants.
THOMAS F. WHELAN, J.
ORDERED that this motion (#004) by defendant, Raymond R. Payne, for an order staying the public sale of the subject premises, vacating the judgment of foreclosure and sale and dismissing the complaint is considered under CPLR 5015 and is denied.

The plaintiff obtained a judgment of foreclosure and sale in this action on December 1, 2003. Prior thereto, the default on the part of the mortgagor defendants (Raymond and Rhonda Payne) was fixed and determined in an order appointing a referee to compute amounts due under the mortgage. For reasons not reflected in the record adduced on the instant motion, the public sale contemplated by the December 1, 2003 judgment has not yet been consummated.
By prior motion returnable February 23, 2007, the mortgagor/defendants, Raymond R. Payne and Rhonda Payne, moved to stay any impending sale of the premises, for a vacatur of the judgment of foreclosure and sale and dismissal of the complaint on the grounds that the plaintiff failed to acquire personal jurisdiction over them by due service of the summons and complaint. By order dated September 28, 2007, this court denied that application without a hearing, finding that the same was unmeritorious.
By the instant motion, defendant, Raymond R. Payne, moves again for a stay of the impending sale of the subject premises, an order vacating the judgment of foreclosure and sale and dismissal of the complaint pursuant to CPLR 5015. Although the order to show cause by which this motion was interposed lists several grounds for the requested relief, including improper service of the summons and complaint, the gravamen of the defendant’s demands for relief rest upon claims that the plaintiff lacked standing to commence and maintain this action due to its lack of ownership of the subject note and mortgage at the time of commencement of this action. For the reasons set forth below the motion is denied.
Recent case authorities emanating from the Second Department have held that the issue of the plaintiff’s standing is not a matter of subject matter jurisdiction but rather, is more akin to the issue of the plaintiff’s capacity to sue. In Wells Fargo Bank Minnesota National Association v Mastropaolo, 42 AD3d 239, 837 NYS2d 247 (2d Dept 2003), the Appellate Division, Second Department, instructed that “[w]here standing is put into issue by a defendant’s answer, a plaintiff must prove its standing if it is to be entitled to relief (see TPZ Corp. v Dabbs, 25 AD3d 787, 789, 808 NYS2d 746 [2d Dept 2006]; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769, 570 NYS2d 778 [1991] [standing is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation’ [emphasis added])”.
Continuing, the Court in Mastropaolo instructed that “where a defendant does not challenge a plaintiff’s standing, the plaintiff may be relieved of its obligation to prove that it is the proper party to seek the requested relief”. The Court went on to hold that “an argument that a plaintiff lacks standing, if not asserted in the defendant’s answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)” [citations omitted]). (see Wells Fargo Bank Minn., NA v Mastropaolo, 42 AD3d 239, 242, 837 NYS2d 247, 250).
More recently, the Appellate Division, Second Department held that a defaulting defendant who moves for vacatur of a judgment of foreclosure and sale and a dismissal of the complaint on the grounds that the plaintiff was without standing to prosecute its claims for foreclosure and sale due to its lack of ownership of the note and mortgage, could not prevail on such application because said defendant waived the standing defense by failing to assert it in an answer or by way of a pre-answer motion to dismiss under CPLR 3211 (see HSBC Bank v Dammond, 59 AD3d 679, 875 NYS2d 490
Page 3
[2d Dept 2009]).

Since the moving defendant here has taken the same position as the unsuccessful movant in Dammond, this court denies defendant’s motion to vacate the judgment of foreclosure and sale on the grounds that the plaintiff lacked standing to prosecute that claim.
To the extent that this motion may be read as one for a stay of the sale, a vacatur of the December 3, 2003 judgment and a dismissal of the complaint on the grounds of lack of personal jurisdiction, it is denied. This second application for such for relief by the moving defendant, Raymond R. Payne, is procedurally improper and substantively insufficient in light of his prior, unsuccessful application for the same relief and the absence of any proof whatsoever, in support thereof.

Equally unavailing are the vague and conclusory claims of fraud which said defendant now asserts by his counsel against the plaintiff (see Wells Fargo Bank v Linzenberg, 50 AD3d 674, 853 NYS2d 912 [2d Dept 2008]; Aames Capital Corp. v Davidsohn, 24 AD3d 474, 808 NYS2d 229 [2d Dept 2005]).

In view of the foregoing, the instant motion is in all respects denied.

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Wells v. US Bank

Posted on July 4, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , |

The particular question posed in this case is: what entity is entitled to receive the
prepetition arrearage payments? As discussed further below, the court finds that at the time
claim 1 was filed, U.S. Bank did not attach documents showing that it is a secured creditor of the
debtors, as alleged in its claim. Additionally, Ocwen Loan Servicing LLC (Ocwen), the entity
that filed the proof of claim, did so using an undisclosed limited power of attorney, which did not
grant it the right to file claim 1 on behalf of U.S. Bank. Moreover, U.S. Bank did not come
forward with documentation as of the hearing date to cure these deficiencies. U.S. Bank has not,
therefore, established that it is entitled to payment under claim 1.

Wells v. US bank_2009

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