Standing

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. [Read more…] about Tenth Circuit Requires Proof of Possession of Note Indorsed in Blank

The Oklahoma Supreme Court recently held Deutsche Bank’s feet to the fire when the debtor challenged Deutsche Bank’s (DB) standing to bring a foreclosure action against him. Deutsche Bank v. Brumbaugh, No. 109223 (January 17, 2012). DB attached the note, mortgage, and loan modification papers to its foreclosure petition but Mr. Brumbaugh denied that the papers were the ones he had signed. He argued that DB had not proved that it was the proper party to bring a foreclosure action. DB filed for summary judgment supported by an affidavit by the servicer averring that DB was the current holder of the note and mortgage. However, the affidavit failed to state when DB became the holder. In its response to debtor’s brief DB attached a copy of the note with an undated indorsement to DB. The trial court granted summary judgment and the Oklahoma Supreme Court reversed and remanded, finding that “It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.” Because the indorsed note finally presented to the court was undated, there was insufficient proof that DB was the holder at the time the foreclosure petition was filed. See also Patterson v. GMAC Mortgage, No. 2100490 (Ala. Ct. Civ. App., Jan. 20, 2012) (mortgage assigned to GMAC after it initiated foreclosure proceedings therefore GMAC lacked standing for ejectment action).

The Sixth Circuit BAP found that the debtor has derivative standing to exercise the trustee’s strong-arm powers under section 542 by seeking avoidance under section 544 of an unperfected lien on his manufactured home.  U.S. Bank Nat’l Ass’n v. Barbee, No. 10-8074 (B.A.P. 6th Cir.) The court identified certain realities that supported its finding: the trustee’s lack of resources to pursue every legitimate avoidance claim, the requirement that the plan conform to section 1325(a)(4), and the possibility of the debtor’s being accused of bad faith if he proposes a plan that does include avoidance of a clearly avoidable lien. In so deciding, the court agreed with the holding in Countrywide Home Loans v. Dickson, 427 B.R. 399 (B.A.P. 6th Cir.), aff’d on other grounds, 655 F.3d 585 (6th Cir. 2011).
Opinion 

A New Jersey intermediate appellate court set aside a sheriff’s sale and vacated summary judgment originally granted in favor of foreclosing entity because it failed to prove it had standing on the day that the foreclosure complaint was filed.  An amended complaint filed after plaintiff received an assignment of mortgage did not cure the defect.

Deutsche Bank v. Mitchell