Federal Law

Bank Admits they Ain’t Got No Note But That’s Okay Says 10th Circuit, it’s JPMorgan Chase, Our Family Bankers

Generally, the only people entitled to enforce a blank-indorsed note are those in physical possession of it, Phillips explained. However, the lost-instrument statute provides an exception if Chase could prove the three elements in the statute.


If you are a school child and you ever want someone to write you a note to the school teacher so you can skip class,  this Judge on the 3-panel at the 10th Circuit is good at lyin’ in the face of ancient precedential property laws.

10th Circuit: Repayment on loan still valid, despite bank losing documentation

Originally Published; 29 Apr., 2020

The U.S. Court of Appeals for the 10th Circuit ruled that JP Morgan Chase was entitled to collect on a $2 million loan to a Colorado couple, despite the fact that the bank had lost the original note that documented the obligation.

In February 2008, Alexander N. Kim took out a $2 million loan from Washington Mutual Bank so he and his wife, Laura Foster, could build a commercial kitchen site for their catering business in Carbondale. Kim signed a promissory note to repay the loan plus interest to Washington Mutual, but during the 2008 recession, the bank failed and the federal government placed it in receivership.

In September of that year, JP Morgan Chase arranged to purchase all of Washington Mutual’s mortgage loans, although Kim and Foster allege that there is no proof that Chase bought Kim’s repayment pledge. Nonetheless, the couple began making payments to Chase until they filed for bankruptcy in 2010. Kim and Foster sent a letter to Chase in March 2014 asking to see the original note. Chase, in turn, moved to foreclose on the couple and sell the property.

Kim and Foster continued to request the proof of Kim’s repayment obligation, and Chase finally acknowledged that it was “not currently in possession of the original [Washington Mutual] Note.” That fact was corroborated during a 2016 bankruptcy hearing in which a mortgage banking research officer admitted that Chase did not have it. There were two key exhibits at trial: a scan of the note’s first page and a summary report about the loan. Kim and Foster called an expert to testify that he could not verify that the image of the note was genuine.

Nevertheless, the bankruptcy judge ruled that Chase had to meet three requirements to be entitled to payment on the note: Chase had to have had the note in its possession and be entitled to enforce it when they lost it. The note could not have been transferred or seized. Finally, Chase had to show that it could not reasonably produce the note.

The court found that Chase scanned the note into its system in 2009, and therefore it had possession. Furthermore, there had been no transfer or seizure, nor could the bank find the note in a reasonable manner. All three elements being satisfied, the bankruptcy judge determined that this scenario was covered under Colorado’s lost-instrument statute, and JP Morgan Chase could collect payment. On appeal to federal district court, the ruling was again in Chase’s favor.

Writing for the three-member 10th Circuit panel, Judge Gregory A. Phillips addressed the fact that the original note did not list Washington Mutual as the recipient of payment and was blank in the “payee” section.

“Generally, the only people entitled to enforce a blank-indorsed note are those in physical possession of it,” Phillips explained. However, the lost-instrument statute provides an exception if Chase could prove the three elements in the statute. Per the mortgage banking research officer’s testimony at trial, she personally knew “that the vault personnel [at Chase’s vault in Monroe, Louisiana,] physically took possession of the note.”

Phillips dismissed the allegation that the witness was not credible for lacking firsthand knowledge because the witness was able to describe in detail the company’s record-keeping process. She stated that the note probably got lost when Chase transferred it to one of its lawyers. She also described the scanning process for documents, to which Phillips observed that the scan of the note as a business record was an exception to the prohibition on hearsay evidence.

Despite Kim and Foster’s argument that the transfer of possession to Chase’s lawyer violated one of the three lost-instrument conditions, Phillips disagreed, saying that the lawyer did not take possession so he could collect on his own behalf.

“Chase gave custody of the Note to its foreclosure counsel, an action meant to facilitate foreclosure proceedings against Kim and Foster. That means that Chase gave its foreclosure counsel custody of the Note through an agency relationship — i.e., an attorney-client relationship,” Phillips wrote. He also wondered why, if an entity other than Chase possessed the note, had that person not begun to demand payment on the $2 million loan.

The court’s opinion concluded with the finding that the federal government did not need to create a bill of sale with Chase when it transferred Washington Mutual’s assets.

The case is Alexander N. Kim et al. v. JP Morgan Chase et al.

Read the 42 page Opinion full of creative wordsmithing and the tang of contempt at the start…

Kim v. JP Morgan Chase Bank N.A. (In re Kim), No. 18-1186 (10th Cir. Apr. 28, 2020)

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Former Wyoming Attorney General Greg Phillips born to be a judge, boss says

Originally Published; 29 Apr., 2020

CHEYENNE — If you walked into Greg Phillips’ office when he was an assistant U.S. attorney, you could usually find him at his desk, deep in thought, with a legal document and multi-colored Hi-Liters lined up neatly before him.

He would be so focused on a case that his boss, Kelly Rankin, sometimes had to tap him on the shoulder to get his attention.

Phillips, Rankin said Thursday, was an academic, a hard worker and a thoughtful attorney — the type born to be a judge.

Rankin, a former U.S. Attorney, is now chief magistrate judge for the federal district court.

When Phillips, then an Evanston attorney, came to the Wyoming Senate in 1993 as a Democratic member of one of the largest freshmen legislative classes ever, he was pleasant but quiet.

But he was quickly recognized as the smartest person in the room, said former state Sen. Jayne Mockler of Cheyenne.

These are the qualities that will make Phillips a great appeals court judge, his colleagues say.

Phillips, the state’s current Wyoming attorney general, will be sworn in as a judge of the 10th Circuit Court of Appeals Monday afternoon in a private ceremony in the chambers of Federal District Judge Alan B. Johnson.

A formal swearing in ceremony will be held in September or October.

During his stint in the U.S. Attorney’s office, Phillips was the office guru on federal sentencing guidelines, Rankin said. His fellow prosecutors went to him for help in applying those guidelines in criminal cases.

Phillips, 52, has argued about 20 cases before the 10th Circuit Court of Appeals. The circuit covers Oklahoma, Kansas, New Mexico, Colorado, Utah, Wyoming and Yellowstone National Park.

Phillips said he expect to begin work immediately next week on business of the circuit court, which is short a couple of members.

He watched the Senate confirmation hearings at home on C-Span 2 and expected them to last about five minutes, not 90.

But they went well and Wyoming’s two senators made a good case for his confirmation.

The final confirmation vote of 88-0 “was nothing to cry about,” he said Friday.

He enjoys the research aspect of legal work.

“Give me a stack of cases, a stack of notebooks and a few color markers and a big Coke Zero and I’m happy,” Phillips said.

His calling

Although he was considered a potential Democratic candidate for governor when he was in the state Senate, Phillips said he never was interested in a political career.

The law suits him nicely.

“I’d be a lousy doctor or optometrist,” he said.

In the Senate, Phillips served with a group of colleagues who went on to higher office. They include Jim Geringer, who became governor; Barbara Cubin, who was elected and re-elected U.S. Representative; Mike Enzi, now a U.S. Senator; and Cynthia Lummis, a current U.S. Representative.

Phillips was chosen Senate “freshman of the year’ by the media.

Mockler won the title in the House that year.

“I honestly I think it was apparent to everybody within weeks of working with Greg on either side of the aisle that his integrity was incredible and he was so smart … almost intimidatingly smart,” Mockler said.

Yet, she added, he was gracious, empathic and had a dry sense of humor.

He kept ribbing her about her passion for oil and gas issues, but was never mean about it.

Mockler is now a member of the state Board of Equalization.

The three-member board deals with knotty oil and gas valuation problems, among other things, so her passion is paying off.

Although Phillips intended to serve in the Senate for 10 years, he stopped at six because his father and brother retired from the family law practice in Evanston. He could not maintain the law practice alone and also serve in the Senate.

Also, he married and had two children, who are now teenagers.

Matt Mead, the current governor, then contacted him and they set up a law practice in Cheyenne.

When Mead took office as governor in January 2011, he named Phillips as Wyoming attorney general.

After he decided against running for re-election to the Senate, he encouraged then-state Rep. Ken Decaria, an Evanston teacher, to run for the Senate seat.

Decaria said he knew Phillips, who came from a prominent Uinta County family, well when Decaria was president of the local teachers’ organization.

Decaria is a now a Wyoming Education Association lobbyist in Cheyenne.

He said it was not easy to succeed Phillips in the state Senate.

Phillips, he said, is a hard worker who is very principled and is super bright.

“You don’t meet many people like that,” Decaria said.

Bank Admits they Ain’t Got No Note But That’s Okay Says 10th Circuit, it’s JPMorgan Chase, Our Family Bankers
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