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FALSE STATEMENTS: In re Jessie M. Arizmendi, Bk. No. 09-19263-PB13, U.S. Bankruptcy Court, Southern District of California

FALSE STATEMENTS: In re Jessie M. Arizmendi, Bk. No. 09-19263-PB13, U.S. Bankruptcy Court, Southern District of California


By FRAUD DIGEST

False Statements

Brian Burnett
Freddie Mac
IndyMac Bank, FSB
MERS
OneWest Bank, FSB

Action Date: June 27, 2011
Location: San Diego, CA

California Bankruptcy Judge Laura Stuart Taylor has joined the ranks of judges who will not tolerate fraudulent documents produced by banks to foreclose. Judge Taylor entered an Order To Show Cause why OneWest Bank, FSB, should not incur “a significant coercive sanction intended to deter any future tender of misleading evidence to any court of this district.” Judge Taylor ordered OneWest to appear before her on July 29, 2011, to show cause as to why it should not be subject to compensatory and/or coercive sanctions, in the case In re Jessie M. Arizmendi, Bk. No. 09-19263-PB13, U.S. Bankruptcy Court, Southern District of California. The case involves a motion for relief from stay filed by OneWest supported with a declaration of Brian Burnett, who declared under penalty of perjury that OneWest was the real party in interest in connection with the Motion because OneWest was the current beneficiary under the terms of a promissory note and Deed of Trust.

According to the Burnett declaration, OneWest received its interest in the Trust Deed pursuant to an Assignment from MERS. The assignment of the Trust Deed and the Note showed the transfer from MERS as nominee for the original lender directly to OneWest in 2010.

At trial, however, OneWest’s witness, Charles Boyle, testified that the beneficiary of the loan was actually Freddie Mac. Based on this conflict, the Court required post-trial briefings.

According to the Court, “OneWest, in its post-trial brief, provided a standing argument based on a new version of the Note, which attached an allonge dated July 24, 2007 evidencing a transfer from Original Lender to IndyMac Bank, FSB and bore an endorsement in blank from IndyMac Bank, FSB. This was new information not presented in the OneWest Declaration and this note was not identical to the note authenticated by the OneWest Declaration and attached to the OneWest Proof of Claim.

This Court is concerned, thus, that OneWest provided false or misleading evidence to the Court and that OneWest did so willfully, maliciously, in bad faith, and/or for an inappropriate purpose.”

According to research by Fraud Digest, Brian Burnett has used many different job titles when signing mortgage-related documents for OneWest, often using different titles on the same day, including:

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Acoustic Home Loans;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Aegis Wholesale Corporation;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for American Brokers Conduit;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Beach First National Bank;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Credit Suisse Financial Corp.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for CTX Mortgage Company, LLC;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for DHI Mortgage Company, Ltd.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Express Capital Lending;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Finasure Home Loans, LLC;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for First Magnus Financial Corporation;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for First Meridian Mortgage;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Flick Mortgage Investors, Inc.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Home Loan Center, Inc. d/b/a LendingTree Loans;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Impac Funding Corp., d/b/a Impac Lending Group;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for IndyMac Bank, FSB;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for LoanCity;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for MortgageIt, Inc.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for NetBank, a Federal Savings Bank;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for New American Funding, a California Corporation;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Opteum Financial Services, LLC;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for OneWest Bank, FSB;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Quicken Loans, Inc.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Sloan Mortgage Group, Inc.;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for Taylor, Bean & Whitaker;

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for TM Capital, Inc.

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for d/b/a Fedfirst Mortgage Corporation; and

- Assistant Vice President, Mortgage Electronic Registration Systems, Inc., as Nominee for UBS AG.

July 29, 2011, may be the day that Brian Burnett and OneWest are held accountable for the thousands of mortgage assignments – with false statements regarding the history and ownership of mortgages – presented to courts to foreclose.



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IN RE ARIZMENDI | CA Bank. Court Denies Stay, Order to Show Cause “Contempt, Sanctions, (2) ONEWEST Notes; 1 Endorsed, 1 Unendorsed” “MERS Assignment”

IN RE ARIZMENDI | CA Bank. Court Denies Stay, Order to Show Cause “Contempt, Sanctions, (2) ONEWEST Notes; 1 Endorsed, 1 Unendorsed” “MERS Assignment”


In re: Jessie M. Arizmendi, Debtor.
OneWest Bank FSB, its assignees and/or successors, Moving Party,
v.
Jessie M. Arizmendi, Debtor; Thomas H. Billingslea, Chapter 13 Trustee; and Indymac Mortgage Services, Junior Lien, Respondents.

Bk. No. 09-19263-PB13, RS No. CNR-2.

United States Bankruptcy Court, S.D. California.

May 26, 2011.

Not for Publication

MEMORANDUM DECISION

LAURA S. TAYLOR, Bankruptcy Judge


EXCERPTS:

Additional Briefing.

At the trial, the Court carefully considered the demeanor of the various witnesses and the testimony provided. In connection with the trial, the Court also reviewed all other evidence and argument appropriately before the Court. Notwithstanding, however, significant questions continued, and the Court required additional briefing in connection with several issues as outlined in the Order Setting Briefing Schedule, Outlining Preliminary Determinations, and Establishing Procedures for Final Resolution of Issues (Dkt. No. 56) (the “Briefing Order”).

OneWest’s post-trial documents provided the analysis and argument required by the Briefing Order. But, these documents also contained factual assertions inconsistent with the OneWest Declaration and the Claim. OneWest now provided a standing argument based on a new version of the Note (the “Endorsed Note”).[3] The Endorsed Note attached an allonge dated July 24, 2007 evidencing a transfer from Original Lender to “IndyMac Bank, FSB” and bore an endorsement in blank from IndyMac Bank F.S.B. OneWest argued in connection therewith that it had enforcement rights under the Endorsed Note as a holder notwithstanding the admittedly accurate testimony at trial indicating that OneWest is a servicer for Freddie Mac and not the secured creditor. The OneWest post-trial memorandum also references a separate agreement with Freddie Mac, but fails to further evidence or discuss this agreement. The OneWest post-trial memorandum, finally, bases a standing argument on physical possession of the Endorsed Note and OneWest’s alleged status as a trust deed beneficiary based on the Assignment.

[…]

But, there are key assumptions that the Court must make in order for this set of facts to withstand scrutiny. And they are that OneWest, in fact, holds the Endorsed Note and held the Endorsed Note at all appropriate points in time. Frankly, the Court is not willing to make such assumptions at this time. OneWest attached the Unendorsed Note to both its Proof of Claim and the Declaration. The Declaration stated under penalty of perjury, that the Unendorsed Note was a true and accurate copy of the Note held by OneWest. The Proof of Claim implicitly stated the same and OneWest, of course, is obligated to provide only accurate information in connection with its Proof of Claim. The problem is that the Unendorsed Note does not bear the endorsement or attach the allonge found on the Endorsed Note, a document produced only after trial and the close of evidence. One West, thus, leaves the Court with the quandary of guessing which promissory note OneWest holds, whether and when One West held the Endorsed Note, and what the explanation is for the failure to provide the Endorsed Note prior to the close of evidence.[10]

A further evidentiary anomaly arises on account of the Assignment; MERS executed this document as a nominee for the Original Lender. But the allonge to the Endorsed Note makes clear that the Original Lender assigned its interests in the Note more than three years prior to execution of the Assignment. And rights under the Trust Deed follow the Note. Polhemas v. Trainer, 30 Cal. 686, 688 (1866). Thus, MERS’ purported assignment of the Trust Deed and the related note as nominee for the Original Lender and without a reference to either IndyMac Bank, FSB or Freddie Mac appears designed to disguise rather than to illuminate the facts.

And finally, even if OneWest’s second post-trial discussion of standing and submission of evidence were accurate, one thing remains clear: OneWest failed to tell the true and complete story in the OneWest Declaration and in the Claim.

The Court is concerned, as a result, that OneWest does not hold the Endorsed Note. But, perhaps more significantly, the Court is concerned that OneWest has determined that business expediency and cost containment are more important than complete candor with the courts. On these points, Ms. Arizmendi has a right to be heard, and the Court has a right to explanation.

Further, this is not the first time that OneWest has provided less than complete information in the Southern District of California. See “Memorandum Decision Re Motion to Vacate Clerk’s Entry of Default and Motion to Dismiss Complaint; Order to Show Cause for Contempt of Court”, docket no. 39, Adv. Pro. 10-90308-MM (In re Doble; Bk. Case No. 10-11296) (Defendants, including OneWest, were neither candid nor credible in explaining failure to respond timely to complaint and submitted multiple and different notes as “true and correct”); “Order to Show Cause Why OneWest Bank, FSB and Its Attorneys Law Offices of Randall Miller and Christopher Hoo Should Not Appear Before the Court to Explain Why They Should Not Be Held in Contempt or Sanctioned”, docket no. 47, In re Carter, Bk. Case No. 10-10257-MM13 (among other things OneWest provides inconsistent evidence as to its servicer status); and “Order After Hearing to Show Cause Why Indymac Mortgage Services; OneWest Bank, FSB; Randall S. Miller & Associates, P.C.; Christopher J. Hoo; Barrett Daffin Frappier Treder & Weiss, LLP; and Darlene C. Vigil Should Not Appear Before the Court to Explain Why They Should Not Be Held in Contempt or Sanctioned”, docket no. 47, In re Telebrico, Bk. No. 10-07643-LA13 (Court concerned that OneWest provided evidence that was either intentionally or recklessly false).

The curious thing about these cases is that OneWest likely would prevail in each of them if it completely and candidly explained the basis for its motion and its standing in connection therewith. Undoubtedly, however, doing so is more costly than using a form declaration that is not customized as to the facts on a case by case basis and that is signed by an uninformed declarant. OneWest perhaps assumes that it really does not matter if the Court provides relief based on erroneous information. But, OneWest should remember an earlier theme in this decision and that is that the law is the law, rules are rules, and both must be obeyed. And, when it becomes clear that OneWest did not obey the rules, the Court can and, indeed, must act.

In short, the Court will not participate in a process where OneWest increases its profits by disobeying the rules of this Court and by providing the Court with erroneous information. The Court, thus, will take two steps. First, the Court will deny the Stay Motion without prejudice based first on the evidentiary problems that make it impossible for the Court to determine that OneWest is properly before the Court and that render evidence critical to OneWest’s prima facie case unreliable and second based on the Court’s inherent authority to regulate and control proceedings. Next, the Court hereafter will issue an order to show cause why One West should not be held in contempt and/or otherwise sanctioned. In connection therewith, the Court will consider a compensatory sanction to include a recovery of any costs Ms. Arizmendi would not have incurred but for OneWest’s improper actions. The compensatory sanction, frankly, could be quite limited. But, the Court also believes that a coercive sanction may well be appropriate. Given the orders to show cause that pre-date the one this Court will issue, it appears that the Court must create an economic disincentive for OneWest that will counter balance the economic benefit of a lack of complete candor. Further detail on the Court’s sanctions considerations will be set forth in the order to show cause and will not be further discussed here.

The Court finally notes that the order to show cause will issue only as to OneWest and possibly as to MERS. OneWest uses a variety of law firms. The Court was in a position to observe the demeanor of the lawyers handling this matter when the witness stated that OneWest was a mere servicer. The Court concludes based on this observation that they were unaware of this fact and unaware that OneWest supplied questionable documentary evidence. And frankly, there is nothing to be gained in pursuing the individual attorneys who must regularly appear in front of this Court. OneWest can simply change counsel and then be less than candid with a new set of attorneys.[11] The Court is interested in modifying OneWest’s behavior at an entity level, and any coercive sanction will be designed to achieve the same.

CONCLUSION

Based on the foregoing, the Stay Motion is denied without prejudice to the right of OneWest to refile a stay relief motion. In so doing, OneWest must provide declaratory evidence that explains when and how it obtained physical possession of the Endorsed Note and/or Unendorsed Note and that otherwise provides case specific evidence of standing given its servicer status.

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