Alert February 10, 2009

Bankruptcy Court Reverses Prior Ruling Dismissing Secured Creditor’s Claim for Lack of Standing

A Massachusetts bankruptcy judge recently reversed on reconsideration one of a series of controversial decisions by the Massachusetts bankruptcy courts holding that creditors lack standing to seek relief from stay or to foreclose. In an earlier decision, the court held that the creditor had failed to prove its ownership of the debtor’s mortgage loan, dismissed the claim for lack of standing, and issued an order to show cause why the creditor and its counsel should not be sanctioned “for filing and prosecuting its Motion for Relief from the Automatic Stay without competent evidence that  [the creditor] had the requisite standing under applicable law as the holder of the mortgage.” Following a further hearing and the submission of factual affidavits and documentary evidence, including evidence of the securitization and transfer of the loan, the same court held that the creditor’s “pleadings filed in support of its Motion for Reconsideration and in conjunction with its amended proof of claim . . . cured the defects found by the court [in its initial decision] and [the creditor] has standing to assert its claim in the bankruptcy case.” Goodwin Procter partner Rich Oetheimer represented the creditor at the successful hearing. Click here for In re Hayes, No. 07-13967 (Bankr. D. Mass. Jan 29, 2009); click here for the related order.