Royal v. First Interstate Bank (In re Trierweiler)

10th Cir. B.A.P. (Case No WY-11-111 - District of Wyoming) Entered - December 28, 2012.
AFFIRMING the bankruptcy court's ruling that the mortgage naming MERS, as mortgagee on behalf of First Interstate Bank, was valid when granted and was properly recorded. Further, there was no invalidating split between the note and the mortgage either when the loan transaction closed or when the note was assigned to Fannie Mae. Therefore, the Trustee may not avoid the mortgage alleging invalidity by splitting the note from the mortgage.
Procedural context:
Appeal by the Trustee, Randy Royal, of the bankruptcy court's judgment in favor of the appellees, First Interstate Bank ("FIB") and the Mortgage Electronic Registration System ("MERS"), on his adversary complaint seeking to avoid the mortgage on the debtors' home.
On March 16, 2009, Debtors, Matthew and Shannon Trierweiler, obtained financing on their home by executing a note in favor of FIB. FIB then sold the note to Fannie Mae, MERS was then assigned the interest in the mortgage in favor of Fannie Mae and FIB continued to service the loan for Fannie Mae. On May 3, 2012, Debtors filed for a Chapter 7 petition and FIB filed a motion for relief from stay. The motion was denied by the bankruptcy court indicating that FIB "failed to meet its burden that it was a real party in interest or that it had authority to act on behalf of the real party in interest." In December 2010, the Chapter 7 Trustee filed an adversary complaint against FIB and MERS seeking avoidance of the mortgage. After trial, on November 21, 2011, the bankruptcy court entered a judgment in favor of FIB and MERS, rejecting the trustee's "split-note" argument. The trustee appealed that decision.
Thurman, Brown and Somers.

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