Memorandum of Decision and Ruling

Re: ECF Nos. 709, 755, 784, 793, 896, 1086, 1111, 1156, 1161.

Re: ECF Nos. 737, 792, 897, 1083, 1112, 1156, 1161.

ANN M. NEVINS, Bankruptcy Judge.

The courts' orders granting relief from stay to Ocwen Loan Servicing, LLC relating to two properties, 107 Oakridge Street, Norwich, Connecticut, and 20 Central Avenue, Norwich, Connecticut were remanded by the District Court for further proceedings. See ECF Nos. 896, 897, 1086, 1087. Specifically, the District Court remanded ECF Nos. 709 and 737 for a determination as to whether the allonge for each note was affixed to the relevant note. See ECF Nos. 1086, 1087.

During a hearing on January 4, 2017, the court examined the original notes at issue in ECF Nos. 709 and 737, and made findings on the record regarding the authenticity of the notes and their respective allonges.1 See ECF No. 1147 (audio file). The court examined the original notes provided by the movant and determined that an allonge was affixed (i.e., stapled) to each. See ECF No. 1147 (audio file).

The court then confirmed that the only remaining issue raised by the debtor was a legal one, specifically whether an allonge consisting of a separate piece of paper affixed to the original note could be valid under Connecticut's version of the Uniform Commercial Code when there was sufficient space on the original signature page of the note for the endorsement. ECF Nos. 1111, 1112, 1147. The court permitted the parties to file supplemental memoranda on this issue. ECF Nos. 1156, 1161.

The debtor argues that an allonge on a separate sheet of paper is only valid when there is no room for the endorsement on the signature page of the note. This is based on the definition of an allonge as "[a] piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself". See SKW Real Estate Ltd. Partnership v. Gallicchio, 49 Conn.App. 563, 566 n.3, cert. denied, 247 Conn. 926 (1998), White v. Bank of Am. Bank, NA, 597 F. App'x 1015, 1017 n.1 (11th Cir. 2014); In re Stanley, 514 B.R. 27, 31 n.4 (Bankr. D. Nev. 2012). The cases cited by the debtor either did not actually address the issue of whether room on the instrument for an endorsement rendered an allonge ineffective; see SKW Real Estate, at 566-71; White, at 1018-20; or, stated exactly the opposite: "Under the law merchant, the majority view was that an allonge was ineffective to transfer a negotiable instrument unless there was no more room on the reverse side of the note for additional endorsements. . . . The 1992 amendments to UCC Article 3 changed this rule to allow an allonge to be effective so long as it was "affixed" to the instrument. UCC § 3-204(a)." (Emphasis added.) In re. Stanley, at 31 n.4.

The movant cites to the Uniform Commercial Code, Official Comment 1 to Section 3-204, codified in Connecticut law as Conn. Gen. Stat. § 42a-3-204, Official Comment 1: "An indorsement on an allonge is valid even though there is sufficient space on the instrument for an indorsement." Other courts considering the issue following the 1992 amendment to the Uniform Commercial Code have declined to follow the "no space" test. See Deutsche Bank Trust Co. Ams. v. Porzio, 2014 WL 2504761 (Conn. Super. Ct. Apr. 29, 2014); In re McFadden, 471 B.R. 136, 172 (Bankr. D.S.C. May 9, 2012); Berg v. eHome Credit Corp., Docket No. 08-C-05530, 2011 WL 761486 (N.D. Ill. Feb. 25, 2011).

The court concludes, for the reasons stated during the hearing held on January 4, 2017, and those stated herein, that the movant is entitled to relief from stay. Accordingly, the court will grant both ECF No. 709 and ECF No. 737 pursuant to 11 U.S.C. §§ 362(d)(1) and 362(d)(2). Separate orders shall enter.