Opinion
No. 4:08-bk-12937-JMM.
April 19, 2010
MEMORANDUM DECISION
On April 13, 2010, a trial was held on the motion for stay relief filed by America's Servicing Company ("ASC"). The parties appeared through counsel. Two witnesses were called, and documentary evidence was introduced. At the conclusion of the hearing, the court took the matter under advisement. It now rules.
FACTS
1. The Debtor, Jessica Lopez, executed a promissory note in favor of New Century Mortgage Corporation for $131,400 (Ex. 1).
2. Co-Debtor, David Lopez, was not a signator on that note (Ex. 1).
3. As security therefor, Jessica Lopez executed a Deed of Trust upon her real property residence at Lot 87, RITA MANOR, Book 14 of Maps, Page 33, Pima County, Arizona (Ex. 2).
4. Jessica and David Lopez reside in the real property described in paragraph 3, above.
5. On September 25, 2008, the Debtors filed a voluntary Chapter 13 bankruptcy petition.
6. The Debtors have failed to make monthly payments, under the promissory note (Ex. 1), and are delinquent, post-petition, from June, 2009 to the present, a period of 11 months. The post-petition arrearage owed on the Note through April, 2010, is $15,407.50.
7. There also existed a pre-filing arrearage on the Note, as well.
8. ASC holds both the original Note (Ex. 1) and Deed of Trust (Ex. 2). The Deed of Trust was also recorded in the Office of the Pima County Recorder. This recording was contemporaneous with the Note's execution and the closing of the Note-loan transaction.
9. In their bankruptcy schedules, filed on September 25, 2008, the Debtors listed the Note obligation on their home as an uncontested, undisputed, non-contingent and liquidated debt in the amount of $168,312 (Sch. A, DN 2). The court may take judicial notice of its own files. FED. R. EVID. 201.
10. Similarly, in the Debtors' Schedule D, they listed ASC as the party to whom the payments under the Note were to be paid. The debt still due and owing was listed as $139,178.
11. On September 1, 2009, Schedule D was amended to reflect a dispute with ASC.
12. The Debtors were directed to make monthly payments to ASC. ASC accounts for the Debtors' payments, when made.
13. The Debtors did not testify. Consequently, no evidence was presented by the Debtors that they were confused by where, or to whom, they were to send the monthly payments under the Note (Ex. 1).
14. Similarly, the Debtors presented no evidence to reflect that they have received conflicting instructions as to where, and to whom, their payments are to be made each month. There is no ambiguity in that regard.
15. On September 1, 2009, the Debtors filed an Amended Chapter 13 Plan. In it, the Debtors noted that they intended to dispute the secured creditor's right to foreclose on the residence (DN 49).
16. On September 4, 2009, the Debtors filed an objection to ASC's proof of claim, contending that ASC was an unsecured creditor (DN 53).
17. To date, the Debtors' Amended Chapter 13 Plan has not been confirmed.
DISCUSSION
The Debtors defend the stay relief motion on the grounds that the moving creditor does not have legal or "constitutional standing" to seek stay relief. The court disagrees. ASC's custodian of records, Ms. DeCaro, testified that ASC was in possession of the original Note, maintained the payment ledger and collected and disbursed payments thereon. She further testified that she was authorized to do so pursuant to agreements with those creditors in privity to the Note. Therefore, ASC has shown that it has a colorable right to seek stay relief.
Any party affected by the stay is entitled to seek relief. 3 COLLIER'S ON BANKRUPTCY ¶ 362.07[2] (Henry Somers Alan Resnick, eds. 15th ed., rev. 2009); Matter of Brown Transp. Truckload, Inc., 118 B.R. 889, 893 (Bankr. N.D. Ga. 1990); In re Vieland, 41 B.R. 134, 138 (Bankr. N.D. Ohio 1984). Relief from stay hearings are limited in scope — the validity of underlying claims is not litigated. In re Johnson, 756 F.2d 738, 740 (9th Cir. 1985). As one court has noted, "[s]tay relief hearings do not involve a full adjudication on the merits of claims, defenses or counterclaims, but simply a determination as to whether a creditor has a colorable claim." In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009).
Because it both holds the original Note, is charged with collecting the Debtors' payments thereon, and in accounting for such payments, ASC has legal standing to seek relief. ( See Exs. 1, 2, 6 and "C.")
A movant for stay relief need only present evidence sufficient to present a colorable claim — not every piece of evidence that would be required to prove the right to foreclose under a state law judicial foreclosure proceeding is necessary. In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009). Accordingly, not every movant for relief from stay has to provide a complete chain of a note's assignment to obtain relief.
Arizona's deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee's Sale. Blau v. Am.'s Serv. Co., 2009 WL 3174823, at *6 (D. Ariz. 2009); Mansour v. Cal-W. Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009). It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure. Moreover, if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 2009 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this court declines to impose a blanket requirement that all movants must offer proof of a note's entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so. This is not one of those cases based on the undisputed factual evidence in this case.
It is also undisputed that the Debtor, Jessica Lopez, who signed the Promissory Note and Deed of Trust (Exs. 1 and 2), was severely delinquent in payments on the Note, both pre- and post-petition. Post-petition, she has missed numerous monthly payments on the Note. Since the Note secures her residence, 11 U.S.C. § 1322(b)(5) requires that it be kept current, from the date of filing forward. She has failed to abide by this basic premise of Chapter 13 law.
The court finds and concludes that cause exists to lift the stay, due to the Debtors' failure to abide by 11 U.S.C. § 1322. All of the Debtors' other defenses have failed to persuade the court that the Debtors should remain in their residence, without consequence.
Similarly, the Debtors' defense that the creditor or creditors' internal transactions, solely between themselves, somehow gives the Debtors a legal reason not to repay the money Jessica Lopez borrowed and promised to pay monthly. The Debtors failed to carry the shifted burden of proof on those issues.
Simply put — the Debtor, Jessica Lopez signed a Promissory Note. The Debtors have not paid according to its terms. The Note and its collateral security are now subject to foreclosure unless the Debtors reinstate pursuant to ARIZ. REV. STAT. § 33-801 et seq.
CONCLUSIONS OF LAW
The automatic stay, imposed by 11 U.S.C. § 362(a), shall be dissolved for cause. Cause is shown by the Debtors' failure to pay on the mortgage note, post-petition, according to its terms.
The creditor made a prima facie case for stay relief. Once the creditor proved its prima facie case, the burden of proof shifted to the Debtors to persuade the court that their defenses to the Note's enforcement outweighed the creditor's prima facie case, and thus defeat the "cause" shown by the creditor. The Debtor failed to carry this shifted burden.
An order will be entered dissolving the automatic stay of 11 U.S.C. § 362(a), in favor of ASC, the creditor herein.
As holder of the original Note, ASC has the right to move for stay relief, and therefore has legal standing to do so.
Because the Debtors have failed in their statutory obligation to meet their post-petition, monthly mortgage payments as required by 11 U.S.C. § 1322(b)(5), cause exists to lift the stay.
The proof of claim filed by ASC, as Claim No. 7, is prima facie valid. FED. R. BANKR.P. 3001(f); In re Heath, 331 B.R. 424 (9th Cir. BAP 2005). Debtors' objections to the proof of claim did not overcome the claim's prima facie validity, nor the proof offered and admitted at the stay relief hearing. The Debtors' objection to the claim shall be OVERRULED.
RULING
The stay will be lifted for cause. 11 U.S.C. § 362(d)(1).
The Debtors' objection to ASC's proof of claim is OVERRULED.
A separate order will be entered contemporaneously with this Memorandum Decision. Any appeal must be filed within 14 days after entry on the court's docket. No "motions for reconsideration" or to alter or amend, or to set aside under FED. R. CIV. P. 59 and 60, will be entertained. The Debtors' sole remedy shall be by appeal.
DATED AND SIGNED ABOVE.
SIGNED.
Date: April 19, 2010