From:
Deadly Clear
COMMENT - This article, which ran today on a case verdict which occurred three years ago ignores the partial reversal of the original verdict occuring March 28, 2012. See below the article published on Deadly Clear Friday, December 13th, 2013.
December 13, 2013
United
States Bankruptcy Judge Robert Grossman has ruled that MERS's business
practices are unlawful. He explicitly acknowledged that this ruling sets
a precedent that has far-reaching implications for half of the
mortgages in this country. MERS is dead. The banks are in big trouble.
And all foreclosures should be stopped immediately while the legislative
branch comes up with a solution.
Little did that Judge know then what we know now!! You can only imagine how illegal he would view the MERS Blur.
Verdict Overturned - March 28, 2012
2012
WL 1043690
Only
the Westlaw citation is currently available.
United
States District Court,
E.D.
New York.
Ferrel
L. AGARD, Appellant,
v.
SELECT
PORTFOLIO SERVICING, INC. and Mortgage Electronic Registration
Systems, Inc., Appellee.
Mortgage
Electronic Registration Systems, Inc., Appellant,
v.
Ferrel
L. Agard, Robert L. Pryor, U.S. Trustee, Select Portfolio Servicing,
Inc., Appellee.
E.D.
Bankr.Case No. 8–10–77338(REG). | Nos. 11–CV–1826(JS),
11–CV–2366(JS). | March 28, 2012.
Amy
E. Polowy, Esq.,
Steven J. Baum, P.C., Buffalo, NY, Joseph
N. Froehlich, Esq.,
Ford Bissell & Brook LLP, New York, NY, for Select Portfolio
Servicing, Inc.
Alfred
M. Dimino, Esq.,
U.S. Department of Justice, Office of the United States Trustee,
Central Islip, NY, for U.S. Trustee.
MEMORANDUM
& ORDER
*1
Pending before the Court are two appeals arising out of a Chapter 7
bankruptcy petition filed in the United States Bankruptcy Court for
the Eastern District of New York by debtor Ferrel L. Agard (the
“Debtor”). On October 14, 2010, Select Portfolio Servicing, Inc.
(“Select”) filed a motion to terminate the automatic stay, which
Bankruptcy Judge Robert E. Grossman granted on February 10, 2011, see
In
re Agard,
444 B.R. 231 (Bankr.E.D.N.Y.2011).
On February 25, 2011, Mortgage Electronic Registration Systems, Inc.
(“MERS”), an intervening party, filed a motion for
reconsideration, which was denied on April 8, 2011. MERS now appeals
Judge Grossman’s opinion granting Select’s motion to terminate
the automatic stay and the order denying MERS’ motion for
reconsideration. For the following reasons, MERS’ appeal is
GRANTED, and Judge Grossman’s opinions are VACATED IN PART.
BACKGROUND
I.
Factual
Background
On
June 9, 2006, the Debtor executed a promissory note (the “Note”)
and mortgage (the “Mortgage”) secured by residential real
property located in Westbury, New York (the “Property”). First
Franklin, a division of National City Bank of Indiana, is the
“Lender” named in both the Mortgage and the Note. The Mortgage
also names the Appellant MERS, stating that “MERS is a separate
entity that is acting solely as a nominee for Lender and Lender’s
successors and assigns” (Mortgage at 1), and that “MERS (as
nominee for Lender and Lenders’ successors and assigns) has the
right: (A) to exercise any or all those rights, including, but not
limited to, the right to foreclose and sell the Property; and (B) to
take any action required of Lender including, but not limited to,
releasing and canceling this Security Instrument” (Mortgage at 3).
On
February 1, 2008, MERS executed an Assignment of Mortgage from MERS
as nominee for First Franklin to U.S. Bank National Association, as
Trustee for First Franklin Mortgage Loan Trust 2006–FF12, Mortgage
Pass–Through Certificates, Series 2006–FF12 (“U .S. Bank”).
Subsequent to the Assignment of Mortgage, the Debtor defaulted under
the terms of the Mortgage and Note, and U.S. Bank commenced a
foreclosure action on March 24, 2008 in New York State Supreme Court,
Nassau County. The Debtor failed to answer or otherwise appear in
that action, and a Judgment of Foreclosure and Sale was entered in
favor of U.S. Bank on November 24, 2008.
II. The
Bankruptcy Proceeding
On
September 20, 2010, the Debtor filed for relief under Chapter 7 of
the Bankruptcy Code. In a schedule attached to her bankruptcy
petition, the Debtor listed her interest in the Property, stating
that she defaulted on the Mortgage and a foreclosure sale was
scheduled for September 21, 2010. On October 14, 2010, Select, as
servicer for U.S. Bank, filed a motion seeking relief from the
automatic stay pursuant to 11
U.S.C. § 362(d)
to foreclose on the Property.
On
October 27, 2010, the Debtor filed a “limited opposition” to the
motion, arguing that Select/U.S. Bank lacked standing to seek the
relief requested because MERS’ nominee status did not give it
authority to assign the Mortgage to U.S. Bank, so the Assignment of
Mortgage was invalid. This would mean that U.S. Bank does not have a
bona fide interest in the Property and, accordingly, is not a secured
creditor. The issue was fully briefed, and Judge Grossman heard oral
argument. Before a decision could be rendered on the motion, MERS
moved to intervene in the matter because:
*2
[1] The Court’s determination of the MERS Issue directly affects
the business model of MERS. Additionally, approximately 50% of all
customer mortgages in the United States are held in the name of MERS,
as the mortgagee of record.
[2] The
Court’s determination of the MERS Issue will have significant
impact on MERS as well as the mortgage industry in New York and the
United States.
[3] MERS
has a direct financial stake in the outcome of this contested matter,
and any determination of the MERS Issue has direct impact on MERS.
(Motion to
Intervene ¶¶ 12–14.) Judge Grossman granted MERS’ motion to
intervene after a hearing on December 13, 2010.
After
an additional round of briefing, on February 10, 2011, Judge Grossman
issued an opinion granting Select’s motion (the “Stay Opinion”)
and an Order terminating the automatic stay and permitting Select to
continue with a foreclosure sale of the Property (the “Stay
Order”). Judge Grossman held that U.S. Bank’s status as a secured
creditor was already determined by the state court that issued the
Judgment of Foreclosure in its favor, and, accordingly, pursuant to
the doctrines of res judicata and Rooker–Feldman,
that issue could not be revisited by the Bankruptcy Court. See
In
re Agard,
444 B.R. at 244
(“The state court already has determined that U.S. Bank is a
secured creditor with standing to foreclose and this Court cannot
alter that determination in order to deny U.S. Bank standing to seek
relief from the automatic stay.”). “On that basis, and because
[Select] ha[d] established grounds for relief from stay under Section
362(d),”
Judge Grossman granted Select’s motion. See
id.
Judge
Grossman continued:
Because of
the broad applicability of the issues raised in this case the Court
believes that it is appropriate to set forth its analysis on the
issue of whether [Select/U.S. Bank], absent the Judgment of
Foreclosure, would have standing to bring the instant motion.
Specifically MERS’s role in the ownership and transfer of real
property notes and mortgages is at issue in dozens of cases before
this Court. As a result, the Court has deferred ruling on motions for
relief from stay where the movants’ standing may be affected by
MERS’s participation in the transfer of real property notes and
mortgages. In the instant case, the issues were resolved under the
Rooker–Feldman
doctrine and the application of res judicata. Most, if not all, of
the remainder of the “MERS cases” before the Court cannot be
resolved on the same basis. For that reason, and because MERS has
intervened in this proceeding arguing that the validity of MERS[’s]
assignments directly affects its business model and will have
significant impact on the national mortgage industry, this Court will
give a reasoned opinion as to [Select/U.S. Bank]’s standing to seek
relief from the stay and how that standing is affected by the fact
that U.S. Bank acquired its rights in the Mortgage by way of
assignment from MERS.
*3
Id.
at 244–45. Judge Grossman then made the following findings: (1)
U.S. Bank is not the holder of the Note, see
id.
at 246 (“[T]he Court finds that the Assignment of the Mortgage is
not sufficient to establish an effective assignment of the Note.”);
(2) the Mortgage, by naming MERS as a “nominee,” did not bestow
authority upon MERS to assign the Mortgage, see
id.
at 252; (3) neither MERS’ membership rules nor New York agency laws
conferred upon MERS the authority to assign the Mortgage, see
id.
at 252–54; and (4) accordingly, U.S. Bank is not the holder of the
Mortgage and, absent the Judgment of Foreclosure, would not have had
standing as a secured creditor, see
id.
The court concluded stating that “in all future cases which involve
MERS, the moving party must show that it validly holds both the
mortgage and the underlying note in order to prove standing.” Id.
at 254.
On
February 25, 2011, MERS filed a motion to reconsider Judge Grossman’s
decision granting the stay. Judge Grossman heard oral argument on
March 30, 2011 and on April 8, 2011 issued an order denying the
motion (the “Reconsideration Order”).
III.
The
Pending Appeals
On
February 22, 2011, the Debtor filed a Notice of Appeal from the Stay
Order. On March 8, 2011, MERS filed a notice of cross-appeal, and on
April 8, 2011, MERS filed a notice of another appeal of the
Reconsideration Order. Debtor withdrew her appeal on April 21, 2011,
and on November 16, 2011, the Court consolidated the remaining
appeals-MERS’ cross-appeal of the Stay Order and MERS’ appeal of
the Reconsideration Order. This consolidated appeal is presently
pending before the Court. MERS’ filed its brief on December 16,
2011. No party filed a brief in opposition.
DISCUSSION
MERS
argues that the Stay Order (which incorporates by reference the Stay
Opinion detailing the court’s rationale) must be vacated in part to
the extent that it goes beyond the application of the Rooker–Feldman
doctrine and res judicata to terminate the stay because: (1) the
Bankruptcy Court lacked jurisdiction under the “case or
controversy” requirement of Article III of the United States
Constitution to address the alleged issues arising out of MERS’
participation in the transfer; (2) even if the Bankruptcy Court had
jurisdiction, it was an error of law for the Bankruptcy Court to
reach these issues; and (3) even if the issues were properly before
the Bankruptcy Court, there were significant errors of law and fact
in the court’s analysis which warrant vacatur.1
|
|
The
Court notes that MERS is not seeking any relief with respect to
the Reconsideration Order. As such, the Court finds that any
issues MERS may have had with such order are considered waived and
will not be addressed in this Memorandum and Order. See
In
re Emanuel,
Nos. 11–BK–2272, 11–BK–2716, 2012 WL 386433, at *2 (2d
Cir. Feb. 8, 2012)
(“[Appellant] abandoned any challenge to the district court’s
denial of his motion for reconsideration by failing to raise any
such challenge in his appellate brief.” (citing Hutchinson
v. Deutsche Bank Sec. Inc.,
647 F.3d 479, 491 n. 5 (2d Cir.2011));
Norton
v. Sam’s Club,
145 F.3d 114, 117 (2d Cir.1998)
(“Issues not sufficiently argued in the briefs are considered
waived and normally will not be addressed on appeal.”).
|
I.
Standard
of Review on Bankruptcy Appeal
II.
“Case
or Controversy” Requirement
*4
“[T]he exercise of federal jurisdiction under [Article III of] the
Constitution ‘depends on the existence of a case or controversy,
and a federal court lacks the power to render advisory opinions.’ “
U.S.
v. Leon,
203 F.3d 162, 164 (2d Cir.2000)
(quoting U.S.
Nat’l Bank v. Indep. Ins. Agents of Am., Inc.,
508 U.S. 439, 446, 113 S.Ct. 2173, 124 L.Ed.2d 402 (1993));
see
also Lewis
v. Cont’l Bank Corp.,
494 U.S. 472, 477, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990)
(“Article III denies federal courts the power to decide questions
that cannot affect the rights of litigants in the case before them
and confines them to resolving real and substantial controversies
admitting of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what the law
would be on a hypothetical state of facts.”).2
The Supreme Court has emphasized that “[w]ithout jurisdiction the
court cannot proceed at all in any cause. Jurisdiction is power to
declare the law, and when it ceases to exist, the only function
remaining to the court is that of announcing the fact and dismissing
the cause.” Steel
Co. v. Citizens for a Better Env’ t,
523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)
(internal quotation marks and citation omitted).
|
|
“Bankruptcy
courts derive their jurisdiction from Article III courts, and like
these Article III courts, bankruptcy courts cannot issue advisory
opinions.” In
re Nunez,
Nos. 98–CV–7077, 98–CV–7078, 2000 WL 655983, at *6
(E.D.N.Y. Mar. 17, 2000)
(citations omitted); accord
N.J.
Dep’t of Envtl. Prot. & Energy v. Heldor Indus., Inc.,
989 F.2d 702, 707 n. 8 (3d Cir.1993).
|
MERS
argues that to the extent that the Stay Opinion addresses and
attempts to resolve issues beyond the application of Rooker–Feldman
and res judicata, it is an improper advisory opinion and should be
vacated. The Court agrees. In holding that Rooker–Feldman
(or in the alternative, res judicata) barred revisiting the issue of
Select/U.S. Bank’s standing as a secured creditor, the Bankruptcy
Court recognized that it lacked subject matter jurisdiction over the
dispute, see
Hoblock
v. Albany Cnty. Bd. of Elections,
422 F.3d 77, 83 (2d Cir.2005)
(recognizing that the Rooker–Feldman
doctrine “goes to subject-matter jurisdiction”), thus the issue
of whether MERS had authority to assign the Mortgage was no longer
before the Bankruptcy Court. In other words, there was no longer a
live case or controversy. Judge Grossman’s discussion and analysis
addressed a now-hypothetical issue: whether Select/U.S. Bank would
have had standing absent the Judgment of Foreclosure, see
In
re Agard,
444 B.R. at 245.
And Judge Grossman’s conclusion-that MERS did not have authority to
assign the Mortgage-had no effect on the parties or the bankruptcy.
Accordingly,
this portion of the Stay Order constitutes an unconstitutional
advisory opinion and must be vacated. See
Unalachtigo
Band of the Nanticoke Lenni Lenape Nation v. Corzine,
606 F.3d 126 (3d Cir.2010)
(vacating in part a district court’s opinion that addressed an
intervenor’s motion to dismiss after sua
sponte
dismissing the complaint for lack of standing); Heldor,
989 F.2d at 709
(vacating an order entered by the bankruptcy court after the issue
was mooted by the withdrawal of the objections to the motion); In
re Nunez,
2000 WL 655983, at *7
(vacating a decision of the bankruptcy court addressing a standing
issue raised by the court sua
sponte
after all motions had been granted or withdrawn and the underlying
bankruptcies terminated).
CONCLUSION
*5
For the foregoing reasons, the Court GRANTS MERS’ appeal and
VACATES the portion of the Stay Decision and Order addressing the
hypothetical question of whether Select/U.S. Bank would have had
standing absent the Judgment of Foreclosure.
The
Clerk of the Court is directed to mark both actions in this
consolidated appeal CLOSED.
SO
ORDERED.
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