EL ECTRONI C CI TATI ON: 2011 FE D App. 0010P (6th Cir.) File Na me: 11b0010p.06

BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT

I n r e : E L I Z AB ET H R . CO L L I NS, )

) Debtor. ) ) No. 10-8085 )

_____________________________________ ) ) ) J . J AMES ROGAN, Trustee , ) ) Ap pe lla nt, )

) v . ) ) L I TTON L OAN SERVI CI NG, L .P., ) THE B ANK OF NEW YORK, MEL L ON F KA ) TH E B AN K O F NE W YO RK AS S UC CES SOR ) TO JP MORGAN CHASE B ANK, N.A ., AS ) TRUSTEE FOR THE B ENEF I T OF THE ) CER TI F I CA TE HO L DE RS O F POP ULAR , A B S, ) I NC. MORTGAGE PASS-THROUGH ) CERTI FI CATES SER I ES 2005-3, ) ) AI G FED ERALS AVI

NGS BANK D BA ) WI L MI NGTONFI

NANCE, ) ) CI TI BA NK, NA, a

nd ) ) GM AC MO RTG AG E L L C, ) ) Ap pe lle e s. ) ) )

Appea l from the United States B ankruptc y Court for the Easter

n District of Kentucky Ba nkruptcy Case No. 10- 50990; Adv. Procee ding N o. 10-05065- 2- Argued : May

4, 2011
Dec ided and F iled: Aug ust 12, 2011
B e fo re : B OSWE L L , H ARRI S, a nd RH OD ES, B ank

ru ptc y Ap pe llate Pane l Judg e s.

____________________ CO UN SEL
ARG UED: J . J ames Rog an, J. J AMES ROGAN, P.S.C., Danville, Kentucky , for Appe llant. Blaine J . Edmonds I I I , NI EL SON & SHERRY, PSC, Ne wport, Ke ntucky , Andre w L . Br asher , BRADL EY ARANT BO UL T CUMMI NGS L L P, B irmingha

m, Alabama, f

or Appe llees. O N B RI E F: J . J ames R o g an , J

. J A M E S R O G A N , P

. S

. C

. , D an v i l l e , K e n tu c ky , f o r Ap p e l l an t

. B l a i n e J

. E d m o n d s III , Richard M. Nie lson, NI EL SON & SHERRY, PSC, Newport, Kentuc ky , Andre w L . Br asher , Marc J ames Ayers, B RA DLEY AR ANT B OUL T CUMMI NGS L L P, Birming ham, Alabama, for Ap pe lle e s.

____________________ OP IN ION

____________________ STE VEN RHO DE S, B ank ru ptc y Ap pe llate Pane l Judg e . J. Jam e s Ro g an, the tr us te e in t his chapte r 7 ca se, appea ls a

n opinion a

nd order of the bankruptc y court dismissing his complaint. The complaint soug ht a dec laratory judgme nt to deter mine the validity , extent, and priority of liens on the re al prope rty

of the debtor, Eliz abeth Collins, held by defe ndants L itton L oan Servic ing, B ank of Ne w York, GMAC Mortg ag e, and Wil mington Finance

. The trustee also appe als an opinion and

or de r o f t he ba nk ru ptc y c ourt g ra nti nga mot io n to va c a te the de fa ult jud g me nt e nte re d a g a ins t Wil mington F inance

. For the re asons that follow, as to def endants L itton L oan Servic ing a nd Ba nk of Ne w York, the P anel vacate s the di smissal and remands t he matter for further procee dings to determine who wa s the holder of

the first mortg ag e on the date of filing , and if it was e ither L it t o n L oan Servic ing or Ba nk of Ne w York, the n whether either w as the holder

of a f ully and prope rly

indorsed note.
As to defe ndant GMAC Mortg ag e, the Panel vac ates the dismissal and re mands the matter to the bankruptc y

court for a determination of t he validit y and priority of GMAC Mortg ag e’s lien.- 3-

As to Wi lmington Fina

nce, the Panel af

fi rms the bankr

uptcy court’s opinion and or der

va c a tin g the de fa

ult jud g me nt ag a ins t Wilmin g ton F ina nc e and dis mis sin g the c omp la int , b e c a us e it is clear f

rom the re cord that when the de btor fil ed b an k ru p t cy , Wil mington no long er ha d an interest in that mortg ag e.
I. ISS UES ON APP EAL
The issues raised by this a ppeal are : ( 1) whether the bankruptc y court e rre d in dismi ssing the trustee’ s complaint ag ainst GMAC Mortg ag e pursua nt to Fede ral Rule of Civil Procedure 12(b)( 6); (2) whe ther the ba

nkrupt cy court e rre d in dismi ssing the tr ustee’s c omplaint ag ainst L itton L oan Servicingand B ank of N ew Yor k pursuant to Fe dera l Ru l e o f C i vil Procedure 12(c) ; and, (3 ) whe the r t

he ba nk ru ptcy cou rt a

bu se d it s d isc re tio n in

va c a tin g the de fa

ult jud g me nt a g a ins t Wil mington F inance

.

II. JU RI SDI CT ION AND STANDARD OF RE VI EW
The Pane l has jurisdiction to decide this ap p ea l

. T h e United States District Court for the Ea ste rn Di str ict of K e ntu c ky

ha s a uth or ize d a

pp e a ls t o th e Pane l, a

nd no ne of the pa rt ie s ti me ly elec ted to have this appe al hea rd by the district court. 28 U.S.C. § 158(b)( 6), (c )(1) . A final orde r of the bankruptc y court may be appea led as of rig ht pur suant to 28 U.S.C. § 158(a )( 1 ). An order dis mis sin g an a dv e rs ary

c omp la int

un de r F e de ra l Ru le of Civ il Pro c e dure 12 (b )( 6) or (c ) i s a fi na l, appea lable orde r. Kay e v . A gr ipo ol, SR L ( In re M urray, Inc

. ), 392 B.R. 288, 292 (B .A.P. 6th Cir. 2008).
The c ourt’s orde r g ranting the motion to set aside the de fault judg ment pursuant to Fe dera l Rule of Civil Proce dure Rule 60(b) is a n interlocutory order

. The Pane l may revie w it after

entry of a fina l judgment in the a dversa ry proce eding

. See Rogan v. Countrywide H ome Loans, Inc. (

In re Br own ), 41 3 B .R. 70 0, 70 2 ( B .A .P. 6th Cir . 2 00 9) . T he ba

nk ru ptc y c ourt ’s or de r did

no t e xplic itl y state that the c ase w as dismissed as to Wi lmington Finance f ollowing the or der se tting aside the defa ult. However , the opinion and orde r did dismiss t he adve rsa ry p roceedingas to all of the

rema ining de fenda

nts and it is reasonably

clea r fr o m t h e o rder and the doc ket that the bankr uptcy court a nd the par

ties viewed the opinion and order as endingthe adv er s ary

proce edingas to all ofI n this opinion, citations to the docket in adve rsar y proce eding10-05065 will be cited a s 1 “adv. pr oc. dkt. # __.” Citations to the docket in bankruptcy case 10-50990 will be cited a s “bankr

. dkt. #__.” The P an e l a ls o n o te s th a t in th is c a s e th e b an kr u p tc y c o u rt e n te r e d an o p in io n and orde r 2 without enteringa sepa

rate final judg ment pursuant to Fe dera l Rule of C ivil P roce dure 58( a). The Panel holds that beca

use the pa

rties have assumed the ti m e to appeal has be g un to run and a cted acc ording ly , technica l compliance with Rule 58(a) is not nece ssary
. Se e Ba nk e rs T ru st C o. v . M all is , 435 U.S. 381, 98 S. Ct. 1117 (1978). Accor dingly , the Panel has jurisdiction to hea r this appea l even tho ug h th e re wa s n o s e pa rate fi na l ju dg me nt.

- 4- the def endants. (B ankr. Ct. Mem. Op. & Orde r, adv. pr oc. no. 10-05065, dkt. #39 at 13.) I n the 1 int e re st o f j ud ic ia l e c on omy , th e Pane l w ill re vie w the or de r s e tti nga si de th e de fa ult a t th is t ime rathe r than re mand for a

final orde r to be e ntere d. 2
Th e ba nk ru ptc y c ourt ’s or de r dis mis sin g the tr us te e ’s c omp la int

fo r f a ilure to s tate a

c la im upon which re lief may

b e granted under F eder al Rule of Civil P roce dure 12( b)(6) is reviewe d de

novo . Tam Travel, Inc. v . Delta Airlines, Inc. ( In re Trave l Agent Comm’n Antitrust Li tig. ), 583 F .3d 896, 902 (6th Cir. 2009). L ikewise, a judgme nt on the pl eading s g rante d pursuant to Rule 12(c) of the Fe dera l Rules of Civil Procedur e is revie wed de novo , using the same standard a s that applied to reviewof a motion to dismis s under Rule 12( b)(6)

. Roger Miller Music, I nc. v. Sony

/ATV Publ’g, LLC , 477 F.3d 383, 389 ( 6th Cir. 2007).
“F or purpose s of a motion for judg ment on the pleading s, all well-plea ded mater ial alleg ations of the plea dings of the opposing party

must be taken a s true, and the motion may be g rante d only

if the moving party

is neverthel es s cl ear ly

entitled to judgment.” S. Ohio Bank v

. Merrill Lynch, Pierc e, Fe nner &Smith, Inc ., 479 F.2d 478, 480 (6th Cir.1973). “Unde r a de novo standard of revie w, the revie wing court decide s an issue independe ntly of, and without defer ence to, the trial cour

t’s deter mination.” Me nn inge r v . A c c re dite d H om e Le nd e rs ( In re M orgeson ), 37 1 B .R. 798, 800 (B .A.P. 6th Ci r. 2007).
Fe dera l Rule of Civil Procedur e 12(b) (6) pe rm i t s a defenda nt to move for dismissal of a complaint prior to filing a re sponsive plea d i n g . Such a motion challeng es the leg al theory of the complaint, not the sufficie ncy of any evidenc e which may

be discove red. Advanc ed Cardiovascular Sys., Inc . v. Scime d Life Sys., Inc. , 988 F .2 d 1 15 7, 11 60 (F e d. Cir . 1 99 3) . “ Th e purp os e of the ru le is to allow the court to eliminate ac tions that are f atally flawe d in their leg al pre mises and destined- 5-

to fail[.] ” Id

. (c i t i n g Neitzke v. W illiams , 490 U.S. 319, 326-27, 109 S. Ct. 1827, 1832 (1989))

. A complaint survives a Rule 12(b)( 6) motion if the “ [f] actua l alleg ations [are] enoug h to raise a rig ht to relief a bove the speculation level, .

. . on the assumption that all the alleg ations in the complaint

are true (eve n if doubtful in f act) . . . .” Be ll A tla nti c Cor p. v . Two mb ly , 550 U. S. 544 , 555 , 127 S. Ct. 19 55 , 1 96 5 ( 20 07 ) (i nte rn a l citatio ns omi tte d) . A c omp la int ne e d o nly

pr ov ide e no ug h f

a c ts t o “state a claim to r elief that is pla usible on its face .” Id . at 570. In the fa ce of a Rule 12(b) (6) motion, a comp l ai n t must be construed in the lig ht most favorable to the plaintiff, the alleg ations of the complaint must be acc epted a s true, and a ll reasona ble infer ences m u s t b e drawn in favor of the plaintiff. Travel Agent Comm’n A ntitrust Liti g. , 583 F .3 d at 903 . “ [T]o s ur viv e a mot ion to d ism iss , the c omp la int mus t c on ta in e ith e r dir e c t or inf e re nti a l a lle g a tio ns re sp e c tin g a ll mate ri al e leme nts to sustain a rec overy under some via ble leg al theory .” Ei ds on v .Te nn . D e p’ t of Chi ldr e n’

s S e rv s. , 510 F.3d 631, 634 ( 6th Cir. 2007). The g rantingof re lief under Fe dera l Rule of Civil Procedur e 60(b) (6) is rev i ew ed fo r an abuse of discretion. Br own , 4 13 B .R. a t 70 2. “ An a bu se of dis c re tio n oc c ur s on ly wh e n th e [tr ia l] court re lies upon clea

rly err oneous finding s of fac t or when it improperly applies the lawor uses a

n
err oneous leg al standar d.” Murray, Inc ., 392 B.R. at 296 ( quotation marks and c itation omit ted).

An abuse of discr et i o n is defined a s a def inite and firm convic tion t h at t h e cour

t below committed a cle ar e rror of judg ment. The question is not how the r eviewingcourt would have rule d, but rather whether a rea sonable person could ag ree with the bankruptc y court’s decision; if re asonable persons could differ as t o the issue, then ther e is no abuse of discr etion. Mayor of Balt., Md. v. W . Va. ( In re Eagle-Pic her Indus., Inc

. ), 285 F.3d 522, 529 (6th Cir. 2002) (interna l quotation marks and citations omitted).

III . F AC TS
The fa cts revie wed he re a re taken fr om the trustee’ s complai n t, the parties’ briefs, the ba nk ru ptc y c ourt ’s op ini on

and or de r, and

the do c ume nts de sig nate d a s p art of the re c or d o n a

pp e a l.
On Janu ary 28 , 2 00 5, the de bto r a

nd he r e x-hu sb and

g ra nte d a fi rs t mo rt g a g e on

the ir ho me to Wi lmington Fina

nce, a division of AI G Fe dera l Savings B ank, to se cure a loan of $135,200. On Fe bruar y 4, 2005, this mortgag e wa s rec orded. ( adv. proc . dkt. #1 at 2, ¶ 5-6.)- 6-

Al so on J anuar

y 28 , 2 00 5, the de bto r gra

nte d a se c on d mo rt g a g e on

the same pr op e rt

y to Wil mington F inance to secure a loan of $33,800. T h e s ec ond mortg ag e wa s also rec orded on Fe bruar y 4, 2005. (adv. pr oc. dkt. #1 at 2, ¶ 7- 8.) Five year s later, on Ma

rch 25, 2010, the debto r fi l ed her pe tition for bankruptcy relief

. (b ank r. dk t. # 1. ) Th e his tor ie s of the tw o mo rt g a g e s, bo th b e fo re and a ft e r t he pe tit ion

date , a re qu ite diverse, a s demonstrated be low.
A. The His to r y o f the F ir st No te and M or tg ag e (L it to n Loa n Se r vic ing and B ank o f Ne w Yo r k) On the day

afte r the fir st mortga g e wa s rec orded , Fe bruar y 5, 2005, Wil mington F inance assig ned the mortga g e to Mortg ag e Electronic R eg istration Sy stems, I nc. (“MERS”). On J une 16, 2005, this a ssignment was rec orded. (Adde ndum to Br

. of Ba nk of Ne w York, F ebrua

ry 16, 2011, app. ca se no. 10-8085, e x . 2.)
The re cord a lso includes an assig nment dated March 26, 2010, the day afte r the de btor filed bankruptc y . MERS assigned this mortg ag e to the Bank of New York Mellon f/k/a The Ba nk of Ne w York, a s succe ssor to J PMorga n Chase Bank, N.A. as t rustee for the benef it of the c ertificate holders

o f P o p u l ar

AB S , I n c. M o rt gage P as s -T h ro u gh C er t i fi ca t es S er i es 2 0 0 5 -3 c/ o L i t t o nL o an S erv i ci n g. (b ank r. c la im 1 -1 .) On Ap ri l 7, 20 10 , wh ic h wa s tw e lve da y s a ft e r t he de bto r f

ile d b ank ru ptc y , th is assig nment was re corde d. Thus, on the day that the debtor f

iled bankruptc y , it appear s that neither B ank of Ne w Yo rk no r L itt on L oa n Se rv ic ing he ld any int e re st in t he fi rs t mo rt g a g e . Ine xplic a bly howeve r, the de btor listed Ba nk of New York/L itton L oan Servicing on schedule D as the sec ured

cre ditor holding the f

irst mortga g e. (ba

nkr. dkt. #1.) Schedule D appea rs to ha ve been filed on the date of the petition. The re cord doe s not provide an e x plan at i o n fo r h o w the debtor w ould have known that B ank of N ew Yor k/L i t t o n L o an S ervic ing w ould be the sec ured c reditor pr ior to the

a ssi g nme nt.
L itt on L oa n Se rv ic ingfi le d a

pr oo f o f c la im o n May 7, 20 10 . A tta c he d to the pr oo f o f c la im

are copies of the rec orded f irst mortga g e, the MERS assig nment of mortg ag e to B ank of N ew Yor k, and the note. ( bankr. c laim 1-1.) As to the note, the re cord doe s not demonstrate a complete c hain of indorse ments. The

rec ord discloses an indor sement fr om Wilmington Fina nce to Popular F inancial Ser vices, L L C, and- 7-

an indorseme nt from P opular AB S, I nc. to J P Morga n Chase B ank as truste e for the bene fit of the

cer tificate holde rs of Popular AB S, I nc. Mortg ag e Pass-Thr oug h Certificates Series 2005-3. Ther e is , h o w e v e r , n o in d o r s e me n t f r o m Po p u la

r F in an c ia l Se r

v ic e s , L L C to Po p u la

r A B S, I n c . By

an
a llo ng e date d M ay

25 , 2 01 0, e xec ute d b y

Pa ul D . Sa vit sk y , V ic e Pr e sid e nt o f JP Mo rg an Ch a se Ba nk, J P Morga

n Chase B ank tra

nsfer red the note to Ba

nk of Ne w York. ( bankr. dkt. #19.)
O nA p r i l 9 , 2 0 1 0 , L i t t o nL o anS e r v i c i n g f i l e d a m o t i o nf o r r e l i e f f r o ma u t o m a t i c s t ay. (b ank r. dk t. # 11 .) Th e tr

us tee ob jec ted to t

he mot ion

on the g ro un d th a t th e no te pa y a ble to Wilmi ng ton

F ina nc e wa s n ot i nd or se d b y

Wilmi ng ton

F ina nc e no r w a s th e re an a llo ng e a tta c he d to the note. In response to the trustee’ s objection, L itton L oan Servic ing pr oduced the allong e date d May 25, 2010, descr ibed above . (bankr . dkt. #19, ex. A.) On May 27, 2010, the bankruptc y court held a hear ing on L itton L oan Servic ing’ s motion for

re lie f f ro m st ay . O n Jun e 8, 20 10 , a n a g re e d o rd e r w a s e nte re d g ra nti ng the tr

us te e 40 da

y s w ith in wh i ch t o fi l e a nad v er s ary p ro ce ed i n g aga i n s tL i t t o nL o an S erv i ci n g.
On Ju l y 1 5 , 2 0 1 0 , t h e t r

u s t e e f i l e d t h i s a dv e r s ar

y c o mp l a i n t

. T h e t r

u s t e e a s s e rt e d

p r i o ri ty over the first mortg ag e then he ld by Ba nk of New York pursuant to 11 U.S.C. § 544 beca use B ank of Ne w Yo rk ha d fa ile d to pr od uc e a pr e pe tit ion e xec ute d ind or se me nt or a ssi g nment of t he n ote pa y a ble to Wi lmi ng ton F ina

nc e , a nd the re fo re ha d “

jud ic ia lly a dmi tte d it

do e s n ot h a ve in i ts possession a prope rly

indorsed note a

nd that it does not have an attachment to a rig ht to pay ment of said note.” ( adv. proc . dkt. #1 at 5, ¶ 20.) The trustee further asser ted that, as a

result, the B ank of New Y ork had not perf

ecte d an attachment of the m ortg ag e prior to the f iling of the debtor’s pe tition, and ther efor e, wa s not actually a cr editor of the de btor. (adv. pr oc. dkt. #1 at 5, ¶ 21- 22.) On August 1 9 , 2 0 1 0, L itton L oan Servic ing a nd Ba nk of Ne w York f

iled an answ er to the trustee’ s complaint. Attache d to their answe r wa s the fi rst mortg ag e and note containingthe indorsements and a llonge s descr ibed above . (adv. pr oc. dkt. #7.)
On Oc tob e r 8 , 2 01 0, L itt on

L oa n Se rvic ingand

B ank of Ne w Y or k a lso fi le d a

mot ion to dis mis s th e tr

us te e ’s c omp la int purs ua

nt to Fe de ra l Rule of

Civ il Pr oc e dure 12 (b )( 6) fo r f a ilure toBe cause the motion to dismiss was not f iled prior to the filing of an answe r, the bankr uptcy 3 c ourt tr e a te d th e mot ion

a s o ne for jud g me nt o n th e ple a din g s p ur su ant t o F e de ra l Ru le of Civ il Procedur e 12(h)( 2), which provides, “[f]ailure to state a claim upon which relief can be g rante d, . . . may be raised

. . . by

a motion under Rule 12(c ).” See also, W agner v. Higgins , 754 F.2d 186, 188 (6th Cir. 1985) (tre ating untimely Rule 12(b)(6) motion as motion for judgme nt on pleading s under Rule 12(c) ).

- 8- state a c laim upon which re lief may be g rante d. (adv. pr oc. d k t

. #20.) In their motion, they

3 contende d that beca

use the trustee asser

ted defic iencies in the indorsements to the note only , and not de fi c ie nc ie s in

the fi rs t mo rt g a g e , th e tr

us te e c ou ld n ot p re va il.
The ba nkruptcy court fir st rejec ted the trustee ’s ar g ument that there was no rig ht of pay ment becaus e the ind or se me nts we re date d p os tpe tit ion . T he c ourt ba se d th is c on c lus ion

on the Sixth Circuit’s holding in Rogan v. Bank One, N.A. ( In re Cook

), 457 F.3d 561, 566-67 (6th Cir. 2006), that the re cordingof an a ssignment of a mortg ag e postpetition is not a viol ation of the a utomatic stay beca use the prope rty

transfe rre d is not that of t he debtor but is only

an equitable interest of the mortg ag ee. “ Certainly , if the fil ing of an assignment of a mortgag e can be done postpetition, then the indorsement of

a note c an be done postpetition. The assignor transfe rre d no interest of the proper ty belong ing to the Debtor, but r ather only its own interest in be ing paid by the Debtor .” (a dv. proc. dkt. #39, at 11.) Turning next t o the t rustee’ s argument that L itton L oan S ervic ing and B ank of N ew Yor k are

no t e nti tle d to pa

y me nt b e c a

us e the ind or se me nts on

the no te do no t pr op e rl y

tr ans fe r the n ote to Ba nk of Ne w York, the bankruptc y court e x plained: [T] he assig nment of the mortg ag e transfe rs “all of Assignor ’s rig ht, title and benef icial intere st in and to that c erta in mor tga g e” (Proof of Claim No. 1 at 28 ). Th e a ssi g nme nt t

he n d e sc ri be s th e c e rt a in m or tg a g e a s th e F ir st Mortg ag e involved in this adversa ry
. The assignment describes the “ L oan” the $135,200.00 note involved in t h i s ad v ersa ry proce edingand then state s “[t] his Security

I nstrument [t he mortgag e] secure s to L ender (i) the repaym ent of the Loan. ” (Proof of Claim No. 1 at 5- 6 ) (e m phasis added)

. There fore , contra

ry to th e Trustee’s a

rgument that Ba

nk of Ne w York doe s not hav e a

r ig h t t o p ay

me n t u n d e r th e B an k

o f N e w Y o r

k N o te , the assig nment provides it with tha t ri g ht by transfe rringall of Wilm ington’ s rig ht, titl e and be nefic ial interest in the F irst Mortga g e.
Id

.- 9-

F ina lly , in re g ard to L itt on L oa n Se rv ic ingand

B ank of Ne w Y or k, the ba nk ru ptc y c ourt he ld that “eve n if the Bank of New York Note is not properly indorsed to B ank of N ew Yor k, the trustee

c ann ot s te p in ahe a d of the pa rt y that do e s ho ld the no te be c a us e the re is a

pr op e rl y pe rf e c te d f ir st Mo rt g a g e wh ic h is , unle ss t he tr us te e c ou ld h a ve the F ir st Mor tg a g e re le a se d o f r e c or d, su pe ri or in all way s to his rights as a

judicial lienholder.” (

Id . at 11-12.)
B. Th e Subs equent History of the Second Mortgage ( GM AC Mor tgage)
The re cord does not c ontain any signific ant information re g ardingthe subsequent history of the sec ond mortg ag e af

ter the de btor g rante d it to Wil mington F inance . The de btor’s Schedule D listed GMAC Mortga g e as the second mortg ag ee in the amount of $31,390.52. GMAC Mortg ag e, howeve r, has not filed a

proof of claim, nor ha s it filed a copy of any mortg ag e or note

. I n the adve rsar

y complaint ag ainst GMAC Mortg ag e, the trustee alleg ed that as a r esult of the fa ilure of Wil mington Financ e and G MAC Mortga g e to file a proof of claim that containe d an executed note, pr operly

indorsed, to evidence the indebte dness desc ribed in the sec ond mortg ag e, there is no evidence of indebtedne ss secure d by the sec ond mortg ag e. The ref ore, the trustee a sserted that his s tr o n g ar

m p o w e r s g r an te d h im an inte r e s t in th e p r o p e rty th a t is s u p e r io r to th at of Wil mington F inance and GMAC Mor t gage , an d that he ca n sell the proper

ty fre e and c lear

of the second mortg ag e. On August 19, 2010, GMAC Mortga g e, as mortga g e ser vicing ag ent for Citibank, filed a motion to di smiss t he trustee ’s complaint pursuant to F eder al Rule of Civil P roce dure 12( b)(6) for fa ilure to s tate a

c la im u po n w hic h r e lie f c an b e g ra nte d. (a dv . p ro c . dkt. #8 .) GM AC Mo rt g a g e a lso filed an a nswer to the c omplaint on August 19, 20 1 0

. (a d v. proc. dkt. #9.) I n its answer to the

c omp la int , GMA C Mor

tg a g e a sse rt e d that it is the be ne fi c ia l own e r an d h old e r o f t he Citi ba nk no te and sec ond mortg ag e and is e ntitled to enfor ce the m pursuant to Kentucky Revised Statute § 355.3- 202, et seq. I n its memorandum in support of its motion to di smiss, GMAC Mortgag e asse rted that the Citibank note was indorsed by means of a

n allong e fr om Wi lmington Fina nce to Sover eig n Ba

nk and that Sovere ign B ank subsequently indorsed the note i n blank. GMAC Mortg ag e fur ther a sserted that it is i n possession of the orig inal note an d m o rtg ag e. (a dv. proc. dkt. #8, at 3.) GMAC Mo rt g a g e did

no t, h ow e ve r, pr od

uc e any of the se do c ume nts

.- 10-

At oral a rgument on this appeal, c ounsel for G MAC Mortga g e admitted that it h as n o t y et produce d the orig inal note sig ned by the debtor.
C. Wilm ington Finance On September

30, 2010, the bankr

uptcy court issued an order

direc ting the tr

ustee to file a motion for defa

ult judgment ag ainst Wi lmington Fina nce, a named defe ndant that had not re sponded to the trustee’ s complaint. (adv. proc. dkt. #16.) On October 7, 2010, the trustee filed the motion (adv. pr oc. dkt. #18), and on October 8, 2010, a default judgme nt was entered. ( adv. proc . dkt. #19.) The judg ment g rante d the trustee a priority over a ny interest of Wilmington Fina nce.
On Octobe r 15, 2010, L itton L oan Servic ing a nd Ba nk of New York filed a mot ion to alter, amend or vacate the def

ault judgme nt ag ainst Wi lmington Fina nce. ( adv. proc . dkt. #22.) The mot ion wa s b a se d u

po n th e a sse rt ion

that W il min g ton

F ina nc e wa s th e pr e de c e sso r i n inte re st t o L itton L oan S ervic ing a

nd Ba nk of Ne w York, a

nd that any

interest Wilmi ng ton Financ e had is now held by L itton L oan Servic ing a

nd Ba nk of Ne w York. The re fore , they asser ted that Wilm ington Financ e should not have be en name d a par ty and should not have been re quired to file r esponsive ple a din g s.
As discussed in detail below, the bankruptcy court g rante d L itton L oan Servic ing’ s motion

and va c a te d th e de fa

ult jud g me nt a g a ins t Wilm ing ton F ina nc e and di sm is sed t

he c la im a s a g a ins t Wilmi ng ton

F ina nc e . T he ba

nk ru ptc y c ourt ’s op ini on and orde r a pp e ars to o rd e r t

hat r e su lt a s to bo th t he fi rs t and se c on d mo rt g a g e s, e ve n th ou g h o nly the c re dit or s w ho we re a sse rt ingan inte re st in the first mortg ag e had claimed that the judg ment prejudice d them and had r equeste d that relief

. Re g ard le ss, the tr

us te e ’s br ie f on a

pp e a l do e s no t argue that it wa s e rr or fo r the ba nk ru ptc y c ourt to
vacate the def

ault judgme nt and dismiss hi s claim ag ainst Wi lmingt o n Fi n an ce as to the second mortg ag e. Ac cording ly , the Panel will not further addre ss this aspect o f t h e b an k ruptcy court’s decision.- 11- IV . D ISC USS ION A. 11 U.S.C. § 544 and Kentucky Law Regar din g Lien Creditors
The trustee ’s complaint alleg es that his interest in t he debtor’s proper ty is superior to that of L itton Loa n S er v i cing and GMA C Mortga g e by virtue of his status of a hy pothetical judicial lien

cre ditor under 11 U.S

. C . § 544(a) (1) a s of the commenc ement of the debtor’s c ase. Sec tion 54 4( a )( 1) pr ov ide s:

(a) The trustee shall have, a s of t he commenc ement of the case , and without r eg ard to a

ny knowledg e of the trustee or of an y o t h er creditor, the rig hts and power s of, or may avoid any

transfe r of pr op e rt y of the de bto r o r a

ny ob lig a tio n in c ur

re d b y the de bto r that is v o i d a b l e b y - (1) a cre ditor that ext ends cr edit to the debtor at the ti me of the c omm e nc e me nt o f t

he c a se , an d that obta ins , at s uc h ti me and wi th r e sp e c t to su c h c re dit , a ju dic ia l li e n o n a ll p ro pe rt y on which a c reditor on a simple c ontrac t c ould have obtaine d su c h a jud ic ia l li e n, wh e the r o r n ot s uc h c re dit or e xists ; Section 544(a) (1) g rants a ba nkruptcy trustee “the status of a hy pothetical lien cr editor who is d e e me d to h av e p e r f

e c te d h is inte r e s t a s o f th e d a te o f th e f il in go f th e b an kr u p tc y p e ti ti o n [, ] Cook , 457 F.3d at 564, and a lso gr ants the trustee the power to avoid transfe rs of prope rty that could be avoided by

a judicial lien cr editor. See Palmer v. W ashington Mut. Bank (

In reRi tc hie ), 41 6 B .R. 638, 643 (B .A.P. 6th Ci r. 2009). “O ne of the se powe rs is the ability to take priority

over or ‘avoid’

secur ity interests that ar e unperfec ted under applicable state law[.]” Neilson v. Chang ( In re Fi rst T.D. & Inv., I

nc. ), 253 F .3d 520, 526 (9th Cir. 2001) (citation omitted). Under § 544(a) (1), if a lien ag ainst the debtor’ s proper ty was improper ly

perf ecte d, or not perf

ecte d at all, before the ba

nkruptcy petition was filed, the t rustee may take pr iority

. Dr own v . P e rfe c t ( In re Giaimo ), 440 B .R. 761, 765 (B .A.P. 6th Ci r. 2010).

“ Ke ntu c ky

law g ov e rn s th e qu e sti on

of wh e the r [the c re dit or ] ha s a pe rf e c te d s e c ur ity

int e re st in the promissory

note that is superior to . . . the ba nkruptcy trustee.” Cook , 457 F.3d at 566. Under Kentucky law, a “l i en cre ditor” includes a “trustee in bankruptcy .” Ky . Rev. Stat. Ann. § 355.9- 102(1)( az)(3).- 12-

A sec urity

interest is subordinate to the r ights of a person that become s a li en cr editor bef ore the sec urity

interest is perf

ecte d. Ky . Rev. Stat. Ann. § 355.9-317(1) (b). “ ‘[A] person who bec omes a lien cr editor bef

ore a secur ity interest is perf

ecte d will defeat the secur ity interest [

. ]’ ” S. Bay Enters., Inc. v . Mirada Bay Pe troleum, Inc. , 957 S.W .2d 287, 288 (Ky

. Ct. App. 1997) (quoting D. L eibson & R. Nowka, The Uniform Commercial Code of Kentuck y , § 10.4(B )(1) (2nd ed. 1992) ).
There fore , 11 U.S.C. § 544 and Kentucky law, oper atingtoge ther, provide that the trustee’ s interest as a

hy pothetical judicial lien cr editor is superior to those secur ity interests which a

re unperf ecte d as of the f

iling of the petition.
Under Kentucky

law, without evidenc e of debt, there is no valid, enfor cea ble mortg ag e. “A mortg a g e ma

y b e e n f o r c e d o n ly b y . . . a p e r s o n w h o is e n ti tl e d to e n f o r c e th e o b li g a ti o n the mortg ag e secu re s .” Restateme nt ( Third) of Property : Mortgages , § 5:4 (1 99 7) . “ [A] mo rt g a g e is

mere ly incident t o the debt or obl igation it is g iven t o secur e[.] ” W arning’s Ex’r v . Tabeling , 133 S.W. 2d 65 , 6 7 ( Ky . 1 93 9) ; see also Grafton v. Shields Mini Mark ets, Inc. , No. 2009-CA-001862- MR, 20 11 WL11 28 33 , * 5 ( Ky . Ct . App . Jan . 1 4, 20 11 ). A mor tg a g e is va lid and e nf

or c e a ble on ly if the underly ing debt continues t o be an e nforc eable obligation. Craddock v. Lee , 6 1 S

. W

. 2 2 ( K y. 1901). “[W] ithout the debt, there is no mortg ag e.” W e ll s F a r g o F in

. Ky

. , I n c
. v
. Thome r , 315 S.W. 3d 33 5, 33 9 (K

y . Ct. App. 2 01 0) ; see also Pe oples Bank of Polk Cnty. v . McD onald ( In re Maryv ille Sav. &Loan Corp. ), 74 3 F .2 d 4 13 (6 th C ir . 1 98 4) (a na ly zingse c ur ity

int e re st i n promissory

notes only

secur ed by deed of

trust under Te nnessee ’s adoption of Unifor m Comm erc ial Cod e ; in te re st i n d e e d o f t ru st analy z ed und e r r e a l e state laws ); McTev ia v. Adamo ( In reAt lan tic Mortg. Corp. ), 69 B .R. 321 (Ba nkr. E.D. Mich. 1987) (holding that mortg ag e lende r investor without possession of underly

ing note holds mere unpe rfe cted se curity interest and tr

ustee’s strongarm po we rs un de r 1 1 U .S. C. § 54 4( a )( 1) de fe a t invest or ’s c la im a ri sin g fr om p ro mis so ry

no te ); Prime F i n
. S er vs., L LC v. Vinton , 7 6 1 N

. W. 2 d 6 9 4 , 6 9 9 ( M ic h

. Ct

. Ap p
. 2 0 0 8 ) ( h o ld in g th a t “ A rti c le 9 g overne d the cr eation of the secur ity interests at issue and that an assig nment of mortg ag e can g ive no g reater rig hts to the assigne e than it has in the note unde rlying the mortg ag e.”)

.The trustee ’s complaint bef ore the bankruptc y court and appellate briefs in this proceeding 4 do not conce de that the first and second mortg ag es were pr operly perf ecte d. The trustee conce des that the parties rec orded the mortg ag es. Howe ver, the trustee a rgues that the mortg ag es ar e not enfor cea ble under Kentucky

law if the a lleg ed sec ured pa rties ca nnot show ev i d en ce o f the debt alleg edly secur ed.

- 13- 1. The trustee has stated a claim un der § 544 against GMAC Mortgage as to the sec ond mortgage. GMAC Mortg ag e asse rts that the “B ankruptc y Court properly held that the mortg ag e lien has priority over a ny hy pothetical lien rig hts of the t rustee, no matter who holds the note se cure d by the mortg ag e.” (GMAC Mortg ag e’s Br

. at 10.) Howeve r, the issue in a § 544 claim is whethe r on the date of filing , the defe ndant holds a proper ly perf ecte d enfor cea

ble mortg ag e that is supe rior to the trustee’ s status as a hy

pothetical judicial lien cre ditor. To survive a motion to di smiss, t he trustee does not have to prove his ca se; he must simply asser t a plausible argument that the cr editor did not have a proper ly perf ecte d mortg ag e on the date of filing

. GMAC Mortg ag e asse rts that becaus e the trustee a dmits t hat the sec ond mortg ag e wa s p r o p e r l y p e r f e c t e d , t h e t r

u s t e e ’ s c o mp l a i n tf

a i l s t o s t a t e a c l a i m o n w h i c hr e l i e f m ay b e g r an t e d

. In 4

su pp or t of thi s p os iti on , G MA C Mo rt g a g e c ite s K e ntu c ky law that no tic e of an inte re st i n p ro pe rt y is established by

proof that the inter est is properly rec orded in the office of the county cler k, Sta te Street Bank & T

r u s t Co
. v. Heck’

s Inc. , 963 S.W .2d 626, 630 (Ky . 1988), and that mortga g es ar e g iven priority

in the order

in which they

are rec orded. K

y . Rev. Stat. Ann. § 382.280. GMAC Mortg ag e fur

ther c ites three de cisions in the Ba nkruptcy Court for the Ea stern District of K entucky wh e re thi s tr

us te e un su c c e ssf

ull y ma de sim ila

r argume nts , a tta c kin g po sse ssi on of n otes , indorsements of notes, a nd assig nments. See R ogan v. De utsche Bank Nat ’lTrust Co. (

In re W atkins ), Adv

. Nos . 1 0- 50 09 , 5 00 1 ( B ank r. E. D. Ky . N ov . 2 4, 20 10 ); Rogan v. Mila, Inc

. ( In re Allen ), Adv. No. 09- 5007, 2010 WL 3168094 (B ankr. E.D. Ky . Aug . 11, 2010); and Rogan v. Citi mortgage, Inc

. (

In re J essup ), Ad

v. No . 0 9- 52 29 , 2 01 0 WL 29 26 05 0, *4 (B ank

r. E. D. Ky . July 22, 2010) (“ All the theories advanc ed by the Plaintiff a s to the alleg ed invalidity of the Mortg ag e or possession of the Note ha ve bee n counter ed by

the Def endants with af

fidavits [.] ”).
Ho we ve r, GM AC Mo rt g a g e ’s re lia nc e on tho se c a se s is mis g uid e d b e c a us e each of

tho se prior ca ses was be fore the bankr uptcy court on cro s s -m otions for summary judgme nt, and theI n fac t, in response to direc t questions at oral ar g ument, counsel for GMAC Mortg ag e wa s 5 unwilling to re prese nt that GMAC Mortga g e is the holder of the note.

- 14- cre ditors presente d evidenc e that they had proper ly perf ecte d their secur ity interests, we re holde rs of the no te s and

the re fo re ha d a

ri g ht t o p ay

me nt.
To the contra

ry , this case was befor e the bankruptc y court on a motion pursuant to Fe dera l Rule of C ivil Procedur e 12(b)(6). Acc ording ly , if the trustee’ s complaint “state[s] a cla im to relief that is plausible on its fac e,” the bankruptc y court erre d in gr anting the GMAC Mortg ag e’s motion in this case. See Trave l Agent Comm’n Antitrust Li tig. , 583 F.3d at 902.
As discussed above , in the absenc e of e v idence of a note , the sec ond mortg ag e of w hich GMAC Mortg ag e cla ims to be a bene ficial owne r and entitled to enf orce is subject to attack by the trustee a s a hy

pothetical judicial lien cr edit or. See F irst N at’l Bank of Boston v. Larson ( In re K ennedy Mortg. Co. ) , 1 7 B

. R. 9 5 7 , 9 6 5 ( B an kr
. D

. N

. J. 1 9 8 2 ) ( “ Wi th o u t th e ma n if e s tati o n o f the debt, us ually

evidenc ed by

a note . . . the mor

tga g e instrument itself is subject to attack. T he lien of a mortg ag e is reg arde d as no g reater than the actua l debt secur ed.”)

. Wit h reg ard to the G MAC Mortga g e sec ond mortg ag e, parag raph 23 of the trustee’ s
c omp la int a lle g e s th a t be c a

us e a pr oo f of

c la im w a s n ot f

ile d, “ the re is n o e vid e nc e of ind e bte dn e ss
secur ed by

the re corde d mortg ag e[.] ” The bankruptc y court focuse d on the argument that GMAC Mo rt g a g e wa s n ot o bli g a te d to fi le a pr oo f o f c la im. Ho we ve r, the imp or tant po int

in t his pr oc e e din g is that th e tr

us te e ’s c omp la int

a lle g e s th a t th e re is n o e vid e nc e of ind e bte dn e ss t o GM AC M o rt gage
. T h e t ru s t ee ’s al l ega t i o n , al t h o u ghp erh ap s i n ar t i cu l at e, i s t h at GM AC M o rt gage is not the holder of the note and ca nnot produce evidenc e of the debt. Ther efor e, assuming that the fac ts alleg ed by

the trustee a

re true , as is r equire d when c onsideringa Rule 12(b) (6) motion, the

5 tr us te e ’s c omp la int

state s a pla us ibl e c la im f

or re lie f a g a in st GM AC Mo rt g a g e , a nd we mus t
c on c lud e that th e ba

nk ru ptc y c ourt e rr e d in dis mis sin g it und e r R ule 12 (b )( 6) . I f t

he tr us te e is a ble to prove the fac ts a lleg ed in his complaint, then as a judicial lien cre ditor, the trustee w ould have p ri o ri t y o v er a cr ed i t o r wh o i s u n ab l e to p ro v e an en fo rc eab l e mo rt gage o n t h e da t e o f fi l i n g. Acc ording ly , the trustee’ s complaint states a plausible c laim ag ainst GMAC Mortg ag e, and the bankruptc y

court e rre d in dismi ssing the c omplaint pursuant to Rule 12(b)(6)

.- 15-

2. The bankruptcy

court must make

fu r the r factual findi ngs regarding Lit ton Loan Servicing and Bank of New Y

ork as to the first mortgage.
L itton L oan S ervic ing makes arg uments simil ar to those of GMAC Mortg ag e, asse rting that “[b] eca use the F irst Mortga g e wa s proper ly perf ecte d at t he time the petition was filed, the trustee
may no t e xer c ise the str on g -a rm po we rs of

11 U. S.C. § 5 44 (a ) t o a sse rt pr ior ity ov e r t he F ir st Mortg ag e.” ( L itton L oan Servic ing’ s Br . at 13.)
The re cord w ith reg ard to the f irst mortga g e is unclea

r. The doc uments strong ly sug g est that MERS was the secur ed par ty on the date of

t h e fi l i n g of the pe tition. The complaint and the bankruptc y

court’s opinion discuss t h e ch ai n of title from Wilm ington F inance to Ba nk of Ne w York to L itton L oan Servic ing. They do not me ntion MERS. Howeve r, the doc umentation attache d to the complaint and in the re cord on a ppeal sug g ests that Wil mington F inance tr an sfer red the mortg ag e to MER S shortly afte r the de btor g rante d the first mortg ag e. More over, B ank of N ew York attached a

copy of an A s s i gn m en t from W ilmington Financ e to MERS dated Fe bruar y 5, 2005. MERS properly

perf ecte d and re corde d the mortg ag e on J une 16, 2006. There fore , it appear s MERS was the secur ed cr editor on the date the petition was filed, Ma rch 25, 2010.
MERS transf

err ed the mortg ag e to Ba

nk of Ne w York on Ma

rch 26, 2010. The complaint does not cha lleng e the status of MERS as a pr operly perf ecte d secur ed cr editor on the date of the filing of the bankr uptcy petition. However , the Panel also notes that the de btor listed L itton L oan Serv i ci n g as s er v icing ag ent for B ank of N ew Yor k on schedule D filed with the pe tition. The

rec ord sug g ests no explanation for how L itton L oan S ervic ing was l isted on the sche dules on the date of filing if the assig nment of the mortg ag e did not occur until after the pe tition was filed.
Moreove r, the trustee’ s alleg ations reg arding L itton L oan Servicing only ad d re s s the postpetition cha in of title. Howeve r, such challeng es to the rig ht to pa y m en t o f a postpetition assig nee should be made in an obje cti o n to a proof of claim or, if ne cessa

ry , in an objection to a motion for relief

from stay . A § 544 claim addr esses the truste e’s powe r as a hy pothetical judicial lien cre ditor on the date of the filing

. Th e re fo re , in or de r t o d e te rm ine wh e the r t he tr us te e state d a

pr op e r c la im und e r § 54 4, it i s important to determine who w as the sec ured pa rty on the date of

the filing of the petiti on. TheThe issue of whether the complaint could be amended to add MERS as a pa rty is not before 6 the Pane l.

- 16- trustee’ s brief a sserts that there is no evidence of a tra ns fer of the mortg ag e fr om Wi lmington Financ e to MERS. However , Ba nk of Ne w York attached as an addendum to its appellate brief a copy of an a ssignment f

rom Wil mington F inance to MERS

. T h e t ru stee named Wilm ington Financ e as a

party and, in fa ct, obtained a

defa ult judgment aga i n s t W i l mington F inance . The trustee also named L itton L oan Servicing and Ba nk of New York and made alleg ations reg arding the cha in of title. Howeve r, the trustee did not name MERS in t he complaint. The bankruptc y court must determine, as of

the date of

the bankr

uptcy filing, the status of the first m o rt g ag e and note

. I f th e tr u s te e ’ s c o mp la int d o e s n o t c h a ll e n g e th e p e r f e c ti o n o r e n f

o r c e a b il it y o f th e n o te and mortg ag e as it wa s held on that date, the n it does not state a cla im under § 544.
There fore , the Panel vac ates the or der of the bankr

uptcy court dismissing the trustee ’s

c omp la int a s to B ank of Ne w Yo rk and L itt on L oa n Se rv ic ing , and re mand s fo r fu rt he r p ro c e e din g s. The ba nkruptcy court’s f irst task is to determine who he ld the firs t m o rt gage on the date of the petition, MERS or L itton L oan Servicingand B ank of N ew Yor k. The fa ct that the debtor listed Ba nk o f Ne w York c/o L itton L oan Servic ing on the petition sugg ests that a tra nsfer may have

occur red pr ior to the fil ing of

the petition. Howeve r, the Pane l cannot make this determination from the re cord be fore it. I f the ba nkruptcy court de termines that MERS was the sec ured c reditor on the date of the filing, then Ba

nk of New Y ork and L itton L oan Servic ing a re not prope r par

ties to the trustee’ s § 544 claim bec ause the y wer e not sec ured c reditors on the date of the f iling. I f the 6 bankruptc y

court de termines that B ank of N ew Yor k/L itton L o a

n Se rvicingwas the se cure d cre ditor as of the date of filing , then the bankr uptcy court must de termine whether Ba nk of Ne w York/L itton L oa n Se rv ic ingc an e sta

bli sha pr op e r c ha in o f t itl e of

the no te to e sta

bli shits ri g ht t o p ay

me nt.
B. Motion to Alter , Am end, or Vacat e De fau lt Judgme nt As to Wilm ington Finance
On Octobe r 8, 2010, the bankruptcy court e ntere d a def

ault judgme nt ag ainst Wi lmington Financ e. L itton L oan Servic ing f iled a motion pursua

nt to Fe dera l Rules of Civil Procedur e 59(e ) and 60(b) to a lter, amend or vacate the defa ult judg ment ag ainst Wil mington F inance . L itton L oan Servicingasser

ted that Wilm ington F inance wa s th e p r e d e cessor in interest to L itton L oan Servic ing and Bank of New York, and that any interest Wilmi ng ton Financ e had is now he ld by L itton L oan- 17-

Servicin g an d Ba nk of Ne w York. The ref ore, the y asser ted that Wilm ington F inance should not have be en name d a par

ty and should not have be en re q u ired to file r esponsive plea dings. L itton L oan Servic ing e x plained that it was see king to va ca t e t h e d ef au l t judgment “ so that it has no neg ative impact upon [L itton L oan Servic ing’ s] rights.” (a dv. proc. dkt. #22, at 4.)
The ba nkruptcy court found that the motion shoul d be conside red unde r F eder al Rule of Civil Procedur e 55(c ) which pr ovides that the cour t “may set aside a

n entry of def au lt for g ood

cause , and it may set aside a defa ult judgme nt under Rule 60(b).” Fe d. R. Bankr . P. 7055(c). The court then state d that it was consider ing the motion under Rule 60(b)( 6) for “any other re ason that justifies relief.” Finding that Wil mington F inance had nothingto lose in failing to file an answe r, that there was no culpable conduct on the part of Wil mington Financ e in failing to answer , and that the trustee w ould n o t b e prejudice d by havingthe def

ault vacated, the bankr

uptcy court g rante d L itton L oan Servic ing’ s motion and vacated the def ault judgme nt. I n so finding, the bankruptc y court a pplied the factors t o be considered when a defe ndant i nvokes Rule 60(b)( 1). See W aifersong, Ltd. v. Class ic Music Ve nding , 976 F. 2 d 2 90, 292 (6th Cir. 1992) (holding that the fa ctors to be considere d under 60( b)(1) are whether culpable conduct of the defendant led to the default, whe ther the def endant ha s a meritorious def ense, a nd whether

the plaintiff will be pre

judiced).
T h e r ec o rdes t ab l i s h es t h at W i l m i n gt o nFi n an ce as s i gn edi t s i n t er es t i n t h e f i rs tm o rt gage to MERS sever al y ear s prior to the petition date. Ne ither the trustee n o r an y of the pa rties have al l ege d t h at W i l m i n gt o nFi n an ce h adan y i n t er es ti nt h at m o r t g a g e o nt h e d at e o f t h e f i l i n g. There fore , the rec ord establishes that Wil mington F inance was not a pr oper pa rty to the trustee’ s
c la im o n th e fi rs t mo rt g a g e . A c c or din g ly , a s to thi s c la im, it i s p la in t hat th e ba nk ru ptc y c ourt did not abuse its discretion in setting aside the defa u l t j u d gm en t pursuant to Rule 60(b)(6) for “ any other re ason that ju s t i fi es re lief.” Se e Br own , 413 B.R. at 706. The ref ore, the Panel af

firms the order of the ba

nkruptcy court va catingthe def ault judgme nt agai n s t Wi lmington Fina nce. Additionally , the Panel af firms the bankr

uptcy court’s implicit order dismiss ing the complaint as to Wi lmington Fina

nce.- 18- V. CO NC LU SION
For the fore g oing r easons, the opinion and or der of the bankr

uptcy court dismissi ng the tr us te e ’s c omp la in t as to GM AC Mo rt g a g e , L itt on L oa n Se rv ic ingand

B ank of Ne w Y or

k is

vacated, and the matter is rema nded fo r fu rt h er procee dings c onsistent with thi s opinion. The opinion and order

of the ba nkruptcy court va catingthe def

ault judgme nt and implicitly dismiss ing the complaint ag ainst Wi lmington Fina nce is a ffirme d.