In re: Arnold John Allen, Jr. and Kimberly Faith Allen
472 B.R. 559
9th Cir. BAP2012Background
- Debtors Arnold and Kimberly Allen filed Chapter 13; scheduled no secured debt on the Newport, WA property but claimed unsecured debt over $358k and property value of about $180k.
- Wells Fargo filed a secured proof of claim for the loan; Allen objection argued Wells Fargo wasn’t the lender and that the allonge/endorsement chain was suspect.
- U.S. Bank, as Trustee under a PSA, filed an amended proof of claim; USB argued it was the holder entitled to enforce the Note and thus have standing.
- PSA/MLSAs describe transfer of the Note from Dream House Mortgage Corp. (DHMC) to DLJ, then to Credit Suisse, and finally to USB; the Lost Note Affidavit purportedly substitutes for the lost Note.
- Bankruptcy court found the Lost Note Affidavit satisfied RCW 62A.3-309 as a substitute for the original Note, and that the blank-endorsed Note constituted a bearer instrument; USB had standing to file the claim.
- Allens appealed the decision; the Panel affirmed, holding USB was the holder entitled to enforce the Note and thus had standing to file the claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether USB has standing to enforce the Note in the bankruptcy case. | Allen contends USB lacks standing to enforce the Note. | Allen mischaracterizes the Lost Note Affidavit and chain of title; USB is holder and entitled to enforce. | Yes; USB is entitled to enforce and has standing. |
| Whether the Lost Note Affidavit satisfies the terms of the Note under RCW 62A.3-309. | Allen argues the Lost Note Affidavit is insufficient to prove the Note's terms. | Lost Note Affidavit, plus endorsed-be bearer note, suffices to prove terms and enforceability. | Yes; the Lost Note Affidavit satisfies the terms and enables enforcement. |
| Whether transfer from DLJ to USB through the PSA chain was a complete conveyance of rights in the Note. | Allen challenges the MLSA/PSA chain and argues lost MLSA undermines transfer. | Evidence shows full transfer of rights to DLJ, then to Credit Suisse, then to USB; MLSA not essential. | Yes; the evidence shows the Note and rights were transferred in full. |
| Whether the DOT assignment is necessary to determine the right to enforce the Note. | Allen asserts the DOT assignment was not established to USB. | Under WA law, the right to enforce the Note governs; DOT assignment is not required for enforcement rights. | No; DOT assignment is not required to determine who may enforce the Note. |
Key Cases Cited
- In re Veal, 450 B.R. 897 (9th Cir. BAP 2011) (standing to enforce a loan as defined by UCC/RCW; holder entitled to enforce may file claim)
- In re Weisband, 427 B.R. 13 (Bankr. D. Ariz. 2010) (indicates limits of allonge vs. face-note indorsement for transfer)
- Caddo Parish-Villas S., Ltd. v. Beal Bank, S.S.B., 250 F.3d 300 (5th Cir. 2001) (assignee steps into assignor’s shoes; rights transfer with note)
- Atlantic Nat’l Trust, LLC v. McNamee, 984 So. 2d 375 (Ala. 2007) (assignment of note carries with it the deed of trust; security follows debt)
- Bobby D. Assocs. v. DiMarcantonio, 751 A.2d 673 (Pa. Super. Ct. 2000) (lost promissory note may be enforced via Lost Note Affidavit)