Gator Bradshaw and the BASICS

31 Jul

CASE INTERPRETATION BY ATTORNEY NEIL GARFIELD of livinglies:
“The real party in interest in relief from stay is whoever is entitled to enforce the obligation
sought to be enforced. Even if a servicer or agent has authority to bring the motion on
behalf of the holder, it is the holder, rather than the servicer, who must be the moving
party, and so identified in the papers and in the electronic docketing done by the moving
party’s counsel.”
For 2 years I have been saying “stick with the basics.” Black Letter Law will set you free. But
time and again attorneys, pro se litigants and judges go astray and find themselves in never-never
land. Most attorneys and Judges take preliminary motions with a grain of salt. Virtually all
foreclosures would be eliminated if lawyers and judges paid attention to the very beginning of
the case. Gator Bradshaw in Florida delivers a nice piece at our seminar on motion practice.
Your job is to immediately focus the Judge’s attention on the fatal defects presented by the
actions of the intermediaries in the securitization process and more specifically, whoever is
attempting to foreclose. By failing to challenge this at the outset you have effectively waived the
issue and now face an uphill battle. This case reported below shows that a mere objection from
the Trustee in BK Court caused the entire claim of the forecloser to completely collapse.
Seven (7) months ago, before any of the landmark decisions reported on these pages, Federal
Bankruptcy Judge Myers in Idaho was presented with an objection from the Trustee to Motion
for Relief From Stay.
The fact that the Trustee took up the cause is reason enough to note this case. What the Court did
with it, in an articulate, well-reasoned memorandum of decision, is nothing short of startling in
its clarity.
One by one, this Judge takes down the arguments and tactics of the intermediaries in the
securitization chain and basically says that none of them has a right to make a claim.
In short, just as in these pages, the Judge doesn’t say who CAN assert and enforce the claim; he
just says that none of these nominees, intermediaries, conduits, bookkeepers, servicers, MERS,
or pretender lenders has any pecuniary interest in the outcome and therefore they lack standing to
be in court. On jurisdictional grounds, therefore, the case is closed and these interlopers are
thrown out of court. Will the REAL Lender please stand up? Maybe, maybe not.
The Judge points out that “The Motion further alleges that Debtors were indebted at filing “to
Movant” and that the debt arose out of a promissory note and a deed of trust dated September 20,
2006 “naming Movant as beneficiary.”
Judge Myers calmly and correctly points out that this was a total lie. When pressed, the
attorney acknowledged that the movant was not owed any money and that MERS was
merely an agent for an undisclosed principal for an undisclosed purpose acting
purportedly for the real party in interest. But the Judge says quite clearly and correctly
that the rules require the real party in interest to be the movant.
This Judge also addresses the issue of burden of proof, a sticking point for many readers of this
blog. He states that the burden is on the movant to prove standing, not on the homeowner or
petitioner to prove lack of standing. In fact, pointing to the rules again, he says that the pleading
must “[p]rovide the details of the underlying obligation or liability upon which the motion
is based;”
In a stroke of his pen, this Judge ends the issue over who has the burden of proof and even
provides grounds BEFORE DISCOVERY for dumping fraudsters out of court. They must plead
the allegations, and they must attach documentation that shows their pleadings are true and
correct.
This Judge is telling fraudsters to stop coming to court with attorney affidavits that are not
evidence (see his memorandum) and to stop submitting affidavits, notes, revisions to notes, late
indorsements, assignments that don’t match up with the pleadings or the requirements of
pleading.
Edited by MSFraud.org
1 All chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
unless otherwise indicated.
2 In 2008, this Court saw over 2,300 stay relief motions in the 5,224 cases filed.
3 See Local Bankruptcy Rule 4001.2 (addressing substantive and procedural
requirements for stay relief motions, and providing for entry of orders upon absence of objection
after notice).
MEMORANDUM OF DECISION – 1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF IDAHO
IN RE )
) Case No. 08-20381-TLM
DARRELL ROYCE SHERIDAN, )
SHERRY ANN SHERIDAN, )
) Chapter 7
Debtors. )
________________________________ )
MEMORANDUM OF DECISION
________________________________________
INTRODUCTION
In this Chapter 7 case, the trustee, Ford Elsaesser (“Trustee”), objects to a
motion under § 362(d) for relief from the § 362(a) automatic stay.1 Motions under
§ 362(d) are common in bankruptcy cases.2 Most stay relief requests proceed
promptly to entry of an order, after proper notice, without any objection.3
However, changes in mortgage practices over the past several years have
created a number of new issues. The one highlighted in this case is the standing of
4 There was no objection, and the exemption was therefore allowed. Taylor v. Freeland
& Kronz, 503 U.S. 638, 643-44 (1992); Rainsdon v. Farson (In re Farson), 387 B.R. 784, 797
(Bankr. D. Idaho 2008). Debtors indicated in their § 521 statement of intention that they would
(continued…)
MEMORANDUM OF DECISION – 2
the moving creditor. Serial assignments of the mortgagee’s interest(s) and the
securitization of mortgages have complicated what was previously a generally
straight-forward standing analysis. Though many creditors provide in their
motions adequate explanation and documentation of their standing to seek relief
on real estate secured debts, Trustee challenges the adequacy of the subject motion
in this case.
Following hearing and consideration of the arguments of the parties, the
Court determines that Trustee’s objection is well taken and the same will be
sustained. The motion for stay relief will be denied.
BACKGROUND AND FACTS
On June 24, 2008, Darrell and Sherry Ann Sheridan (“Debtors”) filed their
joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a
fee ownership interest in a residence located in Post Falls, Idaho. See Doc. No. 1
at sched. A (the “Property”). Debtors asserted the Property’s value was
$225,000.00. Id. They indicated secured claims existed in favor of “Litton Loan
Servicing” ($197,000.00) and “Citimortgage” ($34,000.00). Id. at sched. D.
While this left no apparent equity in the Property, Debtors nevertheless claimed
the benefit of an Idaho homestead exemption. Id. at sched. C.4
4 (…continued)
reaffirm the secured debts on the Property.
5 Closing of the case as a no asset chapter 7 would constitute an abandonment of the
Property as a scheduled but not administered asset, see § 554(c), and the automatic stay would
terminate, see § 362(c)(1).
6 Mortgage Electronic Registration Systems, Inc. refers to itself, and is generally referred
to by others and in the case law, as “MERS.”
MEMORANDUM OF DECISION – 3
The § 341(a) meeting of creditors occurred on July 31, 2008. Debtors
received a discharge on October 3, 2008. While the case was noticed to creditors
as a “no asset” chapter 7, and though Trustee concedes there will be no anticipated
distribution to creditors, Trustee has not yet filed his final report of no distribution
which would allow the case to close.5
On October 16, 2008, the subject motion for relief from stay was filed. See
Doc. No. 21 (the “Motion”). It was filed by “Mortgage Electronic Registration
Systems, Inc. as nominee HSBC Bank USA, National Association, as Indenture
Trustee of the Fieldstone Mortgage Investment Trust Series 2006-3.” Id. at 1 (the
“Movant”).6 The Movant characterized itself as a “secured creditor and
Claimant.” Id. The Motion further alleges that Debtors were indebted at filing “to
Movant” and that the debt arose out of a promissory note and a deed of trust dated
September 20, 2006 “naming Movant as beneficiary.” Id.
Attached to the Motion is a promissory note (the “Note”) executed by
Debtors. It is payable to “Fieldstone Mortgage Company” as the “Lender.” See
7 The documents attached to the Motion were admitted into evidence at the final hearing,
by stipulation of the parties, as “Exhibit 1.”
8 A “final hearing” is contemplated under § 362(d) and (e). That it would be an
evidentiary hearing is a result of the presence of material, disputed facts, which under Fed. R.
Bankr. P. 9014(d) requires testimony in the same manner as in an adversary proceeding.
MEMORANDUM OF DECISION – 4
Ex. 1.7 A portion of the Note states: “I understand Lender may transfer this Note.
Lender or anyone who takes this Note by transfer and who is entitled to receive
payments . . . is called the Note Holder.”
The Note is secured by a deed of trust dated September 20, 2006 and
recorded in the real property records of Kootenai County, Idaho, on September 22,
2006 (the “Deed of Trust”). The Deed of Trust at paragraph (C) identifies and
defines the “Lender” as “Fieldstone Mortgage Company, a Maryland corporation.”
Paragraph (E) of the Deed of Trust recites:
MERS is a separate corporation that is acting solely as nominee for
Lender and Lender’s successors and assigns. MERS is the beneficiary
under this Security Instrument.
Ex. 1.
Trustee objected to the Motion, contending that the Movant failed to
establish its interest in the Property or its standing to seek stay relief. Doc. No. 23.
At a preliminary hearing on November 4, 2008, the parties requested a final
hearing because the question of standing remained unresolved.8 A final hearing
was held on December 16, 2008, at which Trustee and counsel for Movant made
argument, but no evidence was presented other than the documents that, as noted
9 The Code establishes time frames for preliminary hearing, final hearing and ruling.
See § 362(e)(1), (2). In this case, the Motion was originally filed October 16, 2008. Under
§ 362(e)(2), the stay generally “shall terminate on the date that is 60 days after a request is made
by a party in interest” if the case is one under chapters 7, 11 or 13 and the debtor is an individual.
However, that period may be extended by either agreement of the parties or by the Court for good
cause. See § 362(e)(2)(B). Here, the scheduling of the hearings resulted in a final hearing on
December 16, 2008, about the 60th day after the request. This delay was by or with concurrence
of the parties. The Court concludes that additional delay to the date of this Decision was required
to address the contentions of the parties.
10 Another ground for stay relief with respect to acts against property is an absence of
equity in such property coupled with a lack of necessity of such property for an effective
reorganization. See § 362(d)(2). The Motion indicated a lack of equity in the Property and, in
light of the fact that this is a chapter 7 liquidation, the Property is not required for reorganization.
MEMORANDUM OF DECISION – 5
above, were admitted by agreement.9
DISCUSSION AND DISPOSITION
A. Stay relief requires a motion by a party in interest with standing
The Bankruptcy Code, Bankruptcy Rules and this District’s local rules
govern stay relief requests.
Under the Code, relief from the § 362(a) stay is authorized “[o]n request of
a party in interest and after notice and a hearing, . . . .” See § 362(d) (emphasis
added). See also § 362(e)(1) and (2), § 362(f), § 362(j) (all referring to requests
made by a “party in interest.”) One ground for stay relief is “cause, including the
lack of adequate protection of an interest in propertyof such party in interest[.]”
§ 362(d)(1) (emphasis added). The Motion here alleged “cause” based on
delinquent payments, see Doc. No. 21 at 2, thus implicating § 362(d)(1) even
though no specific citations to § 362(d)(1) are made.10
MEMORANDUM OF DECISION – 6
The Rules require that a stay relief request be made by a motion. See Fed.
R. Bankr. P. 9013 (“A request for an order, except when an application is
authorized by these rules, shall be by written motion, unless made during a
hearing.”) (emphasis added); Fed. R. Bankr. P. 4001(a)(1) (“A motion for relief
from an automatic stay provided by the Code . . . shall be made in accordance with
Rule 9014[.]”) (emphasis added).
In addition to the Bankruptcy Rules, this District’s local rules require, inter
alia, that:
– the request shall be made by a “party in interest” and by “motion;”
– the motion shall “[p]rovide the details of the underlying obligation or
liability upon which the motion is based;” and
– the motion shall have attached “accurate and legible copies of all
documents evidencing the obligation and the basis of perfection of
any lien or security interest[.]”
LBR 4001.2(a), (b)(2), and (b)(5).
1. Party in interest, and standing
While the term “party in interest” is not defined by the Code, this Court has
held that such a party must have a “pecuniary interest” in the outcome of the
dispute before the Court. See In re Simplot, 2007 WL 2479664 at *9 n.45 (Bankr.
D. Idaho Aug. 28, 2007) (citing In re Elias, 05.2 I.B.C.R. 41, 42, 2005 WL
4705220 (Bankr. D. Idaho 2005), and In re Stone, 03.2 I.B.C.R. 134, 135 (Bankr.
MEMORANDUM OF DECISION – 7
D. Idaho 2003)). See also Brown v. Sobczak (In re Sobczak), 369 B.R. 512, 517-
18 (9th Cir. BAP 2007) (noting that a “party in interest” may be one who has an
actual pecuniary interest in the case, one who has a practical stake in the outcome
of the case, or one who will be impacted in any significant way in the case).
Simplot not only defined party in interest, it addressed “standing” issues.
The question there was whether the J. R. Simplot Company, which was not a
creditor with a claim against the debtor or estate, “had sufficient party in interest
standing to be heard[.]” 2007 WL 2479664 at *9. This Court stated:
Hasso v. Mozsgai (In re La Sierra Fin. Servs.), 290 B.R. 718 (9th Cir.
BAP 2002), explained that the doctrine of standing encompasses both
constitutional limitations on federal court jurisdiction (i.e., the case or
controversy requirements of Article III), and prudential limitations on
the court’s exercise of that jurisdiction. Constitutional standing
requires an injury in fact, viz. an invasion of a judicially cognizable
interest. 290 B.R. at 726-27. Prudential standing requires that the
party’s assertions fall within the zone of interests protected by the
statute and, further, requires that the litigant assert only its own rights
and not those of another party. Id. at 727 (citing Bennett v. Spear, 520
U.S. 154, 162, 167-68 (1997). The party asserting standing exists has
the burden of proving it. Id. at 726. Though sometimes articulated in
the cases as principles applicable to standing on appeal, the same
propositions apply to a party at the bankruptcy court level.
Id. (footnote citations omitted). In Simplot, the Court concluded that “parties may
not assert . . . objections that relate solely to others, or that go to issues that do not
directly and adversely affect them pecuniarily.” Id. at *10 (footnote citations
omitted). These same standing requirements were recently highlighted in a stay
relief context by the court in In re Jacobson, ___ B.R. ___, 2009 WL 567188 at
MEMORANDUM OF DECISION – 8
*5-6 (Bankr. W.D. Wash. Mar. 6, 2009).
2. Real party in interest
Under Rule 9014, which by virtue of Rule 4001(a)(1) governs stay relief
requests, certain “Part VII” rules are applicable. See Rule 9014(c). Among those
incorporated rules is Rule 7017, which in turn incorporates Fed. R. Civ. P. 17, and
Rule 17(a)(1) provides that “An action must be prosecuted in the name of the real
party in interest.”
Jacobson notes that its moving party, who claimed to be a servicer for the
holder of the note, “neither asserts beneficial interest in the note, nor that it could
enforce the note in its own right.” 2009 WL 567188 at *4. It concluded that Fed.
R. Civ. P. 17 applied, requiring the stay relief motion to be brought in the name of
the real party in interest. Id. (citing In re Hwang, 396 B.R. 757, 767 (Bankr. C.D.
Cal. 2008)); see also In re Vargas, 396 B.R. 511, 521 (Bankr. C.D. Cal. 2008). As
Jacobson summarized:
The real party in interest in relief from stay is whoever is entitled to
enforce the obligation sought to be enforced. Even if a servicer or
agent has authority to bring the motion on behalf of the holder, it is the
holder, rather than the servicer, which must be the moving party, and
so identified in the papers and in the electronic docketing done by the
moving party’s counsel.
Id.
The upshot of these several provisions of the Code, Rules, local rules and
case law is this: to obtain stay relief, a motion must be brought by a party in
interest, with standing. This means the motion must be brought by one who has a
11 The Ninth Circuit’s recent decision in Reusser v. Wachovia Bank, 525 F.3d 855 (9th
Cir. 2008) does not require a different conclusion. Reusser held that a lender, Wachovia Bank,
did not violate the automatic stay by seeking to foreclose on the debtors’ property after the
bankruptcy court granted the loan servicer’s (Washington Mutual) § 362(d) motion. Id. at 861-
62. Although Wachovia did not join in the motion or separately seek stay relief, the court held
that the order entered “as to Washington Mutual” was effective as to Wachovia. Id. at 857, 861.
Notably, however, the Reussers never challenged Washington Mutual’s standing in bankruptcy
court; instead, they launched that attack in a subsequently filed district court action. Id. at 861-
62. The Ninth Circuit held that “a final order lifting an automatic stay is binding as to the
property or interest in question—the res—and its scope is not limited to the particular parties
before the court.” Id. at 861. The difference here is that Trustee has timely objected to Movant’s
standing and, of course, no final order has been entered.
MEMORANDUM OF DECISION – 9
pecuniary interest in the case and, in connection with secured debts, by the entity
that is entitled to payment from the debtor and to enforce security for such
payment. That entity is the real party in interest. It must bring the motion or, if
the motion is filed by a servicer or nominee or other agent with claimed authority
to bring the motion, the motion must identify and be prosecuted in the name of the
real party in interest.11
B. The present Motion
Under the documents attached to the Motion and later admitted at hearing
as Ex. 1, Fieldstone Mortgage Company, a Maryland corporation, would certainly
appear to be a party in interest and have standing. It has an economic interest
according to the Note attached to the Motion and an interest in Debtors’ Property
according to the Deed of Trust that is also attached.
However, the Motion was not brought by Fieldstone Mortgage Company.
12 Idaho Code § 45-1502(1) defines beneficiary for purposes of the trust deed statute as
“the person named or otherwise designated in a trust deed as the person for whose benefit a trust
deed is given, or his successor in interest, and who shall not be the trustee.” Idaho Code § 45-
1502(3) defines trust deed as “a deed executed in conformity with this act and conveying real
property to a trustee in trust to secure the performance of an obligation of the grantor or other
person named in the deed to a beneficiary.” Id. (emphasis added).
MEMORANDUM OF DECISION – 10
1. MERS as “nominee” or “beneficiary”
Counsel for Movant argues that MERS, given its titular designation of
“beneficiary” under the Deed of Trust, is or should be able to prosecute the
Motion under the Code, Rules and Local Rules. Counsel conceded, however, that
MERS is not an economic “beneficiary” under the Deed of Trust. It is owed and
will collect no money from Debtors under the Note, nor will it realize the value of
the Property through foreclosure of the Deed of Trust in the event the Note is not
paid.12
Further, the Deed of Trust’s designation of MERS as “beneficiary” is
coupled with an explanation that “MERS is . . . acting solely as nominee for
Lender and Lender’s successors and assigns.” Ex. 1 (emphasis added). Movant’s
briefing suggests that a “nominee” is synonymous with an “agent.” See Doc. No.
26 at 2.
The Motion was filed by MERS “as nominee [for] HSBC Bank USA,
National Association, as Indenture Trustee of the Fieldstone Mortgage Investment
Trust Series 2006-3.” Even assuming that MERS as a “nominee” had sufficient
rights and ability as an agent to advance its principal’s stay relief request, there
13 The Motion uses several terms (Movant, Claimant, Petitioner) without definition or
evident consistency. The Motion commenced as follows:
“COMES NOW Mortgage Electronic Registration Systems, Inc. as nominee
HSBC Bank USA, National Association, as Indenture Trustee of the Fieldstone
Mortgage Investment Trust Series 2006-3, a secured creditor and Claimant
herein, and moves the Court for its Order granting relief from the automatic
stay[.]”
Thus, the “Claimant” and evidently the “Movant” (i.e., the party who “COMES NOW . . . and
moves”) are one and the same, and this entity also purports to be a “secured creditor.” Since
MERS is acting as nominee, the Claimant/Movant and secured creditor appears by these
allegations to be HSBC Bank USA (in its role as indenture trustee for others). The Motion
continues by asserting that “Debtor was on the date of filing the petition herein, indebted to
Claimant arising out of [the Note] and a Deed of Trust dated September 20, 2006, naming
Movant as beneficiary.” Contrary to these assertions, the Deed of Trust does not name HSBC
Bank USA or the Fieldstone Mortgage Investment Trust as its beneficiary. Nor is there
explanation of how Debtors came to owe HSBC Bank USA.
14 This language appears in the Deed of Trust only. There is no mention of MERS in the
Note.
MEMORANDUM OF DECISION – 11
remains an insuperable problem. The Motion provides no explanation, much less
documentation or other evidence, to show that the Fieldstone Mortgage
Investment Trust Series 2006-3 (as an entity) or HSBC Bank USA (as that entity’s
“indenture trustee”) has any interest in the subject Note or the subject Deed of
Trust.13
In light of Trustee’s objection on this score, Movant argues that MERS’
role as “nominee for Lender [i.e., Fieldstone Mortgage Company] and Lender’s
successors and assigns” gives it ample authority to assert the stay relief request
under the Deed of Trust for whatever successor in interest or assignee might have
the beneficial interest.14 Even if the proposition is accepted that the Deed of Trust
15 Some courts have indicated that the stay relief request should explain the serial
assignments resulting in the movant becoming the holder of the note. See, e.g., In re Hayes, 393
B.R. 259, 269 (Bankr. D. Mass. 2008) (“The Court and the Debtor are entitled to insist that the
moving party establish its standing in a motion for relief from stay through the submission of an
accurate history of the chain of ownership of the mortgage.”); In re Maisel, 378 B.R. 19, 22
(Bankr. D. Mass. 2007) (“‘If the claimant acquired the note and mortgage from the original lender
or from another party who acquired it from the original lender, the claimant can meet its burden
through evidence that traces the loan from the original lender to the claimant.’”) (quoting In re
(continued…)
MEMORANDUM OF DECISION – 12
provisions give MERS the ability to act as an agent (“nominee”) for another, it
acts not on its own account. Its capacity is representative.
2. Documentation
This District’s Local Bankruptcy Rule 4001.2 requires copies of “all
documents evidencing the obligation and the basis of perfection of any lien or
security interest.” The sole documentation provided with the Motion here
evidences the interests in the Note and Deed of Trust held by Fieldstone Mortgage
Company, a Maryland corporation. This submission does not answer the key
question — Who was the holder of the Note at the time of the Motion?
Several movants for stay relief have argued that the holder of a note secured
by a deed of trust obtains the benefit of the deed of trust even in the absence of an
assignment of the deed of trust, on the theory that the security for the debt follows
the debt. Under this theory, it would appear that when bankruptcy intervenes, and
somewhat like a game of Musical Chairs, the then-current holder of the note is the
only creditor with a pecuniary interest and standing sufficient to pursue payment
and relief from stay.15
15 (…continued)
Parrish, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005)). The court in Jacobson decided that it
“need not here go so far” as to require such tracing, because of the paucity of proof presented in
that case. 2009 WL 567188 at *6. The same is true here. Movant’s proof does not even show
who presently holds the Note. That alone provides sufficient basis to deny the Motion.
MEMORANDUM OF DECISION – 13
The Motion here certainly suggests that the Fieldstone Mortgage
Investment Trust Series 2006-3 (or perhaps HSBC Bank USA in its capacity as
indenture trustee for that trust) was the holder of the note on the June 24, 2008,
petition date. But at the time of the final § 362(e) evidentiary hearing herein, the
parties discussed and Movant ultimately conceded that (I) the Note contained
nothing indicating its transfer by Fieldstone Mortgage Company, (ii) the Motion
was devoid of allegations regarding the details of any such transfer, and (iii) the
record lacked any other documents related to the issue.
3. The supplemental affidavit
Subsequent to the closing of the hearing and after the Court took the
dispute under advisement, Movant filed a “supplemental affidavit” of its counsel.
See Doc. No. 28 (filed January 2, 2009). This affidavit alleges that Movant’s
counsel obtained on such date the “original” Note and that the same contains an
indorsement. Counsel states that his “affidavit is presented to supplement the
record herein and for the Court’s consideration in the pending motion[.]” Id. at 2.
The filing and consideration of this supplemental affidavit are improper for
several reasons.
16 Accord Jacobson, 2009 WL 567188 at *6-8 (discussing inadequacies of evidentiary
submissions).
MEMORANDUM OF DECISION – 14
First, the record was closed, and the Court did not authorize the reopening
of that record, nor did it indicate any post-hearing submissions would be accepted.
Second, Trustee did not have the opportunity to address this “newly
obtained” document at hearing, and nothing shows his consent to the post hoc
supplementation of the evidentiary record.
Third, disputed factual issues in contested matters may not be resolved
through testimony in “affidavits” but rather require testimony in open court. See
Fed. R. Bankr. P. 9014(d). Under the circumstances, the identity of the holder of
the Note certainly appears to be a fact in dispute falling within the ambit of this
rule.
Fourth, the affidavit is insufficient to establish that counsel, as affiant, has
the ability to testify regarding or lay the foundation required to admit the
document. See Esposito v. Noyes (In re Lake Country Invs., LLC), 255 B.R. 588,
594-95 (Bankr. D. Idaho 2000).16 The assertion that the newly possessed note is
the “original” appears to be based not on the affiant’s (counsel’s) personal
knowledge but on the assertions of someone else.
Fifth, the proffer of this “new” note as the “original” note directly
contradicts Movant’s prior representations that the Note attached to the Motion
17 See generally Idaho Code § 28-3-205(2) (“When indorsed in blank, an instrument is
payable to the bearer and may be negotiated by transfer of possession alone until specially
indorsed.”); § 28-3-301 (providing that the holder of the instrument may enforce it). These
provisions make identification of the current holder significant.
MEMORANDUM OF DECISION – 15
was “true and correct” and the operative document in this matter. See Doc. No. 21
at 1.
Sixth, even were it considered, the “new” Note’s asserted indorsement
states: “Pay To The Order Of [blank] Without Recourse” and then purports to be
signed by Fieldstone Mortgage Company through a named assistant vice
president. There is no date nor indication of who was or is the transferee.
Fieldstone Mortgage Company may have indorsed the Note in blank, but this
document does not alone establish that either HSBC Bank USA or Fieldstone
Mortgage Investment Trust is the Note’s holder.17
Thus, even if a “nominee” such as MERS could properly bring a motion for
stay relief in the name of and on behalf of the real party in interest – the entity that
has rights in and pecuniary interest under the Note secured by the Deed of Trust –
nothing of record adequately establishes who that entity actually is. Under the
evidence submitted at the § 362(e) final hearing, which consists solely of Exhibit
1, the only entity that MERS could conceivably represent as an agent/nominee
would be Fieldstone Mortgage Company. But MERS does not represent that party
according to the Motion and, in fact, its contentions are to the effect that
18 For this reason, Movant’s reliance on In re Huggins, 357 B.R. 180 (Bankr. D. Mass.
2006) is misplaced. Huggins held that MERS, which was named in a mortgage as the lender’s
nominee, had standing to seek stay relief. Id. at 184-85. But in Huggins, the original lender
continued to hold the note, and the mortgage had not been transferred. Id. at 182, 184.
19 See Fed. R. Bankr. P. 9011(b) (providing inter alia that a motion’s filing or other
presentation constitutes a certification that there has been an “inquiry reasonable under the
circumstances” and that factual allegations made “have evidentiary support or, if specifically so
identified, are likely to have evidentiary support after a reasonable opportunity for further
investigation or discovery”). Trustee here was clear, though, that he asserted no Rule 9011
claims against Movant or its counsel.
MEMORANDUM OF DECISION – 16
Fieldstone Mortgage Company is no longer a party in interest.18
At the time of that final hearing, counsel for Movant conceded that he had
no documentation provided to him by his “client” which indicated the interests
under the Note or Deed of Trust were held by either HSBC Bank USA or the
Fieldstone Mortgage Investment Trust. Counsel filed the Motion and
characterized the Movant’s identity therein based solely on undocumented
representations made to him. This would appear to be a problematic approach
generally.19 And, in this particular case, Trustee’s objection to the Motion put the
matter at issue and Movant to its proof.
CONCLUSION
When Trustee challenged the Motion’s bare assertions, Movant failed to
provide an adequate record showing it was a party in interest with standing
entitled to seek such relief. On the record presented, the Court finds and
concludes Trustee’s objection is well taken. That objection will be sustained. The
Motion will be denied. The Trustee will provide a form of order for the Court’s
MEMORANDUM OF DECISION – 17
review and entry.
DATED: March 12, 2009
TERRY L. MYERS
CHIEF U. S. BANKRUPTCY JUDGE

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