Barney v. Bank of America, N.A., successor by merger to BAC

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
In re
RALPH GIFFORD and
BETTY J. GIFFORD,
Debtor.
GARY A. BARNEY, Trustee,
v.
Bank of America, N.A.,
successor by merger to
Plaintiff(s ),
BAC Home Loan Servicing, L.P.
Defendant.
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Case No. 	09-21237
Chapter 7
Adv. No. 	10-2029
OPINION ON CROSS MOTIONS FOR SUMMARY JUDGMENT
These matters came before the court on the cross motions for summary judgment
filed by the parties stemming from the Amended Complaint to Avoid and Recover
Preferential Transfer or in the Alternative, Avoid Lien, filed by Gary A. Barney,
Plaintiff/Trustee ("Trustee") and the answer filed by BAC Home Loans Servicing, L.P .,
("BANA") its assigns and successors. 1 A telephonic hearing on the cross-motions for
summary judgment was held on March 30, 2012. 	Subsequently, one issue was submitted
1 On August 17, 2011, Defendant BAC Home Loans Servicing, L.P., filed a Notice of Merger and Name
Change ... reflecting that as of July 1, 2011, "BAC Home Loans Servicing LP merged into Bank of America, N.A. and
is now known as Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP." The court's
caption reflects this change.
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to the Wyoming Supreme Court for consideration. This court determined that holding its
decision on other pending matters in abeyance was judicially economical, as the matter
involving Mortgage Electronic Registration System, Inc. ("MERS") was litigated in a
separate case. 2
The W.R.A.P. 11 Certified Question from the United States Bankruptcy Court for
the District of Wyoming was entered by the Wyoming Supreme Court on May 8, 2013
and filed on this court's docket. The court, having reviewed the record, including the
supplemental pleadings filed by the parties, is prepared to rule.
Jurisdiction
The court has jurisdiction over this adversary proceeding under 28 U.S.C. §§ 157
and 1334. This is a core proceeding within the definition of28 U.S.C. § 157(a)(2)(F)
and/or (K). The motion is brought under Fed. R. Civ. P. 56, made applicable in adversary
proceedings by Fed. R. Bankr. P. 7056. 3
Facts
Mrs. Gifford executed a Note and Mortgage with Jackson State Bank for a loan in
the amount of$438,400.00. The mortgage was recorded on February 1, 2006 in the
2 This court entered its opinion and judgment in Royal v. First Interstate Bank (In re Trierweiler), Case No.
10-20499, Ch. 7, Adv. No. 10-2035, (Bankr. Wyo., Nov. 21, 2011). The matter was subsequently appealed to the
Tenth Circuit Bankruptcy Appellate Panel and Tenth Circuit Court of Appeals. Royal v. First Interstate Bank (In re
Trierweiler), 484 B.R. 783 (lOth Cir. BAP, 2012), affirmed by Royal v. First Interstate Bank (In re Trierweiler),
2013 U.S. App. LEXIS 12501 (10 1h Cir. Wyo., July 2, 2014). Thereafter, the Trustee argued that the facts in the case
before this court were distinguishable making the Trierweiler opinion inapplicable to this case.
3 Unless otherwise indicated all future statutory reference are to the United States Bankruptcy Code, 11
U.S.C. 101 et seq.
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Sublette County Clerk's office, Pinedale, Wyoming, granting Jackson State Bank & Trust
a security interest in the real property described as Tract 1 of the Mountain View
Ranches, Sublette County, Wyoming (a.k.a. 49 Glacier Road).
The Mortgage reflects two endorsements: (1) from Jackson State Bank and Trust
to "Countrywide Bank, N.A., without recourse; and (2) an endorsement in blank from
Countrywide Bank N.A. 	Mrs. Gifford was given notice that the loan servicing would
transfer from Jackson State Bank to Countrywide, effective March 1, 2006.
Jackson State Bank executed a Corporate Assignment of all its rights to MERS,
which was also recorded in the Sublette County Clerk's office on February 13, 2006. It is
uncontested that the MERS assignment does not reflect that MERS is an agent or
"nominee." Thereafter, MERS assigned "all the rights, title and interest in and to" the
Mortgage to BAC Home Loans Servicing, L.P. The assignment was filed with Sublette
County Clerk's office on October 27, 2009.
Countrywide merged into BANA. Thereafter, on April27, 2009, Countryside
Home Loan Servicing became BAC Home Loan Servicing, LP. Pursuant to the affidavit
ofTeka Rezai, ReconTrust Company, N.A. was and is, the custodian of the Note, on
behalf of both Countrywide Bank and Bank of America.
Dan McLaughlin, Vice President ofMERS, through his affidavit explained that
members of MERS appoint it to be the mortgagee in the county land records and hold the
mortgage as nominee (agent) on the member's behalf. This is governed by the MERS
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System Rules of Membership. MERS, through the Rules of Membership relies upon the
instruction of the owner of the note and mortgage servicers. Mr. McLaughlin stated that
during the time MERS was the mortgagee of record for the loan executed by Mrs.
Gifford, from January 26, 2006 until October 21, 2009, it was acting as the nominee (or
agent) on behalf of the owner of the loan.
The court held oral arguments on the cross-motions for summary judgment on
March 20, 2012, and after the Tenth Circuit Court of Appeals entered its order in
Trierweiler, held a status hearing. Thereafter the court requested the parties to file
supplemental briefs.
Discussion
Trustee argues that on the date that Debtors filed for chapter 7 bankruptcy
protection, the mortgagee of public record was not the owner of the Note. Trustee first
argues that the lien is voidable under§ 544 as the assignment from Jackson State Bank to
MERS, does not designate MERS as a nominee or other agent, making MERS the
mortgagee without qualification or condition. Therefore, when MERS subsequently
assigned its right, title and interest in the mortgage to BAC did not effectively transfer the
mortgage, therefore the mortgagee of public record on the date Debtors filed their
bankruptcy petition was not the owner of the Note. Alternatively, the Trustee argues the
MERS assignment is an avoidable preferential transfer. Trustee argues that either
arguments prevents BANA from enforcing the mortgage, allowing the Trustee to avoid
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the Mortgage and preserve it for the benefit of the bankruptcy estate.
The Trustee also argued that the recorded assignments of the Mortgage, first to
MERS and then to BAC, did not identify with specificity the terms of the agency
relationship between the holder of the Note and the Holder of the Mortgage, and therefore
did not comply with Wyo. Stat.§§ 34-2-122 and 123. This court certified this question to
the Wyoming Supreme Court ("WSC"), which answered in the negative, holding that the
"Mortgage in this case was not required to comply with§§ 122 and 123 because: a) the
recorded assignment of the Mortgage did not identify the grantee as acting in a
representative capacity; and (b) there were no conflicting claims of a principal and agent
from which a third party would need protection." The court finds this issue has now been
determined.
BANA asserts that a judgment should be entered in its favor as a matter of law, as
the mortgage between Mrs. Gifford and BANA is not a preferential transfer nor voidable
by the Trustee.
A party claiming relief may move, with or without supporting affidavits, for
summary judgment on all or part of the claim. The judgment sought should be rendered if
the pleadings, the discovery and disclosure materials on file and any affidavits show that
there is not a genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law. The Court should determine what facts are not genuinely at
issue by examining the pleadings and evidence before it. The Court should issue an order
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specifying what facts, including items of damages or other relief, are not genuinely at
issue. 4 Summary judgment is proper only if the evidence, reviewed in the light most
favorable to the party opposing the motion, demonstrates no genuine issue of any material
fact. 5 A material fact is one that could affect the outcome of the suit, and a genuine issue
is one where the evidence is such that a reasonable jury could return a verdict for the
nonmoving party. 6 The court views the evidence in light most favorable to the
nonmoving party, but that party cannot rest on the mere allegations in its pleadings and
must come forward with evidence to raise a genuine issue. 7
The court finds that summary judgment is appropriate in this case.
(1) 	Trustee's lien avoidance under §544.
This court held transfers of a note or a mortgage between lenders do not involve
transfers of a debtor's property. Therefore, the Trustee does not have any interest to avoid
under §544. This decision was affirmed by both the Tenth Circuit Bankruptcy Appellate
Panel and the Tenth Circuit Court of Appeals in Trierweiler. In this case, the mortgage
was executed by Mrs. Gifford and recorded in the Sublette County land records on
February 1, 2006. Trustee does not argue nor present evidence that the mortgage was
improperly recorded. The Trustee did not have any interest to avoid. The court finds in
favor of BANA, under this argument.
4 Fed. R. Civ. P. 56, made applicable by Fed. R. Bankr. P. 7056.
5 Frandsen v. Westinghouse Corp., 46 F.3d 975, 976 (lOth Cir. 1995).
6 Farthing v. City of Shawnee, Kan., 39 F.3d 1131, 1134 (lOth Cir. 1994).
7 Supra.
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(2) Preferential transfer under §547
As stated above, the transfer or assignment is not the transfer of the debtor's
interest, therefore the court finds that there was not a preferential transfer. The
assignments did not constitute transfers of Mrs. Gifford's interest. The court finds in
favor of BANA.
Applicability of Wyoming Supreme Court decision regarding Wyo. Stat. 34-2-122 and
The court finds the Wyoming Supreme Court's decision is specifically applicable
to this case as the initial argument was presented to the Bankruptcy Court by the Trustee
during the oral arguments regarding his motion for summary judgment, resulting in this
court certifying the question to the Wyoming Supreme Court for determination under
Wyoming Law. The Wyoming Supreme Court found against Trustee's argument.
In conclusion, the court grants summary judgment in favor ofBANA and against
the Trustee.
This opinion constitutes the Court's findings of fact and conclusions oflaw. A
separate order shall be entered pursuant to Fed. R. Bankr. P. 9021.
DATED this 	~ 	day of January, 2015.
Service to:
James Belcher
Brad Hunsicker
By the Court
J. MCNIFF
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