Jepson v. Bank of New York Mellon etc.

In Chapter 7 proceeding, Bankruptcy Ct. did not err in granting creditor/trustee of residential mortgage-back securities trust’s motion to modify automatic stay and in denying first count of debtor’s adversary complaint alleging that trustee had no interest in debtor’s defaulted home mortgage note due to trustee’s failure to comply with terms of Pooling and Service Agreement (PSA) that applied to instant private trust. Under New York law, debtor lacked standing to challenge any alleged violation of PSA, since: (1) debtor was not third-party beneficiary of instant private trust; and (2) only certificate-holders of instant trust are intended beneficiaries that had standing to raise any PSA violations. As such, Bankruptcy Ct. could properly lift automatic stay and allow trustee to proceed on pending mortgage foreclosure action in state court. Bankruptcy Ct. erred, though, in dismissing second count of adversary proceeding that was not based on alleged PSA violations, which raised state-court claims alleging that creditor could not foreclose on mortgage. On remand, Bankruptcy Ct. may wish to abstain from considering said claims and allow state court to consider them in pending state-court foreclosure action.