by: William Andrew McNeal
Becket & Lee LLP, Malvern, Pa.
The U.S. Bankruptcy Court for the District of Idaho recently sustained a chapter 7 trustee's objection to a creditor's motion for relief from the automatic stay pursuant to 11 U.S.C. §362(d). Under circumstances of serial assignment of an interest that are more the rule in real property mortgage lending than the exception, the court found that the movant failed to show its standing as the real party in interest, with a pecuniary interest or at least an actual stake in the outcome, able to press its cause. The court found that the movant, which styled itself as the "nominee," (or beneficiary) of the lender, could not show its standing because it acted solely in a representative capacity rather than for its own account. The only documentation provided with the motion failed to show that the movant held the note secured by the debtors' real property.
As a cure, the movant's attorney filed a "supplemental affidavit," by which he sought to supplement the record with a purported "original" note. The court found that the filing was improper for several reasons. The affidavit was fatally flawed because it was filed without appropriate authorization, after the record was closed, denying the trustee an opportunity to respond. It impermissibly addressed factual issues that the required testimony in open court lacked any indicia of the declarant's capacity to offer foundational testimony regarding the note and the representation of the note as "original" contradicted the movant's statements in its motion. Finally, the note named no transferee to establish the movant as its holder. Along with a sua sponte cautionary reference to Fed. R. Bankr. P. 9011, the court concluded that the movant failed to establish its standing, and sustained the trustee's objection to the motion for relief from stay.
1. In re Sheridan, No. 08-20381-TLM, Memorandum of Decision (Bankr. W.D.N.Y. Mar. 12, 2009)