USA v . Alex Washington, et a l . CV-10-39-JL 3/28/13

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

United States of America

v. Civil N o . 10-cv-39-JL Opinion N o .

Alex D. Washington et al.

MEMORANDUM ORDER

This is an action by the government to enforce its tax liens

against proceeds from the sale of a parcel of residential real

estate previously owned by defendants Alex D. and Sharon N .

Washington. See

. In addition to the

Washingtons, the government has joined as parties a number of

entities which claimed an interest in the property, see

§ 7403(a), including defendants Bank of America and Bank of New

York, Mellon Trust Company, N.A. (the “Banks”). 1 This court has

subject-matter jurisdiction under

(a) (civil

actions to enforce federal tax liens).

The government has moved for partial summary judgment, see

Fed. R. Civ. P. 5 6 , arguing that there is no genuine issue of

1 Bank of America claims that it services the Washingtons’ mortgage loan on behalf of Bank of New York--and also claims that i t , rather than Bank of New York, was the holder of the promissory note the Washingtons gave when they took out their mortgage loan. Accordingly, Bank of New York’s claimed interest in the Washingtons’ property is unclear. Because it makes no difference to the analysis, however, the court has simply treated both of these banks as a single entity. material fact as to whether the Banks even held any enforceable

interest in the property at the time it was sold, so that they

are not entitled to any of the proceeds from its sale.

Specifically, the government argues, there is no evidence that

the Banks have the right to enforce the mortgage on the property,

or the accompanying promissory note, that the Washingtons gave

when they purchased the property in 1987. To the contrary, the

government says, the undisputed record evidence shows that, in

1993, the note and mortgage were assigned to defendant American

Strategic Income Portfolio, Inc.-III (“ASIP”), which has not

since subsequently assigned the note to anyone else.

The Banks claim their interest in the property through

another entity, First National Bank of Chicago. But by the time

First National obtained its assignment of the note, from the

receiver of Home Owners Federal Savings and Loan Association,

Home Owners had already assigned the note to another party,

Knutson Mortgage Corporation, which subsequently assigned the

note to ASIP. It follows that, at the time the Home Owners

receiver purported to assign the note to First National, Home

Owners no longer had any interest in the note to assign--and that

First National, in turn, had no interest to assign to the Banks.

In opposing the government’s motion for summary judgment,

the Banks do not dispute that the assignment to First National

2 post-dated the assignment to ASIP, nor do they question the

black-letter law that, as a result of this chronology, First

National would have no interest in the note to assign. Instead,

the Banks argue principally that, when Knutson obtained its

assignment of the note, it obtained only “limited powers and

rights . . . . Presumably, pursuant to a servicing agreement

between Home Owners and Knutson, these powers and rights did not

include the power of assignment.” That power, the Banks suggest,

remained with Home Owners, and was subsequently exercised by its

receiver to make a valid assignment of the note and mortgage to

First National. The Banks, however, have not come forward with

any evidence of such a servicing agreement o r , indeed, anything

but speculation to support their theory that Home Owners retained

an interest in the note or mortgage notwithstanding the

assignment to Knutson. After hearing oral argument, then, the

court grants the government’s motion for summary judgment, for

the reasons explained in full below.

I. Applicable legal standard

Summary judgment is appropriate where “the movant shows that

there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ.

P. 56(a). A dispute is “genuine” if it could reasonably be

resolved in either party's favor at trial, and “material” if it

3 could sway the outcome under applicable law. See Estrada v .

Rhode Island,

6 , 62 (1st Cir. 2010). In analyzing a

summary judgment motion, the court “views all facts and draws all

reasonable inferences in the light most favorable to the

non-moving” parties.

Nevertheless, and of particular relevance here,

“[u]nsupported allegations and speculation do not demonstrate

. . . a genuine issue of material fact sufficient to defeat

summary judgment.” Rivera-Colon v . Mills,

(1st

Cir. 2011). Instead, “[t]o defeat a motion for summary judgment,

the nonmoving party must ‘set forth specific facts showing that

there is a genuine issue for trial.’” Welch v . Ciampa,

(1st Cir. 2008) (quoting Anderson v . Liberty Lobby,

Inc.,

4 2 , 256 (1986)).

II. Background

A. Execution and assignments of the note and mortage

In 1987, the Washingtons purchased a parcel of land in

Londonderry, New Hampshire, now known and numbered as 6 Autumn

Lane. They financed the purchase with a loan from Camelot

Financial Services. In exchange for the loan, the Washingtons

gave Camelot a promissory note in the amount of $177,000, dated

September 3 0 , 1987. To secure the debt, they simultaneously gave

4 Camelot a mortgage on the Autumn Lane property. The mortgage was

promptly recorded in the Rockingham County Registry of Deeds.

Camelot immediately assigned the note and the mortgage to

Home Owners. The assignment of the note was accomplished by

indorsing i t , on behalf of Camelot, “without recourse, pay to the

order of Home Owners Federal Savings and Loan Association.” The

assignment of the mortgage was accomplished through an instrument

entitled “Assignment of Mortgage,” also signed on behalf of

Camelot. This instrument was promptly recorded in the Rockingham

County Registry of Deeds.

Later, on October 2 7 , 1987, Home Owners assigned the note to

Knutson. This was accomplished by indorsing i t , on behalf of

Home Owners, “pay to the order of Knutson Mortgage Corporation

without recourse.” The government and the Banks agree that, at

the time of this assignment, Knutson was a subsidiary of Home

Owners. The only record evidence of this fact, though, consists

of two news articles submitted by the government. See Ingrid

Sundstrom, Boston firm wants to sell Knutson Mortgage Co.,

Minneapolis-St. Paul Star Tribune, Feb. 2 3 , 1990, at 3D; Karen

Cord Taylor, Being bigger is no small matter: Massachusetts’

largest S&L relies on its size and rigorous management, Am.

Banker, Oct. 2 6 , 1986, at 2 0 .

5 Relying solely on one of these articles, the Banks state

that Knutson acted on Home Owners’ behalf as a servicer, whose

role was “to collect the mortgage payments, . . . escrow funds

for insurance and real estate taxes, and otherwise monitor

borrowers’ accounts.” The Banks also state, as noted at the

outset, that “Knutson possessed limited powers and rights on [the

Washingtons’] note and mortgage. Presumably, pursuant to a

servicing agreement between Home Owners and Knutson, these powers

and rights did not include the power of assignment.” This

statement is unsupported by anything in the record, including the

news articles, and, indeed, is unaccompanied by any citation.2

In any event, Knutson later executed an assignment of both

the note and mortgage to ASIP. Like the earlier assignments of

the note, this assignment was executed by indorsing i t , on behalf

of Knutson, “pay to the order of American Strategic Income

2 Instead, the Banks assert that “[s]uch a scheme has become commonplace, because it allows the pooling, packaging, marketing, and rapid transfer of real property debt to be carried out without the administrative burden of re-assigning the real property interest with every transaction.” While that is undoubtedly true, it does not follow that this sort of arrangement (i.e., transferring the servicing rights to a mortgage loan without transferring the loan itself) was “commonplace” some 25 years ago, when the Home Owners-Knutson assignment occurred. Moreover, even if the fact that such an arrangement were “commonplace” in 1987 could be established by competent evidence (as opposed to an assertion in a brief as to what is “commonplace” n o w ) , that would not create a genuine issue as to whether the Washingtons’ note was assigned to Knutson pursuant to such an arrangement. See infra Part III.

6 Portfolio Inc.-III without recourse.” Knutson also executed an

“assignment of mortgage” to AMSI, dated March 2 6 , 1993, which was

recorded in the Rockingham County Registry of Deeds on February

1 8 , 1994. There is no record evidence that AMSI subsequently

assigned either the note or the mortgage to anyone else.

In the meantime, the parties agree, the federal government

seized control of Home Owners in 1990, placing both it and

Knutson, its subsidiary, into the receivership of the Resolution

Trust Corporation (“RTC”). The parties further agree that RTC

sold Knutson to a private buyer in 1992. The only record

evidence of these facts consists of news articles submitted by

the government. See Tony Cariedo, Two big business deals: one’s

in health care, the other in mortgage banking, Minneapolis-St.

Paul Star Tribune, Nov. 3 , 1992, at 2D; Phil Roosevelt, Many vie

to buy mortgage servicer, Am. Banker, Feb. 7 , 1992, at 6.

The parties also agree that, on September 1 , 1995, RTC,

acting as receiver for Home Owners, executed an assignment of the

Washingtons’ note and mortgage to First National. This was

accomplished by way of an allonge referring to the note and

stating “pay to the order of” First National “without recourse,”

and an “assignment of mortgage” instrument reciting a date of

September 1 , 1995, bearing signatures dated October 1 0 , 1995, and

recorded with the Registry of Deeds on April 1 6 , 1996. A

7 “satisfaction of mortgage” was later recorded in the Registry, on

September 2 1 , 2005. This instrument stated that the Federal

Deposit Insurance Corporation, which “succeeded the [RTC] as

receiver” for Home Owners, “acknowledge[d] satisfaction” of the

Washington’s note and mortgage.

Nevertheless, the Banks maintain, by way of an affidavit

from a Bank of America employee, that “[t]he loan has not been

paid in full, nor has the mortgage securing the note been

discharged of record in the registry.” In fact, the employee

states, the Washingtons owed more than $132,000 on the loan as of

late August 2012. The employee further states that, since

November 1 3 , 2006, Bank of America has “service[d] the loan of

the Washingtons for Bank of New York Mellon” and that “[b]ased

upon the business records of Bank of America, N.A., the original

note came into the possession of Bank of America, N.A., on or

before November 1 6 , 2009.”

But, in their answers to the government’s interrogatories in

this action, see Fed. R. Civ. P. 3 3 , the Banks have acknowledged

that the note “subsequently was lost.” A Bank of America vice

president, in fact, executed an “affidavit of lost note” to that

effect, dated December 2 3 , 2011. The Banks also stated in their

interrogatory responses that Bank of America “is in the process

of obtaining an assignment from the last mortgage holder of

8 record, The First National Bank of Chicago.” At oral argument,

however, the Banks acknowledged that they have yet to obtain such

an assignment.

B. Procedural history

The government claims that the Washingtons owe more than

$329,000 in income taxes, penalties, and interest, dating back to

1998. In both April 2002 and March 2009, the government filed a

notice of federal tax lien against the Washingtons’ property for

their alleged liabilities for the tax years encompassing, first,

1998-2000, and, then, 2001-2007. In February 2010, the

government commenced this action against the Washingtons, seeking

to collect these alleged liabilities. See

(a).

The government then filed an amended complaint seeking to

foreclose on its liens against the Washingtons’ property and

naming, as additional defendants, AMSI and Bank of America. See

§ 7403(b). The Clerk later defaulted both AMSI and Bank of

America for failing to answer or otherwise respond. See Fed. R.

Civ. P. 55(a).

The case was then stayed, as to the Washingtons only, after

they sought bankruptcy protection in the Bankruptcy Court for the

District of New Hampshire. In re Washington, N o . 10-12227

(Bkrtcy. D.N.H. May 1 0 , 2010). The government then moved for

entry of default judgments in this action against both AMSI and

9 Bank of America, but this court subsequently granted Bank of

America’s motion to set aside the entry of default, see Fed. R.

Civ. P. 55(c), which the government did not oppose. Order of

Aug. 1 7 , 2010. This court did, however, grant the government’s

motion for entry of a default judgment against AMSI,

extinguishing any right, title, or interest it had in the

Washingtons’ property. Order of Sept. 1 4 , 2010.

In the meantime, the Bankruptcy Court discharged the

Washingtons’ debts, In re Washington, N o . 10-12227 (Bkrtcy.

D.N.H. Aug. 2 3 , 2010), and closed the case, In re Washington, N o .

10-12227 (Bkrtcy. D.N.H. Sept. 1 0 , 2010). Apprised of these

developments, this court lifted the stay of this case against the

Washingtons. Order of Sept. 2 7 , 2010. The court then granted

the government’s motion, which was not opposed, to amend its

complaint again. Order of Feb. 1 0 , 2011. The government’s

second amended complaint added Bank of New York as a defendant.

The amended complaint also added a claim against the Washingtons

that their discharge in bankruptcy had not relieved them of their

federal income tax liabilities because they had willfully evaded

them. See

(a)(1)(C). When the Washingtons moved

to dismiss this claim as inadequately pled, see Fed. R. Civ. P.

12(b)(6), the government responded, in part, that it was “willing

to put off litigating the dischargability issue until after the

10 [Washingtons’] property is sold so that the parties will know the

extent of the remaining liability and will have an opportunity to

consider a settlement at that time.”

After this court ordered the parties to confer as to this

proposal, Order of Mar. 2 8 , 2011, the Washingtons indicated their

assent to i t , resulting in another stay of this action, this time

so that the Washingtons could attempt to sell the property.

Order of Mar. 1 2 , 2011. The parties later entered a stipulation

for the sale of the property, at a price to be approved by both

the government and the Banks, with the proceeds to be deposited

into court and distributed according to the parties’ relative

priorities. Nearly a year later, after the Washingtons had

received an offer on the property, the court entered a proposed

consent decree allowing the sale to proceed according to the

stipulation. Order of Dec. 1 0 , 2012. The sale took place, and

the net proceeds ($185,380.08, after payment of the broker’s fee

and real estate taxes) have been deposited with this court.

In the meantime, the court lifted the stay as to the

government’s claim against the Banks, Order of June 1 , 2012, and

the government moved for summary judgment. The Banks filed an

objection, to which both the government and the Washingtons filed

a reply. The court then heard oral argument on the motion.

11 III. Analysis

A federal tax lien “shall not be valid as against any . . .

holder of a security interest” in the property,

(a), provided, in relevant part, “the interest has become

protected under local law against a subsequent judgment lien

arising out of an unsecured obligation,”

§ 6323(h)(1)(A).

Under this statute, “‘security interest’ means any interest in

property acquired by contract for the purpose of securing payment

or performance of an obligation,” id. § 6323(h)(1), such a s , in

this case, a mortgage.

In moving for summary judgment, the government argues that

there is no genuine issue of material fact as to whether the

Banks are the “holder of a security interest” in the Washingtons’

property at the time it was sold, so that this court should

decree that the Banks have no claim to the proceeds of the sale.

In their answers to the government’s interrogatories, the Banks

identify the sole basis of their interest in the property as the

mortgage that the Washingtons gave Camelot. The Banks explain

that “[t]he note received [sic] by the mortgage has been assigned

to [Bank of America]. Under New Hampshire common law the

mortgage follows the note. Since [Bank of America] is the holder

of the note it is the holder of the mortgage.”

12 As already discussed, though, the Banks have admitted that,

as of December 2011 at the latest, they no longer had possession

of the Washingtons’ note. That means that neither of the Banks

is in fact the “holder” of the note under New Hampshire’s version

of the Uniform Commercial Code, which defines “holder” in

relevant part as “the person in possession of a negotiable

instrument.”3

-A:1-201(b)(21)(A). As

the government points out, “[a] person not in possession of [an]

instrument is entitled to enforce the instrument,” but only i f ,

among other things, he “was entitled to enforce the instrument

when the loss of possession occurred.”

-A:3-309(a). Furthermore, “[a] person seeking enforcement of

an instrument under [§ 382-A:3-309(a)] must prove . . . the

person’s right to enforce the instrument.” Id. § 382-A:3-309(b).

The government argues that the Banks have failed to show a

genuine issue of material fact as to whether they had the right

to enforce the Washingtons’ note at the time the Banks say they

lost possession of i t . As noted at the outset, the Banks claim

to have received an assignment of the note from First National,

which is identified as the transferee of the note on the allonge

3 The parties agree that state law, specifically, that of New Hampshire, governs the question of the Banks’ interest in the Washingtons’ property (now, its proceeds). See United States v. Lebanon Woolen Mills Corp.,

(D.N.H. 1 64

13 executed by RTC as the receiver for Home Owners and dated

September 1 , 1995. See Part II.A, supra. Before that date,

however, Home Owners had already transferred the note to Knutson

(on October 2 7 , 1987), which then, in turn, transferred the note,

and assigned the mortgage, to ASIP (on March 2 6 , 1993). See id.

New Hampshire follows the rule that, as between successive

assignments, the first in time is first in right. See Am. Emp’rs

Ins. C o . v . Sch. Dist.,

8 8 , 192 (1954); see also, e.g.,

6A C.J.S. 2d Assignments § 9 8 , at 490-91 (2004). Because Home

Owners, in 1987, “had divested itself of its rights by the

assignment to” Knutson, Home Owners “had nothing to assign to”

First National in 1995. Am. Emp’rs Ins. Co.,

.

The Banks do not question that this is the law, nor do they

claim to have received an assignment from ASIP or its successors

in interest (if any; again, there is no record evidence that ASIP

assigned either the note or the mortgage to anyone, and the Banks

admit that they have not received any assignment of the mortgage

from ASIP). Instead, as discussed supra, the Banks say that,

“[i]n fact, Knutson possessed limited powers and rights on the

note and mortgage,” which “did not include the power of sale or

assignment.” While the Banks do not fully explain the

significance of this point, the court takes it to mean that, in

the transfer of the note to Knutson from Home Owners, Knutson did

14 not obtain the right to transfer the note further, thus voiding

Knutson’s subsequent transfer of the note, and assignment of the

mortgage, to ASIP. But there is no record support for the

asserted “fact” that Knutson’s rights in the note did not include

the right of transfer.

Under New Hampshire’s version of the Uniform Commercial

Code, “[t]ransfer of an instrument, whether or not the transfer

is a negotiation, vests in the transferee any right of the

transferor to enforce the instrument, including any right as a

holder in due course.”

-A:3-203(b).

Here, Home Owners transferred the note to Knutson by way of

negotiation, indorsing the note “pay to the order of” Knutson.

See

§ 382-A:3-201. This vested in Knutson all the rights

that Home Owners enjoyed as holder of the note, including the

right to transfer i t . In New Hampshire, as elsewhere, “an

assignee obtains the rights of the assignor at the time of the

assignment.” YYY Corp. v . Gazda,

3 , 61 (2000)

(applying this rule to the transfer of a promissory note); see

also, e.g., 5A Ronald A . Anderson, Anderson on the Uniform

Commercial Code § 3-201:16, at 454 (3d ed. 1994) (“Commercial

15 paper may be assigned in which case the assignee stands in the same position as the assignor.”).4

It is true, of course, that a transferor may transfer less

than all of its rights in an instrument. See

-A:3-203(d). Again, though, on the face of the note,

Home Owners transferred all of its rights to Knutson by indorsing

it over to Knutson, and the Banks have offered nothing but

speculation to support their theory that a servicing agreement

between Home Owners and Knutson nevertheless restricted Knutson’s

rights in the note. See note 2 and accompanying text, supra.

As an initial matter, there is no competent evidence of a

servicing relationship between those entities, only news

articles, which are hearsay, see Fed. R. Evid. 8 0 1 , that cannot

be considered on summary judgment, see, e.g., Hannon v . Beard,

5 , 49 (1st Cir. 2011). Even putting that aside,

however, the mere fact that Knutson acted as a servicer for

mortgage loans held by Home Owners does not create a genuine

issue as to whether, in endorsing the Washingtons’ note to

4 While “[a]n assignment is a transfer . . . [t]he transfer of rights in commercial paper by assignment, as distinguished from negotiation, is not regulated by the Code,” but by “pre-Code law.” 5A Anderson, supra, § 3-201:13, at 452-53 (footnotes omitted). But that distinction is unimportant here because all transfers of the note were accomplished by negotiation. Thus, the court uses the terms “assignment” and “transfer” interchangably in referring to the note.

16 Knutson, Home Owners was reserving for itself the right to make

further transfers of the note. Unsupported speculation--or, as

the Banks themselves call their theory, “presum[ption]”--does not

create a genuine issue of material fact capable of defeating

summary judgment. See Part I , supra.

In a similar vein, the Banks state that, “[g]iven the

evidence [the government] has itself presented, it is entirely

possible that Knutson never owned the mortgage.” While the

government has not come forward with an instrument assigning the

Washingtons’ mortgage from Home Owners to Knutson, it is

undisputed, as just discussed, that Home Owners transferred the

underlying note from Home Owners to Knutson. Under New Hampshire

law, as the Banks acknowledge, “a transfer of the debt, ipso

facto, transfers the mortgage,” so that a separate assignment of

the mortgage “by deed or writing is not necessary.”5 Whittemore

v . Gibbs,

8 4 , 487 (1852). S o , just as the Banks have

failed to show a genuine issue of fact as to whether Home Owners

transferred its rights in the note to Knutson, they have also

5 As a recent decision by the New Hampshire Superior Court explains, “the intention of the parties to the transaction can override the common law principle that the debt and mortgage are inseparable.” Dow v . Bank of N.Y. Mellon Trust Co., N o . 218- 2011-CV-1297, slip o p . at 14-16 (N.H. Super. C t . Feb. 7 , 2012) (Delker, J . ) . Here, however, there is nothing in either the note or the mortgage instrument suggesting such an intention. Indeed, the Banks themselves claim their interest in the mortgage solely through their alleged interest in the note.

17 failed to show a genuine issue of fact as to whether Home Owners

transferred its rights in the mortgage to Knutson.

In their objection to the summary judgment motion, the Banks

advance three other arguments. First, they say that the

government has adduced no competent evidence on “RTC’s sale of

Knutson,” even though its theory that First National (and hence

the Banks) held no interest in the Washingtons’ note depends on

the premise that “RTC, and then Knutson, had previously

transferred the Washingtons’ mortgage to ASIP.” But the

government’s position--and, for that matter, the undisputed

evidence--is not that RTC assigned the note or mortgage to ASIP.

It is that Knutson assigned the note and mortgage to ASIP. While

the news articles report, and the parties agree, that Knutson was

already in receivership by that point, the Banks do not seem to

be arguing that this fact has any effect on the validity of the

assignment from Knutson to ASIP. Moreover, even if it did, that

would not change the fact that, well before the receivership,

Home Owners had transferred the note to Knutson--a transfer that

itself predates, and voids, RTC’s later transfer of the note (on

behalf of Home Owners) to First National. So the Banks are

incorrect that “the fact of what exactly RTC sold when it sold

Knutson is necessarily material.”

18 Second, the Banks argue that this court did not discharge

the mortgage encumbering the Washingtons’ property by entering a

default judgment against ASIP. Even if that is correct, it is

irrelevant to whether summary judgment should enter against the

Banks on their claim to a mortgage interest in the property (or

the proceeds of its sale). As discussed more than once already,

the Banks do not claim any interest through ASIP. To the

contrary, the Banks say that ASIP never held any interest in the

Washingtons’ mortgage in the first place because Knutson, ASIP’s

transferee, lacked the power to make that transfer. So the

status of ASIP’s interest in the Washingtons’ property is

immaterial to the Banks’ claim to an interest in that property

and, therefore, to the government’s motion for summary judgment on that claim.6

Third, the Banks argue that the government “lacks standing”

to challenge the validity of the assignment from RTC, as the Home

Owners receiver, to First National. The government, however, has

6 All that said, this court’s default judgment against ASIP, on its face, “extinguished” all of ASIP’s “rights, titles, claims, liens, and interests” in the Washingtons’ property. Order of Sept. 1 4 , 2010. The Banks are simply wrong to say that this court lacked the power to enter such a judgment. See

(c) (directing this court, “after all the parties have been duly notified of [an] action” by the government to foreclose on tax liens, to “adjudicate the matters involved therein and finally determine the merits of all claims to and liens upon the property”).

19 an interest in the Washingtons’ property by virtue of its tax

liens--an interest that would be diminished, if not eviscerated,

if the Banks can enforce the competing interest in the property

they claim through the Home Owners-First National assignment.

That gives the government “standing” to challenge that

assignment, at least on the basis the government asserts, i.e.,

that Home Owners had previously assigned its interest in the

Washingtons’ note, and hence their mortgage, to Knutson. See

Drouin v . Am. Home Mtg. Servicing, Inc.,

(recognizing mortgagors’ standing to challenge an alleged

assignment of their mortgage to a foreclosing defendant on the

grounds that the assignor did not hold the mortgage at the time);

accord Culhane v . Aurora Loan Servs. of Neb.,

8 2 , 291

(1st Cir. 2013) (recognizing mortgagor’s standing, as a matter of

both Article III of the Constitution and Massachusetts law, “to

challenge a mortgage assignment as invalid, ineffective, or void

(if, say, the assignor had nothing to assign . . . ) ” ) .

The Banks also argue that the government is attempting to

“enforce” Knutson’s assignment of the note and mortgage to ASIP,

and that the government lacks standing to do that as well. But

the government does not derive its claimed interest in the

Washingtons’ property (or, now, the proceeds of its sale) from

the Knutson-ASIP assignment. As just noted, the governments’

20 claimed interest comes from its federal tax liens. Relying on

the Knutson-ASIP assignment to show that the subsequent Home

Owners-First National assignment was void is not tantamount to

trying to “enforce” the Knutson-ASIP assignment. See Culhane,

708 F.3d at 290 (refusing to apply the rule that “a nonparty who

does not benefit from a contract generally lacks standing to

assert rights under that contract” to deny a mortgagor the “right

to challenge a foreclosing entity’s status qua mortgagee” by

“challenging the validity of an assignment that purports to

transfer the mortgage to a successor mortgagee”).

IV. Conclusion

In short, the government has demonstrated, through the

Washingtons’ note and the endorsement transferring it from Home

Owners to Knutson, that there is no genuine issue of fact as to

whether the Banks have an interest in the Washingtons’ property

or the proceeds of its sale. The Banks claim that interest

solely through an entity, First National, that did not receive an

assignment of Home Owners’ interest in the Washingtons’ note or

mortgage until after Home Owners had assigned its interest in the

note and the mortgage to someone else. The Banks have failed to

show any genuine issue of fact material to this chronology or the

validity of Home Owners’ initial assignment. Accordingly, the

government’s motion for summary judgment on the Banks’ claim to

21 an interest in the proceeds of the sale of the Washingtons’ property7 is GRANTED.

Remaining claim

The only claim remaining in the case, then, is the

government’s claim against the Washingtons, which is stayed at

the moment (as it has been for much of the pendency of this

litigation, see Part II.B, supra). At oral argument, the

government represented that settlement with the Washingtons would

be greatly facilitated by the certainty ensuing from this court’s

resolution of the summary judgment motion. This court’s entry of

a default judgment against ASIP, together with its entry of

summary judgment against the Banks, leave the government as the

exclusive claimant to those proceeds (which are considerably less

than the Washingtons’ alleged federal tax liabilities at this

point). The Banks, however, are entitled to appeal this court’s

entry of summary judgment against them, which would reintroduce

the uncertainty as to the government’s ability to recover from

the proceeds.

Under these circumstances, this court concludes that “there

is no just reason for delay” in directing the entry of final

judgment on the government’s claim against the Banks, even though

7 Document n o . 5 5 .

22 final judgment cannot enter on the government’s claim against the

Washingtons. See Fed. R. Civ. P. 54(b). So far as this court

can tell, there is no overlap between the factual and legal

issues underlying those two claims. If the Banks elect to appeal

the judgment against them, proceedings on the appeal can occur

simultaneously with proceedings in this court on the government’s

claim against the Washingtons (should the government decide to

proceed on that claim rather than settle it in light of the

possibility that the appeal would succeed, potentially reducing

the government’s share of the proceeds).

That process strikes the court as considerably more

efficient, and just, than forcing the government and the

Washingtons to resolve their dispute, either through litigation

or settlement, before knowing whether or not the Banks will

appeal the entry of summary judgment against them (which, in that

scenario, they would not have to decide until after the

resolution of the government’s claim against the Washingtons

enables this court to enter final judgment on all claims). These

concerns are particularly important here, where continued

litigation between the government and the Banks would consume, on

one side, the resources of the public, and, on the other side,

the resources of debtors who have just recently emerged from a

no-asset bankruptcy. Finally, as already noted, the government’s

23 claim against the Washingtons has been stayed for nearly the

entirety of the pendency of this action; the parties have not

conducted discovery. So forcing them to resolve that claim even

though (if the Banks do not appeal) they may very well choose not

to do would result in substantial, and potentially unnecessary,

expense to both the government and the Washingtons.

Accordingly, the clerk shall enter final judgment on the

government’s claim against the Banks. The government’s claim

against the Washingtons shall remained stayed until the earlier

of (1) the Banks’ filing of a notice of appeal or (2) the

expiration of their time for doing s o . Within 45 days of the

earlier of those two events, the government and the Washingtons

shall file a joint report informing the court of the status of

their settlement negotiations, if any (including an estimate of

how much longer they expect the negotiations to continue) or

seeking the lifting of the stay so that litigation of the claim

can resume. If the parties cannot agree on a course of action,

they shall schedule a telephone conference with the court.

SO ORDERED.

United States District Judge

Dated: March 2 8 , 2013

24 cc: Edward J. Murphy, Esq. Patricia E.S. Gardner, Esq. William Philpot, Jr., Esq.

25