Editor: David Reiss
Brooklyn Law School

May 20, 2014

S.D.N.Y. Denies Mortgagor Under 11 U.S.C.S. § 1109(b)

By Ebube Okoli

The court in deciding In re Residential Capital, LLC, 2013 Bankr. 5316 (Bankr. S.D.N.Y., 2013) denied the mortgagor’s motion for an order declaring that the debtors’ bankruptcy estate owned title to the note, to void a state court title transfer, and enjoin the foreclosure action.

The court decided Phillip Scott’s motion to (1) determine that bankruptcy estate owned title to note, (2) void state court title transfer, and (3) enjoin post petition.

In this case, the mortgagor (Scott) did not have standing under 11 U.S.C.S. § 1109(b) to seek a ruling from the bankruptcy court that the business declared Chapter 11 bankruptcy after it acquired and transferred the mortgage he executed with the note held title to real property that secured the note.

In regards to the order to enjoin the foreclosure action, the court found that the mortgagor was not a creditor in the debtors’ bankruptcy estate, the note and mortgage were not owned or serviced by any of the debtors, and none of the debtors was a party to the foreclosure action.

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