In Re Veal
449 B.R. 542
9th Cir. BAP2011Background
- In August 2006, Shelli Veal signed a promissory note to GSF Mortgage Corporation and a mortgage securing the property in Illinois.
- The Veals filed Chapter 13 in 2009, listing AHMSI as a secured creditor with a secured claim on the Veal Loan.
- AHMSI filed a proof of secured claim on July 18, 2009, asserting Wells Fargo as servicing agent and attaching the Note, Mortgage, and assignments.
- Wells Fargo moved for relief from the automatic stay to foreclose; the motion lacked direct evidence of possession of the Note or a clear interest in the Note.
- The Veals objected, arguing Wells Fargo lacked standing and that AHMSI/Wells Fargo had no enforceable interest in the Note; Wells Fargo later submitted assignments that did not prove Note transfer.
- The bankruptcy court granted relief from stay and overruled the claim objection; on appeal, the panel reversed on the stay issue and vacated/remanded the claim objection for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to seek relief from the automatic stay | Veals contend Wells Fargo had no standing as real party in interest. | Wells Fargo argues it has a colorable claim and is an assignee entitled to seek relief. | Wells Fargo lacked standing; reversed the stay relief order. |
| Standing to file AHMSI's proof of claim | Veals argue AHMSI lacked a status as a real party in interest or person entitled to enforce the Note. | AHMSI contends it is Wells Fargo's authorized agent and thus proper to file. | AHMSI's standing to file the claim was not established; remanded for findings on who is entitled to enforce the Note. |
| Application of UCC Article 3 and 9 to enforceability | Veals assert only the actual holder or person entitled to enforce may enforce. | Wells Fargo/AHMSI rely on transfer documents to show standing under Article 3/9. | The court must determine who is the 'person entitled to enforce' the Note under Article 3 and who has ownership/interest under Article 9. |
| Effect of note/mortgage transfers without the Note | Transfer of mortgage without the note renders the mortgage unenforceable. | Assignments attached show Mortgage transfer; the note may still be enforceable by the right party. | Without proper note possession or enforcement rights, Wells Fargo cannot establish colorable claim; this requires further factual development. |
Key Cases Cited
- Kronemyer v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915 (9th Cir. BAP 2009) (standing as threshold issue; colorable claim insufficient without real party in interest)
- In re Gould, 401 B.R. 415 (9th Cir. BAP 2009) (stay relief requires colorable claim to enforce rights against estate property)
- U-Haul Int'l, Inc. v. Jartran, Inc., 793 F.2d 1034 (9th Cir. 1986) (real party in interest doctrine; limits on who may sue in own name)
- Campbell v. Verizon Wireless (In re Campbell), 336 B.R. 430 (9th Cir. BAP 2005) (standing prerequisites; evidentiary weight of debtor schedules not controlling)
- In re Weisband, 427 B.R. 13 (Bankr. D. Ariz. 2010) (distinguishes standing from merely being an assignee for proof of claim)