Tuesday, October 18, 2011

Bankster Required To Provide Evidence Of Actual Possession Of Mortage Note Where Copy Shows Endorsment 'In Blank'

A United States Bankruptcy Appellate Panel for the Eighth Circuit Court of Appeals recently ruled that summary judgment granted by a U.S. Bankruptcy Court judge in an action by a debtor to challenge the standing of a lender holding the mortgage on debtor's home was improper because there was a material issue of fact regarding whether the bankster had possession of the original promissory note.

  • As Kondaur admits, and is apparent from the copy of the note attached to its proof of claim, the promissory note the Debtors executed in favor of NCMC has not been specifically endorsed to Kondaur; it is endorsed in blank. Accordingly, it is a "bearer" note, which requires actual possession of the note to enforce or negotiate it.

    The Debtors raised the issue of whether Kondaur is the proper party to enforce the note and cast further doubt on Kondaur's standing by introduction of the Corrective Assignment. Unfortunately, there is nothing in the record evidencing the location of the note. Kondaur's counsel represented at oral argument before this Court that Kondaur has possession of the note, but its failure to produce the note prior to or at the hearing on its motion to dismiss (treated as a motion for summary judgment) precluded a determination that Kondaur has the right, as a matter of law, to enforce the promissory note.

    At oral argument, Debtors' counsel conceded that there is a valid mortgage on the property and that production of the note most likely will remove the final hurdle to Kondaur's pending motion for relief and Kondaur's motion to dismiss the adversary proceeding.

    For the reasons stated above, the bankruptcy court's order entering summary judgment in favor of Kondaur is reversed and remanded for proceedings consistent with this opinion.

For the ruling, see In re Banks, No. 11-6025 (Bankr. App. Pan., 8th Cir. October 11, 2011).

Thanks to Mike Dillon at GetDShirtz. com for the heads-up on the ruling.

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