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In re Polverari

United States District Court, D. Connecticut

September 30, 2016

IN RE DAVID POLVERARI, Debtor,
v.
DAVID M. POLVERARI and WELLS FARGO BANK, N.A., SUCCESSOR BY MERGER TO WELLS FARGO BANK SOUTHWEST, N.A. f/k/a WACHOVIA MORTGAGE, FSB, f/k/a WORLD SAVINGS BANK, FSB, Appellees. DITECH FINANCIAL, LLC f/k/a GREEN TREE SERVICING, LLC, Appellant, Bankruptcy Petition No. 14-31711 (JAM)

          MEMORANDUM OF DECISION FINDING DEBTOR'S MOTION TO STRIKE [DKT. NO. 6] MOOT AND AFFIRMING BANKRUPTCY COURT ORDER

          Hon. Vanessa L. Bryant United States District Judge

         I. Introduction

         This appeal arises from the Chapter 13 bankruptcy proceeding initiated by the Debtor David Polverari on September 12, 2014. Appellant Ditech Financial, LLC f/k/a Green Tree Servicing, LLC (“Ditech” or “Appellant”), appeals the Bankruptcy Court's denial of its Motion for Relief from Automatic Stay, [Dkt. No. 22, Appellant's Appendix (“Appendix”), at ¶ 490; Dkt. No. 9, Sept. 30, 2016 Transcript from Hearing on Motion for Relief from Stay (“9/30/2016 Tr.”), at 36:15-43:23]. Appellees Mr. Polverari and Wells Fargo Bank, N.A. (“Wells Fargo”) have filed briefs in response. Pending before the Court is Ditech's appeal, as well as Mr. Polverari's Motion to Strike Designation of Items for the Record, [see Dkt. No. 6.]. For the reasons that follow, the Motion to Strike is MOOT, and the Bankruptcy Court's decision on Ditech's Motion for Relief from Automatic Stay is AFFIRMED.

         II. Background

         Unless otherwise noted, the parties do not dispute the facts that follow, and they are consistent with the Bankruptcy Court's factual findings.

         On May 20, 2005, Mr. Polverari entered into an agreement with American Broker's Conduit (“ABC”) for a $309, 000.00 loan for the purchase of a home at 13 Katie Joe Lane, Branford Connecticut (the “Note”). [See Appendix at ¶ 72-74.] This loan was secured by an Open-End Mortgage Deed for that property (the “Mortgage”), which was duly recorded. [See Id. at A75.] Mortgage Electronic Registration Systems (“MERS”) was identified as “the mortgagee under this Security Instrument, ” “acting solely as a nominee for Lender and Lender's successors and assigns.” [See Id. at A75-89.] ABC then endorsed the Note to “Countrywide Document Custody Services, a division of Treasury Bank, N.A., ” which in turn endorsed the Note to Countrywide Home Loans, Inc. (“CHL”). [Id. at A72-74.] CHL then endorsed the Note in blank. [Id. at A72-74.] While the record is somewhat ambiguous as to when these endorsements became effective, Mr. Polverari made mortgage payments to “Countrywide” as early as August 30, 2005. [See Id. at A222-A223, A262-263.] On September 3, 2008, CHL recorded a release of the 2005 Mortgage (the “Release”), dated as of August 20, 2008. [Id. at A107; Dkt. No. 8, July 29, 2015 Transcript from Hearing on Motion for Relief from Stay (“7/29/2015 Tr.”), at 4:8-5:4.]

         MERS subsequently assigned the Mortgage to Bank of America, NA, successor by merger to BAC Home Loans Servicing LP f/k/a Countrywide Home Loans Servicing, LP, which in turn assigned the Mortgage to Appellant's predecessor, Green Tree Servicing, LLC. [Appendix at ¶ 90-91.] Appellant also claims that it has held the Note since 2013, [Dkt. No. 7, June 4, 2015 Transcript from Hearing on Motion for Relief From Stay (“6/4/2015 Tr.”), at 6:23-7:4; 7/29/2015 Tr. at 12:17-20], although it has offered no evidence regarding how it came to hold the Note or from what entity the Note was acquired.

         Ditech filed a Motion for Relief from Automatic Stay in order to commence, and prosecute to judgment, a foreclosure action against Mr. Polverari during the pendency of his Chapter 13 bankruptcy litigation. [Appendix at ¶ 65-69.] Mr. Polverari and Wells Fargo countered that Ditech was not entitled to a stay, because the Release meant that Ditech had no valid security interest in the property. [Id. at A98-127.] During one of three hearings on the motion, Ditech argued that the 2008 release was invalid because it was recorded “by somebody other than the titleholder, ” and because “being a holder of a note does not give the authority to release the mortgage.” [7/29/2015 Tr. at 5:19-6:16.] Appellant further maintained that “MERS was the mortgagee of record; they're the only party entitled to release it. They didn't release it, and therefore the release is invalid.” [Id. at 27:8-16.]

         In an order from the Bench, Judge Manning held that she was “not at all convinced there is any statutory law, case law or anything else that [Ditech] can show me that somehow invalidates this release and allows [Ditech] to claim an interest in the property that allows it to obtain relief from the stay from this Court.” [9/30/2015 Tr. at 38:12-18.] She stated that no Connecticut law dictated that MERS was the only party entitled to release a mortgage, and that she did not agree with the argument that CHL could not release the mortgage because it was “outside of the chain of title.” [Id. at 40:5-13.] Judge Manning further held that whether or not the mortgage was paid prior to CHL released it was irrelevant because the release was recorded “before that issue was ever resolved in any way, shape or form” and because “Countrywide thought it was paid” when it executed and recorded the release. [Id. at 40:20-41:1.]

         III. Standard of Review

         Jurisdiction over this appeal is conferred by 28 U.S.C. § 158(a)(1). In reviewing the judgment of a bankruptcy court, Federal Rule of Bankruptcy Procedure 8013 provides that “[f]indings of fact . . . shall not be set aside unless clearly erroneous.” “A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” New York Progress & Prot. PAC v. Walsh, 733 F.3d 483, 486 (2d Cir. 2013) (quoting United States v. Gypsum Co., 222 U.S. 364, 395 (1948)). “The bankruptcy court's conclusions of law, however, are reviewed de novo.” In re Guadalupe, 365 B.R. 17, 19 (D. Conn. 2007).

         IV. Analysis

         A. Motion to Strike

         Mr. Polverari filed concurrent and identical motions to strike items from Ditech's Designation of Record. [See Dkt. No. 6; Bankruptcy Dkt. Nos. 70, 92.] On January 15, 2016, the Bankruptcy Court issued an order granting Mr. Polverari's Motion to Strike with respect to items 23-28, 30-33, 35-36, and 38-52, and denying it with respect to items 29, 34, and 37. This Court need not decide the motion filed in the District Court in light of the Bankruptcy Court's decision. Federal Rule of Bankruptcy Procedure 8009(e) delegates to the Bankruptcy Court the authority to decide any disputes “about whether the record accurately discloses what happened in the bankruptcy court” and to conform the record accordingly. This Court will not disturb the Bankruptcy Court's holding, because “the bankruptcy court knows best what was before it and what it considered in making its ruling.” In re Ames Dep't Stores, ...


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