MERS Admits It Can't Assign Note

8/3/2019 MERS Admits It Can't Assign Note

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RESPONSE TO DEBTORS SECOND AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J.P. MORGAN AND REPLY TO

OPPOSITION TO MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PHH MORTGAGE CORPORATION

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KEVIN HAHN #9821 E-filed October 27, 2011MALCOLM CISNEROS, A Law Corporation608 South 8

thStreet

Las Vegas, Nevada 89101(702)382-1399 Phone(702)382-0925 [email protected]

Attorneys for Secured Creditor,PHH MORTGAGE CORPORATION

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEVADA

LAS VEGAS DIVISION

In re

JOAN MARIA ANDERSON, andTODD J. SHELLY,

Debtors.

)))

))))))))))))))

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Bankruptcy Case No. 10-31903-lbr

Chapter 13

RESPONSE TO DEBTORS SECONDAMENDED OBJECTION TO PROOF OFCLAIM FILED BY J.P. MORGAN ANDREPLY TO OPPOSITION TO MOTIONFOR RELIEF FROM AUTOMATIC STAYFILED BY PHH MORTGAGECORPORATION

HEARING DATE:DATE: November 10, 2011TIME: 10;30 AMROOM: LBR- Courtroom 1

TO THE HONORABLE LINDA B. RIEGLE, UNITED STATES BANKRUPTCY COURT

JUDGE, THE DEBTORS, DEBTORS COUNSEL, THE CHAPTER 13 TRUSTEE, AND

ALL OTHER INTERESTED PARTIES:

PLEASE TAKE NOTICE that PHH Mortgage Corporation (PHH), as servicer for J.P.

Morgan Mortgage Acquisition Corp. (J.P. Morgan) hereby responds to Debtors SecondAmended Objection to Proof of Claim Filed by J.P. Morgan and Replies to Opposition to Motion

for Relief From Automatic Stay Filed by PHH Mortgage Corporation filed on September 13, 2011.

FACTUAL BACKGROUND

On June 18, 2007, Joan M. Anderson (Debtor) borrowed $680,800.00 from PHH

Case 10-31903-lbr Doc 93 Entered 10/27/11 19:14:30 Page 1 of 11


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Mortgage Corporation and signed a Fixed/Adjustable Rate Rider (Note) secured by a Deed of

Trust (DOT), which was executed on the same day. A true and correct copy of the Note is

attached to this response as Exhibit 1. The true and correct copy of the Note includes an Allonge

to Note (Allonge 1) transferring interest from PHH to Bishops Gate Residential Mortgage Trust(Bishops) without recourse. (See Exhibit 1). A subsequent Allonge to Note (Allonge 2) was

executed by PHH, an administrative agent for Bishops and in blank and without recourse. (Exhibit

1). Allonge 1 and Allonge 2 were also attached to the Amended Proof of Claim, which was filed

on October 21, 2011.

The DOT identified PHH Mortgage Corporation as the Lender and Mortgage Electronic

Registration System as the Nominee and Beneficiary. Under the terms of the DOT, the Debtor

granted and conveyed to the Trustee, in trust with power of sale, the real property located at 8570

West La Madre Way, Las Vegas, Nevada 89149 (Property) as security for the Note. A true and

correct copy of the DOT is attached to this response as Exhibit 2. By executing the DOT, the

Debtor acknowledged that MERS had the right to exercise any or all of those interests, including,

but not limited to, the right to foreclose and sell the Property. (See Exhibit 2, Page 3).

On April 19, 2010, MERS executed an Assignment of Deed of Trust (Assignment) on

behalf of its successors or assignees. A true and correct copy of the Assignment is attached to this

response as Exhibit 3. The assignment granted, assigned, and transferred interest under the Note

and DOT to J.P. Morgan Mortgage Acquisition Corp. The Assignment was recorded in Clark

County on May 18, 2010. (See Declaration of Lawrence Riggs in Support of PHHs Response to

Debtors Amended Objection to Proof of Claim Filed by J.P. Morgan (Declaration) on June 7,

2011, Listed as #66 on Docket Report).

On January 31, 2011, PHH filed its Proof of Claim in the secured amount of $738,399.51

with arrears totaling $54,259.89. The Creditor was identified as J.P. Morgan Mortgage Acquisition

Corp (J.P. Morgan). Attached to the Proof of Claim were a true and correct copy of the Note,

DOT, and Assignment, evidencing J.P. Morgans interest in the Note. On October 21, 2011, PHH

filed its Amended Proof of Claim. Attached to the Amended Proof of Claim were a true and correct

copy of the Note, Allonge 1, Allonge 2, the DOT, and Assignment.



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DEBTORS OBJECTION

First, as discussed below, an adversary proceeding is required to determine the validity,

extent, and priority of J.P. Morgans lien. However, Debtors have failed to file an adversary

proceeding and are seeking to have this debt be deemed unenforceable without doing so. This isnot permitted under the Bankruptcy Rules and a violation of due process. Notwithstanding,

Debtors contentions in the Amended Objection are without merit as discussed below. J.P. Morgan

holds an enforceable Note and Deed of Trust which is secured on the Property. Furthermore, PHH

filed the below response in reliance on the exhibits attached and the Declaration (Listed as #66 on

Docket Report) to support the following opposition. PHH, as the servicer for J.P. Morgan, is

authorized to file the Proof of Claim on behalf of J.P. Morgan. The Objection must be overruled.

RESPONSE TO DEBTORS SECOND AMENDED OBJECTION TO CLAIM

I. DEBTORS OBJECTION IS AN ATTEMPT TO DISALLOW A CLAIMWHICH REQUIRES AN ADVERSARY PROCEEDING.

Debtors are attempting to have the Court determine the validity and extent of the liens in

question by way of an improper objection to claim. It is an attempt to bypass the requirements of an

adversary proceeding and ignore the due process protections afforded to parties by disguising this

matter as an Objection to Claim. An Adversary Proceeding is required and the relief sought cannot

be obtained through an Objection to Claim.

Federal Bankruptcy Rule 3007 provides that if an objection to a claim is joined with a

demand for relief of a kind specified in Rule 7001, it becomes an adversary proceeding. Rule

3007(b) provides that a demand for relief requiring an adversary proceeding may not be included in

an objection to claim. Bankruptcy Rule 7001(2), in turn, provides that an adversary proceeding is

required for an action challenging the validity, priority or extent of a lien. Thus, if Debtors

objection to a secured claim is combined with a challenged to the lien, an adversary proceeding is

required. In re Kleibringk, 346 B.R. 734, 749 (Bankr. N.D.Tex. 2006).

In this case, Debtors request, despite their admissions that they borrowed the monies under

the Note secured by the Deed of Trust, that the debt be unenforceable against them or their property.

This is clearly an attempt to challenge the validity, priority and extent of the lien.



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II. DUE TO THE FACTUAL DIFFERENCES, THE ANALYSIS OFLEYVADOES NOT PERTAIN TO THE CASE AT HAND AND THEREFORE PHH

HAS AN ENFORCEABLE INTEREST IN THE PROPERTY.

A.

Holding ofLeyva

In the Nevada Supreme Court case of Leyva v. National Default Servicing Corp., the Court

ruled that during a Foreclosure Mediation proceeding, Wells Fargo (creditor) failed to produce the

documents to show that it had an enforceable interest in the property that was the subject of the

mediation, under NRS 107.086 and the Foreclosure Mediation Rules. See Leyva v. National Default

Servicing Corp., 127 Nev. ___, ___, ___ P.3d ___, ___ (Adv. Op. No. 40, July 7, 2011). In its

analysis, the Court determined that the language in Nevada Revised Statutes (NRS) 107.086 and

the FMRs necessitates strict compliance. Using this strict compliance standard, the Cour

determined that since the mortgage assignment provided by Wells Fargo was defective and the fact

that the mortgage note was not endorsed according to Article 3 of the Uniform Commercial Code,

Wells Fargo did not substantially comply, and thereby failed to produce the documents required

under NRS 107.086(4). Id.

B. Statutes Governing LeyvaFirst, Foreclosure Mediation and Proof of Claims are governed by different statutes that

require the submission of different evidence. Foreclosure Mediation is governed by NRS 107.086.

Specifically, NRS 107.086(4) states that,

The beneficiary of the deed of trust shall bring to the mediation the original or a certifiedcopy of the deed of trust, the mortgage note and each assignment of the deed of trust ormortgage note.

Among other documents, this statute clearly and unambiguously requires that the beneficiary bring

the original or a certified copy of an assignment of the deed of trust or note. Assignments of deeds

of trust and the notes are mandatory, and Wells Fargo never provided them inLeyva.

In contrast, the case at hand pertains to an Objection to Claim. The filing of a Proof of

Claim is governed by Rule 3001. Rule 3001(d) simply states that the proof of claim, be

accompanied by evidence that the security interest has been perfected. In contrast to NRS



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107.086, Rule 3001 simply states that evidence is required to show the security interest. In this

case, evidence was provided to show that the security interest was perfected. In addition to

providing a copy of the original Note and DOT, PHH submitted a copy of the assignment of DOT

and the Allonge to the Note along with the declaration of Lawrence Riggs, which was filed June 7,2011. These same documents were also attached to the Amended Proof of Claim, filed on October

21, 2011. The required documents were provided by PHH in accordance to Rule 3001, which is the

governing rule for a Proof of Claim.

C. ConsequencesIn Leyva, the Court determined that since the foreclosing party did not bring the required

documents to mediation, it is a sanctionable offense under NRS 107.086 and the FMRs. NRS

107.086(5) states,

If the beneficiary of the deed of trust or the representativedoes not bring to themediation each document required by subsection 4 or does not have the authority or accessto a person with the authority required by subsection 4, the mediator shall prepare andsubmit to the Mediation Administrator a petitionThe court may issue an order imposingsuch sanctions against the beneficiary of the deed of trust or the representative as the courtdetermines appropriate, including, without limitation, requiring a loan modification in themanner determined proper by the court.

The sanctions under NRS107.086 do not include making a claim unenforceable by the

moving party. Therefore, even if this Court finds that the required documents were not provided,

the result should not render the claim unenforceable.

III. J.P. MORGAN IS THE HOLDER OF THE ENDORSED AND NEGOTIATEDPROMISSORY NOTE THAT IS THE BASIS OF THIS CLAIM.

As set forth herein and in the Declaration of Lawrence Riggs, J.P. Morgan is the current

holder of the Note. NRS 104.3205(2) states, When endorsed in blank, an instrument becomes

payable to bearer and may be negotiated by transfer of possession alone until specially endorsed.

Pursuant to NRS 104.3201(1), Negotiation means a transfer of possession, whether voluntary or

involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its

holder. As evidenced in 5 of the Declaration, J.P. Morgan is the current holder of the Note, and

the Note includes Allonge 1 and Allonge 2. (See Exhibit 1, See Declaration, Page 2, 5, See

Amended Proof of Claim filed on October 21, 2011). As Allonge 1 indicates, the Note was



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transferred from PHH to Bishops Gate Residential Mortgage Trust (Bishops). Bishops

subsequently signed in blank and transferred possession to J.P. Morgan (See Allonge 2). J.P.

Morgan is now the holder of bearer paper and entitled to payments thereunder.

IV.

DEBTORS OBJECTION AS TO MERS FAILS GIVEN DEBTORSAGREED TO MERS INVOLVEMENT BY VIRTUE OF SIGNING THE

DEED OF TRUST.Debtors arguments that MERS did not have any rights to transfer the Note and DOT are not

supported by the facts or the law. The parties documented their intention to appoint MERS as the

agent for the Lender, its successors and assigns, through the plain language of the DOT. The DOT

identifies MERS as the nominee for the Lender, and its successor and assigns (Declaration, Exhibit

2, page 2, paragraph (E)). Additionally, page 3 of the DOT provides that the beneficiary of this

Security Instrument is MERS (solely as nominee for Lender and Lenders successor and assigns)

and the successors and assigns of MERS. (See Declaration, Exhibit 2, page 3). The DOT goes

on to further define MERS role as mortgagee and MERS relationship with the Lender and its

successors and assigns as nominee:

Borrower understands and agrees that MERS holds only legal title to theinterests granted by Borrower in this Security Instrument, but if necessary tocomply with law or custom, MERS (as nominee for Lender and Lenders successors

and assigns), has the right: to exercise any or all of those interests, including, butnot limited to, the right to foreclose and sell the Property, and to take any actionrequired of Lender, including, but not limited to, releasing or cancelling thisSecurity Instrument (See Declaration, Exhibit 2, Deed of Trust, Page 3).

Though MERS never held the Note, it could by virtue of its nominee status, transfer the

DOT on behalf of the Note Holder. Although the Assignment contains language purporting to

assign both the Note and Mortgage, MERS lacked the assignable interest in the Note. While this

surplusage evidences poor drafting, it does not affect the validity of MERSs assignment of the

Deed of Trust. In re Kiah, 2010 U.S. Dist. LEXIS 121252, 2010 WL 4781849. In re Huggins, 357

B.R. at 183.

Contrary to Debtors assertion that the assignment split the DOT and the Note, which would

render the debt unenforceable, courts have recently found that MERS has the capacity to assign

instruments. Furthermore, these courts have determined that the mere language of MERS on the



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DOT was not sufficient to split the Note from the Deed. See Hubert v. Metlife Home Loans, et al.

A-10-620408. (D. Nevada, 2010) (holding that MERS does not split the mortgage and the note, or

render the mortgage invalid); Cosgrave v. American Home Mortgage Corp., MERS, et al., A-10-

623894-C. (D. Nevada. 2010) (holding that the presences of MERS on the security instrument doesnot in and of itself cause the note and mortgage to be split or separated and does not invalidate the

mortgage). Based upon the above, it is clear that MERS has the authority to assign the DOT and tha

the debt encumbered by the Debtors is enforceable and should not be disallowed.

V. PHH BY VIRTUE OF ITS SERVICING RIGHTS WITH JPMORGAN

PHH Mortgage Corporation is the servicer for J.P. Morgan Mortgage Acquisition Corp.

(See Declaration, Page 2, 6) Federal Rule of Bankruptcy Procedure 3001(b) states in pertinent part

that, A proof of claim shall be executed by the creditor or the creditors authorized agent. Section

501(a) of the Bankruptcy Code also states that a creditor may file a proof of claim. A servicer of a

mortgage is a creditor pursuant to its duties as a servicer, and therefore, has standing to file a

,

HOLDER OF THE CLAIM, HAS STANDING TO FILE THE PROOF OF

CLAIM.

proof of claim. In re Conde-Dedonato, 391 B.R. 247, 250 (Bankr. E.D.N.Y. 2008); In re

Minbatiwalla, 424 B.R. 104, 109 (Bankr. S.D.N.Y. 2010); In re Woodberry, 383 B.R. 373, 379

(Bankr. D.S.C. 2008); see also Bankers Trust v. 236 Beltway Inv., 865 F. Supp. 1186, 1191 (E.D.

Va. 1994); In re Tainan, 48 B.R. 250, 252 (Bankr. E.D. Pa. 1985). A servicer has standing to bring a

claim because it has a tangible interest in the estate, and its pecuniary interest was derived from its

servicing activities, for which it received compensation. In re Viencek, 273 B.R. 354, 356 (Bankr.

N.D.N.Y. 2002); In re Conde-Dedonato, 391 B.R. at 250.

Numerous courts have held that a servicer, pursuant to their duty as a servicer, is a party in

interest in proceedings involving loans which it services [holding that a servicer was allowed to

defend a proof of claim on behalf of its principal]. In re O'Dell, 268 B.R. 607, 618 (N.D.Ala.2001)

aff'd, 305 F.3d 1297, 1302 (11th Cir. 2002). The loan servicers interest in the note is by virtue of

its servicing activities for which it receives compensation. In re Viencek, 273 B.R. 354, 357-58

(Bankr. N.D.N.Y. 2002)).

http://scholar.google.com/scholar_case?case=13450544105216586492&hl=en&as_sdt=2,5http://scholar.google.com/scholar_case?case=13450544105216586492&hl=en&as_sdt=2,5


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It has been held that mortgage servicers are parties in interest with standing by virtue of their

pecuniary interest in collecting payments under the terms of the notes and mortgages they service. In

re: Henry Lopez, 2011 Bankr. LEXIS 476, *16, (Bank. E.D. Mass. 2011). This is further suppor

that PHH has standing because it has a right to payment pursuant to its duties as a servicer on a loanand it can be injured by a Debtor when it loses it servicing fees as a result of the Debtors

nonpayment of the loan. PHH has shown that it is the servicer for J.P. Morgan and has standing to

file a proof of claim on behalf of JPMorgan. The proof of claim that was filed on January 31, 2011

identifies the Name of the Creditor, the person or other entity to whom the debtor owes money of

property, as J.P. Morgan.

As the Court explained in the case of In re Henry, a party in interest need only demonstrate a

colorable claim to property of the estate, Id., at 18, citing Grella v. Salem Five Cent Sav. Bank 42

F.3d, 26, 32 (1st

Cir. 1994), which PHH has done by providing the chain of title from PHH to J.P.

Morgan.

As set forth herein, PHH is currently the servicer of the Note and DOT and is entitled to file a

proof of claim as the servicer for J.P. Morgan. As a result of its servicing rights and compensation as

a servicer, J.P. Morgan has a tangible interest in the Note and DOT. Based upon this, it is clear tha

PHH is entitled to execute the Proof of Claim on behalf of J.P. Morgan.

VI. DEBTORS OBJECTION TO CLAIM FAILS TO SET FORTH ANY LEGALOR FACTUAL ARGUMENTS AS TO WHY PHHS CLAIM SHOULD NOT

BE CONSIERED AN ENFORCEABLE CLAIM

Notwithstanding the attempted technical arguments by Debtors to try to wipe out the debt on

the Property, the debt is enforceable against the Debtors and Debtors property. Pursuant to Code

Section 502(a), a claim shall be deemed allowed unless an objection is filed. Even when an

objection is filed, the claim shall be allowed, except to the extent that it is disallowed on one of

the grounds provided by Section 502(b). 11 U.S.C. 502(b). Section 502(b) provides the sole

grounds on which a party can object to a proof of claim. In re Heath, 331 B.R. 424, 435 (B.A.P. 9th

Cir. 2005)(citing Dove Nation v. eCast Settlement Corp., 318 B.R. 147, 150-52 (B.A.P. 8th Cir.

2004)).



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An objection to claim must raise sufficient legal or factual grounds on which to disallow or

reduce the claim. A Proof of Claim that does not actually contest Debtors liability or the amount of

the debt is insufficient to disallow a proof of claim, even if the Proof of Claim lacks the

documentation required by Rule 3001(c). In re Campbell, 336 B.R. 430, 432 (B.A.P. 9th Cir. 2005)While a creditor may have an obligation to respond to an objection to claim that is sufficiently

specific about the information required, the Heath Court noted that such an objection should not be

inconsistent with sworn schedules that concede all or some portion of the debt. In re Heath, 331

B.R. 436-437, n.6; see also In re Lasky, 364 B.R. 385, 389-390 (Bankr. C.D. Cal. 2007). In the

event sufficient legal or factual grounds are raised, the Court would then turn to the usual burdens of

proof associated with claims litigation, including the admissions contained in the bankruptcy

schedules, as well as any relevant documentation provided by the claimant. In re Campbell, 336 B.R

at 436. In this case, even if the contentions in Debtors objection could be considered to raise

sufficient legal or factual grounds to come within Section 502(b), PHHs claim is entitled to prima

facie validity. The Debtors cannot overcome the presumption by filing objections that do not

actually dispute the liability or the amount of the claim.

Rule 3001(f) provides that a claim filed in accordance with the rules shall constitute prima

facie evidence of the validity and amount of the claim. Fed. R. Bankr. P. 3001(f); Diamant v.

Kasparian (In re Southern California Plastics, Inc.), 165 F.3d 1243 (9th Cir. 1999). When the claim

is based upon a writing, a copy of the writing shall be filed with the claim. Fed. R. Bankr. P.

3001(c). Noncompliance with Rule 3001(c) is not a statutory ground for disallowance. Debtors

cannot claim that the claim is unenforceable against the Debtors and the property of the Debtors

because the debt is in fact, owing. Except for evidence that the security interest has been perfected

as required by Rule 3001(d), the rules do not require any other evidence be attached to the proof of

claim. In re Garner, 246 B.R. 617, 621 (B.A.P. 9th Cir. 2000). In this case, the claim was

accompanied by both the Note, the writing on which the claim is based, a recorded copy of the DOT

securing the Note, and an Assignment transferring interest in the DOT. Therefore, the burden is on

the Debtors to produce sufficient evidence to rebut the validity of the claim.

Debtors state that the promissory note attached to the Proof of Claim is devoid of any



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endorsements. However, PHH has provided the Note with Allonge 1 and Allonge 2.

On the other hand, the Debtors have failed to provide any substantive evidence to rebut the

prima facie validity of PHHs claim. Fullmer vs. United States, 962 F.2d 1463 (10 th Cir. 1992)

(holding that claims are presumed to be valid on prima facie basis and presumption can be overcomeonly if the objection party offers equally probative evidence to the contrary). Accordingly, Debtors

request that the Proof of Claim be deemed unenforceable should be denied.

CONCLUSION

PHH has provided substantial evidence and has shown that it is entitled to file a Proof of

Claim on behalf of J.P. Morgan. For the foregoing reasons, PHH respectfully requests the Court to

overrule Debtors Second Amended Objection to Proof of Claim and grant PHHs Motion for Relief

from Automatic Stay.

DATED: October 27, 2011 Respectfully Submitted,

MALCOLM CISNEROS, A Law Corporation

/s/Kevin Hahn

KEVIN HAHNAttorney for Secured Creditor,

PHH MORTGAGE CORPORATION



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PROOF OF SERVICE

STATE OF CALIFORNIA )) ss.

COUNTY OF ORANGE )

I am employed in the County of Orange, State of California. I am over the age of eighteenand not a party to the within action; my business address is: 2112 Business Center Drive, Second

Floor, Irvine, California, 92612.

On October 27, 2011, I served the following document described as RESPONSE TO

DEBTORS AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J.P. MORGAN on

the interested parties in this action by placing a true copy thereof enclosed in a sealed envelope with

postage thereon fully prepaid in the United States mail at Irvine, California (and via telecopy or

overnight mail where indicated), addressed as follows:

Joan Maria AndersonTodd J Shelly8570 W. La MadreLas Vegas, NV 89149

Arun Gupta800 N. Rainbow Blvd., #208Las Vegas, NV 89107

Jeffrey J. Whitehead2431 W. Horizon Ridge Pkwy, Ste 110

Henderson, NV 89052Rick A. Yarnall701 Bridger Ave. #820Las Vegas, NV 89101

I declare under penalty of perjury that the foregoing is true and correct.

Executed on October 27, 2011, at Irvine, California.

/s/Dave KimDAVE KIM


Documents

MERS Admits It Can't Assign Note