## Facts

- A Chapter 13 debtor executed a 2000 Texas promissory note payable to Mortgage Factory, Inc. and a Texas deed of trust securing repayment.
- The note copy initially submitted with the creditor’s proof of claim showed a special indorsement to ABN Amro Mortgage Group, Inc., but no indorsement to the claimant and no blank indorsement.
- Recorded assignments of the deed of trust reflected transfers among entities, including an assignment from ABN Amro to MERS (as nominee for another lender) and, shortly before the proof of claim, a 2010 assignment from MERS to Wells Fargo Bank, N.A.
- The 2010 MERS-to-Wells Fargo assignment was executed by an individual who was both a Wells Fargo employee and an asserted MERS officer; his testimony indicated high-volume execution of loan documents with limited review.
- Wells Fargo filed a secured proof of claim supported by the loan documents and modification-related materials reflecting dealings connected to Freddie Mac, the alleged economic owner of the loan.
- The debtor objected, arguing Wells Fargo lacked standing and that the MERS assignment and note endorsements were invalid.
- Wells Fargo filed an amended proof of claim attaching a version of the note that now included a blank indorsement, which (if authentic) would make the note payable to bearer under Texas law.
- After an evidentiary hearing, the court evaluated whether the blank indorsement was authentic, whether Wells Fargo possessed the original note, and whether assignment defects mattered if Wells Fargo could enforce as holder.

## Issues

1. Whether Wells Fargo had standing in the Chapter 13 case to assert and enforce a secured claim as a “person entitled to enforce” the note under Texas U.C.C. Article 3, even if another entity owned the loan.
2. Whether the blank indorsement appearing on the note with the amended proof of claim was authentic and sufficient to establish Wells Fargo as the note’s “holder.”
3. Whether alleged defects in the MERS-to-Wells Fargo assignment (including questions about signatory authority and high-volume execution practices) defeated Wells Fargo’s secured claim.

## Decision

- The court overruled the debtor’s objection in substantial part and allowed Wells Fargo’s secured claim.
- The court held Wells Fargo established standing as a holder entitled to enforce the note under Texas U.C.C. Article 3.
- The court found the debtor did not produce evidence sufficient to overcome the statutory presumption that the blank indorsement signature was authentic.
- The court concluded Wells Fargo’s enforcement right as holder did not depend on proving ownership of the loan or on the validity of the challenged MERS assignment, because the security interest follows the note under Texas law.

## Legal Principles

- Under Texas U.C.C. Article 3, the “person entitled to enforce” a negotiable instrument includes the holder, even if the holder is not the instrument’s owner.
- A note indorsed in blank is payable to bearer; a party in possession of the original note indorsed in blank is generally the holder entitled to enforce it.
- Signatures and indorsements on negotiable instruments are presumed authentic under U.C.C.-based rules; the challenger bears the burden to produce evidence supporting a finding of forgery or lack of authority.
- Allegations based on timing, suspicion, or generalized criticisms of mass document-execution practices do not, without case-specific proof, rebut the presumption of authenticity.
- Under Texas law, the deed of trust follows the note; defects in an assignment of the security instrument do not defeat enforcement where the claimant proves holder status for the note.
- A properly filed proof of claim is prima facie evidence of validity and amount; after objection, evidentiary burdens may shift, but the claimant must ultimately prove entitlement if the prima facie showing is rebutted.

## Conclusion

The court permitted the secured claim because Wells Fargo proved it possessed the original note indorsed in blank and therefore was a holder entitled to enforce under Texas law, while the debtor failed to rebut the presumption that the indorsement was authentic; alleged assignment defects and loan-ownership questions did not bar enforcement.


In re Carrsow-Franklin, 524 B.R. 33 (Bankr. S.D.N.Y. 2015)