United States District Court, D. Maine
DECISION AND ORDER ON BANKRUPTCY APPEAL
D. Brock Hornby United States District Judge.
In 2014, the Maine Law Court ruled that a party seeking to foreclose a residential mortgage lacks standing when it holds the mortgage solely by virtue of an assignment from Mortgage Electronic Registry Systems (MERS). Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶¶ 10-17, 96 A.3d 700. A foreclosing party has to have “two documents-a promissory note and a mortgage securing that note, ” and “standing to foreclose involves the plaintiff’s interest in both the note and the mortgage.” Id. ¶ 9 (emphasis added). With respect to the mortgage document at issue in Greenleaf, the Law Court held that the language of the mortgage granted MERS, as the lender’s nominee, only the authority to record the homeowner’s mortgage; it did not grant MERS the authority to assign the mortgage. Id. ¶¶ 13-17. Thus, a foreclosing party whose purported ownership of a mortgage depends upon an assignment by MERS, without more, lacks standing because it is not a “mortgagee” within the meaning of Maine’s foreclosure statute. Id. ¶ 14; see 14 M.R.S.A. § 6321 (2003 & Supp. 2015).
The repercussions of Greenleaf’s standing requirement have been the subject of vigorous debate among members of the Maine bar. Compare John J. Aromando, Standing to Foreclose in Maine: Bank of America, N.A. v. Greenleaf, 29 Me. Bar J. 186, 188 (2014) (criticizing the Law Court’s analysis in Greenleaf by stating that it is “illogical to require ‘ownership’ of the mortgage, separate and distinct from the note, as a condition of standing to foreclose. Maine law has been clear on this for many years: the mortgage follows the note”), with Thomas A. Cox & L. Scott Gould, In Defense of Greenleaf: A Response to Standing to Foreclose, 30 Me. Bar. J. 18, 21 (2015) (defending Greenleaf as “entirely consistent with long-standing Maine common law precedent, with Maine’s commercial code, with Maine’s statute of frauds, and with Maine’s civil action foreclosure statutes”). After Greenleaf, the Maine Legislature enacted new legislation clarifying the authority of nominee mortgagees like MERS to execute assignments, discharges, and partial releases. P.L. 2015, ch. 289, § 1 (effective Oct. 15, 2015) (codified at 33 M.R.S.A. § 508 (Pamph. 2015) (applying only to assignments that are the subject of a final foreclosure judgment).
This appeal from a bankruptcy judge’s ruling in a Chapter 11 bankruptcy proceeding tests how Greenleaf affects bankruptcy law. Specifically, does Greenleaf prevent a creditor from having secured claim status when its claim is secured by a mortgage assigned from MERS? I take the facts (they are undisputed) from the Bankruptcy Court’s findings under Fed.R.Bankr.P. 7052 and the judicial record. I heard oral argument on January 20, 2015.
Facts and Procedural Background
Shai Shawn Tamir filed a Chapter 11 petition with the Bankruptcy Court of this District. His schedules of assets and liabilities included mortgaged apartment buildings. Under Schedule D (creditors holding secured claims), Tamir listed-as disputed-HSBC Bank and Citibank. Thereafter, each bank filed a proof of claim (POC) asserting its secured claim, and Tamir filed an omnibus objection to the claims under Fed.R.Bankr.P. 3007(d). Based on the Law Court’s holding in Greenleaf, Tamir argued that the bank creditors could not hold secured claims against him because they lacked standing to foreclose given that each held its mortgage by assignment from MERS.
The Bankruptcy Court ultimately overruled Tamir’s objection and allowed the banks’ amended POCs as secured claims,  reasoning that the fact that the banks “may not have standing to foreclose their mortgages on [Tamir’s] properties is not a basis for determining the validity of their secured claims in this chapter 11 case.” Bankr. D. Me. Mem. of Decision at 5 (ECF No. 1-2). The Bankruptcy Court concluded that “[f]or purposes of asserting a secured claim in a borrower’s bankruptcy case[, ] a noteholder’s beneficial ownership of the mortgage is sufficient to establish secured status.” Id. at 6-7. This timely appeal followed.
Standard of Review
I review the Bankruptcy Court’s findings of fact for clear error and its conclusions of law de novo. Davis v. Cox (In re Cox), 356 F.3d 76, 82 (1st Cir. 2004); In re Winthrop Old Farm Nurseries, Inc., 50 F.3d 72, 73 (1st Cir. 1995); see In re Catton, 542 B.R. 33, 35-36 (D. Mass. 2015). Here, because the “decision hinges on an interpretation of the Bankruptcy Code, it presents a question of law (and, thus, engenders de novo review).” In re Bank of N. Eng. Corp., 364 F.3d 355, 361 (1st Cir. 2004) (citing United States v. Yellin (In re Weinstein), 272 F.3d 39, 42 (1st Cir.2001)).
On appeal, the banks challenge Tamir’s standing. I reject Tamir’s contention that the banks waived that issue by failing to raise it in the Bankruptcy Court. “[S]tanding is a jurisdictional issue that may be raised at any time.” In re Torres Martinez, 397 B.R. 158, 163 (B.A.P. 1st Cir. 2008); see In re Great Rd. Serv. Ctr., Inc., 304 B.R. 547, 550 (B.A.P. 1st Cir. 2004) (“[Q]uestions of standing must be considered sua sponte, as it is akin to subject matter jurisdiction.” (alteration in original) (quoting another source)). “[W]hen the lower court has not undertaken the required inquiry, the appellate court must do so.” In re Great Rd. Serv. Ctr., Inc., 304 B.R. at 550; see In re Furlong, 660 F.3d 81, 86 (1st Cir. 2011) (“Where the issue of standing was not raised below, this Court must undertake the inquiry without remanding.”); see also Spenlinhauer v. O'Donnell, 261 F.3d 113, 120 (1st Cir. 2001). But I do conclude that Tamir has standing.
“Bankruptcy standing is narrower than Article III standing.” In re Great Rd. Serv. Ctr., Inc., 304 B.R. at 550; Spenlinhauer, 261 F.3d at 117. “Under the Bankruptcy Code, standing to appeal from a final bankruptcy court order is accorded only to a ‘person aggrieved.’” Spenlinhauer, 261 F.3d at 117. “The ‘person aggrieved’ paradigm . . . bestows standing only where the challenged order directly and adversely affects an appellant’s pecuniary interests.” Id. at 117-18 (footnote omitted) (citations omitted); see In re Formatech, Inc., 483 B.R. 363, 367-68 (B.A.P. 1st Cir. 2012). “A ‘person aggrieved’ is one whose property is diminished, burdens are increased, or rights are impaired by order on appeal.” In re Great Rd. Serv. Ctr., Inc., 304 B.R. at 550; In re Arroyo, 489 B.R. 486, 488 (B.A.P. 1st Cir. 2013).
Whether an appellant is a “person aggrieved” is ordinarily a question of fact, see Spenlinhauer, 261 F.3d at 118; 1-5 Collier on Bankruptcy ¶ 5.07 n.1 (15th ed. 2015), but where the relevant facts are undisputed, courts may treat the question as an issue of law, cf. In re El San Juan Hotel, 809 F.2d 151, 154 n.3 (1st Cir. 1987). See also Spenlinhauer, 261 F.3d at 118 (“[P]rovided ...