by Last week, the Tenth Circuit Court of Appeals found that Deutsche Bank (DB) had not proved its status as a “party in interest” in a motion for relief from stay due to its failure to produce evidence of possession of the promissory note. In re Miller, No. 11-1232 (10th Cir., Feb. 1, 2012). The Millers filed a chapter 13 petition to prevent foreclosure sale of their home after the Colorado state court had granted an “Order Authorizing Sale” (OAS) under Civil Rule 120. In its motion for relief from stay DB presented only a copy of the Note indorsed in blank The bankruptcy court granted relief from stay based on the evidentiary showing, and the BAP affirmed on the basis of the state court’s OAS and the Rooker-Feldman doctrine.
The Tenth Circuit found that the Rooker-Feldman doctrine was inapplicable, in part because the party who had lost in state court was not the party seeking relief in the bankruptcy action. It turned to whether issue preclusion prevented the bankruptcy court’s review of the standing issue and found that it did not. Under Colorado law, an “Order Authorizing Sale,” is specifically not considered a final appealable order. The court went on to address the merits. Looking to state law to determine whether DB was a “creditor” with a right to payment, the court found that possession is required to obtain rights under a Note indorsed in blank. Because DB failed to prove possession, the court found that it did not have standing to seek relief from stay.