Kemp v. Countrywide Home Loans, Inc. (In Re Kemp)
440 B.R. 624
| Bankr. D.N.J. | 2010Background
- Debtor John T. Kemp filed Chapter 13 and identified Countrywide Home Loans as two secured lenders on the Kings Highway property.
- Countrywide filed a secured proof of claim as servicer for Bank of New York as Trustee, alleging $211,202.41 with $40,569.69 in arrears.
- Note and mortgage were executed May 31, 2006; the note was payable to Countrywide and bore no indorsement; an unsigned allonge directed payment to Countrywide.
- Pooling and Servicing Agreement required the original note to be endorsed and delivered to the Trustee, but the note was never transferred to the Bank of New York before the claim was filed.
- MERS held the mortgage as nominee; the 2006-8 PSA connected the note to the Bank of New York as Trustee, though the note remained in Countrywide’s possession.
- Before trial, Countrywide produced a new allonge dated shortly before trial, but it was not affixed to the original note at filing and possession remained with Countrywide/Servicing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bank of New York can enforce the note without possession | Kemp contends Bank of New York cannot enforce due to lack of possession. | Countrywide argues the assignment of mortgage and PSA permit enforcement by Bank of New York. | Enforceability requires possession; Bank of New York never possessed the note. |
| Whether an allonge suffices to transfer holder status when possession never occurred | Bank of New York argues the new allonge retroactively transfers rights. | Countrywide claims the allonge could be used to indorse the note. | No valid indorsement or possession existed; holder status未 established. |
| Whether the servicer can file a proof of claim on behalf of the note's owner | Countrywide as servicer may file as agent for Bank of New York. | Even as servicer, Countrywide cannot confer enforceability where the note isn’t enforceable. | Servicer cannot overcome note enforceability deficiencies; claim disallowed. |
Key Cases Cited
- Adams v. Madison Realty & Dev. Inc., 853 F.2d 163 (3d Cir.1988) (holder status requires proper possession and indorsement)
- Dolin v. Darnall, 115 N.J.L. 508 (E. & A. 1935) (possession is required to be a holder under NJ UCC)
- Marks v. Braunstein, 439 B.R. 248 (D.Mass.2010) (lost-note enforcement depends on possession history)
- Mulert v. National Bank of Tarentum, 210 F.857 (3d Cir.1913) (constructive possession insufficient without actual possession)