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Applewhite v. Carrington Mortgage Services, LLC

United States District Court, N.D. Mississippi, Aberdeen Division

March 31, 2014

HENRY J. APPLEWHITE, Chapter 7 Trustee, Appellant,
v.
CARRINGTON MORTGAGE SERVICES, LLC and WELLS FARGO BANK, N.A., Appellees,

MEMORANDUM OPINION

NEAL B. BIGGERS, Jr., District Judge.

Presently before the court is the appeal from bankruptcy court filed by Henry J. Applewhite, Chapter 7 Trustee. Upon due consideration of the parties' filings and supporting and opposing authority, the court is ready to rule.

Factual and Procedural Background

On October 7, 2005, Jennifer Gardner ("Debtor") and Willie Gardner obtained a loan from New Century Mortgage Corporation and executed an Adjustable Rate Note. The Note was endorsed in blank by New Century. The indebtedness evidenced by the Note was secured by real property located in Lee County, Mississippi, described in a Deed of Trust from the Debtor and Willie Gardner to The Weir Law Firm, Trustee for New Century. The Deed of Trust was recorded on October 17, 2005, in Lee County, Mississippi and was never assigned.

Pursuant to an agreement with New Century, Wells Fargo, and a depositor, Carrington Mortgage Services now services the Note for Wells Fargo and is currently in possession of the Note.

Debtor initiated a Chapter 7 Proceeding on December 16, 2010. On September 27, 2011, Trustee Applewhite commenced an adversary proceeding to avoid the Deed of Trust. Carrington and Wells Fargo filed a motion to dismiss the Trustee's complaint, which the United States Bankruptcy Court granted.

In its Order of Dismissal, the bankruptcy court determined that "[a]lthough the Deed of Trust has never been assigned, this does not affect its validity and any holder of the Note may enforce the Deed of Trust. Thus the Trustee cannot avoid the Deed of Trust and bring the real property identified therein into the bankruptcy estate." Order of Dismissal, at 4. Trustee Applewhite now appeals the Bankruptcy Court's ruling.

Standard of Review

This court serves as an appellate court when reviewing a bankruptcy court's decision pursuant to 28 U.S.C § 158. See Webb v. Reserve Life Ins. Co., 954 F, 2d 1102, 1103 (5th Cir. 1992). A bankruptcy court's findings of fact shall not be set aside unless clearly erroneous, while conclusions of law are reviewed de novo. Fed.R.Bankr.P. 8013; see also Matter of U.S. Abatement Corp., 79 F.3d 393, 397 (5th Cir. 1996). The parties agree that the appeal before the court involves questions of law, and therefore the court will employ the de novo standard of review.

Discussion

Applewhite presents the following issues for the court's review: (1) Whether the Bankruptcy Court erred in its Order of Dismissal; (2) Whether the holder of the Note associated with a Deed of Trust that was never assigned to said holder may enforce the Deed of Trust; and

(3) Whether the Trustee can avoid such Deed of Trust never assigned to the holder of the associated Note and bring the real property identified therein into the bankruptcy estate.

The court's consideration of potential error on behalf of the Bankruptcy Court in dismissing the Trustee's complaint to avoid and/or set aside lien, recover property, and for other relief encompasses Applewhite's remaining issues.

Trustee Applewhite maintains that the Bankruptcy Court erred in dismissing his complaint because Wells Fargo is not a "person entitled to enforce" the Note under Mississippi law. Appellees Carrington and Wells Fargo contend that the Trustee has waived his right to challenge the Bankruptcy Court's judgment because relief was sought pursuant to 11 U.S.C. § 544 and this section does not contemplate holder ...


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