June 14, 2011

Today, Mr. Barnes successfully defeated a Motion for Relief From Stay filed by Wells Fargo Bank National Association as Trustee for a Morgan Stanley securitized mortgage loan trust in a case in the United States Bankruptcy Court for Western District of Washington. The Bankruptcy Court denied the stay relief request finding that the Declaration submitted by Wells Fargo was void of any facts to show that Wells Fargo was a “person entitled to enforce” and that Wells Fargo did not satisfy its burden to show delivery, proof of delivery, and purpose of delivery.

The decision is supported by the recent 46-page opinion of the 9th Circuit Bankruptcy Appellate Panel in the matter of In Re Veal, opinion issued June 10, 2011, which reversed the Arizona Bankruptcy Court’s grant of stay relief to Wells Fargo and vacated that court’s denial of the debtor’s objection to a proof of claim filed by the servicer. The decision thoroughly discussed and analyzed the requirements of constitutional and prudential standing, Rule 17 real party in interest, evidence of “holder” and “person entitled to enforce”, and the interplay between Articles 3 and 9 of the UCC in the context of stay relief requests and objections to a proof of claim.

As the Veal decision emanated from the 9th Circuit BAP, we believe that it will have significant effects on challenges to foreclosure being asserted in Bankruptcy courts in California, Washington, Oregon, Arizona, Nevada, Alaska, and Hawaii. As it is an appellate court decision, servicers and “trustees” of securitized mortgage loan trusts who move for stay relief to foreclose will now be held to their significant burdens of proof to be entitled to seek such relief, and will no longer be able to rely upon conclusory declarations such as the one submitted in the WD Washington case argued today.

Jeff Barnes, Esq.,