In Re: Dana N. Grant-Covert v.
658 F. App'x 175
| 3rd Cir. | 2016Background
- Debtor Dana N. Grant-Covert filed Chapter 7 bankruptcy in June 2015; Wells Fargo moved for relief from the automatic stay to foreclose a first mortgage on her real property.
- Grant-Covert opposed, arguing Wells Fargo lacked standing/was not the real party in interest and had not filed a proof of claim.
- Bankruptcy Court held a hearing (Wells Fargo did not attend), granted relief from stay, and told Grant-Covert to raise defenses in the state foreclosure action.
- District Court affirmed, concluding Wells Fargo was a real party in interest under 11 U.S.C. § 362(d) and had shown cause to lift the stay; Grant-Covert appealed to the Third Circuit.
- The Third Circuit reviewed de novo, focused on whether Wells Fargo was a party in interest (prudential standing) because that status is required to move under § 362(d).
- Record evidence: assignment of the mortgage to Wells Fargo that expressly included the note, a Wells Fargo certification that it (directly or through an agent) possessed the promissory note, and an attached copy of the Note.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wells Fargo was a "party in interest" able to move to lift the automatic stay | Wells Fargo is not the real party in interest because the Note was indorsed in blank and Wells Fargo did not prove entitlement to enforce the Note | Wells Fargo showed it was assigned the mortgage together with the note and certified possession of the promissory note (with copy attached) | Wells Fargo is a party in interest; evidence of assignment plus possession of the Note was sufficient to allow relief from the stay |
| Whether the bankruptcy court retained jurisdiction to resolve who holds the Note | Grant-Covert argued the court should examine enforceability of the Note here | Wells Fargo and courts treated state foreclosure forum as proper to litigate defenses but permitted stay relief | Court held the bankruptcy court properly granted relief and that Grant-Covert could raise defenses in state foreclosure; jurisdictional prudential standing focus controlled |
| Whether Wells Fargo had constitutional or prudential standing | Implicitly argued lack of standing as a threshold defect | Wells Fargo asserted it had standing as assignee/holder of the Note and mortgage | Court did not find a constitutional standing problem; analyzed prudential standing as party in interest and found it satisfied |
| Whether prior cases (e.g., In re Veal) required stricter proof of possession of the Note | Grant-Covert relied on Veal to argue Wells Fargo’s evidence was insufficient | Wells Fargo distinguished Veal by producing an assignment including the note and a certification of possession | Court distinguished Veal and held Wells Fargo’s proof was adequate |
Key Cases Cited
- Barrows v. Jackson, 346 U.S. 249 (1953) (explains Article III case-or-controversy requirement)
- Warth v. Seldin, 422 U.S. 490 (1975) (describes prudential standing limits and third-party rights)
- Kool, Mann, Coffee & Co. v. Coffey, 300 F.3d 340 (3d Cir. 2002) (standards for appellate review of bankruptcy orders)
- In re Veal, 450 B.R. 897 (9th Cir. BAP 2011) (discusses necessity of proof of possession of the note to show party in interest)
- In re Miller, 666 F.3d 1255 (10th Cir. 2012) (addresses proof required to show a party obtained possession of the original promissory note)