In Re Walker
466 B.R. 271
| Bankr. E.D. Pa. | 2012Background
- Debtor Janice Walker filed a chapter 13 plan to cure pre-petition mortgage arrears and make post-petition payments through the trustee.
- Bank of New York Mellon (BNYM) filed a secured proof of claim on the mortgage loan underlying the Debtor's property, through BAC Home Loans Servicing LP.
- The Debtor objected to the Proof of Claim, challenging BNYM's right to enforce the Note based on alleged PSA securitization defects.
- The Note and Mortgage were originated with Allied Mortgage Group, with MERS as nominee, and later transferred into the CWALT, Inc. Alternative Loan Trust 2005-J14 pool via a PSA dated Nov. 1, 2005.
- Assignment of the Mortgage to BNYM as Trustee was executed June 17, 2009 and recorded July 8, 2009; the original Note remained in BNYM's possession since 2006.
- The core dispute centers on whether BNYM has a right to enforce the Note under Pennsylvania UCC Article 3, and whether the PSA/New York law can defeat that right.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the Note a negotiable instrument under Pa. UCC? | Walker argues the Note may not be negotiable due to prepayment notice requirement. | BNYM contends the Note is negotiable under Pa. UCC § 3104 and 3106. | Yes; the Note is negotiable under Pa. UCC. |
| Does the PSA/New York law govern BNYM's rights over the Note, superseding Pa. UCC? | Walker asserts PSA/New York law control and bar enforcement due to noncompliance. | BNYM argues UCC governs; PSA may affect rights but does not render UCC irrelevant. | No; UCC remains applicable; PSA does not supersede the UCC for enforceability rights. |
| Does BNYM have the right to enforce the Note under the Pa. UCC? | Walker contends BNYM has no enforceable interest due to PSA defects. | BNYM shows it is the holder with a blank endorsement and thus entitled to enforce the Note. | Yes; BNYM has the right to enforce the Note as holder under Pa. UCC. |
| Does Debtor have standing to challenge the PSA-related transfer to BNYM? | Walker seeks to void or challenge the transfer due to PSA noncompliance. | BNYM argues Debtor lacks standing because the Note is a negotiable instrument and Debtor’s payment to the holder discharges liability. | No; Debtor lacks standing to challenge transfer under the PSA when the Note is negotiable and holder is entitled to enforce. |
Key Cases Cited
- Veal, 450 B.R. 897 (9th Cir. BAP 2011) (explains rights to enforce a note and holder vs. owner distinctions)
- Kemp, 440 B.R. 624 (Bankr. D.N.J. 2010) (note holder status under indorsement requirements)
- Smoak, 461 B.R. 510 (Bankr. S.D. Ohio 2011) (PSA does not govern who is entitled to enforce the note under UCC)
- Raftogianis, 13 A.3d 435 (N.J. Super. 2010) (discusses mortgage securitization and transfer of note and mortgage rights)