In Re: Annabelle Zaratzian

Background

Annabelle Zaratzian appealed a Bankruptcy Court order denying her objection to a proof of claim filed by Bank of New York Mellon (BNY Mellon) in her Chapter 11 bankruptcy case. The bankruptcy case began as a Chapter 13 case. BNY Mellon’s claim concerned a mortgage on Zaratzian’s home. The proof of claim sought $188,263.99 and included an interest-only fixed-rate note, a mortgage, an assignment of mortgage, recording documents, and a payment history showing default.

The note showed that Countrywide Home Loans, Inc., doing business as America’s Wholesale Lender, had loaned Zaratzian $1,415,000. The note contained a blank endorsement, meaning it could be enforced by the person possessing it. The mortgage described America’s Wholesale Lender as a corporation under New York law. Countrywide had filed a certificate allowing it to use America’s Wholesale Lender as an assumed name.

Arguments and Bankruptcy Court Ruling

Zaratzian argued that the mortgage was void or unenforceable because America’s Wholesale Lender was an assumed name rather than a separate corporation, yet the mortgage referred to it as a corporation. She relied on New York laws governing the use of business names and assumed names. She did not claim that fraud occurred in creating the note or mortgage. Her argument was based on what the courts described as confusion over the lender’s corporate identity.

BNY Mellon argued that Zaratzian had not rebutted the initial evidence supporting its claim and had identified no valid basis under New York law for invalidating the mortgage. The Bankruptcy Court agreed with BNY Mellon and denied Zaratzian’s objection. It determined that the assumed name itself did not include a corporate identifier, that the note did not misleadingly describe the assumed name as a corporation, and that a note issued to a valid assumed name could be enforced by the actual corporation or its transferee together with the mortgage.

District Court’s Analysis

The District Court reviewed legal conclusions from the Bankruptcy Court without deference and reviewed factual findings for clear error. Under Bankruptcy Rule 3001, a properly filed proof of claim is initial evidence that the claim is valid and in the stated amount. If the claimant supplies sufficient evidence, the objector must produce evidence that would refute an essential part of the claim. If the objector does so, the claimant must then establish the claim’s validity; the claimant always retains the ultimate burden of persuasion.

The District Court held that BNY Mellon met its initial evidentiary burden. Its proof of claim included the note and mortgage, the assignment of mortgage, evidence that the mortgage and assignment were recorded, and evidence of default and the amount owed. Because the note was endorsed in blank, BNY Mellon’s possession of the note was sufficient to demonstrate ownership.

The court held that Zaratzian did not rebut that evidence. She admitted signing the note and mortgage, receiving the loan funds, and owing the debt. The court also rejected her interpretation of New York law. It concluded that the assumed name “America’s Wholesale Lender” did not itself contain a corporate identifier and that Countrywide had properly registered the name. The court found that the authorities cited by Zaratzian did not support invalidating the mortgage and noted that other courts had rejected similar arguments.

Disposition

Judge Briccetti affirmed the Bankruptcy Court’s June 7, 2022, order denying Zaratzian’s objection to BNY Mellon’s proof of claim. The District Court instructed the Clerk to close the case.