Court Opinion

ID: 818106
Source: CourtListenerOpinion
Date Created: 2013-02-01 22:56:26.096566+00
Date Added: 2024-06-11T15:26:01.027966
License: Public Domain

FILED
                                                            OCT 15 2012
 1
                                                        SUSAN M SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT
                    UNITED STATES BANKRUPTCY APPELLATE PANEL
 3
                              OF THE NINTH CIRCUIT
 4
 5   In re:                         )     BAP No.      CC-11-1374-MkHHa
                                    )
 6   JOAN KATHLEEN GREEN,           )     Bk. No.      ND 09-11614-RR
                                    )
 7                  Debtor.         )
     _______________________________)
 8                                  )
     JOAN KATHLEEN GREEN,           )
 9                                  )
                    Appellant,      )
10                                  )
     v.                             )     MEMORANDUM*
11                                  )
     WATERFALL VICTORIA MASTER FUND )
12   2008-1 GRANTOR TRUST SERIES A; )
     QUANTUM SERVICING CORPORATION, )
13                                  )
                    Appellees.      )
14   _______________________________)
15                      Submitted Without Oral Argument
                             on September 21, 2012
16
                            Filed – October 15, 2012
17
               Appeal from the United States Bankruptcy Court
18                 for the Central District of California
19        Honorable Robin L. Riblet, Bankruptcy Judge, Presiding
20   Appearances:     Appellant Joan Kathleen Green pro se on brief;
                      Melissa Robbins Coutts of McCarthy & Hotlhus, LLP
21                    on brief for appellees Waterfall Victoria Master
                      Fund 2008-1 Grantor Trust Series A and Quantum
22                    Servicing Corporation.
23
     Before:   MARKELL, HOLLOWELL and HAMMOND,** Bankruptcy Judges.
24
25
          *
26         This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
27   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8013-1.
28
          **
           Hon. M. Elaine Hammond, United States Bankruptcy Judge for
     the Northern District of California, sitting by designation.
 1                               INTRODUCTION
 2        Through an agent, Waterfall Victoria Master Fund 2008-1
 3   Grantor Trust Series A (“Waterfall”) filed a proof of claim in
 4   the bankruptcy case of debtor Joan K. Green (“Green”).    Green
 5   objected to Waterfall’s proof of claim, but the bankruptcy court
 6   overruled that objection.   Green then sought rehearing and
 7   reconsideration, which relief the court also denied.    Green
 8   appealed.   We AFFIRM.
 9                                   FACTS
10        Doing business as Cripple Creek Mountain Ranch, LLC, Green
11   ran what she described as a hospitality business out of a single
12   family residence located on Melody Mountain Lane in Paso Robles,
13   California (“Property”).    In her bankruptcy schedules, she listed
14   the Property as worth $1.3 million with roughly $1 million in
15   encumbrances.
16        On May 1, 2009, she filed her chapter 111 bankruptcy
17   petition.   Roughly one year later, in May 2010, Waterfall and its
18   servicing agent LoanCare, A Division of FNF Servicing, Inc.
19   (“LoanCare”) filed a motion for relief from the automatic stay
20   (“Relief From Stay Motion”), seeking to pursue foreclosure
21   proceedings against the Property.     Waterfall asserted, through
22   its servicing agent LoanCare, that as of April 2010 Green owed it
23   over $1.1 million and that Green’s indebtedness (“Loan”) was
24   secured by a first deed of trust against the Property.
25
          1
26         Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27   all “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037. All “Civil Rule” references are to
28   the Federal Rules of Civil Procedure.

                                       2
 1        Waterfall attached to its moving papers the following
 2   documents as exhibits:
 3   1.   A conformed copy of a deed of trust (“Deed of Trust”) dated
 4        May 24, 2007 (recorded as document no. 2007036626 in the San
 5        Luis Obispo County Recorder’s Office) identifying Green as
 6        borrower, Greenpoint Mortgage Funding, Inc. as lender
 7        (“Greenpoint”) and Mortgage Electronic Registration Systems,
 8        Inc. or “MERS”2 as the beneficiary, solely as the “nominee”
 9
10        2
           Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034
     (9th Cir. 2011), recently described MERS and its general purpose:
11
12        MERS is a private electronic database, operated by
          MERSCORP, Inc., that tracks the transfer of the
13        “beneficial interest” in home loans, as well as any
          changes in loan servicers. After a borrower takes out
14        a home loan, the original lender may sell all or a
15        portion of its beneficial interest in the loan and
          change loan servicers. The owner of the beneficial
16        interest is entitled to repayment of the loan. For
          simplicity, we will refer to the owner of the
17        beneficial interest as the “lender.” The servicer of
          the loan collects payments from the borrower, sends
18        payments to the lender, and handles administrative
19        aspects of the loan. Many of the companies that
          participate in the mortgage industry – by originating
20        loans, buying or investing in the beneficial interest
          in loans, or servicing loans – are members of MERS and
21        pay a fee to use the tracking system.
22
          *    *    *
23
          [The process of recording assignments of deeds of
24        trust] became cumbersome to the mortgage industry,
          particularly as the trading of loans increased. It has
25        become common for original lenders to bundle the
26        beneficial interest in individual loans and sell them
          to investors as mortgage-backed securities, which may
27        themselves be traded. MERS was designed to avoid the
          need to record multiple transfers of the deed by
28                                                      (continued...)

                                     3
 1        for the lender Greenpoint; and
 2   2.   An Adjustable Rate Note (“Note”) dated May 24, 2007, in the
 3        amount of $999,900.00, identifying Green as borrower and
 4        Greenpoint as lender.
 5        The bankruptcy court entered an order in July 2010 denying
 6   Waterfall’s Relief From Stay Motion “for lack of cause shown.”
 7        Meanwhile, LoanCare had filed in December 2009 a proof of
 8   claim (“Proof of Claim”) asserting a secured claim based on the
 9   same Note and Deed of Trust.   In the proof of claim, LoanCare did
10   not state that it was acting as servicing agent for Waterfall,
11   nor did it even mention Waterfall’s name.
12        Nonetheless, relying on the information contained in the May
13   2010 Relief From Stay Motion, Green filed in September 2010 a
14   motion entitled: “Motion For Proof of Perfected Ownership
15   Interest and Right to Collect on Proof of Claim” seeking relief
16   against both LoanCare and Waterfall with respect to the Proof of
17   Claim.3   Even though a conformed copy of the recorded Deed of
18   Trust was attached to the Proof of Claim, Green asserted that the
19   Proof of Claim did not satisfy the requirements of Rule 3001(d)
20
          2
           (...continued)
21        serving as the nominal record holder of the deed on
22        behalf of the original lender and any subsequent
          lender.
23
     Id. at 1038-39 (citing Jackson v. Mortg. Elec. Reg. Sys., Inc.,
24   770 N.W.2d 487, 490 (Minn. 2009), and Robert E. Dordan, Mortgage
     Electronic Registration Systems (MERS), Its Recent Legal Battles,
25
     and the Chance for a Peaceful Existence, 12 Loy. J. Pub. Int. L.
26   177, 178 (2010)).
          3
27         In essence, Green’s motion objected to the Proof of Claim.
     Accordingly, we hereinafter refer to this motion as the “Claim
28   Objection.”

                                      4
 1   because the Proof of Claim contained insufficient evidence
 2   demonstrating perfection of Waterfall’s alleged lien on the
 3   Property.      According to Green, there was nothing recorded in the
 4   public records for San Luis Obisbo County indicating that
 5   Waterfall, or anyone else, had taken from Greenpoint an
 6   assignment of the Deed of Trust.         Green argued that any interest
 7   Waterfall claimed to have in the Note and the Deed of Trust was
 8   invalid without a duly executed and recorded written assignment
 9   of the Deed of Trust.
10           Alternately, Green argued that MERS’s involvement in the
11   Loan transaction rendered unenforceable the lender’s rights under
12   the Note and the Deed of Trust, regardless of who attempted to
13   assert those rights.      It is difficult to follow Green’s argument
14   on this point.      On the one hand, she stated that, for purposes of
15   the Claim Objection, she was assuming that MERS held the original
16   Note.       On the other hand, Green argued:
17           It is the Debtor’s understanding that once a note is
             registered with MERS, all subsequent assignments are
18           done electronically; MERS never acquires actual
             physical possession of the note, nor do they acquire
19           any beneficial interest in the note . . . .
20           It is the Debtor’s contention that MERS had no
             beneficial interest in the note and since MERS was not
21           the title holder, the chain of title was broken and
             consequently no one has standing to sue (obviously, the
22           servicing company [LoanCare], who filed the Proof of
             Claim, has no beneficial interest in the note either).
23
             *       *     *
24
             As held by the Court in the bankruptcy case In re
25           Walker cited above, MERS has no authority to foreclose
             on the Debtor’s mortgage, since it is a ‘mere nominee’.
26           And even more importantly, since MERS had no
             beneficial, transferable interest in the Mortgage,
27           Waterfall cannot collect on the claim.
28   Claim Objection (Sept. 10, 2010) at p. 7 of 28.

                                          5
 1        Green also generally complained about MERS’s electronic
 2   mortgage registration system.   According to Green, MERS’s system
 3   violates “the California Business and Professions Code, as well
 4   as Unfair and Deceptive Acts and Practices . . . .”   Id. at p. 8
 5   of 28.
 6        By way of relief, Green essentially asserted that the court
 7   should require Waterfall to establish its “right to collect on
 8   the claim” by demonstrating its “true ownership” of the Note and
 9   the Deed of Trust.   Id.
10        In October 2010, Waterfall and its new servicing agent
11   Quantum Servicing Corp. (“Quantum”) filed a response to the Claim
12   Objection, along with a “Supplemental Declaration” of April
13   Kennedy in support of the response.   In the Supplemental
14   Declaration, Ms. Kennedy declared that she was an employee of
15   Quantum, and that Quantum was Waterfall’s new servicing agent.
16   Ms. Kennedy further stated that she had reviewed “business
17   records” reflecting a chain of transfers of the “beneficial
18   rights” under the Loan.    According to Kennedy, the beneficial
19   rights were first held by Greenpoint but ultimately ended up with
20   Waterfall by January 2009.   Kennedy also stated that the same
21   business records reflected a chain of transfers of the “servicing
22   rights” under the Loan.    Kennedy declared that Greenpoint was the
23   first servicer of the Loan, that LoanCare was the second servicer
24   of the Loan and that Quantum was the third servicer of the Loan.
25   According to Kennedy, LoanCare was the servicing agent for the
26   Loan between August 2008 and September 2010.   Kennedy’s
27   statements regarding LoanCare and Waterfall are consistent with
28   Waterfall’s claim that LoanCare filed the Proof of Claim in

                                       6
 1   December 2009 on behalf of Waterfall as the servicing agent under
 2   the Loan.
 3        In addition to Kennedy’s declaration, Waterfall relied upon
 4   all of the papers filed in support of its prior Relief From Stay
 5   Motion.   Waterfall argued that these items were sufficient to
 6   establish the standing of its former servicing agent LoanCare to
 7   file the Proof of Claim on Waterfall’s behalf.      Alternately,
 8   Waterfall requested additional time to respond to the Claim
 9   Objection so that its new servicing agent Quantum could obtain
10   and present additional documentation to substantiate Waterfall’s
11   interest in the Loan.
12        Green filed a reply in support of her Claim Objection
13   (“Reply”).   In her Reply, Green asserted that Waterfall should be
14   required to produce the Original of both the Note and the Deed of
15   Trust.    The remainder of Green’s Reply goes into more detail
16   about her complaints regarding MERS and its electronic
17   registration system.    According to Green, MERS generally is used
18   by lenders to hide their identity from borrowers, to avoid
19   payment of recording fees, and to turn pools of loans into ponzi
20   schemes through the securitization process.
21        Significantly, for the first time in the Reply, Green
22   claimed: (1) that her Loan amounted to a contract of adhesion;
23   (2) that Waterfall would be unjustly enriched if it were allowed
24   to enforce its rights (if any) under the Loan; and (3) allowing
25   enforcement of the Loan would be unconscionable (collectively,
26   the “Unconscionability Claims”).       But Green’s Unconscionability
27   Claims were based solely on her general, unsubstantiated
28   allegations against MERS.   Green did not in any way tie her

                                        7
 1   Unconscionability Claims to any specific alleged misconduct
 2   concerning her particular Loan.
 3           The bankruptcy court held two hearings on the Claim
 4   Objection in the Fall of 2010.      After the second hearing, the
 5   court directed Waterfall to file a supplemental brief by the end
 6   of 2010 in support of its standing to file the Proof of Claim,
 7   and the continued the hearing on the claim objection to
 8   January 11, 2011.
 9           Waterfall and Quantum filed their supplemental brief
10   (“Supplemental Brief”) on December 30, 2010.         In it, Waterfall
11   admitted that written assignments of the beneficial interest in
12   the Deed of Trust were never drafted or recorded.         According to
13   Waterfall, the registration information on MERS’s website was
14   meant to serve as a substitute for the execution and recordation
15   of written assignments.      More importantly, Waterfall claimed it
16   had standing to file the Proof of Claim because it was a “person
17   entitled to enforce” the Note within the meaning of § 3301(a) of
18   the California Commercial Code.4         Waterfall argued that it was a
19   “person entitled to enforce” under Cal. Com. Code § 3301(a)
20   because it was a “holder” of the Note.         As Waterfall explained
21   it, pursuant to Cal. Com. Code § 1201(b)(21)(A), its possession
22   of the original Note indorsed in blank made it a holder of the
23   Note.       Waterfall further argued that paper assignments of the
24   Deed of Trust were unnecessary either to perfect the lien created
25   by the Deed of Trust or to convey the beneficial interest under
26
27
             4
           Division 3 of the California Commercial Code is
28   California’s version of Article 3 of the Uniform Commercial Code.

                                          8
 1   the Deed of Trust.
 2        Green filed a response to the Supplemental Brief on
 3   January 7, 2011, a few days before the continued claim objection
 4   hearing.   Green claimed that Cal. Com. Code § 9109(d)(11)
 5   rendered Division 3 of the Cal. Com. Code inapplicable to
 6   transactions creating or transferring liens on real property.
 7   According to Green, the transfer of the lender’s rights under the
 8   Deed of Trust was governed by provisions of California’s Civil
 9   Code, particularly Cal. Civil Code § 1091, which required a
10   writing signed by the transferor.    Green further argued that
11   Waterfall’s attempt to rely solely on its status as a holder of
12   the original promissory note contravened both the California
13   Civil Code and the “lex situs” doctrine.5
14        At the January 11, 2011 continued hearing on the Claim
15   Objection, Waterfall appeared through its servicing agent
16   Quantum, which presented the original Note, indorsed in blank,
17   and the original Deed of Trust, to Green and to the Court.     The
18   bankruptcy court advised Green that it did not receive, and had
19   not had an opportunity to review, her response to the
20   Supplemental Brief, but the court allowed Green to make the same
21   arguments as part of her oral argument at the hearing.
22        The bankruptcy court thereafter ruled that Greenpoint had
23   duly perfected its lien against the Property by recording the
24   Deed of Trust in the official records for San Luis Obispo County,
25   California.   The court further ruled that Waterfall and its
26
27
          5
           We explain Green’s reference to the lex situs doctrine in
28   our merits discussion, infra.

                                      9
 1   servicing agent Quantum were in possession of the original Note
 2   indorsed in blank by Greenpoint, which gave them standing to
 3   enforce the Note.    Based on these rulings, the court held that it
 4   was going to overrule Green’s Claim Objection.
 5        Notwithstanding the court’s oral ruling at the January 11,
 6   2011 hearing, there was a substantial delay before entry of an
 7   order overruling the Claim Objection because neither Waterfall
 8   nor Quantum lodged a proposed form of order.    Ultimately, the
 9   bankruptcy court entered a final order in July 2011.    But before
10   that order was entered, a number of additional events occurred
11   that are relevant to this appeal.     Foremost among them, Green
12   filed motions requesting a new hearing and seeking
13   reconsideration of the court’s oral ruling (collectively, “Post-
14   hearing Motions”).   According to Green, the bankruptcy court had
15   not given her adequate time to respond to the Supplemental Brief.
16   However, there was nothing particularly new about the Post-
17   hearing Motions.    Green merely elaborated on the arguments she
18   had previously made in support of her Claim Objection.
19        Without holding an additional hearing, the bankruptcy court
20   entered an order denying the Post-hearing Motions, for
21   essentially the same reasons that it had stated when it orally
22   had overruled Green’s Claim Objection.
23        Green appealed the order denying her Post-hearing Motions
24   (BAP No. CC-11-1253).   But we dismissed that appeal on
25   jurisdictional grounds, because Green did not timely file her
26   notice of appeal within fourteen days of entry of that order.
27        On July 6, 2011, the bankruptcy court entered an order
28   overruling Green’s Claim Objection.    Green filed a notice of

                                      10
 1   appeal from that order on July 13, 2011.
 2                              JURISDICTION
 3        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 4   §§ 1334 and 157(b)(2)(A) and (B).    We have jurisdiction under
 5   28 U.S.C. § 158, subject to the discussion set forth immediately
 6   below.
 7        Before we address the merits of this appeal, we first must
 8   address a jurisdictional issue raised by the rather odd
 9   procedural history of this matter.   We agree with our prior BAP
10   panel that Green’s appeal of the Post-hearing Motions was
11   untimely and should have been dismissed.   However, we must
12   determine the proper scope of the appeal now before us, which was
13   timely filed after the court entered the order overruling the
14   Claim Objection.   In this instance, the scope of this appeal
15   hinges on the finality of the bankruptcy court’s orders.
16        Generally speaking, an order is final, rather than
17   interlocutory, only when it fully adjudicates the issues raised
18   and clearly manifests the court’s intent to be its final act in
19   the matter.   Brown v. Wilshire Credit Corp. (In re Brown),
20   484 F.3d 1116, 1120 (9th Cir. 2007) (quoting Slimick v. Silva
21   (In re Slimick), 928 F.2d 304, 307 (9th Cir. 1990)).    To
22   ascertain the trial court’s intent, we may look to the content of
23   the order, as well as the judge’s and the parties’ conduct.
24   In re Brown, 484 F.3d at 1120; In re Slimick, 928 F.2d at 308.
25        Green’s appeal of the order denying her Post-hearing Motions
26   was an appeal from an interlocutory order, not final, because the
27   bankruptcy court did not intend that order to fully and finally
28   dispose of the entire matter – the Claim Objection.

                                     11
 1        Here, the bankruptcy court’s comments at a hearing held on
 2   June 29, 2011, reflect that the court had expected Waterfall to
 3   lodge a proposed order memorializing the court’s January 11, 2011
 4   oral ruling overruling the Claim Objection, but that Waterfall
 5   had not done so.   In response to the court’s comments at that
 6   hearing, Waterfall and Quantum apparently lodged a proposed form
 7   of order, which the court signed and entered on July 6, 2011.
 8   That was the final order fully disposing of the Claim Objection.
 9        Orders denying motions for new trial and motions for
10   reconsideration typically are final orders, but that is in part
11   because they usually are entered after entry of an order
12   disposing of the underlying dispute.   Here, the converse is true.
13   The May 3, 2011 order denying Green’s Post-hearing Motions was
14   entered before the court entered its July 6, 2011 order disposing
15   of the underlying Claim Objection.   As a result, the order
16   denying Green’s Post-hearing Motions was interlocutory, not
17   final, at the time it was entered.
18        When a litigant files an untimely appeal from an
19   interlocutory order, we must dismiss it.   See Baldwin v. Redwood
20   City, 540 F.2d 1360, 1364 (9th Cir. 1976).   However, that
21   interlocutory order ultimately merges into the final order, when
22   it eventually is entered, and a timely appeal taken from the
23   final order may cover both the final order as well as any
24   interlocutory order leading up to the entry of the final order.
25   Id.; see also U.S. v. Real Property Located at 475 Martin Lane,
26   Beverly Hills, CA, 545 F.3d 1134, 1140-41 (9th Cir. 2008).
27        Accordingly, both the order overruling the Claim Objection
28   and the order denying the Post-hearing Motions are within the

                                     12
 1   scope of this appeal.   To the extent the parties’ briefs address
 2   issues raised by either order, we may consider them.
 3                                    ISSUE
 4        Did the bankruptcy court err when it overruled Green’s Claim
 5   Objection?
 6                           STANDARDS OF REVIEW
 7        “‘An order overruling a claim objection can raise legal
 8   issues (such as the proper construction of statutes and rules)
 9   which we review de novo, as well as factual issues (such as
10   whether the facts establish compliance with particular statutes
11   or rules), which we review for clear error.’ . . . We review de
12   novo whether a party has standing.” Allen v. U.S. Bank, N.A.
13   (In re Allen), 472 B.R. 559, 565 (9th Cir. BAP 2012) (quoting
14   Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897,
15   906, 918 (9th Cir. BAP 2011)).
16                                 DISCUSSION
17        As a threshold matter, we note certain key facts that Green
18   has not disputed.   Green has not disputed that Greenpoint loaned
19   her roughly $1 million and that she executed the Note and the
20   Deed of Trust in exchange for the Loan.    Green also has not
21   disputed that Greenpoint recorded the Deed of Trust in the
22   official records of San Luis Obispo County and that Greenpoint
23   indorsed the Note in blank.    Nor has Green disputed that LoanCare
24   was acting as Waterfall’s servicing agent at the time it filed
25   the Proof of Claim or that Quantum subsequently succeeded
26   LoanCare as Waterfall’s servicing agent.
27        The sole issue raised in Green’s Claim Objection was
28

                                       13
 1   Waterfall’s standing to file the Proof of Claim.6   While there
 2   are a number of different aspects to standing doctrine, Green’s
 3   Claim Objection focused on whether Waterfall was the party
 4   entitled to enforce the Note and the Deed of Trust.   This issue
 5   implicated the prudential standing requirement that litigants
 6   must assert their own legal rights and not the rights of others.
 7   Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269, 289-90,
 8   128 S.Ct. 2531, 2544 (2008); Warth v. Seldin, 422 U.S. 490, 499,
 9   95 S.Ct. 2197, 2205 (1975).   It also implicated the “real party
10   in interest rule,” Civil Rule 17(a), which provides that “[a]n
11   action must be prosecuted in the name of the real party in
12   interest.”7
13        We have plowed this same ground several times recently, most
14   notably in two published decisions, In re Allen, 472 B.R. 559,
15   and In re Veal, 450 B.R. 897.   In those two decisions, we
16   generally held that a party has standing to file a proof of claim
17
18        6
           In the reply she filed in the bankruptcy court in support
19   of her Claim Objection, Green sought for the first time to add
     her Unconscionability Claims for consideration. By way of these
20   claims, Green apparently sought to have the court rule that
     Waterfall should not be permitted to enforce the Note and the
21   Deed of Trust even if Waterfall established its standing. Green
22   has elaborated on these claims in her appeal briefs. However, in
     addition to belatedly raising her Unconscionability Claims, Green
23   never offered any evidence to support them. In fact, these
     claims were nothing more than unsubstantiated allegations of
24   general misconduct by MERS and its members, which Green generally
     failed to connect to her particular Loan. Consequently, Green’s
25
     Unconscionability Claims cannot and do not support reversal of
26   the orders on appeal.
          7
27         Rule 9014(c) makes Civil Rule 17 applicable in contested
     matters, which include claim objections. In re Allen, 472 B.R.
28   at 565 n.3.

                                     14
 1   based on a promissory note secured by real property if that party
 2   is a “person entitled to enforce” the note under § 3-301 of the
 3   Uniform Commercial Code (“UCC”).     In re Allen, 472 B.R. at 565;
 4   In re Veal, 450 B.R. at 902.   In relevant part, a party is a
 5   person entitled to enforce the note if it is a “holder” of the
 6   note, as defined in UCC § 1-201(b)(21)(A).    In re Allen, 472 B.R.
 7   at 565; In re Veal, 450 B.R. at 910-11.     Under
 8   UCC § 1-201(b)(21)(A), a “holder” includes a “person in
 9   possession of a negotiable instrument8 that is payable . . . to
10   bearer . . . .”   In turn, a negotiable instrument is payable to
11   the bearer when it is indorsed in blank.    See UCC § 3-205(b)
12   (“If an indorsement is made by the holder of an instrument and it
13   is not a special indorsement, it is a ‘blank indorsement.’    When
14   indorsed in blank, an instrument becomes payable to bearer and
15   may be negotiated by transfer of possession alone until specially
16   indorsed.”); see also In re Allen, 472 B.R. at 567.
17        Here, the record indicates that Waterfall’s servicing agent
18   Quantum presented to the bankruptcy court the original Note
19   indorsed in blank by Greenpoint,9 thereby demonstrating that it
20
21        8
           The bankruptcy court’s ruling indicates that it treated
22   Green’s Note as a negotiable instrument. Green has not
     challenged that aspect of the bankruptcy court’s ruling. In any
23   event, even if we assume that the Note did not meet all the
     formal requirements to qualify as a true negotiable instrument
24   under UCC § 3-104, there were sufficient grounds for the court to
     have treated the Note as if it were a negotiable instrument for
25   purposes of determining who is entitled to enforce the Note. See
26   In re Veal, 450 B.R. at 909 & nn. 14, 15.
          9
27         Green has not disputed that Greenpoint indorsed the Note in
     blank, nor is there any evidence in the record which would
28                                                      (continued...)

                                     15
 1   was in possession of the Note and that the Note was payable to
 2   bearer.   Based thereon, the bankruptcy court determined that
 3   Waterfall had standing to file a proof claim based on the Note
 4   and the Deed of Trust.   In light of our holdings in Allen and
 5   Veal, we perceive no error in the bankruptcy court’s ruling.
 6        On appeal, Green principally argues that the bankruptcy
 7   court should not have applied UCC Article 3 to determine
 8   Waterfall’s standing.    Green claims that Division 3 of the
 9   California Commercial Code – California’s version of UCC Article
10   3 does not apply.   Instead, Green claims that a number of
11   provisions of California’s Civil Code do apply, and that these
12   provisions prohibit the transfer of any interest in real
13   property, including the assignment of a deed of trust, absent an
14   executed and recorded writing.   But Green’s legal contentions are
15   simply wrong.
16        Green first argues that Cal. Com. Code Division 3 does not
17   apply because Cal. Com. Code § 9109(d)(11) expressly excepts from
18   Division 3's coverage “the creation or transfer of an interest in
19   or lien on real property.”10   But Green misreads the statute.   On
20
21        9
           (...continued)
22   support a contrary finding. See generally UCC § 3-308 (providing
     a presumption that indorsement signature is presumed to be
23   authentic and authorized); Cal. Com. Code § 3308 (same).
          10
24         The parties to this appeal seem to agree that California
     law should be applied to resolve their dispute. Given that the
25   Note is silent, that Green resides in California and that she
26   executed the Note and the Deed of Trust in California, we agree.
     See Cal. Com. Code § 1301(b); see also Barclays Discount Bank
27   Ltd. v. Levy, 743 F.2d 722, 724–25 (9th Cir. 1984); In re Veal,
     450 B.R. at 921 n. 41 (applying Arizona’s counterpart to Cal.
28                                                      (continued...)

                                      16
 1   its face, Cal. Com. Code § 9109(d)(11) only governs Division 9;
 2   it simply does not address Division 3 and its coverage of
 3   negotiable instruments such as the mortgage note at issue here.
 4        Green next argues that Waterfall’s standing should not be
 5   based on Cal. Com. Code § 3301 because that statute is
 6   inconsistent with the requirements under the Cal. Civil Code for
 7   transferring an interest in California real property.    In making
 8   this argument, Green invokes the “lex situs” doctrine11 and
 9   states that the statutory scheme implemented by the Cal. Civil
10   Code, particularly Cal. Civil Code § 1091,12 contemplates that
11   deeds of trust and other transfers of real property cannot be
12   made except by operation of an executed and recorded writing
13
14        10
           (...continued)
15   Com. Code § 1301(b) under similar circumstances). In any event,
     Green has not pointed us to any material distinction for purposes
16   of this appeal between Division 3 of the Cal. Com. Code and
     Article 3 of the UCC. Nor are we aware of any.
17
          11
           As used by Green, the “lex situs” doctrine generally
18
     requires legal issues involving real property to be determined
19   according to the laws of the state in which the property is
     situated. See Black’s Law Dictionary (9th Cir 2009); see also
20   Restatement (Second) of Conflict of Laws § 223(1) (1971)(“Whether
     a conveyance transfers an interest in land and the nature of the
21   interest transferred are determined by the law that would be
22   applied by the courts of the situs.”). Green has not explained
     why, under the lex situs doctrine, the Cal. Civil Code would be
23   entitled to any greater deference than the Cal. Com. Code.
          12
24             Cal. Civil Code § 1091 provides:
25        Requisites for transfer of certain estates. An estate
26        in real property, other than an estate at will or for a
          term not exceeding one year, can be transferred only by
27        operation of law, or by an instrument in writing,
          subscribed by the party disposing of the same, or by
28        his agent thereunto authorized by writing.

                                        17
 1   memorializing the transfer.   According to Green, because
 2   Waterfall has admitted that there were no written assignments of
 3   the Deed of Trust executed or recorded, any purported transfer to
 4   Waterfall of the Deed of Trust was invalid under Cal. Civil Code
 5   § 1091, and the purported transfer to Waterfall of the Note
 6   consequently was a nullity.
 7        But Green once again misreads the statute.   Cal. Civil Code
 8   § 1091 on its face explicitly permits transfers of interests in
 9   real property “by operation of law.”   And it is settled
10   California law that a lien on real property is incident to the
11   underlying obligation and that a valid transfer of the underlying
12   obligation also carries with it the lien.   See Cal. Civil Code
13   § 2936 (“The assignment of a debt secured by mortgage carries
14   with it the security.”).   Accord, Cockerell v. Title Ins. & Trust
15   Co., 42 Cal. 2d 284, 291, 267 P.2d 16, 20 (Cal. 1954); Marx v.
16   McKinney, 23 Cal.2d 439, 443, 144 P.2d 353, 356 (Cal. 1944);
17   Lewis v. Booth, 3 Cal. 2d 345, 349, 44 P.2d 560, 562 (Cal. 1935);
18   Union Supply Co. v. Morris, 220 Cal. 331, 338–40, 30 P.2d 394,
19   397 (Cal. 1934); Seidell v. Tuxedo Land Co., 216 Cal. 165, 170,
20   13 P.2d 686, 688 (1932); Ord v. McKee 5 Cal. 515, 516 (Cal.
21   1855); Domarad v. Fisher & Burke, Inc., 270 Cal. App. 2d 543,
22   553, 76 Cal. Rptr. 529, 535 (Cal. App. 1969); Santens v. Los
23   Angeles Fin., 91 Cal. App. 2d 197, 201-02, 204 P.2d 619, 621-22
24   (Cal. App. 1949); Poe v. Francis 132 Cal. App. 330, 335-36,
25   22 P.2d 801, 803 (Cal. App. 1933); see also Cal. Comm'l Code
26   § 9203(g) (“The attachment of a security interest in a right to
27   payment or performance secured by a security interest or other
28   lien on personal or real property is also attachment of a

                                     18
 1   security interest in the security interest, mortgage, or other
 2   lien.”); Carpenter v. Longan, 83 U.S. 271, 275 (1872) (“The
 3   transfer of the note carries with it the security, without any
 4   formal assignment or delivery, or even mention of the latter.”).
 5        In short, under long-settled California law, the valid
 6   transfer of the Note carried with it an assignment of the Deed of
 7   Trust.    Because we already have held above that the Note was duly
 8   negotiated to Waterfall under Cal. Com. Code § 3201, Waterfall
 9   also qualifies by operation of law as the assignee of the Deed of
10   Trust.
11        Green also incorrectly relies on several other Cal. Civil
12   Code statutes.13   As a group, these other statutes deal with the
13
14        13
           These statutes include Cal. Civil Code §§ 1107, 1169, 1214
15   and 1215. For the sake of completeness, each of these statutes
     is set forth below.
16
     Section 1107 provides:
17
          Grant, how far conclusive on purchasers. Every grant of
18        an estate in real property is conclusive against the
19        grantor, also against every one subsequently claiming
          under him, except a purchaser or incumbrancer who in
20        good faith and for a valuable consideration acquires a
          title or lien by an instrument that is first duly
21        recorded.
22
     Section 1169 provides:
23
          In what office. Instruments entitled to be recorded
24        must be recorded by the County Recorder of the county
          in which the real property affected thereby is
25        situated.
26
     Section 1214 provides:
27
          Every conveyance of real property or an estate for
28                                                      (continued...)

                                      19
 1   rights of competing transferees of the same real property.   They
 2   do not address the question of who Green must pay on account of
 3   her Loan obligations, which is the basic question raised by her
 4   Claim Objection.   Put another way, it simply is irrelevant to the
 5   resolution of Green’s standing issues who, among competing
 6   claimants, might be entitled to the economic value underlying the
 7   Note and the Deed of Trust.   See In re Veal, 450 B.R. at 912.    So
 8   long as Green knows that, to the extent she pays Waterfall, her
 9   Loan obligations legally will be considered satisfied under Cal.
10   Com. Code § 3602(a), Green should be content.   See id.
11        Alternately, Green argues that Greenpoint impermissibly
12   “split” the Note and the Deed of Trust, by designating itself as
13   payee in the Note while allowing MERS to be named as the
14   “beneficiary” in the Deed of Trust.   According to Green, this
15   split effectively rendered both the Note and the Deed of Trust
16   unenforceable.
17
18        13
           (...continued)
19        years therein, other than a lease for a term not
          exceeding one year, is void as against any subsequent
20        purchaser or mortgagee of the same property, or any
          part thereof, in good faith and for a valuable
21        consideration, whose conveyance is first duly recorded,
          and as against any judgment affecting the title, unless
22
          the conveyance shall have been duly recorded prior to
23        the record of notice of action.

24   Section 1215 provides:
25        Conveyance defined. The term “conveyance,” as used in
26        Sections 1213 and 1214, embraces every instrument in
          writing by which any estate or interest in real
27        property is created, aliened, mortgaged, or incumbered,
          or by which the title to any real property may be
28        affected, except wills.

                                     20
 1        Green’s splitting argument ignores the plain language of the
 2   Deed of Trust.    That language nominally designates MERS as
 3   “beneficiary” but further specifies that MERS serves as
 4   beneficiary “solely as nominee” for the “lender” – in this case
 5   Greenpoint and its successors.   Based on the same deed of trust
 6   language, the Ninth Circuit has held that MERS’s nominal
 7   beneficiary status, as nominee for the lender, does not
 8   irreparably split the Note the from the Deed of Trust, so long as
 9   MERS continues to serve as the nominee or agent for the lender or
10   its successors.   See Cervantes, 656 F.3d at 1044.   Cervantes’
11   holding is consistent with a number of published decisions within
12   this circuit opining that MERS merely serves as the agent for the
13   true beneficiary.   See, e.g., Cedano v. Aurora Loan Servs., LLC
14   (In re Cedano), 470 B.R. 522, 531 (9th Cir. BAP 2012)
15   (identifying MERS as nominal beneficiary and agent/nominee for
16   lender);   Weingartner v. Chase Home Fin., LLC, 702 F.Supp.2d
17   1276, 1279-81 (D. Nev. 2010) (same); see also Gomes v.
18   Countrywide Home Loans, Inc., 192 Cal. App.4th 1149, 1156 n.7,
19   121 Cal.Rptr.3d 819, 825 n.7 (Cal. App. 2011) (identifying MERS
20   as the nominee, or agent, of the noteholder).
21        In light of the decisions cited above, we are not persuaded
22   that the Note and the Deed of Trust have been irreparably split
23   in a manner that would render the Loan documents unenforceable.
24        Finally, Green complains that she was not given sufficient
25   time to respond to Waterfall’s Supplemental Brief.   Green further
26   points out that the bankruptcy court admitted that it did not
27   have an opportunity to review her written response to the
28   Supplemental Brief before the court orally announced its decision

                                      21
 1   to overrule the Claim Objection, on January 11, 2011.
 2        Nonetheless, the record reflects that the bankruptcy court
 3   did not enter its final order disposing of the Claim Objection
 4   until six months later, in July 2011.   During the intervening six
 5   months, Green made the same arguments in her Post-hearing
 6   Motions, which the court explicitly addressed and rejected in its
 7   May 3, 2011 order denying the Post-Hearing Motions.   Under these
 8   circumstances, Green cannot establish that she was prejudiced by
 9   the so-called insufficient amount of time she had to respond to
10   Waterfall’s Supplemental Brief.    See generally Rosson v.
11   Fitzgerald (In re Rosson), 545 F.3d 764, 775-77 (9th Cir. 2008)
12   (holding that inadequate notice was harmless error unless the
13   appellant demonstrated prejudice).
14                              CONCLUSION
15        For all of the reasons set forth above, we AFFIRM the
16   bankruptcy court's order overruling Green’s Claim Objection and
17   its order denying Green’s Post-hearing Motions.
18
19
20
21
22
23
24
25
26
27
28

                                       22