Wayne J. Maisel and Elaine A Maisel

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS

IN RE CHAPTER 7
WAYNE J. MAISEL ,

ELAINE A. MAISEL,
DEBTORS : CASE NO. 07-43324-JBR

MEMORANDUM OF DECISION ON MOTION FOR RELIEF

This matter came before the Court on Wells Fargo Bank, National Association’s
(“Movant”) Motion for Relief from Stay and for Leave to Foreclose (Docket #23). Wells
Fargo filed the Motion in its capacity as Trustee for Morgan Stanley Capital I, Inc. Trust
2004-OP1 Mortgage Pass-Through Certificates, Series 2004-OP1. The Movant sought
relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) on the grounds that the
Debtors had failed to make regular monthly mortgage payments to the Lender and had
not sought to cure the arrearage or reaffirm the debt. The Movant further sought relief
under 11 U.S.C. § 362(d)(2) on the grounds that the Debtors had no equity in the property
and the property was not necessary to an effective reorganization.
FACTS

Wayne J. Maisel and Elaine A. Maisel (“Debtors”) executed and delivered a
promissory note and mortgage to Option One Mortgage Corporation in the original
principal amount of $227,000.00. (Motion for Relief § 3). The Debtors filed a voluntary
Chapter 13 petition and later converted their case to Chapter 7. (Motion for Relief { 2).

The Movant filed a Motion for Relief from Stay on October 12, 2007 seeking leave to

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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foreclose on the mortgage. In its Motion, the Movant stated that it was the current holder
of the note and mortgage. (Motion for Relief 3). The note and mortgage attached to the
Motion as exhibits were both in favor of Option One Mortgage Corporation. (Motion for
Relief, Exhibits “A” and “B”). The Movant asserted that the Debtors had defaulted on
the note and mortgage and that the balance due was $240,988.12. (Motion for Relief {
6). The Movant claimed that the Debtors were in arrears on six of their monthly
mortgage payments and based on its estimated liquidation value of the property of
$236,595.30, the Movant sought relief pursuant to 11 USC. § 362(d)(1) “for cause” and
11 U.S.C. § 362(d)(2) on the grounds that the Debtors lacked equity in the property.
(Motion for Relief §f 8-9, 11-12).

Because the exhibits attached to the Motion for Relief indicated that Option One
Mortgage Corporation was the holder of the note and mortgage, at a hearing held on
October 25, 2007 the Court called upon the Movant to justify its position that it had
standing to have brought the Motion. Counsel for the Movant presented the Court with
an Assignment of Mortgage from Option One Mortgage Corporation to Wells Fargo
Bank, National Association, dated October 16, 2007, four days after the filing of the
Motion for Relief.

DISCUSSION

Today, more and more homeowners turn to the bankruptcy system for protection
when facing financial hardship or impending foreclosure. It is this Court’s responsibility
to ensure that these debtors receive the full protection of the Bankruptcy Code, including
the benefit of an automatic stay, for as long as they are entitled to it. Unfortunately,

concomitant with the increase in foreclosures is an increase in lenders who, in their rush

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to foreclose, haphazardly fail to comply with even the most basic legal requirements of
the bankruptcy system. It is the lenders’ responsibility to comply, and this Court’s
responsibility to ensure compliance, with both the substantive and procedural
requirements of the Bankruptcy Code. See In re Foreclosure Cases, 2007 WL 3232430
(N.D. Ohio 2007). As this Court made clear in its decision in Jn re Schwartz, 366 B.R.
265 (Bankr. D. Mass. 2007), it takes its role in this regard very seriously and will require
proof of each element required to obtain relief from stay. The most basic element
required to obtain relief from stay is that a movant have standing to bring and prosecute
such a motion.

The plain language of section 362 of the Bankruptcy Code requires that one be a
“party in interest” to seek relief from stay. “On request of a party in interest and after
notice and a hearing, the court shall grant relief from stay provided under subsection (a)
of this section, such as by terminating, annulling, modifying, or conditioning such
stay...” 11 U.S.C. § 362(d). The test for whether one is party in interest in the First
Circuit is whether a party has a colorable claim to the property. “A party seeking relief
from the automatic stay to exercise rights as to property must demonstrate at least a
colorable claim to the property.” In re Huggins, 357 B.R. 180, 185 (Bankr. D. Mass.
2006) (citing Grella v. Salem Five Cent. Sav. Bank, 42 F.3d 26 (1st Cir. 1994)). In the
case at bar, the Court cannot find from the evidence provided that the Movant had a
colorable claim to the property at the time the Motion for Relief was filed.

The Movant pointed the Court to a recently decided case from the U.S. District
Court for the District of Massachusetts, Saffran v. Novastar Mortgage, Inc., No. 07-

40257, slip op. (D. Mass. Oct. 18, 2007), for the proposition that the assignment from

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1e Mortgage Corporation to Movant, dated four days after the filing of the

Option One h e Cor
Motion for Relief, was sufficient to confer standing upon the Movant and that standing
should be assessed at the time of the entry of an order granting relief from stay. The
Saffran case, however, does not support Movant’s position.

In Saffran, a debtor had executed a promissory note to Novastar and a mortgage
to MERS as nominee for Novastar to secure the note. Saffran, No. 07-40257, slip op. at
1-2. Novastar moved for relief from stay on June 18, 2007 and the bankruptcy court
allowed its motion. Jd. at 3. Novastar subsequently acquired the mortgage from MERS
via an assignment dated October 8, 2007 that purported to be retroactively effective as of
February 5, 2007. Jd. at 3. Mr. Saffran appealed to the District Court, challenging the
bankruptcy court’s order granting relief from stay and seeking an emergency motion for
stay pending appeal.’ Jd. at 4. Mr. Saffran argued that Novastar did not have standing to
have sought relief from stay. /d. at 5.

The District Court denied the emergency stay because Novastar, having “retained
the authority to invoke the statutory power of sale...and to appear in court to protect its
financial interests...had sufficient financial interest to have standing to seek relief from
stay.” Id. at 5-6. The court did not hold that standing is assessed at the time of entry of
an order granting relief from stay. It is important to recognize that in Saffran, Novastar

was at all times the holder of the note and had a financial interest in that capacity. In the

situation at hand, the Movant was an unrelated third party that had no interest in the

| The issue of standing in Saffran came before the District Court on a motion for stay
pending appeal, and since there was not a full evidentiary hearing on the merits, the

Coffeon decidion i ni :
Saffran decision is of limited precedential value.

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mortgage or note until after the Motion for Relief was filed and, therefore, Movant did
not have standing to seek relief from stay.

Parties seeking relief from stay must be aware that by presenting a motion to the
Court, they represent that “the allegations and other factual contentions have evidentiary
support...” Fed. R. Bankr. P. 9011(b)(3). The Movant was unable to provide evidentiary
support for its allegations when called upon to do so. It is the claimant’s burden to bring
information regarding the relationships between the parties to the Court. Jn re Parrish,

326 B.R. 708, 720 (Bankr. N.D. Ohio 2005).

“Tf the claimant is the original lender, the claimant can
meet its burden by introducing evidence as to the original
loan. If the claimant acquired the note and mortgage from
the original lender or from another party who acquired it
from the original lender, the claimant can meet its burden
through evidence that traces the loan from the original
lender to the claimant. A claimant who is the servicer
must, in addition to establishing the rights of the holder,
identify itself as an authorized agent for the holder.”

Id.

Compliance with these rules is not difficult and this Court will require it in order to
preserve the rights of debtors. Any motion filed with the Court must be true and have
support as of the date of the motion. For example, a movant cannot state that it is the
“current holder” of an instrument if it is not. Similarly, this Court has seen motions for
relief that state that a debtor is in post-petition default where the last payment was due
prepetition, or allege that the Debtor will be in default by the time of any hearing; these
types of allegations are unacceptable to this Court. Lenders must take care in their haste

to obtain relief from stay to ensure that the factual statements they make in their motions

are true, have evidentiary support and support their claims.

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CONCLUSION
As the Debtors indicated their intent to surrender the property, the Motion for

Relief was GRANTED on October 25, 2007.

Dated: November 15, 2007 By the Court,

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| KY, ACL CAY

Joel B. Rosenthal
United States Bankruptcy Judge