United States Bankruptcy Judge Samuel Bufford (Central District of California) has been on the bench since 1985 and is known for having issued some unusual decisions. Judge Bufford’s most recent directive requires creditor’s counsel to present, in court, directly to Judge Bufford at the hearing, the original of all promissory notes (secured or unsecured, apparently) involved in relief from stay motions. Otherwise, the motion will be denied (with certain exceptions).  (See the Judge’s directive linked below). 

This is a serious matter and will have substantial impact on relief from stay practice in his court. It will significantly increase the burden on secured creditors and counsel representing the secured creditors. Are the parties to be compensated for this effort? Let us see what happens if counsel ask for extra compensation. All of this is being imposed unilaterally by Judge Bufford without any evidence, as far as we know, that parties who do not actually hold title to the note are bringing relief from stay motions. Why would anyone bring a relief from stay motion on a note and deed of trust in which the party had no interest? And, how would having the original presented in court solve the question of who actually owns the note?  Further, why wouldn’t simply a declaration from the holder be sufficient, as it has been for decades?  It is truly farcical and obviously intended to place a road block to otherwise routine foreclosures of secured obligations.

Further, we do not feel that Judge Bufford is on good legal or even factual grounds here. He states in his Notice:

“This requirement will apply because developments in the secondary market for mortgages and other security interests cause the court to lack confidence that presenting a copy of a promissory note is sufficient to show that movant has a right to enforce the note or that it qualifies as a real party in interest.”

Judge Bufford does not explain what “developments” he is talking about or why it would cause him the concerns he expresses. Further, a relief from stay motion does not involve the “enforcement” of the note.  It is a request from the creditor to be relieved from an injunction (the automatic stay) against the enforcement of the note under state law.  Certainly, the Judge does not explain why a blanket injunction should apply against all copies of all promissory notes. The practice of using copies of promissory notes has existed since relief from stay motions came into existence.

Judge Bufford makes no differentiation between securitized notes, for example, or simply notes held by mom and pop lenders. He does not even assert that there have been objections or concerns raised by the parties to the matter, the debtor or the creditor. He alone is raising this concern. That is not his job. He is not an advocate, he is a judge employed by the People to judge the matters brought before him, not to be concerned with political issues. The parties and their counsel are the ones who should be raising issues such as these if they even exist.

Certainly, if there were a “genuine question” (see below) in a particular case regarding the note, then that would be one thing. But, to invoke a blanket concern that all promissory notes are suspect as to who owns the note is beyond the pale.

Rule 1003 of the Federal Rules of Evidence provides:

“A duplicate is admissible to the same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original.”

This Rule, cited by Judge Bufford, does not even go to the issue Bufford is worried about. This Rule is intended to cover the question of whether the note itself is authentic, that is, is it altered in some fashion or was it actually signed by the debtor, not who actually owns the note. That is almost never an issue in any case we have ever seen in our 31 years of practice. In fact, we cannot remember a time that there was ever a real legitimate concern over the authenticity of the promissory note. We have never seen a case where there was an actual issue over whether the person who claimed to own the note did, in fact, own the note.

Judge Bufford has created a highly problematic and unnecessary issue. It will have to be addressed by all secured creditors seeking relief from stay in his court and all parties should be well aware of his requirements, no matter how stifling and burdensome the requirements are. In our view, Judge Bufford should be willing to award increased attorneys’ fees for the extra effort the parties are going to be required to undergo to comply with his “perceived” (but unsubstantiated) issue. We will hold our collective breath on that one.

No other court anywhere in the country has this requirement of which we are aware. However, it will be the rule in his court until a higher court tells him otherwise, or he changes his mind.

Click here to Read Judge Bufford’s Public Notice