Pace et al v. JP Morgan Chase Bank, NA et al

Filing 19

ORDER DISMISSING CASE. Signed by Judge James C. Mahan on 8/6/2013. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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CLIVE AND YOLANDA PACE,

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2:13-CV-339 JCM (GWF)

Plaintiff(s),

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v.

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JPMORGAN CHASE BANK, N.A., et
al.,

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Defendant(s).

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ORDER

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Presently before the court is the bankruptcy appeal of Pace, et al. v. JP Morgan Chase Bank,

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et al., case number 2:13-cv-00339-JCM-GWF. Appellants Clive and Yolanda Pace filed an opening

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brief. (Doc. # 13). JPMorgan Chase Bank (“Chase”) and Wells Fargo Bank (“Wells Fargo”) filed

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an answering brief in opposition. (Doc. # 17). Bank of America (“BofA”) and Mortgage Electronic

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Registration Systems, Inc. (“MERS”) also filed an answering brief in opposition. (Doc. # 15).1

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I.

Background

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A.

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On or about April 22, 2004, appellant Clive Pace obtained a loan (the “first loan”) from

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Washington Mutual Bank, F.A. (“Washington Mutual”), by a promissory note in the amount of

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$180,000 secured by a deed of trust recorded against a property located at 352 Rushing Creek Court,

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Henderson, NV 89014 (“the property”). (Doc. # 12, AA2, Ex. A ¶¶2, 5; Ex. B, ¶¶ 2,4 and, 5; Ex.

Factual Background

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James C. Mahan
U.S. District Judge

All answering parties are collectively referred to as “respondents”.

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B-1; Ex. B-2). On or about September 23, 2004, Clive and Yolanda Pace (the “Paces”) executed a

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home equity line of credit agreement (the “second loan”) with Washington Mutual with a credit limit

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of $50,000, which was secured by a deed of trust recorded against the property. (Id., AA2, Ex. A,

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¶¶ 3 and 5; Ex. B, ¶¶ 3-5; Ex. B-3; Ex. B-4). The notes for the first and second loans were endorsed

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by Washington Mutual, making them enforceable by the party in possession. (Id., AA2, Ex. B-1 and

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Ex. B-3).

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The Paces agreed to make monthly loan payments over a thirty year period, and also agreed

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that failure to make monthly payments would result in default, acceleration of the amount owed, and

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foreclosure against the property. (Id., AA2, Ex. B-1, B-2, B-3, and B-4). In 2008, Washington

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Mutual was closed and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as the

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receiver of the assets of Washington Mutual. (Id., AA2, n.5; Ex. C; Ex. D). On or about September

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25, 2008, the FDIC sold assets of Washington Mutual to Chase, including the loans previously held

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by Washington Mutual. (Id., AA2, Ex. A, ¶ 4).

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In or around April 2009, the Paces stopped making payments on the loan. (Id., AA2, Ex. A,

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¶ 8). On August 14, 2009, Chase assigned its beneficial interest under the deed of trust of the loan

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to Wells Fargo. (Id., AA2, Ex. A, ¶ 6; Ex. G). A notice of default was recorded against the property

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on August 17, 2009, but no trustee’s sale has occurred. (Id., AA2, Ex. A, ¶ 10; Ex. H). The Paces

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have not cured their default or tendered the full amount owing on the loans. Meanwhile, the Paces

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have continued to receive rental income from the property. (Id., AA2, Ex. A, ¶¶ 8© and 9).

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B.

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The Paces filed for bankruptcy relief under Chapter 13 of the Bankruptcy Code on October

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22, 2010, which was converted to a Chapter 11 proceeding on March 15, 2011. The Paces also filed

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an adversary proceeding, where they challenged the banks, which asserted they had secured claims

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to the property owned by the Paces. (Doc. # 12, AA2; doc. # 18, AA21).

Procedural Background

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On February 14, 2012, the parties participated in a judicial settlement conference, but were

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unable to resolve the case. (Doc. # 18, AA21). On August 8, 2012, defendants Chase and Wells

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Fargo filed a motion for summary judgment. (Doc. # 12, AA2). Meanwhile, on September 27,

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James C. Mahan
U.S. District Judge

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2012, the Nevada Supreme Court issued its opinion in Edelstein v. Bank of New York Mellon, 286

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P.3d 249 (Nev. 2012). The bankruptcy judge vacated the hearing date and instructed parties to file

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supplemental briefs regarding what effect Edelstein might have on the instant action. (Id., AA5).

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The court held a hearing on the motion for summary judgment on December 18, 2012, where

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the bankruptcy judge granted summary judgment in favor of Chase and Wells Fargo. (Doc. # 18,

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AA21). On January 3, 2013, BofA and MERS filed a motion for summary judgment. (Id.). The

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bankruptcy judge also granted summary judgement in favor of BofA, relying on the same

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interpretation of Edelstein. (Id.).

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The Paces filed a notice of a appeal to the district court on April 2, 2013. (Id.). The notice

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of appeal attaches only the bankruptcy court’s granting of Chase and Wells Fargo motion for

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summary judgment. However, the Paces make arguments in their opening brief regarding the

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bankruptcy court’s granting of BofA and MERS’s motion for summary judgment. (See doc. # 13).

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The court considers the appeal as to both summary judgment orders.

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II.

Legal Standard

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Jurisdiction over an appeal from an order of a bankruptcy court is governed by 28 U.S.C. §

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158. In re Rains, 428 F.3d 893, 900 (9th Cir. 2005). A district court has jurisdiction to hear appeals

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from “final judgments, orders, and decrees . . . and, with leave of the court, from interlocutory orders

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and decrees, of bankruptcy judges.” 28 U.S.C. § 158(a); Rains, 428 F.3d at 900. The district court

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reviews a bankruptcy court’s conclusions of law on a de novo basis. In re Maunakea, 448 B.R. 252,

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258 (D. Haw. 2011).

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III.

Discussion

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The Paces’ only argument on appeal is that the bankruptcy judge erred in holding that

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Edelstein mandated the granting of summary judgment. (Doc. # 13). The respondents argue that

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the bankruptcy judge’s order does not turn solely on Edelstein, and therefore review of this case has

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no bearing on this matter.

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The court, having conducted a de novo review of the bankruptcy judge’s grant of summary

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judgment, agrees with respondents. Evaluation of this case under Edelstein is inapposite because

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James C. Mahan
U.S. District Judge

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here the note was never split.

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Washington Mutual was the lender under the note and the note’s holder, as well as the

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beneficiary under the deed of trust. (See doc. # 14, AA2, Ex. B-1, Ex. B-2). Chase acquired both

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of these interests by way of the acquisition. The note and the deed of trust were not split because

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Chase had both interests at the loan’s inception. Chase assigned the beneficiary interest under the

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deed of trust to Wells Fargo. This would appear to be a split; however because Edelstein adopts the

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Restatement approach, “a promissory note and a deed of trust are automatically transferred together

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unless the parties agree otherwise.” 286 P.3d at 257.

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Here, there is no evidence that the parties intended for the note to be split. Even after the

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assignment to Wells Fargo, there was no split. Therefore, Edelstein’s reunification theory is

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irrelevant to the facts of the present case.

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Even if Chase had physical possession of the note after Chase transferred the deed of trust

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to Wells Fargo, Chase would have possessed the note as Wells Fargo’s servicing agent. This agency

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relationship would not disturb the court’s determination that Wells Fargo acquired the relevant

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interest in the note when the beneficial interest in the deed of trust was assigned.

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Therefore, the court AFFIRMS the bankruptcy judge’s grant of summary judgment in

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respondents’ favor.

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IV.

Conclusion

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the appeal of the

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bankruptcy case, Pace, et al. v. JP Morgan Chase Bank, et al., case number 2:13-cv-00339-JCM-

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GWF be, and the same hereby is, DISMISSED.

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IT IS FURTHER ORDERED that the clerk of the court close this case.

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DATED August 6, 2013.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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