                 United States Bankruptcy Appellate Panel
                      FOR THE EIGHTH CIRCUIT
                             _______________

                                No. 11-6025
                             ________________

In re:                               *
                                     *
Edward D. Banks and                  *
Diane Marie Banks,                   *
                                     *
      Debtors.                       *
                                     *
Edward D. Banks and                  *
Diane Marie Banks,                   *
                                     *
      Plaintiffs - Appellants,       * Appeal from the United States
                                     * Bankruptcy Court for the District
v.                                   * of Minnesota
                                     *
Kondaur Capital Corporation,         *
                                     *
      Defendant - Appellee,          *
                                     *
Shapiro & Zielke, LLP, formerly      *
known as Shapiro Nordmeyer & Zielke, *
                                     *
      Defendant.                     *
                                  _____

                       Submitted: September 13, 2011
                           Filed: October 11, 2011
                                   _____

Before VENTERS, FEDERMAN, and SALADINO, Bankruptcy Judges.
                             _____

VENTERS, Bankruptcy Judge.
      The Debtors, Edward and Diane Banks, appeal the bankruptcy court’s entry of
summary judgment in favor of Defendant Kondaur Mortgage Corp. in the Debtors’
adversary action seeking, inter alia, to avoid Kondaur’s mortgage lien on the
Debtors’ residence. We have jurisdiction over this appeal pursuant to 28 U.S.C. §
158(b). For the reasons stated below, we reverse and remand the matter to
bankruptcy court for further proceedings consistent with this opinion.

                        I. STANDARD OF REVIEW
      Findings of fact are reviewed for clear error, and legal conclusions are
reviewed de novo.1 The bankruptcy court's grant of summary judgment is reviewed
de novo.2

                                II. BACKGROUND
A.     Uncontroverted Facts
       On June 27, 2006, the Bankses purchased a home located at 964 Laurel
Avenue, St. Paul, Minnesota 55104. To finance this purchase, the Bankses executed
a promissory note and mortgage in favor of New Century Mortgage Corporation
(“NCMC”) in the amount of $415,800.00. On April 2, 2007, NCMC filed for Chapter
11 bankruptcy protection in the Bankruptcy Court for the District of Delaware.3
NCMC’s bankruptcy case was jointly administered with the bankruptcy case filed by
its parent company, New Century TRS Holdings, Inc.4



      1
          See In re Waterman, 248 B.R. 567, 570 (B.A.P. 8th Cir. 2000).
      2
        See U.S. v. Horras, 443 B.R. 159, 161–62 (B.A.P. 8th Cir.2011) (citing
Taylor v. St. Louis County Bd. of Election Commissioners, 625 F.3d 1025, 1028
(8th Cir. 2010)).
      3
          Case No. 07-10419-KJC.
      4
          In re New Century TRS Holdings, Inc., Case No. 07-10416.

                                         -2-
       On May 2, 2007, New Century Financial Corporation (“New Century”) and
certain of its subsidiaries (including NCMC) entered into an Asset Purchase
Agreement (“APA”) with Ellington Management Group, LLC.5 Pursuant to the APA,
Ellington purchased all of New Century’s right, title, and interest in numerous notes
and mortgages (the “Purchased Assets”), which included the Bankses’ note and
mortgage. The Delaware Bankruptcy Court approved the APA on May 7, 2007.

      In connection with the APA, New Century also agreed to execute a power of
attorney appointing Ellington as its attorney-in-fact, enabling Ellington to execute all
documents necessary to assign or foreclose mortgages in the name of New Century.
On March 12, 2008, New Century executed and delivered to Ellington a Limited
Power of Attorney, which was recorded with the Ramsey County (Minnesota)
Recorder on February 25, 2010.

       On July 15, 2008, the Delaware Bankruptcy Court approved a plan of
liquidation for New Century TRS Holdings, Inc. The remainder of New Century’s
assets were transferred to a liquidating trustee pursuant to the plan.6

     On May 11, 2009, Ellington, as attorney-in-fact for New Century, assigned the
Bankses’ mortgage to Elizon LA 2007-2, LLC.7 The assignment was recorded on

      5
        The relationship between NCMC and New Century Financial Corp. is not
clear from the record, but it is not the basis of any challenge here.
      6
        The Bankses’ argument that Ellington lacked the authority to assign the
Banksees’ mortgage to Kondaur because the assignment took place some time
after New Century’s assets were transferred to a liquidating trustee under New
Century TRS Holdings, Inc.’s plan is without merit. Although New Century might
have remained the titular owner of the mortgage, its substantive rights therein had
already been transferred to Ellington pursuant to the APA.
      7
      Inexplicably, the date on the assignment indicates that it was signed on
May 11, 2009, but the notarization indicates that it was signed on May 11, 2007.

                                          -3-
June 23, 2009, but according to Kondaur, the assignment to Elizon was a mistake.
On February 22, 2010, Ellington executed a “Corrective Assignment Mortgage”
purporting to re-assign the Bankses’ mortgage to Kondaur. The Corrective
Assignment was recorded on February 25, 2010.8

B.    Procedural Background

      The Bankses filed a Chapter 13 bankruptcy petition on May 17, 2010. On
October 12, 2010, they filed a seven-count complaint against Kondaur, seeking a
combination of declarative, injunctive, and compensatory relief. At essence, the
Bankses challenge Kondaur’s standing as the holder of the promissory note and
owner of the mortgage originally executed in favor of NCMC. Attached to the
complaint as exhibits were copies of (a) the assignment of mortgage from NCMC to
Elizon LA 2007-2, LLC; (b) the “Corrective Assignment,” purporting to assign the
mortgage from NCMC to Kondaur; and (c) the limited power of attorney giving
Ellington Management Group, LLC the power to endorse and transfer mortgages on
NCMC’s behalf.

       On November 24, 2010, Kondaur filed a motion to dismiss the lawsuit.
Kondaur attached a copy of the APA to the motion and referenced Kondaur’s proof
of claim, to which was attached a copy of the original promissory note – endorsed in
blank – and the original mortgage to NCMC.




      8
        Although we reverse on other grounds, we have serious concerns about the
validity and effect of the “Corrective Assignment.” At oral argument, Kondaur
represented that it was common practice in the mortgage industry. Considering
the current state of the mortgage industry, this gives us little comfort. At the least,
the Corrective Assignment would appear to create a cloud on Kondaur’s right to
foreclose, necessitating a judicial foreclosure.

                                          -4-
      The bankruptcy court held a hearing on Kondaur’s motion to dismiss on
December 20, 2010, at which time the court indicated its intent to treat the motion as
one for summary judgment since the motion referred to material outside of the
pleadings. Counsel for the Debtors reiterated that they were there on a motion to
dismiss – not a motion for summary judgment – but they didn’t specifically object
to going forward, and they too referred to the APA in their argument.

      On December 23, 2010, the bankruptcy court entered an order granting
Kondaur summary judgment on all counts of the Debtors’ complaint.9 The Debtors
timely appealed.

                                    DISCUSSION
       Summary judgment is appropriate if there is no genuine issue as to any material
fact and the moving party is entitled to a judgment as a matter of law.10 We view the
summary judgment record in the light most favorable to the nonmoving party and
afford that party all reasonable inferences.11 An issue of fact must be based on
specific factual allegations.12




      9
        The order did not include a judgment on Count VII of the complaint,
which alleged that Kondaur’s attorneys violated the Fair Debt Collection Practices
Act, because the reference had been withdrawn on that count on April 14, 2011.
      10
        Fed.R.Civ.P. 56, applicable herein pursuant to Fed. R. Bankr.P. 7056;
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986).
      11
           See In re Patch, 526 F.3d 1176, 1180 (8th Cir. 2008).
      12
         See Neighborhood Enterprises, Inc. v. City of St. Louis, 644 F.3d 728, 734
(8th Cir.2011) (citation omitted).

                                          -5-
       Summary judgment was improper in this case because there was a material
issue of fact regarding whether Kondaur has possession of the original promissory
note.

      As Kondaur admits, and is apparent from the copy of the note attached to its
proof of claim, the promissory note the Debtors executed in favor of NCMC has not
been specifically endorsed to Kondaur; it is endorsed in blank. Accordingly, it is a
“bearer” note, which requires actual possession of the note to enforce or negotiate it.13
The Debtors raised the issue of whether Kondaur is the proper party to enforce the
note and cast further doubt on Kondaur’s standing by introduction of the Corrective
Assignment. Unfortunately, there is nothing in the record evidencing the location of
the note. Kondaur’s counsel represented at oral argument before this Court that
Kondaur has possession of the note, but its failure to produce the note prior to or at
the hearing on its motion to dismiss (treated as a motion for summary judgment)
precluded a determination that Kondaur has the right, as a matter of law, to enforce
the promissory note.

       At oral argument, Debtors’ counsel conceded that there is a valid mortgage on
the property and that production of the note most likely will remove the final hurdle
to Kondaur’s pending motion for relief and Kondaur’s motion to dismiss the
adversary proceeding.14

                                 CONCLUSION
      For the reasons stated above, the bankruptcy court’s order entering summary
judgment in favor of Kondaur is reversed and remanded for proceedings consistent
with this opinion.

      13
           See Minn. Stat. § 336.3-205(b).
      14
        Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d
487, 494 (Minn. 2009).

                                          -6-
