In RE Miller – Colorado Bankruptcy Appeal – Deutsche Failed to Conform to UCC Requirements

In RE Miller – Colorado Bankruptcy Appeal – Deutsche Failed to Conform to UCC Requirements

By Daniel Edstrom
DTC Systems, Inc.

Thanks to Deontos for this bankruptcy appeals decision.  In RE: Mark Stanley Miller vs. Deutsche Bank National Trust Company. Uniform Commercial Code (UCC) issues are addressed by the appeals court in this ruling.

Excerpt:

4. Deutsche Bank’s Status as “Party in Interest”

5 Deutsche Bank presented evidence that IndyMac had indorsed the Note in

blank. Is proof of this indorsement sufficient under the U.C.C. requirements to

establish Deutsche Bank as the successor holder of the note? As we shall see,

 it is not, because Deutsche Bank must also prove it has possession of the 

Note.

 6 The U.C.C. identifies the requirements for “negotiation” of a note, that is, for

“transfer of possession . . . to a person who thereby becomes its holder.” Id.

§ 4-3-201(a). This statute provides that “if an instrument is payable to an

identified person, negotiation requires transfer of possession of the 

instrument and its indorsement by the holder.” Id. § 4-3-201(b) (emphasis 

added). The Official Commentary to section 4-3-201 explains that negotiation

 “always requires a change in possession of the instrument because nobody 

can be a holder without possessing the instrument, either directly or through 

8 We note that the 9th Circuit BAP has stated that because relief from stay is
a limited proceeding that does not ultimately determine the lender’s and debtor’s
rights, “the concern of real party in interest jurisprudence for avoiding double
payment is quite reduced” in such proceedings. Veal v. Am. Home Mortg.
Servicing, Inc. (In re Veal), 450 B.R. 897, 914 (9th Cir. B.A.P. 2011). We also
note, however, that after making this statement in Veal, the 9th Circuit BAP
reversed a bankruptcy court determination granting relief from stay because the
purported holder of the note and mortgage could not produce the original note or
otherwise provide proof under state law that it was the holder of the note or a
person entitled to enforce it. See id. at 917-18

Author: dmedstrom

Reverse Engineering and Failure Analysis - Reverse Engineering Wall Street

One thought on “In RE Miller – Colorado Bankruptcy Appeal – Deutsche Failed to Conform to UCC Requirements”

  1. Hey Dan,
    I used the following in my appeal – which speaks to the endorsement:

    There is nothing in evidence of who stamped the endorsement, nor under what authority the Note was stamped with the endorsement. In Bengel v. Kenny, 126 Cal. App. 735 [15 P.2d 1031], where the plaintiff claimed title under an assignment of a purported assignee of the corporation but the evidence failed to show that the assignment by the corporation was executed by a person having authority to do so, it was held that the evidence failed to show title in the plaintiff by reason that such an authority to do so. In Brown v. Ball, 123 Cal.App. 758 (12 P.2d 28), it was held that the evidence was insufficient to establish the execution of an assignment where there was no evidence to show that it was executed by the person whose name purported to be signed thereto or that the signer had authority as agent to execute the instrument.”

    Not only was the trial courts presumption of the validity of the “stamped indorsement” on the Note erroneous and prejudicial to Cromwell, it constitutes, as described by the California Supreme Court in Cockerell v. Title Insurance and trust Co., 42 Cal.2d 284 (1954) in denying such a presumption, a “dangerous innovation”.

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