Maryland's Court of Appeals decides Anderson v. Burson, and leaves the lender "standing."

On December 20, 2011, the Maryland Court of Appeals deftly greased the skids for continued enforcement of mortgage notes and deeds of trust in the case Anderson v. Burson. Judge Harrell has poured oil over the troubled waters created by repeated challanges to lender standing to enforce debt instruments, as described in my prior post on this case.

The anlysis is elegantly simple, dealing with the Uniform Commercial Code and the differences between a "holder" and a "transferee."  More importantly, the Court gives yearning litigation lawyers a standard analysis for establishing the "standing" of their lender clients. In practice, the standard will impose a large investigative burden on the lender.  But it is perfectly reasonable for any entity seeking relief from the court to do the work required to establish it's particular entitlement, n'est pas? Take a walk through the decision, after the jump.

Cert granted! Is the bank a non-holder in possession? Should it matter to you?

Anderson v. Burson will be argued in the Court of Appeals on September 1, 2011.  Cook some popcorn in the office microwave, pop up the big screen in your conference room, and settle in for the webcast!

Maryland's highest court will hear argument on whether a "non-holder in possession" has standing to execute on the debt's security instrument.  In a world of missing endorsements, missing originals, or incomplete assignments, this could be huge.  I posted a summary of the COSA opinion in December, 2010.

It's like a game show, these days, trying to identify the holder/owner/servicer/agent/nominee/beneficiary/etc. for a given instrument to the courts. Cue up the introductory fanfare from the band, pick curtain one, two or three, and let the announcer's voice resonate throughout the courtroom, declaring for the judge "and the lender is....."

Missing or incomplete endorsements? Then who can foreclose or sue for priority?

I have not posted for some time. It has not been for lack of interesting stuff happening in the industry. It is because that stuff has been so widely reported in the mainstream media. I have had little to add that would be of interest or which would make the widely distributed news more useful.

But the Maryland Court of Appeals has reported Anderson v Burson ( http://mdcourts.gov/opinions/cosa/2010/434s09.pdf ) on December 22, 2010. This is an opinion worth reading if you are involved in title insurance, foreclosure or bankruptcy work. It clarifies how a lender or servicer may demonstrate its standing to sue for lien priority where the chain of endorsements and assignments is unclear or incomplete.

The case presents a very common fact pattern: The "XYZ Trust" alleges standing to appoint a substitute trustee for purposes of foreclosing a deed of trust naming a prior lender and trustee. The title chain is missing a clear endorsement of the note over to the "XYZ Trust." The borrowers thus moved to enjoin the foreclosure.

The core of this opinion is the Specials' review of the commercial law defining "holders," and the transfer of instruments. In sum, where "XYZ Trust" is not linked into the chain of title by an express endorsement or allonge, it will have standing to sue or appoint substitute trustees if it meets the definition of "a non-holder in possession" as the term presents in the Commercial Code.

For outside counsel, this means some adjustment to our pleading of the issue. It also lessens our burden of proof, since absence of that exact endoresment is no longer fatal to the standing issue. Now, please excuse me as I must amend a few complaints!