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Bret D. Landrith Plaintiff appearing Pro se 9743 Sagamore Rd, Leawood, KS 66206 Cell 913-951-1715 bret@bretlandrith.

corn IN THE DISTRICT COURT OF JOHNSON COUNTY, KANSAS THE BANK OF NEW YORK V. JEFFERY ALLAN BASLER, et al )

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)

Case No. 10CV1749 Court Number: 2

DEFENDANT'S MOTION TO SET ASIDE SALE AND JUDGMENT UNDER K.S.A. 60-309 Comes now the defendant, BRET D. LANDRITH as the successor in interest to JEFFERY ALLAN BASLER, the defendant and makes the following Notice to Set Aside the Sale and Judgment. The defendant BRET D. LANDRITH refers the court and parties to his accompanying Answer asserting a separate an independent basis for continuing jurisdiction of this court to resolve post sale issues in equity and the defendant incorporates by reference the evidentiary documents and the attested facts in his Notice Of Successor In Interest And Motion For Extension Of Time To Answer: STATEMENT OF FACTS 1. The d e fendant Bret D. Landrith, a citizen of the State of Kansas is an arm's length

buyer in good faith of the property on 8-1-2011 that is the subject of this litigation is lot 330, Leawood Estates, a subdivision in Leawood, Johnson County, Kansas, according to the recorded plat thereof, commonly known as 9743 Sagamore Road, Leawood, KS

Exhibit 8 LANDRITH KS Motion to Set Aside Foreclosure

66206 (the "Property" ). SeeAttachment 1 Defendant's Affidavit of Lack of Knowledge and Structural Engineering Defect. 2. The d e fendant came to check the Johnson County registration of deeds in person

and determined JEFFERY ALLAN BASLER was the registered owner. 3. The d e fendant checked the Johnson County civil action database for a foreclosure

action against Basler and did not see it. 4. The d e fendant was told by JEFFERY ALLAN BASLER who resides in the State

of Missouri that he did not know whether there was a foreclosure or not. 5. The r e cord as best can be deciphered by the defendant from the appearance

docket history does not show service of process with return of service on JEFFERY ALLAN BASLER other than by publication. 6. The i n t erest foreclosed upon, any purported interest in the property or alleged

right to foreclose held by the trust THE BANK OF NEW YORK is acting as an agent for was purchased by THE BANK OF NEW YORK. 7. The U S District Court for The District of New Jersey in a bankruptcy proceeding

applying materially identical state UCC law with Kansas, determined in a finding of fact that Countrywide Homeloan, Inc. engaged in a pattern and practice of retaining mortgage notes and not delivering them to the trusts as represented by THE BANK OF NEW YORK in court proceedings, and found that at law, the trust lacked the right to foreclose or to otherwise enforce the note. SeeAttachment 2 Kemp v. Countrywide Home Loans, Inc., 440 B.R. 624 (Bankr. N.J. 2010).

MEMORANDUM OF LAW A sale and judgment of foreclosure obtained on publication service through default may be set aside under K.S.A. 60-309 within two years of its issuance. Facts have come to light providing a basis to question the standing of THE BANK OF NEW YORK and its right to foreclose and whether any valid interest in the 9743 Sagamore Road is held by its principal. Neither the defendant BRET D. LANDRITH nor his predecessor in interest JEFFERY ALLAN BASLER can be found to have acquiesced in the sale or judgment: "[O]ur court has recently held that failure to participate in the foreclosure sale or to seek a stay does not constitute acquiescence in the judgment. Citifinancial Mortgage Co. v. Clark, 39 Kan.App.2d 149, 155-57, 177 P.3d 986 (2008)." Deutsche Bank Nat. Trust Co. v. Rooney, 186 P.3d 820 (Kan. App., 2008). The address of JEFFERY ALLAN BASLER was easily ascertainable and is how the defendant BRET D. LANDRITH found him and succeeded in interest as the purchaser of the 9743 Sagamore Road property: "2. Where the names and addresses of adverse parties are known or easily ascertainable, notice of pending proceedings by publication service, alone, is not sufficient to satisfy the requirements of due process under the 14th Amendment to the federal Constitution or g 2 of the Bill of Rights of the Kansas Constitution." Weaver v. Frazee, 547 P.2d 1005, 219 Kan. 42 (Kan., 1976). The Kansas statues provide a cure for the lack of due process under the 14th Amendment to the federal Constitution and g 2 of the Bill of Rights of the Kansas Constitution created by the default sale and foreclosure judgment of this court in K.S.A. 60-309: "K.S.A. 60-309 (default judgment based on publication service may be set aside within two years of judgment if party had no actual notice)."

Bank 8'estern v. Henderson, 255 Kan. 343, 874 P.2d 632 (Kan., 1994). The defendant has a colorable defense to a foreclosure action by THE BANK OF NEW YORK on behalf of a trust claiming a secured interest and right to foreclose resulting from a Countrywide Mortgage. The Kansas Supreme Court has stated that a foreclosure could be repudiated as fraudulent where the mortgagee does not have any right in the mortgage: "When plaintiff [assignee] discovered what Haas [assignor] had done, it could choose one of two courses of action: It could repudiate the foreclosure proceedings on the ground of fraud, and itself foreclose the Caskey mortgage; or it could confirm the regularity and validity of the foreclosure proceedings as vesting title in Haas [assignor], and hold him as trustee of the title for plaintiff s benefit." 127 Kan. at 242, 273 P. 477. The first course of action is supported by Mutual Benefit Life Insurance Co. v. Huntington, 57 Kan. 744, 48 P. 19 (1897). Once the mortgage is assigned, the mortgagee/assignor no longer has any right in the mortgage, and any judgment the mortgagee/assignor obtained would have been fraudulent." Bank 8'estern v. Henderson, 255 Kan. 343, 874 P.2d 632 (Kan., 1994). It is clearly established that a lack of standing of an entity purporting to foreclose on a mortgage for another party lacking a valid assignment of rights under the note negates subject matter jurisdiction of this court and can be raised at any time: "In Kansas, standing is a component of subject matter jurisdiction, which any party, or the court on its own motion, may raise at any time. Vorhees v. Baltazar, 283 Kan. 389, 397, 153 P.3d 1227 (2007)." Mortgage Elec. Registration Sys.Inc v. Graham (Kan. App., 2010). K.S.A. 84-3-301 is materially identical to N.J.S.A. 12A:3-301 found to bar New York Bank's right to enforce the note. K.S.A. 84-3-301states: 84-3-301: Person entitled to enforce instrument. "Personentitled to enforce" an instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to K.S.A. 84-3-309 or 84-3

418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. There being no independent buyer in good faith prevailing at the sheriff's sale, the parties would not be prejudiced in a lawful possessory interest by setting aside the sale and foreclosure judgment.

Respectfully submitted,

Bret D. Landrith Defendant appearing Pro se CERTIFICATE OF SERVICE I certify I have mailed a copy of the above pleading to counsel for the plaintiff THE BANK OF NEW YORK on September 12, 2011. South and Associates, PC Brian P. Hazel 6363 College Blvd. Suite 100 Overland Park, KS 66211 Brian. Hazel@southlaw.corn

Bret D. Landrith Defendant appearing Pro se

IN THE DISTRICT COURT OF JOHNSON COUNTY, KANSAS THE BANK OF NEW YORK V. JEFFERY ALLAN BASLER, et al )

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Case No. 10CV1749 Court Number: 2

AFFIDAVIT OF NO ACTUAL KNOWLEDGE OF FORECLSOURE AND OF STRUCTURAL ENGINEERING DEFECT I, BRET D. LANDRITH, a citizen of the State of Kansas attest to the following related to the property at 9743 Sagamore Road, in the City of Leawood, Johnson County Kansas: I am an arm's length buyer in good faith of the property which is the subject of this litigation is lot 330, Leawood Estates, a subdivision in Leawood, Johnson County, Kansas, according to the recorded plat thereof, commonly known as 9743 Sagamore Road, Leawood, KS 66206 (the "Property" ). Before offering to buy the property, I went to check the Johnson County registration of deeds in person and determined JEFFERY ALLAN BASLER was the registered owner. I then went home and checked the Johnson County civil action database for a foreclosure action against the name "Basler" and did not see it, the screen showed only a few cases, not a foreclosure action and I made a PDF of the screen search result which I later included as an attachment to my motion for an extension of time to answer the foreclosure. I went to the last address of the registered owner JEFFERY ALLAN BASLER who resided in the Plaza area of the City of Kansas City in the State of Missouri and left

AFFIDAVIT OF NO ACTUAL KNOWLEDGE ATTACHMENT 1

a message on his door answering intercom that I was interested in purchasing whatever rights he had in the 9743 Sagamore Road property. He telephoned me and we exchanged email addresses so I could send him my offer and a proposed quit claim deed. Later we arranged to meet where I explained my research to him on who was the registered owner of the 9743 Sagamore Road property. JEFFERY ALLAN BASLER stated he had no knowledge on whether there was a foreclosure action on the 9743 Sagamore Road property. JEFFERY ALLAN BASLER disclosed he had built the current house at 9743 Sagamore Road in 2006 with the desire to resale it on part of the foundation of an older existing home he had purchased. I asked about the shoring on the North all of the basement and about water I saw through the South East basement window where no sump system appeared to be cast in the basement floor concrete. JEFFERY ALLAN BASLER disclosed that the drainage systems excavated for the property had failed and the buyer's inspection prior to closing revealed two feet of standing water in the basement resulting in the sales contract being revoked. JEFFERY ALLAN BASLER disclosed that a childhood friend of his who had done much of the construction of the current house had re excavated the South East corner in an attempt to fix the problem. I relied on the information about the house including the flooding problem resulting from the construction of the basement foundation in the South East corner of the structure, the need to have had the North wall of the basement shored because of use of

part of the existing concrete basement foundation in the 2006 reconstruction of the house by his childhood friend, and the lack of any knowledge of a foreclosure action or judgment given to me by JEFFERY ALLAN BASLER at this meeting to reach an outright cash purchase price of $6,000.00. I paid JEFFERY ALLAN BASLER while he executed the Quit Claim Deed to me on the afternoon of August 1, 2011. Later that day, I rechecked everything and discovered a foreclosure action was on the electronic record and sent two emails to JEFFERY ALLAN BASLER seeking return of the funds but did not obtain them. See Exb. 1. I returned to the property after a light afternoon rain in August 12, 2011 and took a picture through the basement window at the South East corner of water standing on the floor of the basement. SeeExb. 2

State of Kansas County of Johnson Signed and affirmed before me on Month of September, day of 2011 by

Bret D. Landrith
Affiant

(Signature of notarial officer)

(Seal, if any)

Title (and Rank)

Monday, September 12, 2011 12:51 PM

Subject: Re: Bad News Date: Tuesday, August 2, 2011 9:47 AM From: Bret Landrith <bretobretlandrith.corn> To: "batterup1974ly a hoo.corn" <batterup1974oyahoo.corn>

I will return the quit claim to you and not register it if you return the funds, less compensation for your time and effort.

On 8/2/11 6:46 AM, "batterup1974Nyahoo.corn" (batterup1974Nyahoo.corn) wrote:

Oh no.....bad news. What do you propose. Sent from my HTC on the Now Network from Sprint! -- - Reply message-From: "Bret Landrith" (bretobretlandrith.corn)
Date: Tue, Aug 2, 2011 1:45 am

Subject: Bad News To: "Jeff Basler" (batterup1974Nyahoo.corn) Jeff I found the foreclosure already took place and the sheriff's sale has been confirmed. I will not be able to challenge the lawfulness of the mortgage after it went trough MERS. See attached case history (the case did not turn up on the online search I did before making the offer to youl. Also your redemption period may have been as little as three months, now expired. I have attached a page explanation from the Kansas AG's office that explains the timeline and that the sheriff's sale deed is not granted until the redemption period expires. I think you would have to find a house before the foreclosure was filed or step into the shoes of someone and answer and defend against foreclosure.
Bret

Landrith Affidavit Exhibit 1


Page 1of 1

Landrith Affidavit Exhibit 2

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FOR PUBLICATION UNITED STATES BANKRUPTCY COURT D ISTRICT OF NEN J E R S EY

In the Matter of

Case No. 08-18700-JHW

John T. Kemp
Debtor

John T. Kemp

Adversary No. 08-2448

Coun~

de H o m e Loans, Inc.
Defendant

OPINION

FILED
JAMES J. WALORON, CLERK

APPEARANCES:

B r u c e H . Levitt, Esq. Levitt S Slafkes, PC

November 16, 2010

76 South Orange Avenue, Suite 305


S outh Orange, New Jersey 07079

U.S. BANKRUPTCY COURT CAMDEN, N.J.


BY: 'rherees O'Brien,Judlelel
Assistsht ts Chief Judge Wlzrhur

Counsel for the Debtor

Harold Kaplan, Esq. Dori L. Scovish, Esq. Frenkel, Lambert, Weiss, Weisman S Gordon, LLP
80 Main Street, Suite 460

West Orange, New Jersey 0 7 052 Counsel for the Defendant

Before the court for resolution is the debtor's adversary complaint seeking to expunge the proof of claim 61ed on behalf of the Bank of New York by Countryvnde Home Loans, Inc. as servicer. The debtor challenges the creditor's opportunity to enforce the obligation alleged to be due, based

MOTION TO SET ASIDE ATTACHMENT 2

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primarily on the fact that the underlying note executed by the debtor was not properly indorsed to the transferee, and was never placed in the transferee's possession. Under the New Jersey Uniform Commercial Code, the note, as a. negotiable instrument, is not enforceable by the Bank of New York under these circumstances. The plaintiff/debtor's challenge to the proof of claim is sustained, on this record.

PROCEDURAL HISTORY

On, May 9, 2008, the debtor, John T. Kemp, Gled a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. The debtor scheduled an
ownership int e rest in several properties, including one located at 1 316 Kings

Highway, Haddon Heights, New Jersey, the property at issue in this proceeding. Schedule D of the debtor's petition, listing creditors holding secured claims, listed Count~ de H o m e Loans as both the first and second

mortgagee, with claims of 5167,000 and $42,000, respectively, against the 1316 Kings Highway property. The debtor's Chapter 13 plan proposed to make payments over 60 months to satisfy priority claims and to cure arrearages on three separate mortgages, including the two Coun~ de m o r t gages.'

T he debtor filed an amended plan on October 3, 2008 wh ich wa s

co~ ed o n D ecember 11, 2008 at 82,081 for 54 ro.onths. The modified plan increased the arrearage to be paid. to CountxyvAde from 418,000 to 534,000,

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On June 11, 2008, the defendant herein, Countryside Home Loans, Inc.
(hereinafter "Countryvride"), identifying itself as the servicer for the Bank of New York, filed a secured proof of claim in the amount of $211,202.41, including $40,569.69 in arrears, noting the property at 1316 Kings Highway as
the collateral for the claim.~ The debtor Gled this adversary complaint on

October 16, 2008 against Coun ~

de, s e eking to expunge its proof of claim.'

The debtor asserts that the Bank of New York cannot enforce the underlying obligation.

and maintained the second Countrywride mortgage arrears at 86,000. A second


modified plan was filed on April 15, 2010 and is cu r r ently scheduled for

confirmation on December 8, 2010. The latest modified plan does not list
C oun ~ de a s a c r e d i tor to be treated under the pl an .

Although the debtor listed two mortgages held by Countrymde against 1316 Kings Highway in his schedules, Countrywide only filed one proof of claim regarding one mortgage and note. In 2008, Coun~ de F i n a n ciaL Corporation, the umbrella
organization for Countryw ide Home Loans, Inc., was pur ch ased. by the Bank of

America Corporation. Effective April 27, 2009, Countrymde Home Loans, Inc.
changed its name to BAC Home Loan Servicing, L.P. ("BAC Servicing" ). Motion to Dismiss, Van Beveren Certif. at 1 . O n J u l y 1 , 2 0 10, a T r a n s fer of Claim for

Security" was Gled on the debtor's claim register, transferring the claim from
" Country m d e Home Loans, Inc., servicer for Bank of New York t o " B A C H om e Loan Servicing, Lp". I n t h i s op i n i on, I will cont i nu e to refer to the defendant as

Countryvride.

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FACTS

In his complaint, the debtor does not dispute that he signed the original mortgage documents in question. The note and mortgage were executed by the debtor on May 31, 2006. The note, designated as an "Interest Only
A djustable Rate Note", listed the lender as "Countr y m d e H ome Loans, Inc." N o

indorsement appeared on the note. Accompanying the note was an unsigned "Allonge to Note" dated the same day, May 31, 2006, in favor of "America' s Wholesale Lender", directing that the debtor "Pay to the Order of Coun~ Home Loans, Inc., d/b/a. America's Wholesale Lender." de

The mortgage, in the amount of 8 1 67,000, listed the lender as "America' s Wholesale Lender". M o r t gage Electronic Registration Systems, Inc., or "MERS",

is named as "the mortgagee", and is authoxized to act "solely as the nominee" for the lender and the lender's successors and assigns. The mortgage references the promissory note signed by the borrower on the same date. The mortgage was recorded in the Camden County Clerk's Office on July 13, 2006.

Shortly after the execution by th e debtor of the note and m or tgage, the

The record does not reflect whether the unsigned allonge was physically affixed to the note.

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instruments executed by the debtor were apparently pooled with other sim i l ar

instruments and sold as a package to the Bank of New York as Trustee. On June 28, 2006, a Pooling and Servicing Agreement ("PSA" or "the Agreement" ) was executed by CWABS, Inc. as the depositor, with Countrymde Home Loans, Inc., Park Monaco, Inc. and Park Sienna, I.LC as the sellers, Countrymde Home Loans Servicing LP ("Coun~ de S e r vicing" ) as the master servicer, and

the Bank of New York as the Trustee. Pursuant to the Agreement, the
depositor was directed to transfer the Trust Fu nd , consisting of specified mortgage loans and their pr oceeds, including the debtor's loan, to the Bank of

New York as Trustee, in return for certificates referred to as Asset-backed


Certificates, Series 2006-8. Th e sellers sold, transferred or assigned to the depositor "all the right, title and in t erest of such Seller in and to th e applicable Initial Mortgage Loans, including all in t erest and pr i n cipal received and

receivable by such Seller." PSA g 2.01(a) at 52. In turn, the depositor immediately transferred "all right title and interest in the Initial Mortgage
Loans," including the debtor's loan, to the Tru stee, for the benefit of th e c ertificate holders. I d .

The Agreement expressly provided that in connection with th e t r a n sfer of

each loan, the depositor was to deliver "the original Mortgage Note, endorsed by manual or facsimile signature in blank in the following form: 'Pay to the order

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without recourse', with all intervening endorsements that show


a coxnplete chain of endorsement from the oxiginator to the Person endorsing

the Mortgage Note." PSA g 2.01(g) {ij at 56. Most significantly for purposes of this discussion, the note in question was never indorsed in blank or delivered to the Bank of New York, as required by the Pooling and Servicing Agreement.

On March 14, 2007, MERS, as the nominee for America's Wholesale Lender, assigned the debtor's mortgage to the Bank of New York as Trustee for the Certificateholders CWABs, Inc. Asset-backed Certificates, Series 2006-8. The assi~ament purported to assign "a certain mortgage dated May 31, 2006 .. . [tjogether with the Bond, Note or other obligation described in the Mortgage,
a nd the money due and to become due thereon, with th e in t erest." T h e assignment provided further that th e "Assignor covenants that t h ere is now

due and owing upon the Mortgage and the Bond, Note or other obligation secured thereby, the sum of 5167,199.92 Dollars principal with interest
thereon to be computed at the rate of 9.530 percent per year." Th e assignment

was recorded with the County Clerk on March 24, 2008.

At the trial of this m a tt er, Coun t ~

de pr o d u c ed a new u n d ated "Allonge

to Promissory Note", which directed the debtor to "Pay to the Order of Bank of New York, as Trustee for the Certificateholders CWABS, Inc., Asset-backed

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Certificates, Series 6006-8."' The new allonge was signed by Sharon Mason, Vice President of Countxymde Home Loans, Inc., in the Bankruptcy Risk
Litigation Management Department . L i n d.a DeMartini, a. supervisor and

operational team leader for the Litigation Management Department for BAC Home Loans Servicing L.P. ("BAC Servicing" ),' testified that the new allonge was prepared in anticipation of this litigation, and that it was signed. several weeks before the trial by Sharon Mason.

As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Coun~ the original note appears to have been transferred to Coun~
unit, as evidenced by internal FedEx track ing nu m b e rs .

de, a n d t h at de' s f oreclosure

Sh e also confirmed

that the new allonge had not been attached or otherwise affixed to the note. S he testified further that it was cu stomary for Cou n ~ d e t o ma intain

The allonge misidentifies the Asset-backed Certificates as "Sexies 6006-8" rather than "Series 2006-8."
Ms. DeMartini testified that Cou n ~ de Hom e L o a ns, In c., the

originator of the note and xnortgage at issue here, and Countrywide Home Loans Servicing LP, the sexvicer of the loan both before and after the sale of the
loan, were and are two different legal entities under one corporate umbr ella. Her und.erstanding that the entity k n own as Coun t ry vnde Horne Loans

Servicing I P became BAP Home Loans Servicing LP when Bank of America took over the Countrywide entities differs from the representation xnade in papers
submitted by the defendant herein that th e entity k n own as Countxy md e Hom e

Loans, Inc. became BAP Home Loan Servicing LP. See n. 3.

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possession of the original note and related loan documents.

In a supplemental su bm i ssion dated September 9, 2009, the defendant

asserted that "the Defendant/Secured Creditor located the original Note. The original Note with allonge and Pooling and Servicing Agreement are available
for inspection." W h e n t h e m a t ter r et u r ned to the court on September 24,

2009, counsel for the defendant represented to the court that he had the original note, with the new allonge now attached, in his possession. No additional information was presented regarding the chain of possession of the note from its origination until counsel acquired possession.

In sum, we have established on this record that at th e tim e of the filing of

the proof of claim, the debtor's mortgage had been assigned. to the Bank of New

In a bizarre twist, in the same September 9, 2009 submission,


C ountrymd e pr oduced a copy of a "Lost Note Certification," dated February 1, 2007, which in d icated that the original note had. been delivered to the lender

on the origination date and thereafter "misplaced, lost or destroyed, and after a. thorough and diligent search, no one ha.s been able to locate the original Note."
The defendant asserted for the first t ime that th e "wh ereabouts of the Note

could not be determined" at the time that the proof of claim was filed. Def.
Suppl. Subm. at 6 . A s a r e su lt, Coun t r y m d e claimed that it was u n a ble to affix t he allonge to the note until after the original note had been rediscovered. A t

the next hearing on September 24, 2009, counsel was not able to explain the
inconsistencies between the lost note certification, Ms. DeMartin i's testimony, and the r e d i scovery" of the note, and asked that the lost note certification be

disregarded. T13-15 to 16 (9/24/2009).

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York, but that Countrymde did not transfer possession of the associated note
to the Bank . S h o r tly before trial in t hi s m a t t er, the defendant executed, an

allonge to transfer the note to the Bank of New York; however, the allonge was not initially aKxed to the original note, and possession of the note never actually changed. The Pooling and Servicing Agreement required an
indorsement and tr an sfer of the note to the Tru stee, but t hi s was not

accomplished prior to the filing of the proof of claim. The defendant has now produced the original note and has apparently affixed the new allonge to it, but the original note and allonge still have not been transferred to the possession of the Bank of New Yoxk. Count ~ d e, t h e originator of the loan, filed the proof
t h a t i t w a s th e

o f claixn on behalf of the Bank of New York as Tru stee, clai o~ g

servicer for the loan. P u r s u an t t o th e PSA, Countryw ide Servicing, and not Countxymde, Inc., was the master servicex for the transferred loans.8 At all relevant times, the original note appears to have been either in th e possession

by Coun~ ~,

According to a Prospectus Supplement dated June 30, 2006, filed. de, I n c . with the Securities and Exchange Commission,see c v 'd 'l l * *d Ih l gi

b y Countr p m de, Inc. Th e Prospectus notes that "Cou n ~ de Hom e L o a n s expects to continue to directly service a portion of its loan portfolio," while

f* ~ll 1

g *

g g 1 . t d sc d

C , b*

d S* I

g. ~ P ** f

hV
de

Home Loans became exnployees of Coun t ~

de S e r v i c i ng, Cou n ~

Servicing has engaged Countrywide Home Loans as a subservicer to perform certain loan servicing activities on its behalf." Id. Because Countrpmde Home
L oans, Inc. designated itself as the servicer for the Bank of New York on t h e

proof of claim at issue here, I assume for these purposes that it is acting in that capacity on this loan.

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of Countxymde or Coun~

de S e r vicing.'

DISCUSSIOK

With this factual backdrop, we turn to the issue of whether the challenge to the proof of claim filed on behalf of the Bank of New York, by its servicer Countxymde, can be sustained. Under the Bankruptcy Code, a claim is deexned allowed unless a party in interest objects. 11 U.S.C. g 502(a). If an
objection to a claim is m ade, the claim is disallowed "to the extent th a t . ..

such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured." 11 U.S.C. g 502(b)(1).

Countrywide's claim here must be disallowed, because it is


unenforceabie ader New Jersey law on two grounds. First, under New Jersey's Uniform Commercial Code ("UCC") provisions, the fact that the owner

The record is unclear about wh ether the original note has been in

the possession of Countrpmde Home Loans, Inc. or Countrywide Hoxne Loans


Servicing LP. Ms . DeMartini t estified both that th e original note was always l ocated in the Cou n ~ de or i g i n a t ion file (presumably at Coun t r y m d e H om e

Loans, Inc.) and that the sexvicer actually retained possession of the original note (presumably Countrymde Home Loans Servicing LP). She also testified that the "Documents Department" was charged with imaging and storing the
original documents, but th e record is not clear about w h ich of the two entities

housed the Documents Department.

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of the note, the Bank of New York, never had possession of the note, is fatal to its enforcement. Second, upon the sale of the note and mortgage to the Bank
of New York, the fact that the note was not pr operly indorsed to the new owner

also defeats the enforceability of the note.

Under New Jersey law, the enforcement of a promissory note that is


secured by a mortgage is governed by the UCC. Th e n o te, at issue here, made

payable to Coun~

de, p r o viding for interest and an unconditional promise to

pay the lender, is a "negotiable instrument" under the New Jersey UCC, which defines a negotiable instrument as "an unconditional promise or order to pay a
fixed amount of money, with or w i t h ou t i n t erest or other charges described in the promise or order, if it : ( 1 ) is payable to bearer or to order at the tixne it is

issued or first comes into possession of a. holder; (2) is payable on demand or at a definite time." N.J.S.A. 12A:3-104. A party is entitled to enforce a negotiable
instrument if it is "the holder of the inst r u m e nt , a n on h older in p ossession of

the instrument who has the rights of a holder, or a person not in possession of
t he instrum ent who is entitled to enforce the instru m ent p u r s u an t t o

12A:3-309 or subsection d. of 12A:3-418." N.J.S.A. 12A:3-301. In this case,


the creditor raay not enforce the instr u m ent u n der any of the th ree statutory qualifiers.

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1.

H ol d e r .

A "holder" is defined as "the person in possessio~ if the instr u m ent i s payable to bearer or, in the case of an instr u m ent payable to an identi6ed

person, if the identified person is in possession." N.J.S.A. 12A:1-201(20). "Mere ownership or possession of a note is insuKcient to qualify an individual
as a 'holder'." Ad a ms v. Madison Real 8 x D e v. Inc., 853 F.2d 163, 166 (3d

Cir. 1988). Where, as here, the ownership of an instruxnent is transferred, the transferee's attainment of the status of "holder" depends on the negotiation of
the instrum ent to th e tr an sferee. N . J .S.A. 12A:3-201(a). The two elexnents

required for negotiation, both of which are missing here, are the transfer of
p ossession of the instr u m ent to the tr an sferee, and its in dorsement by th e

holder. N.J.S.A. 12A:3-201(b).

As to the issue of possession, we are not certain on t hi s record whether

the party in possession of the note is Countrymde or Countxymde Servicing." What we do know is that the note was purchased, by the Bank of New York as
Trustee, but never came into the physical possession of the Bank . B e c a use the

Bank of New York never had possession of the note, it can not qu alify as a

"holdex under the New Jersey UCC. See Dolin v. Darnall, 115 J . l . . 508, 181

See n. 9.

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A. 201 (E8A 1935) ( Since the plaintiff was not 'in possession of' the notes in
question, he was neither the 'holder' nor the 'bearer' thereof. )."

The second element required to negotiate an instrument to the transferee, i.e., indorsement of the instrument by the holder, is also missing here. An indorsement means "a signature, other than that of a signer as

maker, drawer, or acceptor, that alone or accompanied by other words is made


on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or incurring indorser's liability on the instrument."
N.J.S.A. 12A:3-204. Th e i n d orsement may be on the in st r u i n ent it self, or it may be on "a paper affixed to the inst r u m e n t. " I d . S u c h a p a per is called an

"allonge", defined as "[a] slip of paper sometiines attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements." 2009). Se eBlack's Law Dictionary at 88 (9~ Kd.

The significance of indorsement and aKxation requirements to achieve

If Countrymde was in possession of the note, then. it would have had holder" status as of the date of the petition 61ing date, because the note was payable to Countryv6de, no indorsement or allonge had been executed, and Count~ de w a s in possession of the original note. However, Coun~ de
did not file the claim on its own behalf. R a t h er, it filed the claim as "servicer f or Bank of New York." Th e qu a lification of the Bank of New York, rather th a n

Coun~

d e, t o enforce the note is at issue.

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holder status, and thereby qualify to enforce a note against the maker, was
explained by the Third Circuit in Ad a ms v. Madison Real 8 a D e v. Inc., ~su ra .

The court explained that the maker of the note xnust have certainty regarding the party who is entitled to enforce the note.
From the maker's standpoint, th erefore, it becomes essential to

establish that the person who demands payment of a negotia.ble note, or to whom payment is made, is the duly qualified holder. Otherwise, the obligor is exposed to the risk of double payment, or
at least to the expense of litigation incu r red to prevent du pl i cative

satisfaction of the instrument. These risks provide makers with a recognizable interest in demanding proof of the chain of title. Consequently, plaintiffs here, as makers of the notes, may properly press defendant to establish its holder status.

853 F.2d at 168.

At the time of the Adams' decision, the New Jersey UCC provided in relevant part that "[ajn indorsement must be written by or on behalf of the holder and on the instrument or on a paper so 6raQy affixed thereto as to become a part thereof." N.J.S.A. 12A:3-202(2) (1961)." The UCC Commentary explained that this language was in conformance with those

decisions holding that a purported indorsement on a mortgage or other separate paper pinned or clipped to an instrument is not

The New Jersey Study Comment noted that the "wording in reference to indorsements [wasJ changed from 'or upon a paper attached
thereto', to 'so firmly aftixed thereto as to become a part th ereof'. Th is ch a ng e

merely implernent[edJ the ancient doctrine of allonge."

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s ufficient for negotiation. T h e i n d orsement must on t h e

instrument itself or on a paper intended for the purpose is so


firmly affixed to the instr u m ent as to become an extension or part

of it. Such a paper is called an allonge.

In 1995, Chapter 3 of Title 12A was amended and subsection 2 of 12A:3-202


was revised, renumbered, and inclu ded as the last sentence in N.J.S.A. 12A:3

204(a). As revised, the provision now states that "[f]or the purpose of
determining whether a signature is made on an in s t r u m e nt , a paper affixed to the instrum ent is a part of the in st r u m e n t. " N . J . S .A. 12A:3-204(a).

In this case, we had neither a proper indorsement on the note itself, nor
an allonge that was executed at the time the proof of claim was fQed. An allonge purporting to negotiate the note to the Bank of New York was no t executed until shortly before the original trial date, and was not affixed to th e

original note until the second trial date. Even if the newly executed allonge is
recogruzed as a. valid indorsement of the note, under th ese circum stances, the

Bank of New York does not qualify as a holder, because it never came into possession of the note."

As an additional argument in support of the proposition, that the


Bank of New York qualifies as a holder who may enforce the note, the claimant

cites to Mulert v. National Bank of Tarentum, 210 F. 857, 860 (3d Cir. 1913) for the proposition that it had. constructive possession of the note because Coun~ de i n t e nded to transfer possession, and that constructive possession
is sufficient to permit th e tr an sferee to enforce the note. T h i s p r oposition is not

sustainable in light of the actual possession required under the New Jersey -15

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2.

Nonh o l d er in Possession.

Nor does the claimant qualify as a non-holder in possession who has the rights of a holder. "A person may be a person entitled to enforce the instrument even though the person is not the owner of the instruxnent or is in wrongful possession of the instrument." N.J.S.A. 12A:3-301. The Official
C omment to section 3-301 adds that t hi s definition :

includes a person in possession of an inst r u m ent wh o is not a

holder. A nonholder in possession of an instrument includes a


person that acquired rights of a holder by subr ogation or u n d er

Section 3-203{a). It also includes both a rexnitter that has received


an instrum ent from th e issuer but ha s not yet tr an sferred or negotiated the instruxnent to another person and also any other

person who under applicable law is a successor to the holder or


otherwise acquires the holder's rights.

Id. at UCC Comment to g 3-301. Coun t ~

de, t h e originator of the loan and

the original "holder" of the note, sold the note -to the Bank of New York as Trustee. In this way, the Bank of New York is a successor to the holder. As a s uccessor to the holder of the note, the Bank of New York would qu~ as a

n on-holder in possession who could enforce the note by its servicer if it h a d

possession of the note. Because the Bank of New York does not have possession of the note, and never did, it may not enforce the note as a

UCC. See N.J.S.A. 12A:1-201(20j.

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noxiholder in possession.

3.

No n- ho l d e r Not in Possession.

The third category that would enable a. claimant to enforce the note

would be a person not in possession of the note who is entitled to enforce the
note pursuant to N.J.S.A. 12A:3-309 or subsection d. of N.J.S.A. 12A:3-418. Section 12A:3-309 concerns the enforcement of lost, destroyed ox stolen

instruments." Th e defendant presented a. lost note certification to this court,

N.J.S.A. 12A:3-309 provides: a. A person not in possession of an instr u m ent is enti t led to enforce the instru m ent if th e person was in possession of the

instrument and entitled to enforce it, when loss of possession occurred, the loss of possession was not the result of a transfer by the person or a laved seizure, and the person, cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a pexson that
cannot be found or is not am enable to service of process.

b. A person seeking enforcement of an instrument under


subsection a. of this section must pr ove the terms of th e instrument and th e person's xight to enforce the instr u m e nt . If th at

proof is made, 12A:3-308 applies to the case as if the person


seeking enforcement had pr oduced the instruxnent. The court m ay

not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is
adequately protected against loss that m i ght occur by rea.son of a claim by another person to enforce the instr u m e nt. Adequate

protection may be provided by any reasonable mean,s.

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but the factual predicate of the certificate conQicted with other facts presented
o n. this record, and we have determined to disregard the certificate." S e ction

12A:3-418, concerning payment or acceptance by mistake, does not apply here.

In a recent District Court decision from the District of Massachusetts, the court rejected the enforcement of a note where the assignee of the note and accompanying mortgage did not have possession of the note. Marks v. Braunstein, No. 09-11402-NMG, 2010 WL 3622111 (D.Mass. Sept. 14, 2010). In Marks, the assignee of the note and mortgage purchased the collateral for the note, a commercial building, from the Chapter 7 trustee, filed a secured proof of claim, and, sought to enforce the note and mortgage against the
proceeds from the sale. W h en th e rnatter first came on to be heard, the

claimant confirmed that he was not in possession of the note and was unaware
of who was in possession of it. ' B e c a u s e the claimant ack n owledged that he

was never in possession of the note, he was precluded from reliance on Section 3-309A of the Massachusetts UCC, which permits enforcement of a lost,
destroyed or stolen instrLiment, but r e qu ires possession of the instr u m ent at

See n. 7. Following the disallowance of the proof of claim by the court, the
claimant discovered the location of the note. H o w ever, the bank r u p tcy cour t denied his motion for reconsideration of the disallowance. Th e denial was ad5rmed by the District Court. Ma r k s v. B r a u n s t e in, 2 0 10 WL 362 2 1 11 at *5.

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some point. Citing to Premier Ca ital L LC v. Gavin, 319 B.R. 27, 33 (1" Cir. HAP 2004), the Marks court reflected that "[tjhe purpose of the possession
requirement in Ar t i cle 3 is to protect the Debtor from m u l t i pl e enforcement

claims to the same note." Id. at "3. Acknowledging that conflicting


enforcement claims were not a concern in th e case before it, the court

nevertheless applied the statutoxy requirements to hold that the note could not be enforced by the claimant to collect proceeds otherwise due to the claimant
from the sale of the collateral on account of his secured claixn.

Similarly, in this case, the purchaser of the note and xnortgage, the Bank
of New York, never had possession of the note. T h er efore, under the Un i form Commercial Code as adopted in New Jersey, the Bank of New York as Tru stee m ay not enforce the instr u m e n t .

On behalf of the Bank of New York, Coun~

de c o n t ends that the

w xitten mortgage assignment in t hi s case, which pu r p o rts to assign both t h e note and mortgage in this case, and which was properly executed and recorded

with the appropriate county clerk's office, serves to properly transf'er the note
t o the new owner, enabling the n.ew owner to enforce both the note and th e

mortgage. The recorded assignment of mortgage does in.elude provision for the
assignment of the note as well. H o w ever, the recorded, assignment of th e

-19

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mortgage does not establish the enforceability of the note. As discussed above, the UCC governs the transfer of a promissory note. See 29 Myron C. Weinstin, New Jersey Practice, Law of Mortgages, g 11.2 at 749. The attempted
assignment of the note in th e assignment of mor tgage document, together with

the terms of the Pooling and Sexvicing Agreement, created an ownership issue, but did not transfex the right to enforce the note.

The right to enforce an instr u m ent an d own ership of th e instruxnent are two different concepts . . . . M o r e o v er, a person who has an ownership right in an i n s t r u m en t m i ght not be a person

entitled to enforce the in,trument.. For example, suppose X is the owner and holder of an instrument payable to X. X sells the instrument to Y but is useable to deliver immediate possession to Y.
Instead,, X signs a document conveying all of X's right, ti t le, and

interest in the instrument to Y. Although the document may be effective to give Y a claim to ownership of the instrument, Y is not a
p erson entitled to enforce the instr u m ent u n ti l Y obtain s p ossession of the instr u m e nt . N o t r a n sfer of the instr u m e n t

occurs under Section 3-203(a) until it is delivered to Y.

N.J.S.A. 12A:3-203 (UCC Cmt. 1). Accordingly, the Bank of New York has a
valid claim of ownership, but xnay not enforce the note on the basis of the

referexice to the note in the recorded. assignment of the mortgage.

The fact that the proof of claim in qu estion was filed by

C o u n tryv6de

Home Loans, Inc., as sexvicer for Bank of New York, Trustee" does not alter the enforceability of the note. Bankruptcy Rule 3001(b) provides that a proof of
claixn may be filed by either the creditor "or the creditor's agent.' -20

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FED.R.BANKR.P. 3001(b).

H e r e , Countr y m d e , Inc. was the originator of th e

note and mortgage, but sold both the note and mortgage to the Bank of New York as Trustee, and Gled. the proof of claim as the "servicer for the Bank of New York. A servicer has standing to Gle a proof of claim on behalf of a creditor. See, ~e.. Greer v. O'Dell, 305 F.3d 1297, 1302 (11~ Cir. 2002) ("A sexvicer is a party in interest in proceedings involving loans which it services."); l. 27 . R. 5 . 3 58 [ . . . . 0 ):

07-33271-SGJ-13, 2010 WL 3342193, "9 (Bankr. N.D.Tex. Aug. 23, 2010) ("many courts have held that a mortgage servicer has standing to participate in a debtor's bankruptcy case by virtue of its pecuniary interest in coQecting payments under the terms of a note"); In re Minbatiwalla, 424 B.R. 104, 109
(Bankr. S.D.N.Y. 2010); In re Conde- Dedonato, 391 B.R. 247, 250 (B ~ .

E.D.N.Y. 2008) ( A sexvicer of a mortgage is clearly a. creditor and has standing to file a proof of claim against a debtor pursuant to its duties as a servicer. ).
But Coun t ~ de, a s t h e sexvicex., acts only as the agent of the owner of th e

i nstrument, and has no greater right to enforce the instr u m exit than it s

principal. See, ~e, G reer v. O'Deli,305 F.3d at 1303. Because the Bank of New York has no right to enforce the note, CountryvMe as its agent and
sexvicer cannot enforce the note."

As noted, Countryw ide Horne Loans, Inc. is listed. as the sexvicer o n the debtor's loan. H o w ever, there is serious question raised about t h e

authority of that exitity to file a proof of claixn on behalf of the Bank of New
-21

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CONCLUSION

Because the claim filed by "Countrymde Home Loans, Inc., servicer for Bank of New York" cannot be enforced under applicable state law, the claim must be disallowed under 11 U.S.C. g 502(b)(1).

Dated:

N o v e m ber 16, 20 10

g/~Q
J I T HH . WIZ U R CHIEF JUDGE
U.S. BANKRUPTCY COURT

York. A Power of Attorney dated November 15, 2005 was submitted, affording
Countrymd e Hoxne Loans Servicing LP, not Countxywide Home Loans, Inc., the

limited opportunity to perform all necessary acts to foreclose xnortgage loans,


d ispose of properties and modify or release mortgages, presumably in clu d i n g the authority to file a. proof of claim in a b a n k r u p tcy case.