In Re Agard
444 B.R. 231
| Bankr. E.D.N.Y. | 2011Background
- Debtor filed for Chapter 7 relief on September 20, 2010; original mortgage on Westbury, NY property encumbered; movant Select Portfolio Servicing (servicer for U.S. Bank as Trustee) seeks relief from stay to foreclose; Debtor challenges movant’s standing due to alleged lack of authority by MERS to assign the mortgage; state foreclosure judgment of November 24, 2008 is in record; court must address whether movant has standing notwithstanding the foreclosure judgment.
- Foreclosure documents show Mortgage listing MERS as nominee for First Franklin with rights to foreclose; Assignment of Mortgage dated February 1, 2008 lists MERS as assignor and U.S. Bank as assignee; Debtor argues MERS lacked authority to assign the mortgage; MERS argues it acted as agent/nickname for lenders under its system.
- The Chapter 7 discharge occurred after filings and a no-asset report; movant argues discharge/mootness; court holds the stay as to property of the estate persists unless relief under 362(d) is granted; the property remained estate property and not abandoned.
- MERS’s authority to assign the mortgage is central; court finds MERS nominee/agent status insufficient to empower a valid assignment absent explicit written directions from the principal; court reviews MERS membership rules, New York agency law, and public policy but ultimately finds lack of explicit agency evidence.
- Court applies Rooker-Feldman and res judicata to uphold the state foreclosure judgment as evidence of movant’s secured status and standing; court concludes movant has standing to seek relief from stay notwithstanding questions about MERS’s authority; however, the court requires future movants to prove both mortgage and note ownership.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to lift stay | Agard held liable; U.S. Bank must show valid assignment of note/mortgage | MERS lacked authority; standstill on assignment | Movant has standing via state foreclosure judgment and related doctrines |
| Effect of discharge on stay | Discharge terminates the stay on estate property | Property remains estate asset until relief granted | Discharge does not moot stay; property remains estate; relief required under 362(d) |
| Authority of MERS to assign | Mortgage documents/nominee status give MERS authority to assign | Nominee status insufficient without express agency; no valid assignment shown | MERS lacked authority to validly assign the Mortgage |
| Rooker-Feldman and res judicata | State foreclosure judgment can be reviewed; not barred | Judgment controls; cannot revisit in bankruptcy | Rooker-Feldman and res judicata apply to preclude debtor’s challenge; judgment stands |
| Noteholder status and possession | U.S. Bank holds Note; Assignment of Mortgage supports lien | No evidence U.S. Bank holds Note or possesses endorsed Note | Movant failed to prove U.S. Bank holds the Note; yet relief granted based on other grounds |
Key Cases Cited
- In re Ward, 423 B.R. 22 (Bankr. E.D.N.Y. 2010) (Rooker-Feldman applied to foreclosure-stay context)
- McKithen v. Brown, 481 F.3d 89 (2d Cir. 2007) (standing limits in bankruptcy context; state judgments preclusive)
- Meisel v. Grunberg, 651 F. Supp. 2d 98 (S.D.N.Y. 2009) (agency concepts in New York law; actual authority)
- Landmark Nat'l Bank v. Kesler, 216 P.3d 158 (Kan. 2010) (nominee/agency interpretations; limits of MERS authority)
- In re Tour Train Partnership, 15 B.R. 401 (Bankr. D. Vt. 1981) (standing and creditor requirements for lift-stay relief)