In Re Hwang, 438 B.R. 661 (C.D. Cal. 2010)
In the first of two bankruptcy court decisions, In re Hwang, 393 B.R. 701 (Bankr. C.D. Cal. 2008), the Bankruptcy Court for the Central District of California denied the motion for relief from the automatic stay of IndyMac Federal Bank, F.S.B., (“IndyMac”), as the loan servicer for the Federal Home Loan Mortgage Corporation (“Freddie Mac”) on the grounds that IndyMac was not the note holder and therefore not the real party in interest entitled to enforce the note secured by the mortgage. The Bankruptcy Court continued the hearing to allow the real party in interest to join in, ratify, or substitute into the motion.
IndyMac filed a motion for reconsideration, which the Bankruptcy Court granted. In the second decision, In re Hwang, 396 B.R. 757 (Bankr. C.D. Cal. 2008), the Bankruptcy Court recognized that IndyMac was the note holder but reversed positions and held that the owner of the note rather than the note holder was the real party in interest even though the owner had no power to enforce the note under California law. The Bankruptcy Court denied the motion for relief from stay on the grounds that Rules 17 and 19 of the Federal Rules of Civil Procedure require an action to be prosecuted in the name of the real party in interest and joinder of the owner of note.
IndyMac, represented by Malcolm Cisneros, appealed to the United States District Court for the Central District of California, which reversed. The District Court held that IndyMac, as the note holder, was the real party in interest under Rule 17 and ruled that Rule 19 did not require joinder of the note’s owner in order to seek relief from the automatic stay.