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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
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My business bought a note that was tied to a mortgage over

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My business bought a note that was tied to a mortgage over 20 years ago, and the note was properly assigned over to my business but the mortgage was not. The business has since taken bankruptcy and the owner says he is now not authorized to to sign over the mortgage as the corporate representative to a corporation that no longer exists. The problem is that my company paid for this note and mortgage and I'm unable to benefit from the assigned collateral and I was defrauded. As is, no one can collect nearly $10,000 in a suspense fund held by an oil production company. How can the owner legally sign over the mortgage to my company?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
If I undestand correctly, there is a real property asset (surface or mineral), located in Oklahoma. The property owner signed a note and mortgage secured by the property, and subsequently assigned the note to you, but not the mortgage. If that is a correct understanding of the circumstance, then you already have everything you need, because “Courts are virtually unanimous in holding that where a mortgage lender with a promissory note negotiates that note to a holder, the holder of the promissory note also obtains any mortgage securing that note." See CPT Asset Backed Certificates, Series 2004-EC1 v. Cin Kham, 2012 OK 22, 278 P.3d 586 (Okla. 2012).

You can foreclose the security without anything other than the note, as long as the mortgage is recorded and it shows your predecessor on the note as the secured party.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34836
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Basically correct. Debtor signed note and mortgage to a bank. Bank failed and FDIC sold/assigned the note & mtg to CFS. CFS auctioned off the notes and I (FFI) bought the note. CFS never assigned the mtg to FFI, then went BKR. Oil production comp. won't turn over the oil money owed to FFI because we aren't shown as the mtg owner at the county recorders office. So do I have to file suit against CFS, that no longer exists, or how do I foreclose the security--against whom? Or, should I try to go to the bankruptcy court and get them to authorize CFS former President to sign over the assignment of mortgage, or possibly the BKR court would sign off on it.

Expert:  socrateaser replied 1 year ago.
Okay thanks.

If CFS filed Chapter 7, then it would no longer owe anything on the note that you purchased, and your only recourse would be against the property secured by the mortgage (presumably mineral rights located somewhere in Oklahoma). You would have to sue the current owner of the property on a foreclosure theory, and if the owner doesn't pay your note, then the court will order the property sold at auction, at which point you would get whatever was the high bid, and you would have no further recourse for anything beyond that.

I'm assuming that CFS did not file a Chapter 11 or that if it did, that Chapter 11 was later converted to Chapter 7, because you said it no longer exists.

Concerning this "suspense" fund, I don't know anything about that contract -- but, unless the money was somehow tied to the mortgage itself as rents or royalties collected from the property and never turned over to CFS, then I doubt you have any legal right to the money. If anything, that money belongs to the bankruptcy trustee -- who probably is unaware of its existence -- otherwise, the trustee would reopen the case and demand the money from the production company.

If the money was rents and royalties collected but never turned over to CFS, then the bankruptcy trustee would argue that it is no longer security for the note, and you're going to argue that it is security because the mortgage grants you rents and royalties as security for your note. You will probably win this argument in bankruptcy court, at which point you would have an court order that the production company can't ignore.

So:

1. Sue the current owner of the mineral rights for foreclosure in Oklahoma civil court.
2. Sue the production company and claim that it is holding rents/royalties that are secured by the mortgage attached to the note you are holding.
3. Hopefully the parties will settle and pay your note.
4. If not, the judge will determine whether or not the production money is security for the note.

That's pretty much it, except for the part where the bankruptcy trustee may suddenly show up and try to get some of the money.

Hope this helps.

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