Simpson v. Deutsche Bank National Trust Co. (In re Simpson)

Summarized by Emil Khatchatourian , Foley & Lardner LLP
12 years 9 months ago

Citation:

BAP No. CC-12-1445-MkTaJu (B.A.P. 9th Cir. May 29, 2013) (NOT FOR PUBLICATION)

Tag(s):

Ruling:

The Bankruptcy Appellate Panel for the Ninth Circuit AFFIRMED the bankruptcy court's allowance of bank's claim, but without prejudice to debtor's filing in the bankruptcy court a § 502(j) reconsideration motion based on the bank's foreclosure of the subject real property, which extinguished the bank's claim in its entirety. The bankruptcy court's decision to vacate the disallowance order was based on its interpretation of another of its orders---the conditional order sustaining the debtor's objection but granting leave to amend the claim---for which the panel gave broad deference to the court's interpretation of its own orders. Thus, debtor did not demonstrate that he was prejudiced by the lack of advance notice or the lack of an additional hearing when the disallowance order was reconsidered. As to debtor's standing objection, the panel held that a creditor can establish that it is a person entitled to enforce a note by demonstrating that it holds the original note endorsed in blank. Because the bankruptcy court found that the bank held the original note endorsed in blank, the creditor had standing to prosecute the claim. Even if there were some error in the bankruptcy court's decision to vacate the disallowance order and overrule debtor's claim objection, it was harmless error because the property had been foreclosed upon subsequent to the filing of the appeal. This is a complete defense to the proof of claim, which defense debtor can assert via a § 502(j) reconsideration motion on remand. At any rate, the loan was non-recourse as to debtor.

Procedural context:

The bankruptcy court sustained the objection to claim and entered an order disallowing the claim. After creditor amended its claim and presented further evidence, however, the court vacated its prior disallowance order and overruled debtor's claim objection. Debtor appealed from the order overruling his claim objection and vacating the disallowance order.

Facts:

In filing a proof of claim, Deutsche Bank identified itself as the creditor and Carrington Mortgage Servicers as servicing agent. The basis of the claim was a note secured by a deed of trust on real property. Attached to the proof of claim were copies of the note, the deed of trust, an assignment of the deed of trust, and a legal description of the property. Debtor objected to the claim of creditor on the basis that the creditor did not have standing, because creditor had not demonstrated that it was the holder of the note. Creditor opposed the objection, attaching a declaration by an employee of Carrington who declared that Carrington was the servicer of the note on Deutsche Bank's behalf and that true and correct copies of the note and deed of trust were attached as exhibits to the declaration. The bankruptcy court sustained the objection but also granted leave to amend. Deutsche Bank amended amended the proof of claim and again filed a declaration, but this time the declaration also stated that Deutsche Bank possessed the original note. The bankruptcy court determined that Deutsche Bank was the note holder and had standing to prosecute the proof of claim. Accordingly, it entered an order overruling the objection to the amended claim and vacating the prior disallowance order. After debtor filed a notice of appeal, Deutsche Bank moved for relief from stay to foreclose on the property. The property was sold at a non-judicial foreclosure sale.

Judge(s):

MARKELL, TAYLOR, and JURY

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