FILED
MAR 9 2020
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. MT-19-1120-LBG
LEILANI HOPE RICKERT, Bk. No. 2:18-bk-60937-BPH
Debtor.
LEILANI HOPE RICKERT, FKA Leilani
Hope McConnell,
Appellant,
v. MEMORANDUM*
SPECIALIZED LOAN SERVICING LLC,
Appellee.
Argued and Submitted on February 27, 2020
at Pasadena, California
Filed – March 9, 2020
Appeal from the United States Bankruptcy Court
for the District of Montana
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Honorable Benjamin P. Hursh, Chief Bankruptcy Judge, Presiding
Appearances: Appellant argued pro se; Benjamin J. Mann of Halliday,
Watkins & Mann, P.C. argued for Appellee.
Before: LAFFERTY, BRAND, and GAN, Bankruptcy Judges.
INTRODUCTION
Chapter 131 debtor Leilani Hope Rickert (“Debtor”) appeals the
bankruptcy court’s order: (1) overruling her objection to Appellee
Specialized Loan Servicing LLC’s (“SLS”) proof of claim; and (2) granting
SLS’s motion to modify the automatic stay. In support of its proof of claim
and its motion to modify the stay, SLS attached a copy of the original
promissory note in favor of SunTrust Mortgage, Inc. (“SunTrust”), signed
by Debtor and indorsed in blank, and copies of the pertinent deed of trust
and assignments showing that SLS was the assignee of the original deed of
trust encumbering Debtor’s residence in Hardin, Montana (the “Property”).
Despite this documentation, Debtor argued that SLS lacked standing
as the real party in interest entitled to file a claim and move to modify the
stay. She contended that, despite repeated requests, SLS had not
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
2
“validated” the loan by supplying her with either the original note or an
“authenticated and notarized or certified copy” of the loan documents. At
an evidentiary hearing, an SLS representative testified that she was in
physical possession of the original promissory note and that SLS was acting
as the creditor, servicer, and custodian of the note. Based on this unrefuted
evidence, the court found that SLS was the real party in interest entitled to
enforce the note and deed of trust. Accordingly, it overruled Debtor’s
objection to SLS’s claim and granted SLS’s motion to modify the stay. We
AFFIRM.
FACTUAL BACKGROUND
In 2014, Debtor executed a note in the principal amount of $58,850.00
in favor of SunTrust. The note is secured by a deed of trust on the Property.
The deed of trust names Mortgage Electronic Registration Systems, Inc.
(“MERS”), solely as nominee for SunTrust, as the original beneficiary
under the deed of trust. MERS executed an assignment of deed of trust to
SunTrust in November 2016. A few months later, SunTrust executed an
assignment of deed of trust to SLS. The original deed of trust and both
assignments were recorded in Big Horn County, Montana.
Debtor fell behind on the note payments. After she received a notice
of default from SLS in July 2017, she wrote to SLS requesting “validation”
of the debt. In its letter in response, a representative of SLS explained that
it was the current servicer of her mortgage loan. The letter also stated that
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SunTrust was the original creditor and Federal Home Loan Mortgage
Corporation (“Freddie Mac”) was the current creditor. The letter indicated
that copies of the note, deed of trust, notice of servicing transfer, and
payment history were enclosed. Debtor also apparently contacted SunTrust
for clarification and received a responsive letter in September 2017, in
which a SunTrust representative informed her that the original loan terms
remained valid and enforceable. The SunTrust letter indicated that copies
of the original note and the notification letter informing Debtor that SLS
was the servicer were enclosed. Despite these responses, Debtor continued
to send letters to SLS, SunTrust, and Freddie Mac, which she characterized
as Qualified Written Requests under the Real Estate Settlement Procedures
Act (“RESPA”) and which contained voluminous requests for information
and documentation.
Debtor filed for chapter 13 relief in October 2018. She listed on her
schedules a fee simple interest in the Property, valued at $120,000. She did
not list any secured creditors on Schedule D but included SLS as a
nonpriority unsecured creditor, identified as a “debt collector for loan,”
with a claim of $13,797.11. Debtor filed a number of proposed chapter 13
plans, none of which were confirmed by the bankruptcy court. At a hearing
in late November 2018, the court denied confirmation but gave Debtor an
opportunity to file another amended plan.
In December 2018, SLS filed its proof of claim asserting a secured
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claim of $59,681.28, including an arrearage of $13,797.11.2 SLS attached to
its proof of claim copies of all pertinent loan documents, including the
promissory note indorsed in blank, the deed of trust, and the assignments
of the deed of trust.
Debtor’s amended chapter 13 plan dated December 20, 2018, listed
Wells Fargo Bank, N.A., as a secured creditor holding an arrearage claim of
$13,797.11. At the continued confirmation hearing held in early January
2019, the chapter 13 trustee, Robert G. Drummond (“Trustee”), objected to
the December 20 plan because it provided for payment to the wrong
creditor. This appeared to be the only deficiency in the proposed plan, and
the court gave Debtor “one last chance to get it right.” Hr’g Tr. (Jan. 4,
2019) at 11:9-10.
SLS subsequently filed a Motion to Modify Stay based on Debtor’s
failure to make any post-petition payments on the loan. Debtor filed an
opposition, alleging, among other things, that SLS lacked legal authority to
move for relief from the stay. Debtor also filed an objection to SLS’s claim
in which she contended that SLS was not a party in interest because
SunTrust and MERS had sold their alleged rights. Debtor also filed a
Motion to Compel SLS to Produce Documents, i.e., responses to her RESPA
requests.
2
SLS later amended its proof of claim to reflect an arrearage of $15,344.96, which
increased the total claim to $61,229.13.
5
At the hearing on the Motion to Modify Stay and Motion to Compel,
the bankruptcy court permitted Debtor to testify under oath. During that
testimony, the bankruptcy court reviewed SLS’s proof of claim with her.
Debtor admitted that the note and deed of trust contained her signatures.
She also acknowledged that the most recent assignment of the deed of trust
named SLS as the assignee. She then stated that SLS had not responded to
her RESPA requests and argued that she never signed a note or contract
with SLS and that the assignment from MERS to SunTrust was
“fraudulent” because the MERS Procedures Manual states that MERS
cannot transfer the beneficial rights to a debt.
The bankruptcy court then asked Debtor whether the issues could be
resolved if she had the opportunity to question a witness from SLS. She
replied, “If we have the hearing and I can present my case and question the
witness and have–present my documents, yes.” Hr’g Tr. (Feb. 12, 2019) at
45:16-18. Debtor also agreed to SLS’s witness and counsel appearing by
video. With that, the court continued the hearing to April 11, 2019, at which
time the court would also consider Debtor’s objection to SLS’s claim.
At the April 11 hearing, attorney Clarence Belue appeared on
Debtor’s behalf on a limited basis solely with respect to the claim objection.
SLS’s witness, Laura Ollier, a second assistant vice president in the default
litigation department at SLS, appeared by video as previously agreed.
Ms. Ollier testified that she had in her physical possession the note dated
6
March 26, 2014 that Debtor had signed. Ms. Ollier also testified that
(1) SunTrust was the original lender, (2) the note, which was indorsed in
blank, had been transferred to SLS for servicing in May 2017, and (3) SLS is
the creditor, servicer and custodian of the note. After Ms. Ollier’s
testimony, Mr. Belue moved for a directed verdict, which the court denied.
Debtor then testified. She again admitted under oath that she had
signed the March 26, 2014 note in favor of SunTrust. She also testified that
she had received notice in May 2017 that SLS was servicing the loan and
that she was to make payments to them at the address they gave her. At the
conclusion of the hearing, Mr. Belue moved to retract Debtor’s agreement
that SLS’s witness could appear by video, which the court denied. The
court then denied on the record Debtor’s motion to compel SLS to produce
documents on the ground that the evidentiary hearing had resolved the
issues, and it took Debtor’s claim objection and SLS’s motion to modify the
stay under advisement.
On April 29, 2019, the bankruptcy court issued a memorandum of
decision and an order (1) overruling Debtor’s objection to SLS’s claim; and
(2) granting SLS’s motion to modify stay.3 Debtor timely appealed.
3
The order also: (1) denied Debtor’s April 22, 2019 motion to admit additional
evidence; (2) denied Debtor’s two Motions to Strike Proof of Claim No. 5 filed April 10
and April 26, 2019, respectively; (3) denied Debtor’s motions to compel filed January 31,
2019, and April 8, 2019; and (4) denied confirmation of Debtor’s December 21, 2018
chapter 13 plan and set a hearing on her amended plan filed April 9, 2019. Only the
(continued...)
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JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(1) and (b)(2)(B) and (G). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Whether the bankruptcy court erred in overruling Debtor’s objection
to SLS’s proof of claim.
Whether the bankruptcy court abused its discretion in granting SLS’s
motion to modify the stay.
STANDARDS OF REVIEW
“An order overruling a claim objection can raise legal issues (such as
the proper construction of statutes and rules) which we review de novo, as
well as factual issues (such as whether the facts establish compliance with
particular statutes or rules), which we review for clear error.” Veal v. Am.
Home Mortg. Serv. Inc. (In re Veal), 450 B.R. 897, 918 (9th Cir. BAP 2011)
(citations omitted). Standing is a legal issue that we review de novo. Id. at
906. De novo review is independent, with no deference given to the trial
court’s conclusion. Barclay v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d
700, 702 (9th Cir. 2008). Review under the clearly erroneous standard is
significantly deferential, requiring a “definite and firm conviction that a
3
(...continued)
granting of SLS’s motion to modify and the overruling of Debtor’s objection to SLS’s
claim are at issue in this appeal.
8
mistake has been committed.” Easley v. Cromartie, 532 U.S. 234, 242 (2001).
A bankruptcy court’s determinations regarding stay relief are
reviewed for an abuse of discretion. In re Veal, 450 B.R. at 915. Under the
abuse of discretion standard, we first “determine de novo whether the
[bankruptcy] court identified the correct legal rule to apply to the relief
requested.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en
banc). If the bankruptcy court identified the correct legal rule, we then
determine under the clearly erroneous standard whether its factual
findings and its application of the facts to the relevant law were:
“(1) illogical, (2) implausible, or (3) without support in inferences that may
be drawn from the facts in the record.” Id. (internal quotation marks
omitted).
DISCUSSION
A. The bankruptcy court did not err in overruling Debtor’s objection
to SLS’s claim.
SLS’s proof of claim was executed by an authorized agent of SLS and
attached copies of the relevant promissory note, recorded deed of trust and
assignments, a statement of the amounts owing, and the amount necessary
to cure default, as required under Rule 3001. Such a proof of claim
constitutes “prima facie evidence of the validity and amount of the claim.”
Rule 3001(f). To defeat a prima facie valid claim under § 502, “the objector
must come forward with sufficient evidence and ‘show facts tending to
9
defeat the claim by probative force equal to that of the allegations of the
proofs of claim themselves.’” Lundell v. Anchor Constr. Specialists, Inc. (In re
Lundell), 223 F.3d 1035, 1039 (9th Cir. 2000) (quoting Wright v. Holm (In re
Holm), 931 F.2d 620, 623 (9th Cir.1991)).
Debtor objected to SLS’s proof of claim on the ground that SLS is not
the real party in interest entitled to enforce the note. She alleged in her
objection that SLS had not produced either the original or a certified copy
of the note despite numerous requests. She has also argued at various times
that either SunTrust or Freddie Mac is the holder of the note and that she
has no contractual relationship with SLS, which is a debt collector only.
This Panel has held that a party has standing to prosecute a proof of
claim involving a negotiable promissory note secured by real property if,
under applicable law, it is a “person entitled to enforce the note” as defined
by the Uniform Commercial Code (“UCC”). In re Veal, 450 B.R. at 902. In
Montana, the “person entitled to enforce” is:
the holder of an instrument, a nonholder in possession of the
instrument who has the rights of a holder, or a person not in
possession of the instrument who is entitled to enforce the
instrument pursuant to 30-3-309. 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.
Mont. Code Ann. § 30-3-301.
Here, the bankruptcy court found that the note is a negotiable
10
instrument that was indorsed in blank by SunTrust. Thus, under Montana
law, the bearer of the note–here, SLS–is entitled to enforce it. Additionally,
the court found that the recorded assignments of the deed of trust showed
that SLS was the assignee and could thus enforce the deed of trust. See
Hofman v. HSBC Bank USA, NA (In re Hofman), 488 B.R. 157, 166 (Bankr. D.
Mont. 2013); Mont. Code Ann. § 71-1-110.4 Noting that Debtor had failed to
produce any contrary evidence, the court concluded that SLS had
established that it had standing to file its proof of claim as the party
entitled to enforce the note and deed of trust.
On appeal, Debtor persists in her argument that SLS did not have
standing to file a proof of claim in her bankruptcy. Her arguments are not
easily comprehensible, but they are essentially a rehash of the arguments
she presented in the bankruptcy court. Her position is that SLS failed to
satisfy the requirements for a proof of claim because it did not produce the
original note or an original document showing it had a valid security
interest. As such, she argues, SLS committed fraud upon the court. She
also contests that the signatures on the note and deed of trust are hers, but
this assertion is directly contradicted by her sworn testimony. She also
argues that because SLS did not “validate” the debt as requested, it
violated the Federal Debt Collection Practices Act, and she had the right
4
That statute provides, “[t]he assignment of a debt secured by mortgage carries
with it the security.”
11
under the UCC to cease payments on the loan. She also seems to argue that
SLS had an obligation under the “lost or stolen documents” provisions of
the UCC to post a bond to indemnify her, even though there was no
evidence the note was lost or stolen. She also posits that her loan was
securitized, which she contends discharged the debt. There is simply no
basis in fact or law to support any of these arguments.
Debtor also presents some procedural arguments that are equally
groundless. She argues that Ms. Ollier was not a qualified witness because
she lacked personal knowledge, did not know who the previous
noteholders were or whether Freddie Mac was the “real” holder of the
note, nor could she explain how SLS obtained the note. These assertions are
contradicted by the record. Ms. Ollier testified that she was personally
holding the original note that was indorsed in blank by SunTrust and that
the note had been transferred from SunTrust to SLS on May 23, 2017. As for
Freddie Mac, Ms. Ollier testified only that she would not try to make a
legal conclusion as to who “owns” the note, but that Freddie Mac was the
underlying investor. In any event, as the bankruptcy court found, the issue
of Freddie Mac’s involvement has no bearing on whether SLS is entitled to
enforce the note. See In re Veal, 450 B.R. at 911 and n.25 (noting that one can
be an owner of a note without being a “person entitled to enforce” it, and
the converse may also be true). Debtor also contends that the bankruptcy
court erred by not requiring SLS to produce the real party in interest or any
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original documents. Again, this argument is neither accurate nor does it
impact any relevant issue. Ms. Ollier produced the original note, by video,
as agreed to by the Debtor, and SLS proved it was the real party in interest.
Debtor further argues that the bankruptcy court erred in not ruling
on her motion to compel discovery until after the April 11 hearing because
further discovery would have provided potentially favorable information
showing the SLS debt was invalid. The bankruptcy court denied Debtor’s
motion to compel based on Debtor’s agreement to hear testimony from the
SLS representative regarding the documents attached to SLS’s proof of
claim. The court concluded that the testimony given at the hearing
accomplished what was intended by the motion to compel. Debtor did not
argue otherwise in the bankruptcy court. Nor has Debtor articulated what
documents she sought that would have contradicted the evidence
presented by SLS regarding its right to enforce the note and deed of trust.
Debtor also complains of a lack of due process, which seems to be a
blanket objection to the entire process, but may also be based on allegations
that she was never notified of the assignment of the obligation to SLS, nor
did she receive a copy of the proof of claim. Both of these allegations are
contradicted by the record. Debtor testified at the April 11 hearing that she
had received the notice of transfer to SLS in May 2017, and the certificates
of service for SLS’s original and amended proofs of claim both indicate that
she was served at her home address.
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Finally, Debtor alleges that Judge Hursh is prejudiced against her,
either because she knows the law or because of her Native American
heritage. This issue is not properly before us in this appeal. In any event,
nothing in the record supports this allegation. To the contrary, Judge
Hursh gave the Debtor extraordinary leeway in prosecuting her claim
objection.
In short, Debtor has not shown that the bankruptcy court erred in its
legal analysis or factual findings in overruling her objection to SLS’s proof
of claim.
B. The bankruptcy court did not abuse its discretion in granting SLS’s
motion to modify stay.
Under § 362(d)(1), on request of a party in interest and after notice
and a hearing, the bankruptcy court “shall” grant relief from the automatic
stay “for cause, including the lack of adequate protection of an interest in
property of such party in interest.” The court found cause to grant the
motion, given that Debtor had not made any post-petition payments to SLS
during the approximately six months her chapter 13 case had been
pending, nor had she made any pre-petition payments to SLS after
September 2017. Additionally, none of Debtor’s proposed chapter 13 plans
provided for the debt owed to SLS. The court also noted Debtor’s
continued insistence that SLS is not the real party in interest, resulting in
delay. In sum, the court found that cause existed for granting stay relief
14
based on Debtor’s “frivolous pleadings, delay that increases [SLS’s]
attorney’s fees and costs and otherwise prejudices it, [and] Debtor’s failure
to make post-petition payments coupled with her pattern of presenting
legal theories devoid of any merit to the Court . . . .” Mem. Dec. at 14.
Debtor does not dispute any of the bankruptcy court’s factual
findings underlying its granting of relief from stay (i.e., her failure to pay
or propose a plan that provides for SLS). She instead argues that SLS has no
valid interest in these proceedings, i.e., that it lacks standing to seek relief
from stay. But “a party has standing to seek relief from the automatic stay
if it has a property interest in, or is entitled to enforce or pursue remedies
related to, the secured obligation that forms the basis of its motion.” In re
Veal, 450 B.R. at 902. Because stay relief proceedings are essentially
procedural and do not finally determine a creditor’s debt or security, “a
party seeking stay relief need only establish that it has a colorable claim to
enforce a right against property of the estate.” Id. at 914–15 (citations
omitted). As discussed above, SLS established that it was entitled to enforce
the note and deed of trust, and Debtor has not convinced us otherwise.5
5
Shortly before oral argument, Debtor filed a motion to supplement the record
with a recently prepared “Chain of Title Analysis & Mortgage Analysis” (“Analysis”).
We denied the motion because the Analysis was not before the bankruptcy court when
it ruled. Not to be discouraged, at oral argument, Debtor raised a number of
contentions, apparently gleaned from the Analysis, that had not been presented
previously or were simply inapt, e.g., that the terms of her loan contract with SunTrust
prohibited the note from being indorsed in blank and that the securitization of the note
(continued...)
15
CONCLUSION
The bankruptcy court did not err in overruling Debtor’s objection to
SLS’s claim, nor did it abuse its discretion in granting SLS’s motion to
modify the stay. Accordingly, we AFFIRM.
5
(...continued)
resulted in splitting the note from the deed of trust, thus rendering the note
unenforceable. We decline to consider these arguments for the same reason we denied
the motion to supplement: they are based on evidence that was not before the
bankruptcy court.
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