Court Opinion

ID: 4080432
Source: CourtListenerOpinion
Date Created: 2016-10-06 20:00:39.592643+00
Date Added: 2024-06-11T13:06:19.665556
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                       ___________

                                       No. 16-1880
                                       ___________

                          IN RE: DANA N. GRANT-COVERT,
                                                   Appellant

                       ____________________________________

                     On Appeal from the United States District Court
                                for the District of Delaware
                         (D.C. Civil Action No. 1-15-cv-06018)
                       District Judge: Honorable Noel L. Hillman
                      ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                  September 1, 2016

             Before: VANASKIE, SCIRICA and FUENTES, Circuit Judges

                             (Opinion filed: October 6, 2016)

                                       ___________

                                        OPINION*
                                       ___________

PER CURIAM

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
         Dana N. Grant-Covert appeals from the District Court’s order, which affirmed a

bankruptcy court order1 that vacated the automatic stay in her bankruptcy proceeding.

We will affirm the District Court’s judgment.

         Because the parties are familiar with the history and facts of the case, we will limit

our discussion to those facts essential to our decision. Appellant filed a Chapter 7

bankruptcy proceeding in June of 2015. Wells Fargo Bank, N.A., claiming to be a

secured creditor based on a first mortgage on real property, filed a motion for relief from

the automatic stay, see 11 U.S.C. § 362(a), in order to foreclose on the real property.

Grant-Covert opposed the motion, arguing that Wells Fargo was “not the Real Party in

Interest,” that it did not have standing, that it was a “third Party Interloper,” and that it

had “not filed a Proof of Claim to be considered as Secured Creditor.” Bankr. Dkt. #24 at

2.

         The Bankruptcy Court held a hearing on the motion. Wells Fargo did not attend.

The Bankruptcy Judge granted Wells Fargo’s motion, informing Grant-Covert that she

would have to raise any defenses she had in the state-court foreclosure action. Grant-

Covert timely appealed.

         The District Court affirmed the Bankruptcy Court order. The Court agreed that

Grant-Covert could raise her defenses to the claim in the foreclosure action, concluded

that Wells Fargo was a real party in interest under 11 U.S.C. § 362(d), and held that

1
    See In re: Dana N. Grant-Covert, No. 15-20394-ABA (Bankr. D.N.J. July 22, 2015).
                                             2
Wells Fargo had shown cause for relief from the automatic stay. Grant-Covert filed a

timely appeal.

       The District Court had jurisdiction to review the Bankruptcy Court’s order

pursuant to 28 U.S.C. § 158(a), and we have jurisdiction to review the District Court’s

order under 28 U.S.C. §§ 158(d) and 1291. Our review of the District Court’s

determination is plenary, and we use the same standard of review as the District Court in

reviewing the decision of the Bankruptcy Court. See Kool, Mann, Coffee & Co. v.

Coffey, 300 F.3d 340, 353 (3d Cir. 2002).

       Grant-Covert raises four issues in her brief on appeal, but her argument essentially

boils down to this: Wells Fargo could not properly move to lift the stay because it lacked

standing and/or was not a real party in interest. The Bankruptcy Court did not address

the argument, stating that “[t]here’s really no basis for this Court to retain the jurisdiction

over those issues.” Tr. at 5. The District Court did consider the argument, and held that

Wells Fargo was a real party in interest. We agree.

       Constitutional standing is a threshold jurisdictional limitation; federal courts may

only decide real cases or controversies. See Barrows v. Jackson, 346 U.S. 249, 255

(1953). Grant-Covert does not appear to argue that Wells Fargo failed to show

constitutional standing. But even if “the plaintiff has alleged injury sufficient to meet the

‘case or controversy’ requirement, [the Supreme] Court has held that the plaintiff

generally must assert his own legal rights and interests, and cannot rest his claim to relief

on the legal rights or interests of third parties.” Warth v. Seldin, 422 U.S. 490, 499

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(1975). This prudential aspect of standing is closely related to § 362(d)’s requirement

that the party moving to terminate the automatic stay be “a party in interest.” Because

real parties in interest always have standing, but the converse is not always true, we focus

on whether Wells Fargo is a real party in interest. See In re Veal, 450 B.R. 897, 907 (9th

Cir. BAP 2011) (citing 4 Moore’s Fed. Prac. § 17.10[1], at p. 17-15 (3d ed. 2010)2); see

also In re Miller, 666 F.3d 1255, 1261 (10th Cir. 2012) (party seeking relief under

§ 362(d) must be either creditor or debtor of bankruptcy estate).

       Grant-Covert argues that Wells Fargo is not a real party in interest because it did

not show that it was entitled to enforce the Note associated with her mortgage. She does

not dispute that her mortgage was transferred to Wells Fargo, but she argues that it cannot

show that it was entitled to enforce the associated note because it was “indorsed to Wells

Fargo and then indorsed in blank.” Appellant’s Br. at 11, quoting Dist. Ct. Op. at 2.

       Under New Jersey law, an instrument that is indorsed in blank “becomes payable

to bearer and may be negotiated by transfer of possession alone until specially indorsed.”

N.J. Stat. Ann. § 12A:3-205. Thus, whoever was in possession of the note would become

the “holder” of the note, and would be entitled to enforce the note under N.J. Stat. Ann.

§ 12A:3-301. And under common law, if Wells Fargo held the mortgage but not the

underlying note, the mortgage would have been “a worthless piece of paper.” See Veal,
450 B.R. at 916 (internal quotation and citation omitted). Grant-Covert argues that the

2
 The same concept now appears at 2-13 Moore’s Manual--Federal Practice and
Procedure § 13.01[1] (2016).
                                        4
reasoning in Veal should persuade us and similarly should result in a finding that Wells

Fargo did not show that it is a real party in interest. But we find that unlike in Veal,

Wells Fargo made a sufficient showing here that it possessed the note as well as the

mortgage.

       First, in Veal the assignment of the mortgage did “not contain language effecting

an assignment of the Note.” Veal, 450 B.R. at 905. In contrast, the assignment here

assigned the mortgage to Wells Fargo “Together with the bond, Note or other Obligation

therein described, and the money due to grow due thereon, with the interest.” Bankr.

Dkt. #18-1 at 22. Second, Tiffany Pompey, Vice President Loan Documentation of

Wells Fargo certified that she had personally reviewed the company’s records and

certified that Wells Fargo “directly or through an agent, has possession of the promissory

note.” Id. at 1. And the certification attached a copy of the Note. Id. at 11-12. Cf. Veal,
450 B.R. at 904 (“Wells Fargo submitted . . . no evidence as to who possessed the Note

and no evidence regarding any property interest it held in the Note.”); Miller, 666 F.3d at

1264 (“While Deutsche Bank has offered proof that IndyMac assigned the Note in blank,

it elicited no proof that Deutsche Bank in fact obtained physical possession of the original

Note from IndyMac, either voluntarily or otherwise.”).

       As Wells Fargo provided evidence that it had been assigned the mortgage, and that

it was in possession of the Note indorsed in blank, it produced sufficient evidence to

allow the Bankruptcy Court to find that it was a party in interest, entitling it to ask that

court to lift the automatic stay.

                                               5
For the foregoing reasons, we will affirm the District Court’s judgment.

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