NOT FOR PUBLICATION

MEMORANDUM*

INTRODUCTION

Yong Ho Pak and Kum Jae Pak (the "Paks") appeal the bankruptcy court's order granting Aurora Loan Services LLC ("Aurora") relief from the automatic stay. We AFFIRM.

FACTS

On October 19, 2006, the Paks executed a promissory note (the "Note"), payable to SCME Mortgage Bankers, Inc. ("SCME"), to finance the purchase of real property located in Santa Maria, California (the "Property").1 To secure their obligations under the Note, the Paks executed a deed of trust (the "Deed of Trust") against the Property, also in favor of SCME. However, the named beneficiary under the Deed of Trust was Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for SCME and its successors and assigns.

On January 12, 2011, the Paks filed a Chapter 72 bankruptcy petition. The Paks listed Aurora as a secured creditor, with a first priority deed of trust against the Property (valued at $521,500.00) and a claim totaling $717,013.00 ($195,513.00 of that amount being unsecured).3

On January 31, 2011, Aurora moved for relief from the automatic stay to foreclose on the Property. The basis for its motion was two-fold. First, Aurora claimed a lack of adequate protection sufficient to constitute cause for relief under Section 362(d)(1). Second, Aurora claimed that it was entitled to relief under Section 362(d)(2) because, it alleged, there was no equity in the Property.

In support of the motion, Aurora submitted a declaration by one of its custodians of records, Kimberley Dotson (the "Dotson Declaration"). The Dotson Declaration listed an outstanding principal balance of $717,013.52 and accrued interest of $23,887.19. The Dotson Declaration also stated that ten prepetition payments (totaling $39,099.70) had become due but remained unpaid. According to Dotson, the Paks last made a payment on the loan on July 21, 2010.

In further support of the motion, Aurora attached a copy of the Deed of Trust as Exhibit 1; a copy of a corporate assignment of deed of trust (the "Assignment") as Exhibit 2; a copy of the Note, bearing an endorsement in blank by SCME on the back of the last page of the Note, as Exhibit 3;4 copies of the Paks' original schedules A and D as Exhibit 4; and a summary of costs and advances as Exhibit 5. With respect to the Note, the Paks never raised any evidentiary objection to the copy Aurora proffered pursuant to Evidence Rule 1003, nor have they otherwise disputed the Note's authenticity.

The Paks filed their opposition to Aurora's motion on February 8, 2011. In their opposition, the Paks challenged Aurora's standing to prosecute the motion. Specifically, the Paks argued that Aurora was not a proper holder of the Note and was thus not a person entitled to enforce the Note. The Paks also argued that the Assignment of the Deed of Trust to Aurora was invalid because MERS lacked the authority to assign the Deed of Trust. In support of its opposition, the Paks attached copies of several cases that, they maintained, supported their position.

In its reply, filed on February 17, 2011, Aurora contended that it had standing to move for relief from stay, that the Paks' previous statements in their schedules contradicted their allegations that Aurora did not have standing, and that it had met its burden of proof in demonstrating cause justifying the relief requested.

The hearing on the motion was held on February 22, 2011. At the hearing, the bankruptcy court rejected the Pak's standing arguments and expressly found that Aurora had submitted "all the necessary documentation" to establish its standing and its entitlement to relief from stay. Hrg. Tr. (Feb. 22, 2011) at 2:7. On February 25, 2011, the court entered its order granting Aurora's motion under Sections 362(d)(1) and 362(d)(2). The Paks timely appealed.5

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

ISSUES

STANDARD OF REVIEW

Standing "is a legal issue that we review de novo." Veal v. Am. Home Mortg. Servicing (In re Veal), 450 B.R. 897, 906 (9th Cir. BAP 2011) (citing Wedges/Ledges of Cal., Inc. v. City of Phoenix, 24 F.3d 56, 61 (9th Cir. 1994); Kronemyer v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 919 (9th Cir. BAP 2009)). De novo review requires that we consider a "matter anew, as if no decision had been rendered below." Dawson v. Marshall, 561 F.3d 930, 933 (9th Cir. 2009) (quoting United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988)).

A bankruptcy court's decision to grant relief from stay is reviewed for abuse of discretion. Arkison v. Frontier Asset Mgmt. (In re Skagit Pac. Corp.), 316 B.R. 330, 335 (9th Cir. BAP 2004). The abuse of discretion test has two prongs: "first, whether the court applied the correct legal standard; and second, whether the factual findings supporting the legal analysis were clearly erroneous." In re Veal, 450 B.R. at 915 (citing United States v. Hinkson, 585 F.3d 1247, 1261-63 (9th Cir. 2009) (en banc)). Where the bankruptcy court has failed to apply the correct legal standard, "it has `necessarily abuse[d] its discretion.'" Id. (citing Hinkson, 585 F.3d at 1261-63) (modifications in original). We review this prong of the analysis de novo. Id. If the bankruptcy court has applied the correct legal standard, "the inquiry then moves to whether the factual findings made were clearly erroneous." Id. (citing Hinkson, 585 F.3d at 1262). A bankruptcy court's findings are clearly erroneous if they are "`illogical, implausible, or without support in inferences that may be drawn from the record.'" Id. (citing Hinkson, 585 F.3d at 1263). See also Rule 8013.

DISCUSSION

A. Standing.6

The Paks' sole argument on appeal is that Aurora lacked standing. According to the Paks, Aurora did not have standing to seek relief from stay because it was not entitled to enforce the Note and because the Assignment was invalid. As discussed below, the Paks' standing arguments lack merit.

A party seeking relief from stay "need only establish that it has a colorable claim to enforce a right against property of the estate." In re Veal, 450 B.R. at 914-15 (citing United States v. Gould (In re Gould), 401 B.R. 415, 425 n.14 (9th Cir. BAP 2009); Biggs v. Stovin (In re Luz Int'l, Ltd.), 219 B.R. 837, 842 (9th Cir. BAP 1998); Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 32 (1st Cir. 1994)). A showing by a party that it is a person entitled to enforce the note at issue or that it holds some ownership or other interest in the note translates to a colorable claim. Id. at 917 (citing In re Hwang, 438 B.R. 661, 665 (C.D. Cal. 2010)).

1. The Paks' argument that Aurora was not entitled to enforce the Note fails.

The California Commercial Code7 defines a "person entitled to enforce" an instrument8 as "(a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3309 or subdivision (d) of Section 3418." Cal. Comm. Code § 3301.

Because Aurora was not the original payee on the Note or the original beneficiary under the Deed of Trust, it had to show that it was a person entitled to enforce the Note, either as a holder to whom the Note was negotiated or a nonholder in possession of the note who has the rights of a holder to whom the Note was transferred.

A "holder" is "the person in possession of a negotiable instrument that is payable either to bearer9 or, to an identified person that is the person in possession . . . ." Id. § 1201(b)(21). A holder attains such status by way of a negotiation of the note, that is, the "transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer . . . ." Id. § 3201(a). Where "an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder." Id. § 3201(b). But, where an instrument is payable to bearer or endorsed in blank, negotiation only requires transfer of possession. Id. §§ 3201(b), 3205(b).

The Note was properly negotiated to Aurora. SCME endorsed the Note in blank. This endorsement appears on the back of the last page of the Note.10 Because a bearer instrument such as this one is properly negotiated upon the transfer of possession alone, the crucial inquiry here was whether Aurora actually possessed the Note. The Paks never challenged the authenticity of the original Note, nor did they raise any evidentiary objection to the copy of the Note Aurora proffered pursuant to Evidence Rule 1003. Consequently, we conclude that the proffered copy of the Note sufficed to show that Aurora possessed the Note, thereby satisfying the requirements for negotiation of a bearer instrument. Aurora was thus a person entitled to enforce the Note as the holder of the Note, and we accordingly reject the Paks' contrary argument.11

2. The Paks' argument that Aurora lacked standing because the Assignment was invalid also fails.

The Paks' second standing argument — attacking the validity of the Assignment from MERS to Aurora — also fails. Even if we were to conclude that this argument had merit, the Paks have conceded that the beneficial interest in the Deed of Trust follows the Note. See Appellant's Opening Brief at p. 11 (citing Carpenter v. Longan, 83 U.S. 271, 274 (1872)); see also In re Veal, 450 B.R. at 916 (citing Carpenter as an enunciation of the common law rule still applicable in most states); Cockerell v. Title Ins. & Trust Co., 267 P.2d 16, 20 (Cal. 1954).

Accordingly, the bankruptcy court did not err when it concluded that Aurora had standing to move for relief from stay.

B. Grounds for relief under Sections 362(d)(1) and 362(d)(2).

The Paks' sole argument before the bankruptcy court and before this Panel was that Aurora lacked standing to move for relief from stay. Nothing in the record shows that the Paks ever challenged whether Aurora had properly established grounds for relief under Section 362(d)(1) or Section 362(d)(2). The Paks have waived any such argument, and we need not address the merits here. See Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 919 (9th Cir. BAP 2011) (citing Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 613 (9th Cir. BAP 2002); Branam v. Crowder (In re Branam), 226 B.R. 45, 55 (9th Cir. BAP 1998), aff'd, 205 F.3d 1350 (9th Cir. 1999) (unpublished table decision)).

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy court's order granting Aurora relief from the automatic stay.