November 25, 2014
by Andrew S. Cannella
Bendett & McHugh, PC – USFN Member (Connecticut, Maine, Vermont)
The Bankruptcy Court in the District of Maine has concluded that the Maine Supreme Judicial Court’s ruling in Bank of America v. Greenleaf, 2014 ME 89, 96 A.3d 700 (Me. 2014), does not impact a creditor’s standing in a bankruptcy proceeding to seek an order granting relief from the automatic stay of 11 U.S.C. § 362(a).
Based on the evidence in the record, the court in Greenleaf was unable to conclude that at the time of the origination of the mortgage loan, Mortgage Electronic Registration Systems, Inc. (MERS) received anything but the right to record the mortgage. As a result the court held that the subsequent assignment of mortgage executed by MERS only conveyed the right to record the mortgage and did not convey any other rights in, and to, the mortgage. As Maine’s foreclosure statute (14 M.R.S. § 6321) requires the plaintiff in a foreclosure case to be the mortgagee, the plaintiff in Greenleaf did not prove that it had the requisite standing to foreclose the mortgage. The plaintiff only received its assignment from MERS and not from the lender referenced in the MERS mortgage.
On September 4, 2014, the bankruptcy judge in the bankruptcy court’s Portland Division entered an order granting a creditor’s motion for relief from stay, and overruled the Chapter 7 trustee’s objection to said motion (which was based on an alleged lack of standing because the security instrument at issue was a MERS-originated mortgage and the creditor/movant was not the original lender). In re Woodman, No. 14-20483 (Bankr. D. Me. 2014). The bankruptcy court properly concluded that standing to foreclose a mortgage is irrelevant to the matter of standing to bring a motion for relief from stay.
Standing to foreclose is an issue that needs to be litigated in a state court foreclosure proceeding, not in bankruptcy court. A colorable claim is all that is required for a creditor to have standing to prosecute a motion for relief from stay in bankruptcy court. The UCC “adopts the traditional view that the mortgage follows the note; i.e., the transferee of the note acquires, as a matter of law, the beneficial interests in the mortgage, as well.” [11 M.R.S. § 9-1308 cmt. 6].
As the creditor/movant was the holder of the note, it met the requisite standing requirement to pursue a motion for relief from stay. Subsequently, in the bankruptcy court’s Bangor Division, in a Chapter 13 case in which the debtor’s counsel interposed a similar objection to a creditor’s motion for relief from stay (based on Greenleaf), the court advised the parties of its agreement with the ruling in Woodman. This occurred at a status conference on October 2, 2014. In re Mooney, No. 10-11651 (Bankr. D. Me. 2014).
Editor’s Note: In a prior article, this author’s firm addressed Bank of America v. Greenleaf, 2014 ME 89, 96 A.3d 700 (Me. 2014) [USFN e-Update, Sept. 2014 Ed.]
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