Summary:
Debtor executed a promissory note and Deed of Trust in favor of First Citizens in 2004, but since the loans inception made payments to (or through) Cenlar. After the Debtor filed Chapter 13 in 2007, Cenlar filed a proof of claim, including a copy of the note, but without any indorsement. In 2008, the Debtor fell behind on payments and a consent order resolving such delinquency was entered, stating, among other things, that Cellar was the holder or servicer of the note. In March of 2011, Residential Credit Solutions ("RCS") filed a transfer of claim for other than security to notify the Debtor, Trustee and Court that Cenlar had transferred its claim to RCS. More recently in 2011, the Debtor fell behind on payments again.
Contesting the Motion for Relief by RCS, the Debtor asserted that RCS was not a real party in interest and was without standing to bring the motion. At the hearing, RCS introduced the original promissory note, which contained an indorsement from First Citizens to Self-Help Ventures, which apparently then indorsed the note in blank. No formal assignment of the Deed of Trust was ever recorded, instead only one made by Alicia Wood on behalf of MERS.
The Court held that pursuant to N.C. Gen. Stat. § 25-3-301, the holder of a negotiable instrument has the right to enforce it. When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone, N.C. Gen. Stat. § 25-3-205(b), "‘[m]ere possession’ of a note by a party to whom the note has neither been indorsed nor made payable ‘does not suffice to prove ownership or holder status.’" In re Adams, 693 S.E. 2d 705, 710 (N.C.App. 2010). Distinguishing this case from In re David A. Simpson, P.C., 711 S.E.2d 165, 173 (N.C.App. 2011), the Court held that this note was indorsed in blank, rather than to another party, and RCS is the holder of the note through its possession.
The Debtors also contended that RCS did not hold a valid security interest as the assignment by MERS may be fraudulent. While the Court did find that the assignment of the Deed of Trust was "suspect", as Alicia Wood was both a Vice President for MERS and Officer/Director of RCS, it held that as a Deed of Trust follows the note in North Carolina, See Jenkins v. Wilkinson, 18 S.E. 696 (N.C. 1893) and as there was no evidence that the not, even indorsed in blank, was fraudulent, that RCS consequently had the valid security interest and standing.
Robinson- Blank Indorsement of Note,PDF
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