Editor: David Reiss
Brooklyn Law School

August 8, 2013

Bankruptcy Court Rules MERS Has Standing and the Customary Rights of a Mortgagee Under a Mass. Mortgage and May Act Under the Mortgage

By Ebube Okoli

The Massachusetts bankruptcy court hearing In re Sonya D. Huggins f/k/a SONYA D. HICKS, Debtor Chapter 13, Case No. 05-18826-RS overruled the Huggins’ objection to the standing of the nominee to seek relief from the automatic stay and ordered an evidentiary hearing on the motion for stay relief.

After Huggins commenced her Chapter 13 case, the court denied a motion by a nominee mortgagee for relief from stay to foreclose a mortgage on the debtor’s residence but ordered monthly adequate protection payments. The nominee filed a second stay relief motion under 11 U.S.C.S. § 362(d), and the debtor objected.

Huggins maintained that the nominee could not stay relief in bankruptcy because it had no rights to enforce the mortgage outside bankruptcy. The court disagreed, finding that the nominee was acting for a lender that held the note, thus there was no disconnection between the note and the mortgage. The nominee was the record mortgagee under the terms of the mortgage with its powers expressly set forth, and Mass. Gen. Laws Ch. 244, § 14 expressly authorized the exercise of sale powers by a mortgagee or a person authorized to sell, which was precisely the position of the nominee.

The court concluded that the denial of the nominee’s foreclosure right as mortgagee could lead to anomalous and perhaps inequitable results, such as the lender being able to foreclose despite the fact that it was not named as mortgagee or that no one could foreclose. Thus, as the court concluded, the nominee had standing to foreclose on the lender’s behalf. As to relief from stay, the court concluded that there was no irrefutable presumption that the property was necessary for an effective reorganization under 11 U.S.C.S. § 362(d)(2)(b). The debtor was required to proffer evidence on those issues.

| Permalink