Successor Bank Has Standing to Enforce

Throughout the recent economic downturn and wave of foreclosure cases, “lack of standing” has been the most common, but not necessarily the most successful, defense asserted by borrowers in mortgage foreclosure cases.  The theory came into vogue with the 2007 Boyko opinion, about which I wrote six years ago.  Pichon v. American Heritage, 2013 Ind. App. LEXIS 10 (Ind. App. 2013) succinctly rejects the defense based upon the given facts.

Details.  Pichon is a very involved appellate opinion following a trial that dealt with at least nine separate issues, one of which was whether the plaintiff had standing to enforce a $650,000 promissory note.  The plaintiff, American Heritage Banco, Inc. (AHB), was the successor-in-interest to First National Bank of Fremont (FNBF).  AHB had acquired FNBF following a merger.  The note in question was payable to FNBF.  The defendant borrower alleged that AHB was not the real party in interest.  The trial court concluded that AHB had standing to enforce the note because it occupied the status of “holder” of the note.

Standing-related statutes.  The Indiana Court of Appeals agreed with the trial court.  There were two Indiana statutes relevant to the Pichon opinion.  First, I.C. § 26-1-3.1-301 states that a “person entitled to enforce instrument” means the “holder” of the instrument.  Second, I.C. § 26-1-1-201(20) defines “holder,” which includes one in possession of a negotiable instrument (a) if that instrument is payable to an identified person and (b) if the identified person is in possession. 

Ruling.  For purposes of the trial, the parties stipulated that FNBF was merged into AHB.  Pursuant to that merger, AHB was the successor to FNBF.  In Pichon, the subject note expressly stated that it was payable to FNBF or “its successors and assigns,” and AHB had possession of the note.  As such, the Court of Appeals affirmed the trial court’s conclusion that AHB had standing to enforce the note.

Related posts.  Here are links to some other posts that relate to the standing defense: 

• From the New York Times:  “Foreclosures Hit a Snag for Lenders”
• To Be Enforceable, Promissory Notes Must be Endorsed and Delivered
• Bankruptcy Proofs of Claim and Standing/Loan Assignment Issues
• Successor-in-Interest Banks as Plaintiffs in Foreclosure Actions
• Proving You’re the Holder of the Note

Happy Holidays everyone.