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In re Blomberg

United States District Court, D. Arizona

October 31, 2014

In re DARRELL CARLTON BLOMBERG, Debtor(s).
v.
EDWARD J. MANEY, Chapter 13 Trustee, et al., Appellees. DARRELL CARLTON BLOMBERG, Appellant, Bankruptcy Court No. 2:11-bk-24029-EPB.

ORDER

H. RUSSEL HOLLAND, District Judge.

Darrell Carlton Blomberg, appearing pro se, appeals the bankruptcy court's order denying his motion to vacate and the bankruptcy court's order denying his motion for a new trial. Oral argument was requested and has been heard.

Background

Appellant is Darrell Carlton Blomberg. Appellees are Edward J. Maney, Chapter 13 Trustee; Bank of America NA (BANA); and the United States Trustee.

On May 24, 2005, Blomberg borrowed $269, 500 from Countrywide Home Loans, Inc. to purchase a single family residence located at 912 E. Cambridge Avenue, in Phoenix, Arizona.[1] The loan was evidenced by a Note and secured by a Deed of Trust.[2] Fannie Mae bought Blomberg's loan on June 1, 2005.

After Blomberg filed for bankruptcy, BANA filed a proof of claim for $292, 933.66.[3] BANA claimed that Blomberg had not made any payments on his loan since April 1, 2008 and that he was $100, 919.86 in arrears.[4] Attached to the proof of claim was a Corporation Assignment of Deed of Trust Arizona in which Mortgage Electronic Registration Systems, Inc. (MERS) assigned all beneficial interest in the Deed of Trust as well as the Note, including the right to monies due under the Note to BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing LP.[5] Also attached to the proof of claim was a Texas Certificate of Merger stating that on July 1, 2011, BAC Home Loans Servicing, LP had merged into BANA.[6] Also attached was the Deed of Trust[7] and the Note.[8] The Note, which was certified to be a true and correct copy of the original Note, was not endorsed.[9]

On January 14, 2013, BANA moved for relief from the automatic stay.[10] In the motion, BANA contended that it "services the loan" and that if "a foreclosure action is commenced on the mortgage property, the foreclosure will be conducted in the name of Movant."[11] BANA further contended that it "directly, or through an agent, has possession of the Note. The Note is either made payable to Movant or has been duly endorsed. The Movant is the original mortgagee or beneficiary or assignee of the Deed of Trust."[12] Attached as an exhibit to the motion was a copy of the Note that had been endorsed in blank.[13] In a Supplemental Declaration, Celia Mora, an Assistant Vice President at BANA, averred that "[o]n 11/30/2009, [MERS] (as beneficiary under the Deed of Trust) assigned all rights and interests in the Deed of Trust to BAC Home Loan Servicing, LP FKA Country-wide Homes Loans Servicing, LP" and that "BAC Home Loan Servicing, LP subsequently merged into" BANA.[14] Mora further averred that "Countrywide Home Loans, Inc. endorsed the Note to blank making the note bearer paper. [BANA] is in possession of the Note and thus is the proper party entitled to enforce the Note."[15]

Blomberg objected to BANA's motion for relief from the automatic stay, arguing that BANA lacked standing to seek such relief because BANA had failed to establish that BAC Home Loans Servicing, LP merged into BANA.[16]

The bankruptcy court granted BANA's motion for relief from the automatic stay after a hearing because "there is no legitimate dispute that [BANA] is in possession of the relevant promissory note (which was endorsed in blank) [and] a properly assigned deed of trust is on the record and the entitlement to payments rests with" BANA.[17] In its March 4, 2013 order terminating the automatic stay, the bankruptcy court ordered that

any and all stays against lien enforcement, including the automatic stay of 11 U.S.C. § 362(a) and the automatic injunc-tion of 11 U.S.C. § 524(a), are hereby vacated with respect to the property generally described as 912 E. Cambridge Ave., Phoenix, AZ 85006, and Movant, its assignees and/or succes-sors in interest, may proceed with a foreclosure of and hold a Trustee's sale of the subject property pursuant to the state law, and thereafter commence any action necessary to obtain complete possession of the subject property without further court order or proceeding being necessary.[18]

On March 18, 2013, Blomberg filed a motion to vacate the bankruptcy court's March 4 order.[19] Blomberg argued that BANA did not have any right, title, or interest in the Note or Deed of Trust but had merely been the servicer on the loan. In short, Blomberg argued that BANA did not have standing to seek relief from the automatic stay. The bankruptcy court treated Blomberg's motion to vacate as a motion for reconsideration and denied the motion on April 2, 2013.[20]

On March 19, 2013, Blomberg filed his objection to BANA's proof of claim, in which he argued that BANA did not have standing to file a proof of claim because it had not established that it was a "creditor."[21] The bankruptcy court held an evidentiary hearing on June 19, 2013. BANA brought the original endorsed Note to court, [22] which was admitted into evidence.[23] The bankruptcy court cast Blomberg's objection as "based on one sole allegation that [BANA] does not possess the right to payment under the note."[24] The bankruptcy court overruled Blomberg's objection because BANA,

the purported creditor has produced an original valid promis-sory note endorsed in blank and establishes under the applica-ble Arizona statute[s] and case law interpreting them that the purported creditor is the holder of the note and entitled to file a proof of claim.[25]

On July 5, 2013, Blomberg moved for a new trial.[26] Blomberg argued that the bankruptcy court erred in holding that BANA was entitled to file a proof of claim because he contended that BANA held the Note in a custodial capacity only. The bankruptcy ...


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