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ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. EW-11-1537-PaDH

)

ARNOLD JOHN ALLEN, JR. and ) Bk. No. 11-01152

KIMBERLY FAITH ALLEN, )

)

Debtors. )

______________________________)

)

ARNOLD JOHN ALLEN, JR.; )

KIMBERLY FAITH ALLEN, )

)

Appellants, )

)

v. ) O P I N I O N

)

US BANK, NATIONAL ASSOCIATION,)

)

Appellee. )

______________________________)

 Argued and Submitted on May 16, 2012

at Pasadena, California

Filed - June 8, 2012

Ordered Published - June 14, 2012

Appeal from the United States Bankruptcy Court

for the Eastern District of Washington

Honorable Patricia C. Williams, Bankruptcy Judge, Presiding

 

Appearances: William Jeffrey Barnes argued for appellants Arnold

John Allen, Jr. and Kimberly Faith Allen; Ryan P.

McBride of Lane Powell, PC argued for appellee

US Bank, National Association.

 

Before: PAPPAS, DUNN and HOLLOWELL, Bankruptcy Judges.

FILED

JUN 08 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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 Unless otherwise indicated, all chapter, section and rule 1

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

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PAPPAS, Bankruptcy Judge:

Chapter 13 debtors Arnold John Allen, Jr. and Kimberly Faith 1

Allen (the “Allens”) appeal the bankruptcy court’s order

overruling their objection to the claim of U.S. Bank, National

Association (“USB”). We AFFIRM.

FACTS

According to the documentary evidence admitted without

objection in the record of the bankruptcy court, the following

facts and transactions of relevance to this appeal occurred.

On April 24, 2006, the Allens executed a promissory note (the

“Note”) in the amount of $164,000 in favor of Dream House Mortgage

Corporation (“DHMC”). An endorsement in blank appears on the

third page of the Note, which reads, “Pay to the Order of; Without

Recourse, By [signed initial “J”] John C. Pointe, President, Dream

House Mortgage Corporation.” There is also an allonge attached to

the Note reciting substantially the same information, but with the

addition of a date, April 28, 2006.

The Note was secured by a recorded deed of trust (“DOT”)

executed by the Allens on their property in Newport, Washington

(the “Property”). In the DOT, Mortgage Electronic Registration

Systems, Inc. (“MERS”) is named as the grantee and nominee for

DHMC.

On May 31, 2006, the president of DHMC executed a “Lost Note

Affidavit and Agreement” (the “Lost Note Affidavit”). The Lost
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Note Affidavit recites, among other things, that DHMC “was the

current holder of the indebtedness evidenced by the” Note; the

original Note had been lost, and attached to the allonge was a

photocopy of the original in its files; and pursuant to a Mortgage

Loan Sale Agreement (“MLSA”) dated May 3, 2002, DHMC had “assigned

all its rights, title and interest in and to the Mortgage Loan

identified below [the Loan]” to DLJ Mortgage Capital Inc. (“DLJ”).

On September 1, 2006, DLJ entered into a Pooling and

Servicing Agreement (“PSA”) that established the CSAB MortgageBacked Pass-Through Certificates, Series 2006-1. The parties to

the PSA were Credit Suisse First Boston Mortgage Securities Corp.

(“Credit Suisse”), the Depositor; DLJ, the Seller; Wells Fargo

Bank N.A. (“Wells Fargo”) as Servicer, Master Servicer and Trust

Administrator; Washington Mutual Mortgage Securities Corp.

(“WaMu”) as Servicer; Select Portfolio Servicing, Inc. [later

known as America’s Servicing Co.](“ASC”) as Servicer; and USB as

Trustee. The PSA provided for the transfer of the Note from DLJ

to USB as Trustee under the PSA. To implement this transaction,

DLJ first transferred the Note to Credit Suisse, the Depositor,

and then Credit Suisse assigned the Note to USB, the Trustee. 

Section 201(a) of the PSA provides in part:

[Credit Suisse] hereby sells, transfers, assigns,

delivers, sets over and otherwise conveys to [USB] for

the benefit of the Certificateholders and the

Certificate Insurer, without recourse, [Credit Suisse’s]

right, title and interest in and to (a) the Mortgage

Loans listed in the Mortgage Loan Schedule [“MLS”].
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 “MLSA” should not be confused with the similar acronym, 2

“MLS.” The Mortgage Loan Service Agreement (MLSA) was an

agreement dated May 3, 2002, between DHMC and DLJ regarding

assignment of mortgage loans from DHMC to DLJ. The Mortgage Loan

Schedule (MLS) was the list of mortgage loans included in the PSA.

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The MLS attached to the PSA lists the Property, identified by the 2

owner “Allen,” and the same address listed in the Allens’

bankruptcy schedules.

“Mortgage Loans” is a defined term in the PSA Article I; the

term includes “related Mortgage Notes.” Section 201(d) of the PSA

provides that, “It is the express intent of the parties to this

Agreement that the conveyance of the Mortgage Loans by [Credit

Suisse] to [USB] be construed as a sale of the Mortgage Loans by

[Credit Suisse] to [USB].” In addition, the PSA states in

§ 12.04(a) that:

It is the express intent of [Credit Suisse], [DLJ],

[Wells Fargo, WaMu], and [USB] that (I) the conveyance

by [DLJ] of the Mortgage Loans to [Credit Suisse]

pursuant to the Assignment and Assumption Agreement and

(v) the conveyance by [Credit Suisse] to [USB] as

provided for in Section 2.01 of each of [DLJ’s] and

[Credit Suisse’s] right, title and interest in the

Mortgage Loans be, and be construed as, an absolute sale

and assignment by [DLJ] to [Credit Suisse] and by

[Credit Suisse] to [USB].

PSA §§ 201(b)(I) and 206 confirm the actual delivery and

receipt of the Lost Note Affidavit from DLJ to Credit Suisse, and

to USB. PSA §§ 3.01-3.03 provide that Wells Fargo and ASC have

authority to service, administer, enforce and foreclose the

Mortgage Loans to protect the interests of the trust “in the same

manner as it protects its own interests in mortgage loans in its

own portfolio[.]” The PSA was signed by officers of each of the

parties.
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The Allens filed a petition for relief under chapter 13 on

March 9, 2011. Their schedules listed no secured creditors, the

value of the Property as $180,000, and total unsecured debt of

$358,072.31. Two days later, the Allens filed a proposed

chapter 13 plan which did not provide for any payment to secured

creditors.

Wells Fargo filed a secured proof of claim in the Allens’

bankruptcy case on March 31, 2011 in the amount of $204,526.95

(the “Wells Fargo Claim”). The Allens objected to the Wells Fargo

Claim, arguing that Wells Fargo was not the lender, that the

allonge was not attached to the Note that was attached to the

Wells Fargo claim, and consequently, appeared to have been created

after the Note, and that Wells Fargo had not established that it

was holder of the Note entitled to enforce the Note or the DOT.

USB filed an amended proof of claim on June 7, 2011 (the “USB

Claim”) in its capacity as Trustee under the PSA. On June 22,

2011, USB filed a response to the Allens’ claim objection, noting

that the Wells Fargo claim had been filed by Wells Fargo acting in

its capacity as Servicer. USB described the history of the Note

and DOT transactions, explaining that the Note had been lost, that

USB had standing to file a proof of claim as a “person entitled to

enforce the Note,” and pointing out that any issues regarding the

allonge were immaterial because an endorsement in blank appeared

on the face of the Note.

The Allens objected again, this time to the USB claim, now

challenging the “chain of possession” showing transfer of the Note

from DHMC to USB.

The bankruptcy court conducted a hearing on the Allens’
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objection to the USB claim on August 30, 2011. Both the Allens

and USB were represented by counsel who were heard. Early in the

hearing, the parties agreed to admit all of the documentary

evidence offered by USB, including, among others documents, copies

of the Assignment of Deed of Trust, the Note, the Lost Note

Affidavit, the DOT, the PSA, and the MLS. During the hearing,

counsel for USB presented to the bankruptcy court the original

Lost Note Affidavit, with a copy of the Note attached to it, and

the original DOT. Tr. Hr’g 46:23–25, August 30, 2011. The court

verified that the documents had been signed, and that the DOT bore

a recording stamp. Counsel for the Allens acknowledged that she

had reviewed the original documents presented by USB, and did not

object to their admission into evidence. The bankruptcy court

took issues raised by the Allens’ objection to the USB claim under

submission.

On September 15, 2011, the bankruptcy court entered a

“Memorandum Decision Re: Debtors’ Amended Objection to U.S. Bank

National Association’s Amended Proof of Claim.” In its decision,

the court decided that USB’s “Amended Proof of Claim is a valid

claim.” Among the bankruptcy court’s findings and conclusions

were that:

- The Lost Note Affidavit satisfied the requirements of

applicable state law, RCW 62A.3-309, and therefore constituted an

acceptable substitute for the original Note.

- The endorsement in blank on the face of the Note complied

with the applicable requirements of the Bankruptcy Code to

evidence transfer, and therefore, the allonge was superfluous.

- The contents of the Lost Note Affidavit demonstrated that
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the transfer from DHMC to DLJ included the right to enforce the

Note, and that such right could thereafter be transferred by DLJ

to another.

- There was no evidence to indicate, or from which it could

be inferred, that the transfer of the Note by DLJ was a transfer

of less than all rights under the Note.

In summary, the bankruptcy court stated:

The Court finds that the Lost Note Affidavit is

sufficient to replace the original Promissory Note. The

endorsement in blank on the face of the Note was legally

sufficient pursuant to RCW 62A.3-204. Wells Fargo d/b/a

[ASC] is the agent of U.S. Bank and would have standing

to file the claim so long as U.S. Bank is the person

entitled to enforce the Note. The transfer of the Note

from Dream House to DLJ was for the purpose of enforcing

the Note. The evidence introduced by U.S. Bank

satisfies its burden of demonstrating that it is the

person entitled to enforce the Note. Therefore, U.S.

Bank and/or [ASC] has standing to file the Proof of

Claim. Debtor’s Amended Objection (Docket No. 49) is

OVERRULED. The Amended Proof of Claim filed on June 7,

2011 is proof of a valid claim.

The bankruptcy court entered an Order overruling the Allens’

objection to the USB claim on September 15, 2011. The Allens

filed a timely notice of appeal.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(B). The Panel has jurisdiction under 28 U.S.C.

§ 158.

ISSUES

Whether the bankruptcy court erred overruling the Allens’

objection to the USB claim.

STANDARD OF REVIEW

“An order overruling a claim objection can raise legal issues

(such as the proper construction of statutes and rules) which we
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 The issue of standing involves both “constitutional 3

limitations on federal-court jurisdiction and prudential

limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498

(1975); In re Veal, 450 B.R. at 906. Only prudential standing is

(continued...)

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review de novo, as well as factual issues (such as whether the

facts establish compliance with particular statutes or rules),

which we review for clear error.” Veal v. Am. Home Mortg.

Servicing, Inc. (In re Veal), 450 B.R. 897, 918 (9th Cir. BAP

2011). We review de novo whether a party has standing. Mayfield

v. United States, 599 F.3d 964, 970 (9th Cir. 2010); In re Veal,

450 B.R. at 906.

De novo review is independent, with no deference given to the

trial court’s conclusion. Barclay v. Mackenzie (In re AFI

Holding, Inc.), 525 F.3d 700, 702 (9th Cir. 2008). Review under

the clearly erroneous standard is significantly deferential,

requiring a “definite and firm conviction that a mistake has been

committed.” Easley v. Cromartie, 532 U.S. 234, 242 (2001).

DISCUSSION

Although the Allens did not list any secured debt for the

Property in their bankruptcy schedules, they have not disputed

that they executed the Note and DOT in connection with a home

mortgage loan, that they owe over $200,000 on that loan, or that

some entity holds a secured claim in the bankruptcy case on

account of that loan. The sole issue presented in this appeal is

whether USB is that creditor.

The Allens have generally characterized that inquiry as one

of standing; they allege that USB has failed to demonstrate it has

standing to assert the claim in the bankruptcy case. The 3
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(...continued) 3

at issue in this appeal, which requires that a party assert only

its own claim rather than the claims of another. Dunmore v.

United States, 358 F.3d 1107, 1112 (9th Cir. 2004).

In addition, claim objections are contested matters under

Rule 9014. Rule 9014(c) makes Civil Rule 17(a)(1) (incorporated

by Rule 7017) applicable to contested matters. Civil

Rule 17(a)(1) provides that “[a]n action must be prosecuted in the

name of the real party in interest.” To satisfy the requirements

of prudential standing and Civil Rule 17(a)(1), “the action must

be brought by the person who, according to the governing

substantive law, is entitled to enforce the right.” 6A Wright,

Miller, Kane & Marcus, FED. PRAC. & PROC. ¶ 1543 (3d ed. 2010);

In re Veal, 450 B.R. at 908. A party without the legal right to

enforce an obligation under substantive law is not a real party in

interest. See Simon v. Hartford Life, Inc., 546 F.3d 661, 664

(9th Cir. 2008); In re Veal, 450 B.R. at 908 (“The modern function

of the rule . . . is simply to protect the defendant against a

subsequent action by the party actually entitled to recover, and

to insure generally that the judgment will have its proper effect

as res judicata.”).

 For the purpose of determining who is entitled to enforce a 4

note, “the forum state’s choice of law rules determine which

state’s substantive law applies.” In re Veal, 450 B.R. at 920

n.41. Washington’s choice of law statute provides that in the

absence of an agreement stating which law governs, Washington’s

version of the Uniform Commercial Code applies to transactions

bearing a “reasonable relation” to the state. See RCW 62A.1-105. 

The Allens reside at the Property which is located in Washington,

and USB does not dispute that Washington law governs. To the

extent that we are called upon to construe Washington state law,

the Washington Supreme Court instructs that: “In interpreting a

statute, our primary objective is to ascertain the legislative

(continued...)

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bankruptcy court disagreed.

Our opinion in In re Veal provides a comprehensive

examination of standing in the context of a mortgage loan claim in

a bankruptcy case and of the rights of parties entitled to enforce

a promissory note. 450 B.R. at 902. As explained in that

decision, a “person entitled to enforce the note,” as defined in

U.C.C. § 3-301, has the requisite standing to file a proof of

claim in a bankruptcy case. Id. Washington’s version of this

U.C.C. provision is RCW 62A.3-301, which lists three ways in 4
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(...continued) 4

body’s intent. If a statute’s meaning is plain on its face, the

court must give effect to that plain meaning as an expression of

legislative intent.” Dowler v. Clover Park Sch. Dist. No. 400,

258 P.3d 676, 682 (Wash. 2011) (citation omitted). Neither party

has suggested that the applicable Washington U.C.C. provisions are

in any way ambiguous, so we assign those provisions their plain

meaning.

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which a person may acquire “person entitled to enforce the note”

status:

“Person entitled to enforce” an instrument means (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

RCW 62A.3-309 or 62A.3-418(d). A person may be a person

entitled to enforce the instrument even though the

person is not the owner of the instrument or is in

wrongful possession of the instrument.

RCW 62A.3-301. This statute, in turn, refers to RCW 62A.3-309,

the provision applicable to lost notes, which provides:

(a) A person not in possession of an instrument is

entitled to enforce the instrument if (i) the person was

in possession of the instrument and entitled to enforce

it when loss of possession occurred, (ii) the loss of

possession was not the result of a transfer by the

person or a lawful seizure, and (iii) the person cannot

reasonably obtain possession of the instrument because

the instrument was destroyed, its whereabouts cannot be

determined, or it is in the wrongful possession of an

unknown person or a person that cannot be found or is

not amenable to service of process.

(b) A person seeking enforcement of an instrument under

subsection (a) must prove the terms of the instrument

and the person’s right to enforce the instrument. If

that proof is made, RCW 62A.3-308 applies to the case as

if the person seeking enforcement had produced the

instrument[.]

RCW 62A.3-309.

The plain meaning of RCW 62A.3-309(a) is that a person no

longer in possession of an instrument is nonetheless entitled to
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enforce it if that person was in possession and entitled to

enforce it when the loss of possession occurred. Subsection (b)

requires a proponent under subsection (a) to prove the terms of

the instrument, e.g., via a Lost Note Affidavit. As the

bankruptcy court correctly reasoned, the questions that arise in

this case are: (1) did the Lost Note Affidavit constitute adequate

proof of the terms of the Note under RCW 62A.3-309; and (2) could

an assignee of a lost promissory note enforce the note based on

the Lost Note Affidavit. The court noted that there was no

Washington case law interpreting RCW 62A.3-309, and our own

research confirms that. But the bankruptcy court did refer to

cases from other courts in states with comparable U.C.C.

provisions where a Lost Note Affidavit was used as a substitute

for a lost promissory note, and holding that rights under a lost

note may be assigned.

For example, according to the holding in Bobby D. Assocs. v.

DiMarcantonio, 751 A.2d 673, 676 (Pa. Super. Ct. 2000), the

assignee of a lost promissory note may enforce the note through a

Lost Note Affidavit. And the Alabama Supreme Court decided in

Atl. Nat’l Trust, LLC v. McNamee, 984 So. 2d 375 (Ala. 2007) that

a valid assignment gives the assignee the same rights, benefits,

and remedies that the assignor possesses, such that the assignee

simply steps into the shoes of the assignor. Applying this law in

the context of a lost, destroyed, or stolen promissory note, if

the assignor of a promissory note was entitled, when the assignor

owned the note, to enforce the note under Ala. Code § 7-3-309, the

assignee of the promissory note steps into the assignor’s shoes

and acquires the right to enforce the promissory note under
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§ 7-3-309. Id. at 378.

The Fifth Circuit applied the Louisiana U.C.C. in Caddo

Parish-Villas S., Ltd. v. Beal Bank, S.S.B. (In re Caddo ParishVillas S., Ltd.), 250 F.3d 300, 302 (5th Cir. 2001). The trial

court had been given an affidavit and other evidence as proof of

the contents of the original note. As the assignee of a note,

plaintiff stood in the shoes of the assignor and obtained all the

rights, title, and interest that the assignor had at the time of

the assignment. This would include the right of enforceability

under La. Rev. Stat. Ann. § 10:3-309.

These states’ versions of U.C.C. § 3-309 — RCW 62A.3-309(a),

13 Pa. Cons. Stat. § 3309(a), Ala. Code § 7-3-309, and La. Rev.

Stat. Ann. § 10:3-309 — are virtually indistinguishable, and we

have found no case law in those states inconsistent with the cited

cases.

The Allens challenge reliance upon these cases as

inconsistent with In re Weisband, 427 B.R. 13 (Bankr. D. Ariz.

2010). The bankruptcy court in In re Weisband indeed held that an

allonge attached to a Note would not be sufficient to transfer the

Note because an indorsement in blank must appear on the face of

the note and not on an attached page. But as the bankruptcy court

noted, that holding is of no moment in this case, since here the

allonge was superfluous because the Note contained an endorsement

in blank on its face. As the court explained, RCW 62A.3-204

provides:

(a) “Indorsement” means a signature, other than that of

a signer as maker, drawer, or acceptor, that alone or

accompanied by other words is made on an instrument for

the purpose of (i) negotiating the instrument,

(ii) restricting payment of the instrument, or
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(iii) incurring indorser’s liability on the instrument,

but regardless of the intent of the signer, a signature

and its accompanying words is an indorsement unless the

accompanying words, terms of the instrument, place of

the signature, or other circumstances unambiguously

indicate that the signature was made for a purpose other

than indorsement. For the purpose of determining

whether a signature is made on an instrument, a paper

affixed to the instrument is a part of the instrument. .

. .

(c) For the purpose of determining whether the

transferee of an instrument is a holder, an indorsement

that transfers a security interest in the instrument is

effective as an unqualified indorsement of the

instrument.

Based on its analysis of available law, the bankruptcy court

determined that the Lost Note Affidavit, with the endorsement in

blank appearing on its face, was sufficient to replace the

original Note. We find no error in this conclusion. Once it was

established that the Note was endorsed in blank, the Note became a

bearer instrument:

Special indorsement; blank indorsement; anomalous

indorsement . . . . (b) If an indorsement is made by

the holder of an instrument and it is not a special

indorsement, it is a “blank indorsement.” When indorsed

in blank, an instrument becomes payable to bearer and

may be negotiated by transfer of possession alone until

specially indorsed.

RCW 62A.3-205; Pequignot v. Deutsche Bank Nat’l Trust Co. (In re

Pequignot), 2010 WL 3605326, at *3 (W.D. Wash. 2010).

It is uncontested that USB presented the Lost Note Affidavit

and the copy of the original Note, endorsed in blank, at the

hearing on August 30, 2011. As a bearer instrument, the Note was

negotiable by transfer of possession alone. RCW 62A.3-201(a)

(“Negotiation” means a transfer of possession, whether voluntary

or involuntary, of an instrument by a person other than the issuer

to a person who thereby becomes its holder.). The bankruptcy

court found, and counsel for the Allens agreed, that the Note was
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authentic and admissible in evidence, and was in the possession of

USB. That the Lost Note Affidavit with a copy of the original

Note endorsed in blank was in the possession of USB and physically

presented to the bankruptcy court, standing alone, gave USB status

of a holder and a “person entitled to enforce” the instrument and,

consequently, the real party in interest for purposes of filing a

proof of claim. In re Veal, 450 B.R. at 920.

The Allens, as noted above, did not deny that they were

obligated under the terms of the Note, nor did they object to the

admission of the Assignment of Deed of Trust, the Note, the Lost

Note Affidavit, the DOT, the PSA, the MLS and the declaration of

Beverly DeCarlo, vice president for loan documentation of Wells

Fargo. Indeed, the Allens failed to submit any declaratory or

documentary evidence to the bankruptcy court at all. Instead, the

focus of the Allens’ objection to USB’s status as a holder of the

Note consisted solely of their challenge to the chain of

possession of the Note:

[USB] is not a person entitled to enforce the Note as

(a) it failed to prove that the Debtors’ mortgage loan

was even within the inventory of DHMC at the time of the

alleged conveyance thereof to DLJ; (b) the MLSA which

was the alleged source of the authority for the transfer

from DHMC to DLJ was never introduced into evidence;

(c) there was no evidence of actual delivery of the

Debtors’ mortgage loan to [USB]; and (d) there is a

factual finding that the DOT was never assigned to [USB]

as required by the PSA to which [USB] was a party, which

it was bound by, and which it agreed to in terms of the

manner by which mortgage loans were to be conveyed to

the Trust. Thus, the bankruptcy court’s decision was

clear error and must thus be reversed and vacated.

The Allens’ Op. Br. at 18.

None of these allegations is supported by the record. On the

contrary, the bankruptcy court examined each allegation and, based
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on the evidence, ruled against the Allens. As the court

explained:

1. The Allens’ first allegation: “[USB] is not a person

entitled to enforce the Note as (a) it failed to prove that the

Debtors’ mortgage loan was even within the inventory of DHMC at

the time of the alleged conveyance thereof to DLJ[.]” In its

Memorandum, the bankruptcy court cited to ¶ 1 of the Lost Note

Affidavit, which recites, “[i]immediately prior to the assignment

by the Seller [DHMC] of its interest in such Mortgage Loan to the

Purchaser [DLJ], the Seller [DHMC] was the current holder of the

indebtedness evidenced by the Mortgage Note.” A copy of the Note

was attached to and incorporated in the Lost Note Affidavit. The

Lost Note Affidavit was executed and sworn by John C. Pointe,

president of DHMC, and constitutes evidence that the original note

was in the possession (or in the Allens’ term, in the “inventory”)

of DHMC at the time of the conveyance to DLJ. The Allens provide

no evidence to the contrary.

2. The Allens second allegation: “[USB] is not a person

entitled to enforce the Note as . . . (b) the MLSA which was the

alleged source of the authority for the transfer from DHMC to DLJ

was never introduced into evidence[.]” The “phantom” MLSA is a

recurring theme of the Allens’ arguments, even though the

bankruptcy court clearly disposed of this contention in its

Memorandum:

Even though the [conveyance from DHMC to DLJ] took place

four years after the underlying transaction [the MLSA],

the [Lost Note Affidavit] introduced into evidence

acknowledges and recites that all rights under the Note

have been transferred to DLJ. This satisfies the burden

of producing evidence that the purpose of the transfer

was to enforce the Note as “all right[s]” and “all
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interest” must necessarily include the right to enforce

[the definition of a “holder”]. At a minimum, this

evidence shifts the burden of producing evidence to the

Debtors to produce evidence casting doubt upon the

recitations in the agreement.

In short, the bankruptcy court found that the missing MLSA was not

essential in determining if possession of the Note and authority

to enforce its provisions was conveyed from DHMC to DLJ. The

court found that, based on the evidence in the Lost Note

Affidavit, the Note was conveyed to DLJ with authority to enforce

it, thus making DLJ a holder by negotiation of the Note. Again,

the bankruptcy court correctly observed that the Allens had

produced no evidence casting doubt upon the recitations in the

Lost Note Affidavit.

3. “[USB] is not a person entitled to enforce the Note as

. . . (c) there was no evidence of actual delivery of the Debtors’

mortgage loan to [USB][.]” Relying on the PSA, which was admitted

into evidence without objection by the Allens, in its Memorandum,

the bankruptcy court stated,

Section 2.01(b)(i)(A) of the PSA recites that delivery

of each original Note or a Lost Note Affidavit has

occurred. Section 2.01(d) reiterates that the intent of

the PSA is to convey and sell the Mortgage Loans. In

Section 2.06, U.S. Bank acknowledges the assignment and

delivery of the Mortgage Loans. There is no evidence

which indicates or from which it could be inferred that

the transfer of this Note by DLJ [to Credit Suisse to

USB] was a transfer of less than all rights held in the

Note.

In other words, the sole evidence presented to the bankruptcy

court was that the Note was conveyed and delivered, with the right

to enforce the Note intact, from DLJ to Credit Suisse to USB. The

Allens provided no contrary evidence.

4. Finally: “[USB] is not a person entitled to enforce the
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Note as . . . (d) there is a factual finding [by the bankruptcy

court] that the DOT was never assigned to [USB] as required by the

PSA to which [USB] was a party[.]” The Allens take this factual

finding out of context. The complete statement in the factual

section of the bankruptcy court’s Memorandum reads:

No assignment of the Deed of Trust has occurred. Under

Washington law, the person entitled to enforce the

obligation secured by the Deed of Trust is entitled to

foreclose. The determination of the identity of the

“person entitled to enforce” the Note will therefore

determine the identity of the entity entitled to

foreclose the Deed of Trust.

By this statement, the bankruptcy court is explaining that, in

this setting, the DOT, which was not directly conveyed by the PSA,

is unimportant. As noted by the court, the critical issue for

claim purposes of judging allowance of a claim is who is the

“person entitled to enforce the Note” (i.e., the holder of the

Note). In this respect, the bankruptcy court is correct that an

assignment of the DOT is not relevant because under Washington

law, the security for an obligation follows the debt. 

RCW 61.24.005(2) (“’Beneficiary’ means the holder of the

instrument or document evidencing the obligations secured by the

deed of trust, excluding persons holding the same as security for

a different obligation.”); Mutual Sec. Fin. v. Unite, 847 P.2d 4,

6 (Wash. Ct. App. 1993) (“the promissory note was secured by the

deed of trust . . . and . . . assignment of the note . . . carried

with it the deed of trust”).

In summary, USB established by documented, probative evidence

that it was holder of the Note by negotiation from DHMC to DLJ to

Credit Suisse to USB. In contrast, the Allens provided no

evidence whatsoever to challenge the physical transfer of the Note
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with its rights intact. Indeed, at the hearing, counsel for the

Allens consented to the admission of all the USB supporting

documents, and instead argued that the evidence should be given

little weight. But weighing of evidence is within the “broad

discretion” of the trial court. Carijano v. Occidental Petroleum

Corp., 643 F.3d 1216, 1225 (9th Cir. 2011); Hagans v. Andrus,

651 F.2d 622, 627 (9th Cir. 1981) (“Of course, the evaluation and

weighing of evidence is within the discretion of the [trial]

judge.”). Here, the bankruptcy court did not abuse its discretion

in weighing the evidence when it ruled in favor of the only side

presenting evidence.

Because the bankruptcy court found that the evidence proved

that USB was a holder of the Note, its determination that USB was

a “person entitled to enforce the Note” will not be disturbed.

CONCLUSION

We AFFIRM the bankruptcy court’s order overruling the Allens’

objection to the USB claim.