District Court Partially Overturns

Bankruptcy Court Decision

Concerning MERS Authority
By David A. Blansky, Esq. | Published March 30, 2012
On March 28, 2012, U.S. District Court Judge Joanna Seybert vacated part of the decision made
by Bankruptcy Court Judge Robert E. Grossman in In re Ferrel L. Agard, 444 B.R. 231
(Bankr.E.D.N.Y. 2011), wherein he concluded that MERS’s “nominee” status did not confirm
upon it authority to assign mortgages. A copy of the decision may be found here.
In Agard, Judge Grossman granted a motion for relief from stay because the movant mortgagor
had been determined to be secured to the residence by the state court that issued judgment of
foreclosure in its favor. In addition to granting relief from stay, Judge Grossman concluded that
“in all future cases which involve MERS, the moving party must show that it validly holds both
the mortgage and the underlying note in order to prove standing before this Court.” Id at 254.
Subsequent to the issuance of the decision in Agard, Agard appealed Judge Grossman’s order
granting stay relief. MERS moved, as an intervening party, for reconsideration and cross-
appealed the order granting relief from the automatic stay. Judge Grossman denied MERS
motion for reconsideration on April 8, 2011. MERS appealed the denial of its motion for
reconsideration. Agard later withdrew her appeal.
On appeal, MERS argued that to the extent that Judge Grossman’s decision addresses issues
beyond the application of the Rooker-Feldman doctine and res judicata, the Agard decision was
an unconstitutional advisory opinion requiring vacatur. Judge Seybert agreed and observed that
once Judge Grossman determined he was barred from revisiting the movant’s status as a secured
creditor as a result of the judgment of foreclosure entered by the state court, the Bankruptcy
Court lacked subject matter jurisdiction over the dispute. She determined, accordingly, that
Judge Grossman’s conclusion that MERS lacked authority to assign the subject mortgage had no
effect on the parties before him. As a result, she directed that his decision in Agard addressing
the hypothetical question concerning the standing of the movant to seek relief from stay, in the
absence of a judgment of foreclosure, be vacated as to his ruling on this issue.
While the vacatur of part of the Agard decision prevents the case from being cited as authority
for the proposition that MERS, in its capacity as nominee, lacks standing to assign mortgages, it
should not dissuade practitioners from taking up the issue in a future case where judgment of
foreclosure has not been entered or from using Judge Grossman’s observations as grounds to
object to relief from the automatic stay.
Judge Seybert’s decision was entered in the consolidated appeals before the District Court in
Agard v. Select Portfolio Servicing, Inc., case no. 11-cv-1826 and Mortgage Electronic
Registration Systems Inc. v. Ferrel L. Agard, et al, case no. 11-cv-2366, both arising out of
Ferrel L. Agard’s Chapter 7 bankruptcy case, case no. 10-77338-REG.
The views expressed on this post are mine and do not necessarily reflect the views of LH&M.