Opinion
MEMORANDUM DECISION SUSTAINING OBJECTIONS TO CONFIRMATION OF CHAPTER 13 PLAN
NEIL W. BASON, Bankruptcy Judge.
I. INTRODUCTION
In November of 2005 the above-captioned debtors (the "Gallaghers") received a loan in the original principal amount of approximately $607,200. On January 4, 2012 (the "Petition Date") they filed their chapter 13 bankruptcy petition.
The Gallaghers do not dispute that they have failed to make a huge number of monthly mortgage payments - twenty five as of the Petition Date. Objection to Confirmation of Chapter 13 Plan (dkt. 14) (" Objection ") para. 1 & 6 & Ex.A. Their original chapter 13 plan (dkt. 10) lists an alleged arrearage of $47,161, which they proposed to cure over time. The Objection asserts that in fact the total prepetition arrearage is approximately $106,519.70. Objection (dkt. 14) para. 6. In response the Gallaghers filed an amended chapter 13 plan on April 5, 2012 (dkt. 20) that purports to reinstate the loan without paying any arrears. That plan was also objected to. Reply (dkt. 25).
A confirmation hearing was held at the date and time listed in the caption. Appearances were made by Shannon A. Doyle for the Gallaghers, Jared D. Bissell for U.S. Bank (defined below), and Angela Gill for the Chapter 13 Trustee.
This Memorandum Decision sustains the objections to the Gallaghers' proposed chapter 13 plans (dkt. 10 & 20).
II. DISCUSSION
The objecting party is U.S. Bank National Association, as Trustee, successor in interest to Bank of America, National Association, as Trustee (successor by merger to LaSalleBank National Association) as Trustee for Thornburg Mortgage Securities Trust 2006-4 ("US Bank"). The Gallaghers argue that U.S. Bank is not the real party in interest, or lacks standing, or is otherwise prevented from arguing that the chapter 13 plan is unconfirmable. Response (dkt. 21) at 9:15-10:14 et seq. (citing inter alia In re Veal, 450 B.R. 897 (9th Cir. BAP 2011), and Rule 17(a)(1), Fed. R. Civ. P., incorporated by Rules 3015(f), 7017 and 9014, Fed. R. Bankr. P.) ("Rule 17(a)(1)").
Specifically the Gallaghers argue that: (A) the promissory note ("Note") on which U.S. Bank relies is not authentic; (B) the purported assignments of the Note to U.S. Bank are void; and (C) U.S. Bank is prohibited from receiving a transfer of the Note under the Trust Agreement governing the securities that were issued in connection with the pool of loans to which the Gallaghers' loan belongs. These arguments are all unpersuasive.
U.S. Bank argues that the Gallaghers are challenging the "validity" of its lien and therefore an adversary proceeding is required pursuant to Rule 7001(2), Fed. R. Bankr. P. But the Gallaghers appear not to be challenging the validity of the lien itself. Instead they challenge the standing of U.S. Bank to enforce that lien, or whether U.S. Bank is the real party in interest for purposes of enforcing that lien or protecting other rights under the loan documents. Therefore U.S. Bank has not established that an adversary proceeding is presently required.
A. The Gallaghers' Challenges to the Authenticity of the Note Are Not Persuasive
The Gallaghers admit that they "executed a promissory note... and deed of trust" ("DOT") in connection with the loan. Response (dkt. 21) at 6:4-5. But they challenge whether the particular Note on which U.S. Bank relies is authentic. Id. at 9:6-10.
(1) Location.
The Gallaghers argue that the Note cannot be authentic because they "were out of state on the purported execution date of the Note." Response (dkt. 21) at 9:7. That makes no sense because there is no "purported execution date" of the Note: the first page of the Note shows an effective date of November 23, 2005, but the signature on the last page is undated. See id. Ex. 5. That format is common, precisely because the signer may be unavailable to execute the loan documents on the effective date, or for other reasons of administrative convenience.
(2) Spouse's signature.
The Gallaghers argue that the Note is not authentic because it "includes only one signature by Matthew Gallagher' but the Debtors signed their loan documents together." Response (dkt. 21) at 9:7-9. That argument is unavailing.
Ms. Gallagher's sweeping statement that she executed the "loan documents" is too tenuous for me to find that she did in fact execute the Note, without corroborating evidence such as a photocopy of the Note with her signature. I take judicial notice that it is not unusual for a promissory note to be executed by only one spouse, because for example that spouse may have a better credit rating than the other. In such situations both spouses typically execute the deed of trust because of community property laws and other considerations. The Gallaghers have not shown that there is anything wrong with this practice.
In addition, supposing for the sake of discussion that Ms. Gallagher did execute a promissory note, the Gallaghers have not shown how that would render the Note at issue inauthentic. They do not dispute that Mr. Gallagher signed the Note, so U.S. Bank can pursue recovery from him and from community property, and for that matter it could choose whether to pursue Ms. Gallagher separately on account of any lost or destroyed promissory note. See Cal. Com. Code § 3309. The allegedly missing signature is not a defense.
(3) Initials.
In seeming contradiction to their assertion that they both executed all of the loan documents, the Gallaghers next argue that "the initials on the Note do not match [their own]." Response (dkt. 21) at 9:9-10 and attached Decl. at 3:3-6. They appear to mean that the initials of one of them are written in cursive on another document but in printed letters on the Note. So what?
That does not establish that the Note is inauthentic. If they seek to establish some sort of forgery then would need to prove that, presumably with expert testimony and other evidence, none of which has been presented. Moreover they do not deny having received the funds, and they do not challenge the authenticity of the DOT so it is unclear what they ultimately would accomplish if they could prove some sort of forgery of one of their initials.
B. The Gallaghers Have Not Established That Assignments of the Note to U.S. Bank Are "Void" or Otherwise Ineffective
The Gallaghers argue that the assignments of the Note to U.S. Bank are "void, " "fraudulent" or otherwise ineffective. On this basis they assert that U.S. Bank lacks standing.
Standing is a "threshold question in every federal case, determining the power of the court to entertain the suit." In re Edwards, 454 B.R. 100, 104 (9th Cir. BAP 2011) (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)) (internal quotation marks omitted). Although standing has both constitutional and prudential aspects ( Warth, 422 U.S. at 498), it is undisputed that U.S. Bank has constitutional standing, so the standing issue comes down to whether it also has prudential standing. Prudential standing requires that a party must assert its own legal rights rather than the legal rights of others. Veal, 450 B.R. at 907.
The Gallaghers also object that U.S. Bank is not the real party in interest under Rule 17(a)(1). "The real party in interest under Rule 17 is the party with the right to enforce a claim under the applicable substantive law." In re Hwang, 438 B.R. 661, 665 (C.D. Cal. 2010) (citation omitted). "Generally, real parties in interest have standing, but not every party who meets the standing requirements is a real party in interest." Veal, 450 B.R. at 907 (quoting 4 Moore's Federal Practice § 17.10[1], at p. 17-15 (3d ed. 2010) (footnotes omitted)).
Based on the foregoing, the central issue is whether U.S. Bank has the "right to enforce" the claim represented by the Note and secured by the DOT. If so, then it has prudential standing and it is the real party in interest.
The Gallaghers' arguments on these issues are not entirely clear. But they appear to take the position that (i) the Note could only be transferred pursuant to California real estate law, meaning pursuant to an instrument recorded in the real estate records rather than the allonges attached to the Note, and (ii) without a cognizable transfer of the Note the assignment of the DOT to U.S. Bank is "meaningless." Response (dkt. 21) at 11:19. I reject both arguments.
1. U.S. Bank, As The Person Entitled to Enforce The Note, Can Object to the Chapter 13 Plan
The Note was assigned by two allonges, both attached to the Note. Objection (dkt. 14) Ex. A (last two pages); Reply (dkt. 25) Ex. A p. 13. The allonge from the original lender ("Original Lender") states, "Pay to the Order of Wells Fargo Bank, N.A." ("Wells Fargo"). Id. The second allonge is endorsed by Wells Fargo in blank. Id.
A promissory note endorsed in blank or payable to the bearer can be enforced by the person who has physical possession of the note. See Cal. Com. Code § 3301; Hwang, 438 B.R. at 665 ("Under California law, the holder of a note has the right to enforce it, regardless of whether the holder is the owner of the note or is in wrongful possession of the note."). The Gallaghers do not dispute that U.S. Bank (or its agent) has physical possession of the Note, and in any event U.S. Bank confirms in its Reply that it does have such possession. See Reply at 4:19.
In other words, U.S. Bank has established that is the person entitled to enforce the Note. Therefore it is the real party in interest and it has standing to object to the chapter 13 plan's proposed treatment of the indebtedness under the Note. See Veal, 450 B.R. 897.
2. U.S. Bank's Interest In the Note Need Not Be Reflected in the Real Property Records to be Enforceable
The foregoing analysis follows Veal. The Gallaghers themselves rely on Veal in their written Response. But at oral argument they changed course and attempted to distinguish Veal.
Counsel for the Gallaghers pointed out that the parties in Veal assumed the applicability of the Uniform Commercial Code (the "UCC"). Veal, 450 B.R. at 909. In this case, she argued, the governing law is not the UCC (as enacted in California) but the California real estate laws, apparently meaning that the transfer of the Note to U.S. Bank would have to be reflected in the real property records to be cognizable. In support of this new argument the Gallaghers rely on Debrunner v. Deutsche Bank Nat. Trust Co., 204 Cal.App.4th 433 (2012).
Debrunner does not help the Gallaghers. Debrunner deals with foreclosure under a DOT, not transfer of a promissory note, and it acknowledges that the UCC governs negotiable instruments such as promissory notes. See Debrunner, 204 Cal.App.4th at 441 (citing Padayachi v. IndyMac Bank, 2010 WL 4367221 (N.D. Cal. 2010) for the proposition that "[a]lthough Article 3 of the UCC governs negotiable instruments, it does not apply to nonjudicial foreclosure under deeds of trust.") (emphasis added).
The parties have not briefed whether the Note is in fact a negotiable instrument, but that has not been shown to make any difference. Debrunner referred to negotiable instruments, but as noted in Veal the same principles articulated by the UCC can be applied to transfers of non-negotiable instruments, and the Gallaghers have not shown any reason to do otherwise. See Veal, 450 B.R. at 909 n.14.
The matter before me is not a foreclosure but an objection to confirmation of a chapter 13 plan that proposes to ignore the arrears owed under the Note. It is hard to see how U.S. Bank, as the person entitled to enforce that Note, would not be the real party in interest with standing to object that proposed treatment. It is, for the reasons stated in Veal. See Veal, 450 B.R. 897.
3. The Gallaghers' Remaining Arguments Regarding the Note Transfer Rest on The Same Faulty Premises
a. Section 2932.5 of the California Civil Code Adds Nothing to the Gallaghers' Arguments
The Gallaghers cite California Civil Code § 2932.5, apparently for the proposition that transfers of the Note cannot be effective until they are recorded in the real estate records. Response (dkt. 21) at 10:15-25. That statute provides, "Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, " then that power of sale "is part of the security" and may be exercised by "the assignee if the assignment is duly acknowledged and recorded. " Cal. Civ. C. § 2932.5 (emphasis added).
There is substantial authority that this statute, which names mortgages but not deeds of trust, does not apply to the latter. In any event, by its terms the statute applies only to the exercise of a "power of sale." Assuming for the sake of discussion that U.S. Bank would have to show compliance with the statute by the time it sought to exercise the power of sale under the DOT, that is not the issue before this Bankruptcy Court. In this contested matter U.S. Bank is not exercising a power of sale, it is objecting to confirmation of a proposed chapter 13 plan. The Gallaghers have not shown how the statute is relevant to that objection.
See Herrera v. Federal National Mortgage Association, 205 Cal.App.4th 1495, 1509 (2012) ("It is well established that section 2932.5 does not apply to trust deeds in which the power of sale is granted to a third party, the trustee. Section 2932.5 applies to mortgages, in which the mortgagor or borrower has granted a power of sale to the mortgagee or lender."); Calvo v. HSBC Bank USA, N.A. 199 Cal.App.4th 118, 123 (Ct. App. 2011), rev. denied (Cal.S.Ct. Jan. 4, 2012) ("The rule that section 2932.5 does not apply to deeds of trust is part of the law of real property in California."); Caballero v. Bank of America, 2012 WL 475766 at *1 (9th Cir. 2012) ("For the reasons stated in Calvo and the many district court decisions that have reached the same conclusion... we find no convincing evidence' that the California Supreme Court would hold that California Civil Code section 2932.5 applies to deeds of trust."); Haynes v. EMC Mortgage Corporation, 205 Cal.App.4th 329, 332 (Cal.App. 1 Dist. 2012) ("That section 2932.5 applies only to mortgages is well settled."); In re Salazar, 2012 WL 896214 at *3 (S.D. Cal. 2012) ("the Court finds that § 2932.5 does not apply to deeds of trust."); Lindsay v. America's Wholesale Lender, et al., 2012 WL 83475 at *2 (C.D. Cal. 2012) ("Section 2932.5 does not require the recordation of an assignment of beneficial interest for a deed of trust, as opposed to a mortgage.'") (quoting Caballero v. Bank of America, No. 10-CV-02973-LHK, 2010 WL 4604031 at *3 (N.D. Cal. 2010) (emphasis in original); Yau v. Deutsche Bank National Trust Co. Americas, et al., 2011 WL 5402393 at *9 ("[Section 2932.5] does not apply where the power of sale is set forth in a deed of trust. Section 2932.5 applies only to mortgages that give a power of sale to the creditor, not to deeds of trust which grant a power of sale to the trustee.") (citation omitted). But see In re Cruz, 457 B.R. 806 (Bankr. S.D. Cal. 2011). See also Tamburri v. Suntrust Mortgage, Inc., 2011 U.S. Dist. LEXIS 72202 at *10-13 (N.D. Cal. 2011).
b. MERS' Alleged Inability to Assign the Note is Irrelevant, Because It is Not MERS Who Executed The Allonges
The Gallaghers devote a substantial portion of their arguments to alleged problems with the Mortgage Electronic Registration Systems, Inc. ("MERS"). MERS is the entity which is named as the Beneficiary in the DOT, as "nominee" for the Original Lender. Objection (dkt. 21) Ex. 1 pp. 9-10.
To put the issues in context, the reason for designating MERS as a nominee for lenders is so that many DOTs can be pooled, securitized, fractionalized, and traded via MERS' internal records without having to incur the burdens and risks associated with attempting to record each transfer of every DOT interest with the applicable county recorder's office. See, e.g., In re Weisband, 427 B.R. 13, at 20 n.6 (Bankr. D. Ariz. 2010). That delegation to MERS undoubtedly has its drawbacks (among other things, county recorders complain that they receive fewer fees, and both borrowers and loan servicers complain that securitization can make it difficult to determine who has authority to negotiate any departure from strict enforcement of the loan documents). But borrowers like the Gallaghers may benefit at the inception of the loan from reduced transaction costs and an easier flow of capital. In any event, as noted in Veal, for purposes of determining prudential standing or the real party in interest it is "irrelevant whether the Note has been fractionalized or securitized - so long as [debtors] do know who[m] they should pay." Veal, 450 B.R. at 912.
The Gallaghers point out that MERS executed various documents entitled "Assignment of Deed of Trust" that purport to assign not only the DOT but also the Note or "all rights accrued or to accrue under [the Note]." Response (dkt. 21) Ex. 1 pp. 26-31. The Gallaghers argue that the DOT only grants MERS the authority to assign the DOT itself, not the Note, and there is no evidence in the record of any "agency agreement" or other authority granted to MERS. Response (dkt. 21) at 11:14-24 & 12:12:15-13:3 (citing cases).
The courts disagree whether MERS does in fact have sufficient authority to effectuate a transfer of the Note under the standard language of the DOT. Compare, e.g., Tilley v. Ampro Mortgage, 2012 WL 33033, at *3 (E.D. Cal. 2012) ("courts have found that whatever the role a nominee may play when necessary to comply with law and custom' [the standard language of the DOT], MERS acts as the agent of the lender and may assign a beneficial interest in the deed of trust, assign the note, and appoint a substitute trustee.") (emphasis added) (citing Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 270-271 (2011)) with In re Weisband, 427 B.R. 13, 20 (Bankr. D. Ariz. 2010) (holding that MERS lacks authority to assign any documents under standard language) and In re Fontes, 2011 WL 3300933 at *4 (9th Cir. BAP) ("although the deed of trust gave MERS, as nominee, the power to assign the deed of trust, it did not mention the note, nor did the note itself name MERS as nominee, so MERS could not take this right from the documents themselves").
But I need not decide this issue. MERS did not execute the allonges. The Original Lender and Wells Fargo executed allonges, and as discussed above that was sufficient to transfer the Note to U.S. Bank.
For all of the foregoing reasons, U.S. Bank, as the person entitled to enforce the Note, is the real party in interest and has standing to object to the chapter 13 plan's proposed treatment of the Note. The Gallaghers' arguments must be rejected on that basis alone.
4. Alternatively, U.S. Bank as Assignee of the DOT Can Object to the Plan
Supposing for the sake of discussion that the allonges' transfers of the Note to U.S. Bank were void (which they are not), U.S. Bank can object to the plan solely on the basis of being the assignee of the DOT. The Gallaghers claim that "[i]f the Deed of Trust is severed from the Note, it becomes meaningless." Response (dkt. 21) at 11:18-19. That is incorrect.
Debrunner holds that a creditor who has not yet received a transfer of the promissory note can commence nonjudicial foreclosure based solely on its interests under the DOT. That is not to say that a creditor can complete nonjudicial foreclosure without the promissory note, but it can at least start the process. Debrunner, 204 Cal.App.4th at 442 (rejecting common law, cited in Veal, that "an assignment of the [DOT] alone is a nullity") (footnote and citation omitted). See also Veal, 450 B.R. at 915-18 & n. 34 (citing authority that under California law nonjudicial foreclosure can be commenced by an assignee of the DOT alone, without the related promissory note).
See Santens v. Los Angeles Fin. Co., 91 Cal.App.2d 197, 201-02 (1949); Cockerell v. Title Ins. & Trust Co., 42 Cal.2d 284, 291 (1954) (summarizing Santens as holding that the deed of trust "... could only be foreclosed by the owner of the note").
Given that U.S. Bank could commence foreclosure without the Note, it certainly can take the lesser step of defending its interests under the DOT against the proposed treatment in a chapter 13 plan. This is not to say that, if the Note and the DOT were held by different entities, the Gallaghers would have to take the risk of paying one entity and not the other. If those were the facts, then the Gallaghers might need to hold distributions in a disputed claims reserve pending a determination of who was the true creditor.
But those are not the facts and that issue is not before me. Rather, U.S. Bank is taking the defensive position of objecting to the chapter 13 plan's proposed radical changes in rights under both the Note and the DOT. U.S. Bank can defend against that proposal either as holder of the Note, or the DOT, or both. See Veal, 450 B.R. at 913-22 (analysis of standing and real party in interest is different for relief from stay than for claims allowance).
The Gallaghers raise several additional arguments regarding assignment of the Note, but I reject each of those arguments below. In addition, the arguments are all fruitless because, as set forth above, U.S. Bank can rely on the allonges to the Note without having to rely on any assignment of the DOT.
a. Redundancy Does Not Invalidate the DOT Assignments
The Gallaghers point to three DOT assignments, which they obtained from U.S. Bank's proofs of claim in an earlier case. The Gallaghers are correct that the assignments appear to be redundant, but they do not show why that matters.
U.S. Bank argues that I should disregard the Gallaghers' evidence regarding the chain of assignments because those documents were filed by U.S. Bank in a prior dismissed case, not in the instant case. Reply (dkt. 25) at 5:19-27. I reject that argument. I will not ignore documents on which U.S. Bank itself previously relied, which also were recorded in the public records.
The first assignment is from MERS directly to U.S. Bank. The latter two assignments are from MERS to Wells Fargo and then from Wells to U.S. Bank.
In other words, U.S. Bank apparently received the same thing twice. This appears to be either a correction of some defect in the first assignment or an error in issuing redundant assignments, but in any event the Gallaghers have not shown anything ineffective, improper, or nefarious about this redundancy.
b. The Gallaghers Have Not Established Any Ineffectiveess of the DOT Assignments Due to Format or Timing
The first assignment is dated April 16, 2010 and recorded April 22, 2010, and it is from MERS, "by First American Title Insurance Company [First American'], its Attorneys In Fact, as Beneficiary, " to U.S. Bank ("Assignment 1"). Response (dkt. 21) Ex. 1 pp. 26-27. The second assignment is dated May 19, 2010 and recorded August 27, 2010 from MERS, "Solely as Nominee" for the Original Lender, to Wells Fargo ("Assignment 2"). Response (dkt. 21) Ex. 1 pp. 28-29. A third assignment is dated May 19, 2010 and recorded August 30, 2010, from Wells Fargo to U.S. Bank ("Assignment 3"). Response (dkt. 21) Ex. 1 pp. 30-31.
The Gallaghers object that MERS "failed to state Lender's name in [the Assignment 1] transaction, " apparently meaning that Assignment 1 was executed by First American, as attorney in fact for MERS, without naming the Original Lender in the signature line itself. Response (dkt. 21) at 11:6-8 (footnote omitted). From this they argue that the assignment is "void" because MERS was acting in its own name instead of the name of its principal, citing Fisher v. Salmon, 1 Cal. 413 (1851).
Fisher is not as broad as the Gallaghers argue. It involved a dispute between the successors in interest to the agent and the principal, in which the court held that the agent could not act beyond the authority granted by the principal. Fisher, 1 Cal. At 413-14. Fisher does not stand for the proposition that, simply because the signature line did not name the Original Lender, MERS somehow lost the authority that actually is granted to it in the DOT, which the Gallaghers do not challenge.
In addition, supposing for the sake of discussion that Assignment 1 were ineffective, the DOT was separately assigned to U.S. Bank through Assignments 2 and 3.
The Gallaghers next object, "Notably Assignment 1 was recorded eight days after the recording of a Notice of Sale by First American." Response (dkt. 21) at 11:2-3. The Gallaghers do not explain what is notable about this timing, but their argument might be that before U.S. Bank received an assignment of the DOT First American was purporting to act as its agent under the DOT. Alternatively, perhaps the Gallaghers' argument is that First American violated Civ. C. § 2932.5 by taking steps to exercise the power of sale before the recording of the assignment under which derived its authority. Again, Assignments 2 and 3 appear to solve this problem by ratifying First American's authority, if it needed ratification. Principals ratify the acts of agents all the time.
The Gallaghers appear to argue that principals cannot ratify the acts of agents when real property is involved, citing Videau v. Griffin, 21 Cal. 9 (1863). That sweeping generalization is incorrect: Videau involved the statute of frauds, and a contest between two transferees of the same property, one of whom claimed to take first in time but through a person who was not authorized to act for the transferor at the time. No such facts are presented in this case.
c. The Gallaghers Have Not Established Any Ineffectiveess of the DOT Assignments Due to Notarizations
The Gallaghers argue that the assignment documents are somehow invalid because "the same notary" notarized assignments on "the same day" for entities located in Michigan and South Carolina. Response (dkt. 21) at 7:11-16 (emphasis omitted). That argument is misguided, if not misleading. The entities' principal offices might be located in different states, but the notarization shows that both the notary and the individuals who signed the documents were in South Carolina. Response (dkt. 21) Ex. 1 at 29 & 31.
The Gallaghers argue that on one copy of Assignments 2 and 3 the person whose signature is being notarized is identified in typewritten text as "Assistant Secretary" of MERS, whereas the other copy of the same documents has handwritten marks crossing off those words, substituting the signer's name, and adding the notary's initials next to the change. See Response at 8:6-9 & Ex. 1 at PDF pp. 27-30 and compare id. Ex. 4 at PDF pp. 28-30. This appears to be nothing more than a correction by the notary after an initial photocopy was made, but regardless what it is the Gallaghers have not established why that would bar U.S. Bank from objecting to confirmation if their chapter 13 plans.
d. The Purported Dual Agency Is Not Shown to Make the DOT Assignments Ineffective
The Gallaghers argue that one of the persons executing an assignment could not have been an authorized agent for MERS because a different document designates her "as a signer of documents for Wells Fargo." Response (dkt. 21) at 7:18-19 & Ex. 2. But the documents are of different dates so the person at issue may have been sequentially an authorized signatory for one institution and then another. Second and alternatively, the Gallaghers have not presented any authority that there is anything wrong with simultaneously acting as an authorized signer for two different entities who are not shown to be adverse to one another. Lawyers do so all the time, for example.
5. Pejorative Terms do not Make the DOT Assignments Ineffective
The Gallaghers argue that one of the document signers is "a robo-signer, " by which they mean someone who "signs foreclosure documents without reviewing them or having actual knowledge of the matter" and who "fraudulently certif[ies] that the financial institution has the correct and required legal documentation to foreclose on the property." Response (dkt. 21) at 8:1 & n.2. The Gallaghers' pejorative terms and allegations about what might have occurred in connection with other loans add nothing to their argument: they have not established any lack of "correct and required legal documentation" regarding their own loan, let alone any fraud perpetrated against them.
6. Prima Facies Validity of U.S. Bank's Claim
Supposing for the sake of discussion that any one of the foregoing arguments had any partial merit, they are insufficient to overcome the prima facie validity of the proof of claim filed by U.S. Bank on May 10, 2012. Fed. R. Bankr. P. 3001(f).
C. The Gallaghers Have Not Established Their Standing to Object to Any Alleged Violation of the Trust Documents
The Gallaghers argue that there has been some sort of violation of the trust agreement that was executed in connection with the securitization of the loan. Response (dkt. 21) at 16:9-18:21. As discussed at oral argument at the hearing on April 19, 2012, they have not shown how they have any standing to assert an alleged violation of a trust agreement to which they are not a party, which involves groups of investors in pools of loans. The Gallaghers have nothing to do with that trust agreement.
D. The Gallaghers Offer No Actual Defense For Their Chapter 13 Plan
The Gallaghers' original chapter 13 plan would not fully cure the arrears under the Note and their amended chapter 13 plan simply ignores the arrears. As U.S. Bank argues, these defects are fatal to the Gallaghers' efforts to confirm a chapter 13 plan for several alternative reasons.
First, the Gallaghers fail to meet the statutory requirement to cure arrearages within a reasonable period not exceeding 60 months. 11 U.S.C. § 1322(b)(5) & (d). Second, they fail to provide the present value of the arrearages. 11 U.S.C. § 1325(a)(5)(B)(ii). Third, their proposals are not feasible because they lack sufficient monthly disposable income to cure the foregoing defects. 11 U.S.C. § 1325(a)(6).
The Gallaghers offer no contrary arguments. U.S. Bank's objections to confirmation are sustained.
III. CONCLUSION
The Gallaghers' original and amended chapter 13 plans both propose to disregard, either in whole or in part, the arrears owed under the Note and secured by the DOT. The Gallaghers offer no defense for that treatment of their debt, other than to challenge whether U.S. Bank has standing or is the real party in interest. Those challenges lack merit. U.S. Bank can object to the proposed treatment of that debt, both as the person entitled to enforce the Note and alternatively as the assignee of the DOT given to secure that debt. U.S. Bank's objections to confirmation are sustained. Confirmation will be DENIED by separate order.