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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF ALABAMA
IN RE: SALLY W STRACHAN aka SALLY WHEELAHAN STRACHAN DEBTOR
CASE NO: 10-04790-MAM-7
OBJECTION TO MOTION FOR RELIEF FROM STAY FILED BY CHASE CH ASE HOME FINANCE LLC AND MOTION TO STRIKE AFFIDAVIT FILED BY C OUNSEL FOR CREDITOR REGARDING THE VALUE OF DEBTOR’S HOME
COMES NOW the Debtor, by and through counsel, and objects to the Motion for Relief From Stay filed by Chase Home Finance LLC (herein referred to as the “Creditor”) and moves the Court to strike the Affidavit filed by counsel for the Creditor which asserts that Debtor misrepresented the value of her home on Schedule A of her petition in this case on the following grounds: OBJECTION TO MOTION FOR RELIEF FROM STAY 1. Creditor has no standing to bring this action because the real estate mortgage described in and attached to the Motion of Creditor (herein referred to as the “Mortgage”) on the principal residence of Debtor (herein referred to as the “Property) was given by Debtor and her brother Kevin Wheelahan (also a debtor under Chapter 13 in this Court, case no: 10-04792) to the Mortgage Electronic Registration Systems, Inc (“MERS”) as nominee for Renasant Bank, a Mississippi corporation. (herein referred to “Renesant”). There is no assignment from Renasant Bank to Creditor and, accordingly, Renasant is the real party in interest and Creditor has no standing. While there is an assignment from MERS to Creditor, only Renasant is the proper party to assign the Mortgage and associated note. As nominee MERS has no authority to assign the Note and Mortgage despite any language to the contrary in the Mortgage. 2. Creditor does not hold the power of sale of the Mortgage and no evidence has been presented that it holds such power of sale because MERS is not qualified to do business in Alabama and never paid a mortgage tax on the assignment of the Mortgage to MERS or subsequently to Creditor. 3. Creditor is not a ‘holder’ ‘holder’ of the Note and Mortgage and accordingly has absolutely no right, at law or equity, to enforce the Note and Mortgage. The date of the Assignment from MERS to Creditor is November 2, 2010, which is after the date the bankruptcy was filed but Creditor had required debtor to make payments to creditor a substantial time before November 2, 2010, which calls into question the validity of the last minute assignment of the Note and Mortgage to Creditor. Upon information and
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belief, this Note and Mortgage were part of a pooled investment and were one time held by 100’s if not thousand’s of investors through a derivative security pool and each of whom would be required to assign the Note and Mortgage back to MERS before MERS could assign to Creditor. 4. There are necessary parties who have not been joined and who must be joined in the Motion for relief to be granted. These necessary parties are Renasant and MERS, as well as the 100’s if not thousands of investors in the pooled derivative trust which, upon information and belief, this Note and Mortgage were a part. The power of sale is ostensibly held by MERS and MERS is not a party and there is no proof that the power of sale was transferred with the Note and Mortgage, and, in fact, there is no proof that the Note and Mortgage were ever properly negotiated to Creditor. MERS allegedly assigned the Mortgage and Note to Creditor but such assignment did not include the power of sale that was ostensibly granted to MERS. 5. Even if the two primary parties mentioned in 4 above were joined, the Court could not grant termination of the stay because, upon information and belief, based largely upon the existence of MERS as nominee under the Mortgage, this Mortgage and the associated Note are one of those instruments transferred to a pass through pool of investors who then created a trust and resold parts of the loan pool to various tranches of derivative securities. These derivative securities may then have been sold and resold. Accordingly, either the Creditor has absolutely no right to bring this case or, even if it does, it cannot obtain a judgment or any other relief as the right to recover on the Note and Mortgage has been pledged to hundreds, perhaps thousands, of other investors in the pool. Alternatively, the Creditor may only have rights to the Note and Mortgage Mortgage as a security position itself, in which case it is not the proper “holder” to bring this action. Any foreclosure of a pooled mortgage would violate Ala Code section 35-10-12 (1975) in that the persons entitled to the money “thus secured” have not been located and perhaps scattered throughout America and the world. Compare Crum v LaSalle Bank, NA, No. 2080110 (Ala.Civ App. 2009). 6. MERS is a necessary and indispensable party to this action and the failure of MERS to be a party renders the rights of Creditor nonexistent. 7. Creditor is not a valid continuation of or successor in interest to the original mortgagee, who was MERS as nominee for Renasant (not Creditor), despite the purported last minute assignment from MERs to Creditor. This is because the fourth paragraph of the Mortgage attached as exhibit B to Creditor’s Motion states, in part, as follows: “for this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender’s successors and assigns) assigns) and to the successors and assigns of MERS, with power of sale…….” (emphasis supplied)
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succeeds to MERS in its entirety. It should not be interpreted to allow MERS to execute individual assignments from its principal to another successor lender like it tried to do in this case. See Argent Classic Convertible Arbitrage Fund, LP v. Countrywide Financial Corp 07-CV-07097 (CD CA 2009). 8. MERS is a necessary party and is not qualified to do business in Alabama and, accordingly, may not sue on any contract in Alabama since MERS does considerable business in Alabama. In fact, MERS was formed for, inter alia, escaping mortgage transfer taxes that otherwise would have been required to pool investments such as the Mortgage. 9. Creditor will find it impossible to prove that it is a holder in due course of the Note and Mortgage and hence it is subject to any of the foregoing defenses that are deemed substantive and not n ot jurisdictional. Most importantly, for Creditor to be able to foreclose and file a motion for relief from stay, sta y, there would have to be a valid assignment from Renasant to Creditor and the assignment from MERS to Creditor is ineffective for any purpose. There is no authority or apparent authority for MERS to undertake substantive assignment transactions on behalf of its principal. Instead, it was only given the power of sale for Renasant, and was not given the right to assign Renasant’s rights to another lender. 10. There is absolutely no evidence that the original Note has been endorsed or that an allonge has been signed and affixed to the Note in any manner effective to make Creditor a holder of the Note much less a holder in due course of the Note. See UCC 7-3201. 11. The Note was a negotiable instrument under Alabama’s Uniform Commercial Code and the Creditor did not properly acquire the Note via negotiation. See Union Bank & Trust Co. v Thompson, 202 Ala. 537, 81 So. 39, 40 (1919) and Crum, supra. See also, Alabama Code Sections 7-3-104(a) and 7-3-301. 12. In order to endorse a note, the current holder must either sign the instrument itself or an allonge (a paper so s o firmly affixed to the note that it becomes part of the note). See, e.g. Crossland Sav. Bank FSB v. Constant, 737 S.W. 2d 19 (Tex Ct.App. 1987). The text of the UCC suggests mere assignment of an instrument is not sufficient to make the assignee a holder. This is because when an instrument is assigned, it is not necessarily indorsed to the assignee. Courts have supported this interpretation and in a bankruptcy proceeding, one court held that assignment alone does not make the note owner a holder in the absence of endorsement and delivery to the person currently in possession. In re Governor’s Island, 39 B.R. 417 (Bankr E.D.N.C. 1984)(holding mere assignment of a note without endorsement by the note’s previous owner prevents the note’s current owner from being a holder of the note). Without status as a holder, one can never be a holder in
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13. Alternatively, even if the alleged assignment from MERS to Creditor is deemed to be within the authority of MERs (which debtor strongly disputes), disputes ), if the assignment is not firmly affixed affixed to the Note, there has not been a valid endorsement. See Adams v Madison Realty & Development, 853. F.2d 163 (3rd Cir 1998). 14. MERS was created to facilitate the easy transfer of equity participation rights in mortgages and notes, but overlooked was the law on the proper transfer of instruments in the various states, including Alabama, and when MERS is named as a nominee with a power of sale and no more, it does not have the authority to transfer or assign the underlying instrument from lender to lender. Transfers and assignments from lender to lender must be conducted by each lender and not its power of sale nominee. 15. There is no evidence contained in Creditor’s Motion that would indicate that MERS has any right to transfer or assign the Note and Mortgage. Even if the Court holds that MERS does have that right, there is no evidence in the file to indicate that Renasant directed MERS to assign this Note and Mortgage to Creditor. 16. Finally, there have been serious questions raised concerning the execution of documents by lenders and MERS by what are being referred to as “robosigners” to the point that numerous jurisdictions have suspended all foreclosures. Moreover, the fact that Creditor was collecting payments from debtor for several s everal months prior to November 2, 2010, the assignment from MERS to Creditor was executed only after this bankruptcy case was filed. Moreover, the person signing the assignment has a title of Vice PresidentBankruptcy Manager. This leads to the inevitable conclusion that the assignment filed in this case by Creditor was not done in the ordinary course of business of MERS or Renasant or Creditor for that matter.
WHEREFORE, the Court is respectfully requested to deny the Creditor’s Motion for Relief From Stay until such time as Creditor can show a valid chain of title to the Note and Mortgage which would require, at a very minimum, an assignment from Renasant to Creditor and some evidence that the Note and Mortgage were not sold as a derivative investment.
MOTION TO STRIKE AFFIDAVIT OF COUNSEL TO CREDITOR 17. Counsel for Creditor filed an affidavit re fair market market value of debtor’s home (document number 22 in this case) stating that debtor had misrepresented the value of the home on her schedule A by stating the value was $58,500 when said counsel asserts the true value is $155,800.
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19. Second, counsel for Creditor asserts that the fair market value of the home is equal to the tax assessed value of $155,800 but it is common knowledge that, in Baldwin County, the tax assessment values are far in excess of the true value, especially after the BP oil spill and the real estate market retreat. Neither debtor nor Kevin Wheelahan challenged the assessed value of the home, but if they had it is certain that the value would have been substantially reduced. 20. Debtor asserts that the fair market value of the home is $117,000 and that she only owns a one half undivided interest in the home, and therefore debtor did not misrepresent anything on schedule A of her petition. 21. Debtor therefore objects to the affidavit submitted by counsel for Creditor and moves that it be struck from the record in this case. 22. Debtor asserts that the affidavit submitted by counsel for Creditor served no purpose in this case as debtor indicated that she was surrendering the home, and debtor therefore asserts that the affidavit was filed to vex and harass debtor and to call into question the veracity of debtor and counsel for debtor. 23. Even though the opinion of counsel for Creditor as to fair market value of debtor’s home has absolutely no relevance to this case, it should be struck from the record as vexatious, harassing and irrelevant and because it negatively affects the truth and veracity of debtor and counsel for debtor. WHEREFORE, debtor respectfully requests this Court to strike the Affidavit re Fair Market Value, document number 22 in this action, on the grounds stated above.
/s/ Ronald F. Suber Ronald F Suber (Sub 3612) Attorney for Debtors PO Box 1297 Fairhope, AL 36533 (251) 209-3269 [email protected] CERTIFICATE OF SERVICE I do hereby certify that on the 25th day of November 2010 I caused a copy of the foregoing document to be served upon the Trustee, J.C. McAleer, III, by the ECF system
IN RE: SALLY W STRACHAN aka SALLY WHEELAHAN STRACHAN DEBTOR
CASE NO: 10-04790-MAM-7
OBJECTION TO MOTION FOR RELIEF FROM STAY FILED BY CHASE CH ASE HOME FINANCE LLC AND MOTION TO STRIKE AFFIDAVIT FILED BY C OUNSEL FOR CREDITOR REGARDING THE VALUE OF DEBTOR’S HOME
COMES NOW the Debtor, by and through counsel, and objects to the Motion for Relief From Stay filed by Chase Home Finance LLC (herein referred to as the “Creditor”) and moves the Court to strike the Affidavit filed by counsel for the Creditor which asserts that Debtor misrepresented the value of her home on Schedule A of her petition in this case on the following grounds: OBJECTION TO MOTION FOR RELIEF FROM STAY 1. Creditor has no standing to bring this action because the real estate mortgage described in and attached to the Motion of Creditor (herein referred to as the “Mortgage”) on the principal residence of Debtor (herein referred to as the “Property) was given by Debtor and her brother Kevin Wheelahan (also a debtor under Chapter 13 in this Court, case no: 10-04792) to the Mortgage Electronic Registration Systems, Inc (“MERS”) as nominee for Renasant Bank, a Mississippi corporation. (herein referred to “Renesant”). There is no assignment from Renasant Bank to Creditor and, accordingly, Renasant is the real party in interest and Creditor has no standing. While there is an assignment from MERS to Creditor, only Renasant is the proper party to assign the Mortgage and associated note. As nominee MERS has no authority to assign the Note and Mortgage despite any language to the contrary in the Mortgage. 2. Creditor does not hold the power of sale of the Mortgage and no evidence has been presented that it holds such power of sale because MERS is not qualified to do business in Alabama and never paid a mortgage tax on the assignment of the Mortgage to MERS or subsequently to Creditor. 3. Creditor is not a ‘holder’ ‘holder’ of the Note and Mortgage and accordingly has absolutely no right, at law or equity, to enforce the Note and Mortgage. The date of the Assignment from MERS to Creditor is November 2, 2010, which is after the date the bankruptcy was filed but Creditor had required debtor to make payments to creditor a substantial time before November 2, 2010, which calls into question the validity of the last minute assignment of the Note and Mortgage to Creditor. Upon information and
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belief, this Note and Mortgage were part of a pooled investment and were one time held by 100’s if not thousand’s of investors through a derivative security pool and each of whom would be required to assign the Note and Mortgage back to MERS before MERS could assign to Creditor. 4. There are necessary parties who have not been joined and who must be joined in the Motion for relief to be granted. These necessary parties are Renasant and MERS, as well as the 100’s if not thousands of investors in the pooled derivative trust which, upon information and belief, this Note and Mortgage were a part. The power of sale is ostensibly held by MERS and MERS is not a party and there is no proof that the power of sale was transferred with the Note and Mortgage, and, in fact, there is no proof that the Note and Mortgage were ever properly negotiated to Creditor. MERS allegedly assigned the Mortgage and Note to Creditor but such assignment did not include the power of sale that was ostensibly granted to MERS. 5. Even if the two primary parties mentioned in 4 above were joined, the Court could not grant termination of the stay because, upon information and belief, based largely upon the existence of MERS as nominee under the Mortgage, this Mortgage and the associated Note are one of those instruments transferred to a pass through pool of investors who then created a trust and resold parts of the loan pool to various tranches of derivative securities. These derivative securities may then have been sold and resold. Accordingly, either the Creditor has absolutely no right to bring this case or, even if it does, it cannot obtain a judgment or any other relief as the right to recover on the Note and Mortgage has been pledged to hundreds, perhaps thousands, of other investors in the pool. Alternatively, the Creditor may only have rights to the Note and Mortgage Mortgage as a security position itself, in which case it is not the proper “holder” to bring this action. Any foreclosure of a pooled mortgage would violate Ala Code section 35-10-12 (1975) in that the persons entitled to the money “thus secured” have not been located and perhaps scattered throughout America and the world. Compare Crum v LaSalle Bank, NA, No. 2080110 (Ala.Civ App. 2009). 6. MERS is a necessary and indispensable party to this action and the failure of MERS to be a party renders the rights of Creditor nonexistent. 7. Creditor is not a valid continuation of or successor in interest to the original mortgagee, who was MERS as nominee for Renasant (not Creditor), despite the purported last minute assignment from MERs to Creditor. This is because the fourth paragraph of the Mortgage attached as exhibit B to Creditor’s Motion states, in part, as follows: “for this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender’s successors and assigns) assigns) and to the successors and assigns of MERS, with power of sale…….” (emphasis supplied)
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succeeds to MERS in its entirety. It should not be interpreted to allow MERS to execute individual assignments from its principal to another successor lender like it tried to do in this case. See Argent Classic Convertible Arbitrage Fund, LP v. Countrywide Financial Corp 07-CV-07097 (CD CA 2009). 8. MERS is a necessary party and is not qualified to do business in Alabama and, accordingly, may not sue on any contract in Alabama since MERS does considerable business in Alabama. In fact, MERS was formed for, inter alia, escaping mortgage transfer taxes that otherwise would have been required to pool investments such as the Mortgage. 9. Creditor will find it impossible to prove that it is a holder in due course of the Note and Mortgage and hence it is subject to any of the foregoing defenses that are deemed substantive and not n ot jurisdictional. Most importantly, for Creditor to be able to foreclose and file a motion for relief from stay, sta y, there would have to be a valid assignment from Renasant to Creditor and the assignment from MERS to Creditor is ineffective for any purpose. There is no authority or apparent authority for MERS to undertake substantive assignment transactions on behalf of its principal. Instead, it was only given the power of sale for Renasant, and was not given the right to assign Renasant’s rights to another lender. 10. There is absolutely no evidence that the original Note has been endorsed or that an allonge has been signed and affixed to the Note in any manner effective to make Creditor a holder of the Note much less a holder in due course of the Note. See UCC 7-3201. 11. The Note was a negotiable instrument under Alabama’s Uniform Commercial Code and the Creditor did not properly acquire the Note via negotiation. See Union Bank & Trust Co. v Thompson, 202 Ala. 537, 81 So. 39, 40 (1919) and Crum, supra. See also, Alabama Code Sections 7-3-104(a) and 7-3-301. 12. In order to endorse a note, the current holder must either sign the instrument itself or an allonge (a paper so s o firmly affixed to the note that it becomes part of the note). See, e.g. Crossland Sav. Bank FSB v. Constant, 737 S.W. 2d 19 (Tex Ct.App. 1987). The text of the UCC suggests mere assignment of an instrument is not sufficient to make the assignee a holder. This is because when an instrument is assigned, it is not necessarily indorsed to the assignee. Courts have supported this interpretation and in a bankruptcy proceeding, one court held that assignment alone does not make the note owner a holder in the absence of endorsement and delivery to the person currently in possession. In re Governor’s Island, 39 B.R. 417 (Bankr E.D.N.C. 1984)(holding mere assignment of a note without endorsement by the note’s previous owner prevents the note’s current owner from being a holder of the note). Without status as a holder, one can never be a holder in
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13. Alternatively, even if the alleged assignment from MERS to Creditor is deemed to be within the authority of MERs (which debtor strongly disputes), disputes ), if the assignment is not firmly affixed affixed to the Note, there has not been a valid endorsement. See Adams v Madison Realty & Development, 853. F.2d 163 (3rd Cir 1998). 14. MERS was created to facilitate the easy transfer of equity participation rights in mortgages and notes, but overlooked was the law on the proper transfer of instruments in the various states, including Alabama, and when MERS is named as a nominee with a power of sale and no more, it does not have the authority to transfer or assign the underlying instrument from lender to lender. Transfers and assignments from lender to lender must be conducted by each lender and not its power of sale nominee. 15. There is no evidence contained in Creditor’s Motion that would indicate that MERS has any right to transfer or assign the Note and Mortgage. Even if the Court holds that MERS does have that right, there is no evidence in the file to indicate that Renasant directed MERS to assign this Note and Mortgage to Creditor. 16. Finally, there have been serious questions raised concerning the execution of documents by lenders and MERS by what are being referred to as “robosigners” to the point that numerous jurisdictions have suspended all foreclosures. Moreover, the fact that Creditor was collecting payments from debtor for several s everal months prior to November 2, 2010, the assignment from MERS to Creditor was executed only after this bankruptcy case was filed. Moreover, the person signing the assignment has a title of Vice PresidentBankruptcy Manager. This leads to the inevitable conclusion that the assignment filed in this case by Creditor was not done in the ordinary course of business of MERS or Renasant or Creditor for that matter.
WHEREFORE, the Court is respectfully requested to deny the Creditor’s Motion for Relief From Stay until such time as Creditor can show a valid chain of title to the Note and Mortgage which would require, at a very minimum, an assignment from Renasant to Creditor and some evidence that the Note and Mortgage were not sold as a derivative investment.
MOTION TO STRIKE AFFIDAVIT OF COUNSEL TO CREDITOR 17. Counsel for Creditor filed an affidavit re fair market market value of debtor’s home (document number 22 in this case) stating that debtor had misrepresented the value of the home on her schedule A by stating the value was $58,500 when said counsel asserts the true value is $155,800.
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19. Second, counsel for Creditor asserts that the fair market value of the home is equal to the tax assessed value of $155,800 but it is common knowledge that, in Baldwin County, the tax assessment values are far in excess of the true value, especially after the BP oil spill and the real estate market retreat. Neither debtor nor Kevin Wheelahan challenged the assessed value of the home, but if they had it is certain that the value would have been substantially reduced. 20. Debtor asserts that the fair market value of the home is $117,000 and that she only owns a one half undivided interest in the home, and therefore debtor did not misrepresent anything on schedule A of her petition. 21. Debtor therefore objects to the affidavit submitted by counsel for Creditor and moves that it be struck from the record in this case. 22. Debtor asserts that the affidavit submitted by counsel for Creditor served no purpose in this case as debtor indicated that she was surrendering the home, and debtor therefore asserts that the affidavit was filed to vex and harass debtor and to call into question the veracity of debtor and counsel for debtor. 23. Even though the opinion of counsel for Creditor as to fair market value of debtor’s home has absolutely no relevance to this case, it should be struck from the record as vexatious, harassing and irrelevant and because it negatively affects the truth and veracity of debtor and counsel for debtor. WHEREFORE, debtor respectfully requests this Court to strike the Affidavit re Fair Market Value, document number 22 in this action, on the grounds stated above.
/s/ Ronald F. Suber Ronald F Suber (Sub 3612) Attorney for Debtors PO Box 1297 Fairhope, AL 36533 (251) 209-3269 [email protected] CERTIFICATE OF SERVICE I do hereby certify that on the 25th day of November 2010 I caused a copy of the foregoing document to be served upon the Trustee, J.C. McAleer, III, by the ECF system
