Title: CPT Asset Backed Certificates, Series 2004-EC1 v. Kham

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

CPT ASSET BACKED CERTIFICATES, SERIES 2004-EC1 v. KHAM2012 OK 22Case Number: 108384Decided: 03/06/2012THE SUPREME COURT OF THE STATE OF OKLAHOMA
NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN 
THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR 
WITHDRAWAL. 

CPT ASSET BACKED CERTIFICATES, SERIES 2004-EC1, 
Plaintiff/Appellee,v.CIN KHAM AND NGUL LIAM CING, 
Defendants/Appellants,
ON APPEAL FROM THE DISTRICT COURT OF TULSA COUNTYHONORABLE 
DAMAN H. CANTRELLDISTRICT JUDGE
¶0 Appeal from an order denying Petition and Motion to Vacate Default Journal 
Entry of Judgment granted in favor of CPT Asset Backed Certificates, Series 
2004-EC1, by the Bank of New York Mellon, a New York Banking Corporation, as 
Trustee under the Pooling and Servicing Agreement dated as of November 1, 2004, 
against Cin Kham and Ngul Liam Cing. 
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS
Phillip Aaron Taylor, TAYLOR & ASSOCIATES, Broken Arrow, Oklahoma, for 
Appellants.Steven A. Heath, BAER, TIMBERLAKE, COULSON & CATES, Tulsa, 
Oklahoma, for Appellee
COMBS, J.
FACTUAL AND PROCEDURAL HISTORY
¶1 On August 27, 2004, the appellants, Cin Kham and Ngul Liam Cing 
(Appellants), executed an adjustable rate note in favor of Encore Credit 
Corporation, a California Corporation (Encore). Contemporaneously, the 
Appellants executed a mortgage to secure the note. The mortgage names Mortgage 
Electronic Registration Systems, Inc. (MERS), as the mortgagee and further 
states "MERS is a separate corporation that is acting solely as a nominee for 
Lender and Lender's successors and assigns." Encore is identified as the Lender 
in this mortgage.
¶2 On or about November 1, 2008, Appellants defaulted on the note. Appellee, 
CPT Asset Backed Certificates, Series 2004-EC1, by the Bank of New York Mellon, 
a New York Banking Corporation, as Trustee under the Pooling and Servicing 
Agreement dated as of November 1, 2004 (Appellee), filed a foreclosure petition 
on May 11, 2009. Appellants failed to answer the petition and a default judgment 
was entered against them on July 31, 2009. A hearing to confirm the sale was set 
for March 9, 2010. On March 9, 2010, Appellants filed a Petition and Motion to 
Vacate challenging Appellee's standing to foreclose on the subject property.1 On May 5, 2010, the trial 
court denied Appellants' petition to vacate judgment but granted leave to file a 
writ of prohibition.2 Appellants filed an application to assume original 
jurisdiction and petition for writ of prohibition in this Court on June 3, 2010. 
This proceeding was recast as an appeal on October 26, 2010. A petition in error 
was filed on November 11, 2010, and a second amended petition in error was filed 
on December 22, 2010. 
STANDARD OF REVIEW
¶3 The standard of review for a trial court's ruling either vacating or 
refusing to vacate a judgment is abuse of discretion. Ferguson Enterprises, 
Inc. v. Webb Enterprises, Inc., 2000 OK 78, ¶5, 13 P.3d 480, 482; Hassell v. Texaco, Inc., 
1962 OK 
136, 372 P.2d 233. A clear abuse-of -discretion standard includes appellate review of 
both fact and law issues. Christian v. Gray, 2003 OK 10, ¶43, 65 P.3d 591, 608. An abuse of discretion occurs 
when a court bases its decision on an erroneous conclusion of law, or where 
there is no rational basis in evidence for the ruling. Fent v. Oklahoma 
Natural Gas Co., 2001 OK 35, ¶ 12; 27 P.3d 477, 481.
MERS BACKGROUND
¶4 Mortgage Electronic Registration Systems, Inc., is "a private corporation 
that administers the MERS system, a national electronic registry that tracks the 
transfer of ownership interests and servicing rights in mortgage loans." 
Mortgage Electronic Registration System, Inc. v. Nebraska Dept. of Banking 
& Fin., 704 N.W.2d 784, 785 (Neb. 2005). "In 1993, the MERS 
system was created by several large participants in the real estate mortgage 
industry." Matter of MERSCORP, Inc. v. Romaine, 861 N.E.2d 81, 83 (N.Y. 
2006). "Although at first MERS was only able to attract the 
participation of Fannie Mae and Freddie Mac, private label subprime mortgage 
securitizers began using MERS in 1999."(emphasis original)3 Today, "[o]ver half the 
nation's mortgage loans are now recorded under MERS name."4 " . . . MERS is legally 
involved in the origination of approximately 60% of all mortgage loans in the 
United States."5 MERS's "mission is to register every mortgage loan in 
the United States on the MERS System."6
¶5 Any explanation or description of the MERS system must begin with an 
understanding of traditional mortgage lending and the American real property 
recording systems. "Public land title records have been a fundamental feature of 
American law since the founding of the Republic."7 They have been adopted in 
all fifty states and an analogous recording system has been adopted for personal 
property interests under Article 9 of the Uniform Commercial Code (UCC). "The 
early colonial objective of these laws was, as it is today, to prevent disputes 
over property rights and to facilitate the use of land as collateral by creating 
a transparent public record that provides certainty in private bargains."8 
¶6 In traditional mortgage lending, mortgages were recorded in the public 
land records so that mortgagees would not "risk losing the ability to enforce 
their contract as against a subsequent purchaser for value."9 Any transfer of the 
Lender's rights was accomplished through the process of assignment and recorded 
in the public record.
¶7 The legal foundation of traditional mortgage lending is the longstanding 
rule that the mortgage follows the note. "Courts are virtually unanimous in 
holding that where a mortgage lender with a promissory note negotiates that note 
to a holder, the holder of the promissory note also obtains any mortgage 
securing that note."10 Over one hundred years ago, the United States Supreme 
Court held: "The note and mortgage are inseparable; the former as essential, the 
latter as an incident. An assignment of the note carries the mortgage with it, 
while an assignment of the latter alone is a nullity." Carpenter v. Longan, 
83 U.S. 271, 274; 21 L.Ed 313 (1872).
¶8 Oklahoma law is in accord. "In Oklahoma, ownership of the note is 
controlling, and assignment of the note carries with it assignment of the 
mortgage. ". . . An assignment of the mortgage to one other than the holder of 
the note is of no effect." BAC Home Loans Serv'g, L.P. v. White, 
2011 OK CIV APP 
35, ¶ 10, 256 P.3d 1014, 1017, citing Gill v. First Nat. 
Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717, 719. "A mortgage securing the payment 
of a negotiable note is merely an incident and accessory to the note, and 
partakes of its negotiability. The indorsement and delivery of the note carries 
with it the mortgage without any formal assignment thereof." Chase v. 
Commerce Trust Co., 1923 OK 676, 224 P. 148 (syl. n.1 by the Court).
¶9 Time-honored conservative mortgage lending practices changed beginning in 
the early 1990's as loans, many of them subprime, were sold and resold, often 
multiple times, on the secondary market. The loans were transferred among 
banking institutions to be pooled into trusts. Mortgage-backed securities were 
then sold to investors, a process known as "securitization." 
¶10 MERS was "[e]stablished to facilitate the residential loan securitization 
markets, . . ."11 "MERS was created by the mortgage banking industry to 
streamline the mortgage process by using electronic commerce to eliminate 
paper."12 "MERS essentially privatized part of the mortgage 
recording system," namely the portion that records mortgage assignments. 
Jackson v. MERS, Inc., 770 N.W.2d 487, 490 (Minn. 2009).
¶11 Under the MERS system, MERS is named the "mortgagee" in the security 
instrument either at closing or by subsequent recorded assignment. At the same 
time, it is termed the "nominee" of the lender. According to MERS: "[N]o 
mortgage rights are transferred on the MERS system. The MERS system only tracks 
the changes in servicing rights and beneficial ownership interests. Servicing 
rights are sold via a purchase and sale agreement. Beneficial ownership 
interests are sold via endorsement and delivery of the promissory note."13 MERS considers both events to be "non-recordable." 14 MERS remains the mortgagee of record without regard to 
which entity holds the note so long as the note holder is a MERS member. MERS 
maintains that "[a]ny loan registered on the MERS system is inoculated against 
future assignments because MERS remains the mortgagee no matter how many times 
servicing is traded."15
¶12 The perceived advantage of the MERS system for mortgage lenders is 
twofold. First, lenders avoid the filing fees associated with the recording of 
each assignment of the note.16 Second, until recently, MERS would "bring foreclosure 
proceedings in its own name rather than the name of the actual owner of the 
loan, which is often a trust owned by investors."17 That authority has been questioned in several 
jurisdictions.
¶13 The appellate courts of several states have addressed the impact of the 
MERS designation on later foreclosures of the pledged property. For example, in 
Landmark Nat. Bank v. Kesler, 289 Kan. 528, 216 P.3d 158 (2009), 
MERS, as nominee of the second mortgagee, assigned the second mortgage to 
Sovereign Bank. The first mortgagee foreclosed, naming the borrower and second 
mortgagee as defendants, and took a default judgment. The trial court denied the 
motion of MERS and Sovereign Bank to set aside the default judgment. The Kansas 
Supreme Court affirmed, reasoning MERS lacked any enforceable rights because 
there was no evidence MERS owned the promissory note secured by the mortgage. 
Landmark Nat. Bank v. Kesler, supra, at 167-168. Similarly, appellate 
courts in Arkansas, Missouri, Maine and Vermont have refused to allow MERS or 
its assignee to assert rights against the mortgagor because it did not hold the 
note secured by the mortgage. Mortgage Elec. Registration System v. Southwest 
Homes of Arkansas, 2009 Ark. 152, 301 S.W.3d 1; Bellistri v. Ocwen 
Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App. E.D., 2009); 
Mortgage Electronic Registration Systems, Inc. v. Saunders, 2 A.3d 289 
(Me. 2010); and U.S. Bank National Association v. Kimball, 27 A.3d 1087, 
75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011).
ANALYSIS
¶14 Appellants allege Appellee lacks standing to commence this foreclosure 
action. Appellants further allege the mortgage is a nullity because MERS cannot 
be a mortgagee in this state and therefore the note is unsecured. They also 
allege the original note should be required to be presented to the trial court 
prior to a trial court's disposition regardless if the defendant has 
answered.
¶15 The dispositive issue is whether or not Appellee has standing. Appellants 
allege that Appellee does not have standing to foreclose the subject property 
and therefore the trial court lacked subject matter jurisdiction. This argument 
is based on the lack of indorsements on the note attached to Appellee's petition 
to foreclose, and the fact that the original note was not presented to the trial 
court prior to judgment. Therefore, Appellee did not establish they were an 
entity entitled to enforce the note. 
¶16 This Court has previously held:
Standing, as a jurisdictional question, may be correctly raised at any level 
of the judicial process or by the Court on its own motion. This Court has 
consistently held that standing to raise issues in a proceeding must be 
predicated on interest that is "direct, immediate and substantial." Standing 
determines whether the person is the proper party to request adjudication of a 
certain issue and does not decide the issue itself. The key element is whether 
the party whose standing is challenged has sufficient interest or stake in the 
outcome.
Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 
1993 OK 
162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:
Respondent challenges Petitioner's standing to bring the tendered 
issue. Standing refers to a person's legal right to seek relief in a judicial 
forum. It may be raised as an issue at any stage of the judicial process by 
any party or by the court sua sponte. (emphasis original)
¶17 Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated "[s]tanding 
may be raised at any stage of the judicial process or by the court on its own 
motion." Additionally in Fent, this Court stated:
Standing refers to a person's legal right to seek relief in a judicial forum. 
The three threshold criteria of standing are (1) a legally protected interest 
which must have been injured in fact- i.e., suffered an injury which is 
actual, concrete and not conjectural in nature, (2) a causal nexus between the 
injury and the complained-of conduct, and (3) a likelihood, as opposed to mere 
speculation, that the injury is capable of being redressed by a favorable court 
decision. The doctrine of standing ensures a party has a personal stake in the 
outcome of a case and the parties are truly adverse.
Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who 
has not suffered an injury attributable to the defendant lacks standing to bring 
a suit. And, thus, "standing [must] be determined as of the commencement of 
suit; . . ." Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S. Ct. 2130, 2142, 119 L. Ed. 351 (1992).18
¶18 To commence a foreclosure action in Oklahoma, a plaintiff must 
demonstrate it has a right to enforce the note and, absent a showing of 
ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust 
Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.19 An assignment of the mortgage, however, is of no 
consequence because under Oklahoma law, "[p]roof of ownership of the note 
carried with it ownership of the mortgage security." Engle v. Federal Nat. 
Mortg. Ass'n, 1956 OK 
176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the 
security interest from the note." BAC Home Loans Servicing, L.P. v. White, 
2011 OK CIV APP 
35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a 
negotiable instrument, it is subject to the requirements of the UCC. Thus, a 
foreclosing entity has the burden of proving it is a "person entitled to enforce 
an instrument" by showing it was "(i) the holder of the instrument, (ii) a 
nonholder in possession of the instrument who has the rights of a holder, or 
(iii) a person not in possession of the instrument who is entitled to enforce 
the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 
12A-3-418 of this title." 12A O.S. 2001 §3-301.
¶19 To show you are the "holder" of the note you must prove you are in 
possession of the note and the note is either "payable to bearer" (blank 
indorsement) or to an identified person that is the person in possession 
(special indorsement).20 Therefore, both possession of the note and an 
indorsement on the note or attached allonge21 are required in order for one to be a "holder" of the 
note.
¶20 To be a "nonholder in possession who has the rights of a holder" you must 
be in possession of a note that has not been indorsed either by special 
indorsement or blank indorsement. There is nothing in the present record to 
demonstrate the note has been indorsed. No negotiation has occurred because the 
person/entity now in possession did not become a holder by reason of the lack of 
the note being indorsed. Negotiation is the voluntary or involuntary transfer of 
an instrument by a person other than the issuer to a person who thereby becomes 
its holder. 12A O.S. 2001, § 
3-201. Transfer occurs when the instrument is delivered by a person other than 
its issuer for the purpose of giving to the person receiving delivery the right 
to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note 
would still have to occur even though there is no negotiation. Delivery is 
defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee 
would then be vested with any right of the transferor to enforce the note. 12A 
O.S. 2001, 3-203(b). Some jurisdictions have held, without holder status and 
therefore the presumption of a right to enforce, the possessor of the note must 
demonstrate both the fact of the delivery and the purpose of the delivery of the 
note to the transferee in order to qualify as the person entitled to enforce. 
In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 
12A O.S. 2001, § 
3-203. 
¶21 In the present case, Appellee claims they are the holder of the note and 
mortgage. The note found in the record contains no indorsements. Appellants 
state, in their Reply Brief, that an alleged original "blue ink" copy of the 
note was with Appellee's counsel at the hearing on the motion/petition to vacate 
with a belated indorsement; however, the "blue ink" copy does not appear in the 
record and is not before this Court for review. For the above reasons, and more 
specifically because there is no indorsement on the note in the record, Appellee 
can not be a holder as defined by the statute. 
¶22 The real issue is not whether or not one is a holder but whether or not 
one is entitled to enforce the note. As mentioned, a person/entity can be 
entitled to enforce the note without any indorsements. There is, however, a 
higher standard to meet to establish you are entitled to enforce the note if all 
you possess is the note without any indorsement. 
¶23 Attached to Appellee's petition to foreclose was an Assignment of Real 
Estate Mortgage. This assignment is dated October 21, 2008, wherein, MERS, as 
nominee for Encore, purports to assign the subject mortgage to Appellee. This 
document also reflects, MERS assigned the mortgage "together with the note, 
debts and claims thereby secured" covering the subject property. Therefore, it 
appears MERS attempted to transfer both the mortgage and note to Appellee by 
this document.
¶24 MERS is not mentioned in the note but only in the mortgage. The status 
given MERS in the mortgage is mortgagee and further states "MERS is a separate 
corporation that is acting solely as a nominee for Lender and Lender's 
successors and assigns." Encore is named as the Lender in the mortgage. Neither 
Oklahoma law nor the mortgage documents define the term "nominee." In the 
absence of a contractual definition, the parties leave the definition to 
judicial interpretation. Black's Law Dictionary (9th ed. 
2009)defines a nominee as " [a] person designated to act in place of another 
usu[ally] in a very limited way." "This definition suggests that a nominee 
possesses few or no legally enforceable rights beyond those of a principal whom 
the nominee serves." Landmark Nat. Bank v. Kesler, 289 Kan. 528, 216 P.3d 158, 166 (2009). By definition, a "nominee" is substantially the same as the 
definition of an "agent."22 The legal status of a nominee/agent, then, depends on 
the context of the relationship of the nominee/agent to its principal. In the 
present case, that relationship appears to only be related to the mortgage and 
not the note. There is nothing in the record to demonstrate MERS had any 
authority to assign the note to Appellee although, arguably, it had authority to 
assign the mortgage. Assignment of the mortgage, however, does not assign the 
note. As previously stated, in Oklahoma, ownership of the note is controlling, 
and assignment of the note carries with it assignment of the mortgage - not the 
other way around. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 
1945 OK 
181, 159 P.2d 717, 719. ". . . [M]ortgage securing the payment of a negotiable note is 
merely an incident and accessory to the note, and partakes of its negotiability, 
and the endorsement and delivery of the note carries with it the mortgage 
without any formal assignment thereof." Prudential Ins. Co. of America v. 
Ward, 1929 OK 
71, ¶ 19, 274 P. 648, 650.
¶25 Therefore, if Appellee is trying to establish it is a person entitled to 
enforce the note by virtue of being a nonholder in possession who has the rights 
of a holder, the assignment of the mortgage is not supportive. A person trying 
to establish it is a nonholder in possession who has the rights of a holder must 
bear the burden of establishing its status as a nonholder in possession with the 
rights of a holder. Appellee must establish delivery of the note as well as the 
purpose of that delivery. Without anything in the record establishing Appellee 
is a person entitled to enforce the note, either as a holder or nonholder in 
possession who has the rights of a holder, there is nothing to establish 
Appellee's standing in this case.
¶26 Appellee must also demonstrate it became a "person entitled to enforce" 
prior to the filing of the foreclosure proceeding. We find there is no 
evidence in the record establishing Appellee had standing to commence this 
foreclosure action. The trial court's granting of a default judgment in favor of 
Appellee could not have been rationally based upon the evidence or Oklahoma law. 
Therefore, we find that the trial court abused its discretion when granting the 
default judgment. Because this issue is dispositive, we will not address the 
remaining issues on appeal. The order denying Appellant's petition and motion to 
vacate should be reversed and remanded back for further proceedings to determine 
whether Appellee is a person entitled to enforce the note consistent with this 
opinion. 
CONCLUSION
¶27 It is a fundamental precept of the law to expect a foreclosing party to 
actually be in possession of its claimed interest in the note, and to have the 
proper supporting documentation in hand when filing suit, showing the history of 
the note, so that the defendant is duly apprised of the rights of the plaintiff. 
This is accomplished by showing the party is a holder of the instrument or a 
nonholder in possession of the instrument who has the rights of a holder, or a 
person not in possession of the instrument who is entitled to enforce the 
instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the 
homeowners, absent adjudication on the underlying indebtedness, today's 
decisions to reverse the denial of the petition and motion to vacate cannot 
cancel their obligation arising from an authenticated note, or insulate them 
from foreclosure proceedings based on proven delinquency. This Court's decision 
in no way releases or exonerates the debt owed by the defendants on this home. 
See, U.S. Bank National Association v. Kimball, 27 A.3d 1087, 75 UCC 
Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 
78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS
¶28 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, 
JJ.
¶29 DISSENT: WINCHESTER (JOINS GURICH, J.), GURICH (BY SEPARATE WRITING), 
JJ.
¶30 RECUSED: COLBERT, V.C.J.
FOOTNOTES
1 Petition and Motion to 
Vacate Journal Final Entry of Judgment (by default) entered July 31, 2009) sic, 
and Brief and Affidavit in Support Thereof, and Motion for Order Suspending All 
Execution Proceedings Including Confirmation of Sheriff's Sale Set for Hearing 
on March 9, 2010, or, Alternatively, Request for Leave of Court to File 
Application to Assume Original Jurisdiction and Petition for Writ of Prohibition 
in the Oklahoma Supreme Court (Based Upon Plaintiff's Lack of Standing). 
2 This order was later memorialized and filed on December 
21, 2010. This Court, on November 30, 2010, ordered Appellants to file a second 
amended petition in error and attach this memorialized order of the Tulsa County 
District Court. 
3 Christopher L. Peterson, Foreclosure, Subprime 
Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. 
Cin. L. Rev. 1359, 1370 (2010). 
4 John R. Hooge & Laurie Williams, Mortgage 
Electronic Registration Systems, Inc.: A Survey of Cases Discussing MERS' 
Authority to Act, Norton Bankr. L. Adviser, Aug. 2010 at 1, 21. 
5 Peterson, supra, at 1362. 
6 MERS web page overview . 
7 Peterson, supra at 1363. 
8 Peterson, supra at 1364-1365. 
9 Peterson, supra at 1364. 
10 Peterson, supra at 1379. 
11 Michael T. Madison et al., Law of Real Estate 
Financing § 12:35. 
12 MERS web page overview. 
13 Sharon McGann Horstkamp, MERS Case Law Overview, 
64 Consumer Fin. L. Q. Rep. 458, 458 (2010) (author is Vice President and 
General Counsel for MERSCORP, Inc.) 
14 Id. 
15 MERS web page overview. 
16 Peterson, supra, at 1362. 
17 Peterson, supra, at 1362. 
18 The dissenting opinion in this matter relies upon 
Justice Opala's concurring opinion in Toxic Waste Impact Group, Inc. v. 
Leavitt, 1994 OK 
148, 890 P.2d 906, for the proposition that standing is not a jurisdictional question. 
Justice Opala's concurring opinion was not the majority opinion of this Court 
and as such "a minority opinion has no binding, precedential value." 20 Am.Jur. 
2d Courts §138. 
19 This opinion occurred prior to the enactment of the 
UCC. It is, however, possible for the owner of the note not to be the person 
entitled to enforce the note if the owner is not in possession of the note. (See 
the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, 
APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO 
MORTGAGE NOTES (NOVEMBER 14, 2011)). 
20 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205. 

21 According to Black's Law Dictionary (9th ed. 2009) an 
allonge is "[a] slip of paper sometimes attached to a negotiable instrument for 
the purpose of receiving further indorsements when the original paper is filled 
with indorsements." It should be noted that under 12A O.S. 2001, § 3-204(a) and its comments in 
paragraph 2, it is no longer necessary that an instrument be so covered with 
previous indorsements that additional space is required before an allonge may be 
used. An allonge, however, must still be affixed to the instrument. 
22 Black's Law Dictionary defines "agent" as "[o]ne who is 
authorized to act for or in place of another; a representative." (9th ed. 2009). 

GURICH, J., with whom WINCHESTER, J. joins dissenting: 
¶1 I respectfully dissent. In this case, the record demonstrates that the 
Plaintiff filed the Petition in May of 2009, attaching an unindorsed note and an 
assignment of mortgage. The Defendants failed to answer the Petition and filed 
nothing in the case until the Plaintiff's moved to confirm the sale of the 
property at sheriff's sale. In their Petition and Motion to Vacate Final Entry 
of Judgment, the Defendants argued that the Plaintiff was not the proper party 
to bring the foreclosure action. However, because the Defendants failed to 
assert Plaintiff's lack of "standing" until after the judgment, I would affirm 
the trial court's denial of Defendants' Petition and Motion to Vacate Final 
Entry of Judgment. 
The majority states that "[t]o commence a foreclosure action in Oklahoma, a 
plaintiff must demonstrate it has a right to enforce the note, and absent a 
showing of ownership, the plaintiff lacks standing," citing Gill v. First 
Nat. Bank & Trust Co., 1945 OK 181, 159 P.2d 717.1 See Majority Op. ¶ 5. I agree that in any 
foreclosure action a party must demonstrate it is the proper party to request 
adjudication of the issues. However, the issue of whether a party is the proper 
party to request adjudication of the issues is a real-party-in-interest issue, 
not an issue of "standing," as the majority frames it. See Toxic Waste 
Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring). Justice Opala 
framed the issue correctly in Toxic Waste Impact Group: 
Standing in the federal legal system is imbued with a 
constitutional/jurisdictional dimension, while in the body of state law it 
fits under the rubric of ordinary procedure. The U.S. Constitution, 
Article III, has long been held to require that a "case" or "controversy" is 
essential to invoke federal judicial jurisdiction and that a person's competence 
to bring an action is a core component of standing in a case-or-controversy 
inquiry. It is for this reason that standing is an integral part of the 
mechanism for invoking the federal judiciary's power. 
Oklahoma's fundamental law places no restraint on the judiciary's power 
analogous to the federal case-or-controversy requirement. Under the earlier Code 
of Civil Procedure the suit had to be brought by the real party in interest. 
That requirement has always been non-jurisdictional. If a state court proceeded 
to adjudicate a claim pressed by one not in that status, its decision was not 
fraught with jurisdictional infirmity but rather regarded as erroneous for want 
of proof to establish an important element of the claim. An error in this 
category is waivable at the option of the defendant; and, if not asserted on 
appeal, the reviewing court may reach the merits of the case despite a 
plaintiff's apparent lack of standing at nisi prius.
Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring, ¶¶ 2-3) (emphasis 
added); see also Black Hawk Oil Co. v. Exxon, 1998 OK 70, ¶ 24, 969 P.2d 337, 344 ("Using the term 'standing' to 
designate real-party-in-interest issues tempts courts to apply standing 
principles outside the context in which they were developed. . . . A defendant 
is entitled to have the suit against him prosecuted by the 'real party in 
interest' but 'his concern ends when a judgment for or against the nominal 
plaintiff would protect defendant from any action on same demand by another.") 
(Watt, J., Majority Op.).
¶2 The majority in this case cites Hendrick v. Walters, 
1993 OK 162, ¶ 4, 865 P.2d 1232, 1234 and Fent v. Contingency Review 
Board, 2007 OK 
27, n.19, 163 P.3d 512, 519 for the proposition that "standing may be raised at any stage of 
the judicial process or by the court on its own motion." See Majority Op. 
¶ 4. Those cases cite Matter of the Estate of Doan, 1986 OK 15, ¶ 7, 7272 P.2d 574, as authority for this 
proposition. Arguably, however, Doan misstates the law: 
Ever since the Code of Civil Procedure was replaced in 1984 by the Pleading 
Code, our nomenclature for identifying the party entitled to sue, which began to 
follow that of federal jurisprudence, has used "standing" as if it were a 
functional equivalent of the earlier procedural terms of art--real party in 
interest, one with appealable interest, one occupying the aggrieved-party or 
pecuniary-interest status. It was during this transition that one of our 
opinions inadvertently referred to "standing" in terms of a jurisdictional 
requirement, thus creating the misimpression that the term has a jurisdictional 
dimension. Oklahoma's constitution has no case-or-controversy clause. Standing 
is hence to be viewed as an adjective-law concept. The inadvertent reference to 
the contrary should be treated as ineffective to alter standing's true character 
in the body of our procedural law.
. . . .
I concur in today's opinion and in the disposition of the cause. If I were 
writing for the court, I would additionally declare that Doan's 
inadvertent reference to federal law is to be viewed as withdrawn. 
Lujan's tripartite standing test, which we adopt today, must be treated 
as having been received sans its federal jurisdictional baggage. 

See Toxic Waste Impact Group, 1994 OK 148 (Opala, J., concurring ¶ 4). 
¶3 Additionally, both Hendrick and Fent were original actions 
in this Court. As such, "standing" could have been raised at any point by this 
Court sua sponte. However, in a proceeding in District Court, because it is a 
non-jurisdictional issue, failure to assert that the Plaintiff is not the real 
party in interest may be waived. See Liddell v. Heavner, 
2008 OK 6, n.5, 180 P.3d 1191 (Opala, J., Majority Op.); see also 
12 O.S. 2012 § 2008(D). 
¶4 In this case, the facts demonstrate that the Defendants did not raise the 
issue of "standing" until after the property was sold at sheriff's sale. 
Therefore, the Defendants waived the issue below, and the majority improperly 
addresses the issue on appeal.2 Liddell, 2008 OK 6, n.5, 180 P.3d 1191. 
¶5 Additionally, the trial court in this case correctly granted default 
judgment to the Plaintiffs and did not abuse its discretion in denying 
Defendants' Petition and Motion to Vacate Final Entry of Judgment. As the 
Appellee argues in its Answer Brief, it had a right to enforce the note despite 
the fact the note lacked an indorsement. The Majority correctly states the law 
regarding a nonholder in possession who has the rights of a holder, entitling 
that entity to enforce the note. However, I cannot agree with the Majority's 
application of the law to the facts in this case. 
Transfer of an instrument occurs when the instrument is delivered by a person 
other than its issuer for the purpose of giving to the person receiving delivery 
the right to enforce the instrument. 12A O.S. § 3-203. Once the note is delivered, the 
transferee is then vested with any right of the transferor to enforce the note. 
12A O.S. § 3-203(b). Official Comment 2 of 
Section 3-203 explains: 
If the transferee is not a holder because the transferor did not indorse, the 
transferee is nevertheless a person entitled to enforce the instrument . . . if 
the transferor was a holder at the time of transfer. Although the transferee is 
not a holder under (b) the transferee obtained the rights of the transferor as 
holder. Because the transferee's rights are derivative of the transferor's 
rights, those rights must be proved. . . . The instrument, by its terms, is not 
payable to the transferee and the transferee must account for possession of the 
unindorsed instrument by proving the transaction through which the transferee 
acquired it. Proof of a transfer to the transferee by a holder is proof that the 
transferee has acquired the rights of a holder. 
In this case, the note attached to the Petition was not indorsed. As such, to 
enforce the note, the Plaintiff had to prove it was a nonholder in possession 
with rights of the holder. Plaintiff's Petition alleged a valid cause of action 
against Defendants, ownership of the subject note and mortgage, Defendants' 
default on the note, and Plaintiff's right and intent to foreclose. Defendants 
were served with summons and Petition and were fully aware of Plaintiff's claim 
against them. The Defendants not only failed to answer the Petition and deny the 
pled facts, but also failed to respond in any way until the Plaintiff's moved to 
confirm the sale of the property at sheriff's sale. As a result of the 
Defendant's failure to respond, the facts pled in the Petition were admitted. 
12 O.S. 2012 § 2008(D). As such, Plaintiff 
proved it was a nonholder in possession with rights of the holder and an entity 
entitled to enforce the note. The trial court correctly granted default judgment 
to the Plaintiffs. 
¶7 Because the issue raised by the Defendants in this case is a 
real-party-in-interest issue and not one of "standing," the Defendants waived 
their right to argue the issue when they failed to assert it until after the 
judgment. As such, the issue was waived, and it is improper for the majority to 
address the issue on appeal. Additionally, because the Defendants failed to 
respond before the judgment, the Plaintiff proved it was entitled to enforce the 
note. The trial court correctly granted default judgment to the Plaintiffs and 
did not abuse its discretion in denying Defendants' Petition and Motion to 
Vacate Final Entry of Judgment. The procedure imposed by the majority in this 
case invalidates a properly granted default judgment, will result in delay, will 
not affect the inevitable outcome of foreclosure, and will increase the 
homeowner's debt. I would affirm the trial court's denial of Defendants' 
Petition and Motion to Vacate Final Entry of Judgment. 
FOOTNOTES
1 In Gill, the 
plaintiff brought an action to foreclose a mortgage on real property. There was 
no discussion in the case of whether the plaintiff had standing to bring the 
action or whether the plaintiff was the real party in interest. In fact, the 
case was tried to the Court, and the appeal turned on the sufficiency of 
evidence presented at trial. The Gill decision stands for the proposition 
that the assignment of the note carries with it an assignment of the mortgage. 
It is not relevant to the standing analysis, nor does it stand for the 
proposition that the plaintiff must prove at the time of filing that it 
has a right to enforce the note. 
2 The majority's discussion of MERS is also improper as 
MERS was not a party to the action and was not seeking to enforce the note and 
mortgage in this case. Again, had the Defendants wished to challenge Plaintiff's 
right to bring the foreclosure action, it should have done so before judgment. 
Because it did not, it waived the issue, and this Court cannot address the issue 
on appeal.