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STEWART TITLE BULLETIN: RE: Recent Oklahoma Supreme Court Decisions Regarding Foreclosures

STEWART TITLE BULLETIN: RE: Recent Oklahoma Supreme Court Decisions Regarding Foreclosures


Dear Associates:

The Oklahoma Supreme Court has recently issued several opinions:

Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3 {Approved for Publication}

Deutsche Bank National Trust v. Byrams, 2012 OK 4

HSBC Bank USA v. Lyon, 2012 OK 10

Deutsche Bank National Trust Company v. Matthews, 2012 OK 14

Deutsche Bank National Trust Company v. Richardson, 2012 OK 15

CPT Asset Backed Certificates; Series 2004-EC1 v. Kham, 2012 OK 22

Bank of America, N.A. v. Kabba, 2012 OK 23

JPMorgan Chase Bank, N.A. v. Eldridge, 2012 OK 24

(It is important to note that only one of the opinions, Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, has been approved for publication so far.)

These opinions hold that to commence a foreclosure action, the plaintiff must show that it has the right to enforce the promissory note, and in the absence of such showing, the plaintiff lacks standing to bring the lawsuit.  The fact patterns in each of the cases vary slightly (seven are based on appeals from orders granting summary judgment entered by the trial court, and one is based upon a default judgment), but the basic fact pattern is as follows:  Plaintiff files a foreclosure action either without attaching a copy of the promissory note or attaching the note without proper indorsement(s) by the original lender.  Defendant raises the issue that Plaintiff does not have standing to sue, either in response to a Motion for Summary Judgment or by pleadings filed after the Journal Entry of Judgment.  Motions are denied after Plaintiff provides documentation showing indorsement or allonge.  Defendant appeals.

[STEWART VIRTUAL UNDERWRITER]

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[Video] Oral Arguments; Washington Supreme Court, BAIN v. MERS and Selkowitz v. Litton Loan Servicing

[Video] Oral Arguments; Washington Supreme Court, BAIN v. MERS and Selkowitz v. Litton Loan Servicing


Counsels for Kristin Bain & Kevin Selkowitz attorneys Melissa Huelsman and Richard Jones (great voice) did a FANTASTIC, OUTSTANDING JOB!!!

BOMBSHELL: Listen and watch when they ask MERS’ counsel “Who is the holder of the note”? HE DOES NOT KNOW & CANNOT ANSWER!

Oral arguments: Bain v. Mortgage Electronic Registration Sys, et al and Selkowitz v. Little “Litton” Loan Servicing, LP, et al. (May a party be a lawful beneficiary under WA’s Deed of Trust Act if it never held the promissory note secured by the deed of trust?)

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State Supreme Court to rule on legality of mortgage recording system (MERS)

State Supreme Court to rule on legality of mortgage recording system (MERS)


KOMO NEWS-

For the first time, a local homeowner’s fight to keep a house is headed to the state Supreme Court.

What happens there will effect thousands of people who’ve taken out mortgage loans in the past 10 years. If you own property, you need to know about a system known as MERS.

MERS stands for Mortgage Electronic Registration Systems. It was created by the real estate finance industry to simplify the process of transferring mortgage loans.

But struggling homeowners complain MERS also conceals the true note holder when your mortgage is sold to investors.

Kristen Bain’s comfortable condo in Tukwila is tied up in the MERS debate. First, she had to sue her mortgage broker and the lender for predatory lending and failure to provide proper documentation as required by law.

[KOMO NEWS]

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HABER v. DEUTSCHE BANK | FL 4DCA “failed to show that it provided appellant with the requisite notice and opportunity to cure, not entitled to a final SJ”

HABER v. DEUTSCHE BANK | FL 4DCA “failed to show that it provided appellant with the requisite notice and opportunity to cure, not entitled to a final SJ”


OMAR HABER, Appellant,

v.

DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATE HOLDERS FOR ARGENT SECURITIES, INC., ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-W2, Appellee.

 No. 4D10-4458.

 District Court of Appeal of Florida, Fourth District.

  February 22, 2012.

Lionel Barnet of the Law Offices of Lionel Barnet, P.A., Miami, for appellant.

Debra Rescigno of Robertson, Anschutz & Schneid, P.L., Boca Raton, for appellee.

PER CURIAM.

Omar Haber appeals the trial court’s entry of a final summary judgment of foreclosure in favor of Deutsche Bank National Trust Company (the bank). He argues that summary judgment was improper because the bank lacked standing to file the foreclosure suit and failed to refute his affirmative defense that the bank did not provide him with the requisite notice and opportunity to cure required an the mortgage agreement. We affirm as to the standing issue without discussion, but we reverse the final summary judgment because the bank failed to refute appellant’s affirmative defense regarding notice and opportunity to cure.

The mortgage agreement states, in pertinent part:

Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property.

There is no evidence within the record showing that the bank provided appellant with the requisite notice and opportunity to cure.

An order granting summary judgment is reviewed de novo. Allenby & Assocs., Inc. v. Crown St. Vincent Ltd., 8 So.3d 1211, 1213 (Fla. 4th DCA 2009) (citation omitted). In order to be entitled to summary judgment, a mortgagor must refute all of the affirmative defenses of the mortgagee or show that they are legally insufficient. Woodrum v. Wells Fargo Mortg. Bank, N.A., 73 So.3d 873, 874 (Fla. 4th DCA 2011) (citing Frost v. Regions Bank, 15 So.3d 905 (Fla. 4th DCA 2009)). Because the bank failed to show that it provided appellant with the requisite notice and opportunity to cure, it was not entitled to a final summary judgment of foreclosure.

Affirmed in part, Reversed in part and Remanded.

[ipaper docId=82643503 access_key=key-9edsce27q6wik8cyrxo height=600 width=600 /]

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Amicus Brief of Washington State Attorney General Robert M. McKenna – Bain v. Metropolitan Mortgage and Selkowitz v. Litton Loan Servicing LP “MERS”

Amicus Brief of Washington State Attorney General Robert M. McKenna – Bain v. Metropolitan Mortgage and Selkowitz v. Litton Loan Servicing LP “MERS”


SUPREME COURT OF
THE STATE OF WASHINGTON

KRISTIN BAIN

vs

METROPOLITAN MORTGAGE GROUP INC. et al

[ipaper docId=81662045 access_key=key-24v4kd0j2bq2hhng7wkd height=600 width=600 /]

 

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Bain v. MERS (Wash. Supreme Court) Amicus of Atty Shawn Newman on behalf of Organization United for Reform (OUR) – Washington

Bain v. MERS (Wash. Supreme Court) Amicus of Atty Shawn Newman on behalf of Organization United for Reform (OUR) – Washington


Bain v. Metropolitan is set for hearing on March 15. This is an amicus from attorney Shawn Timothy Newman for Organization United for Reform (OUR) – Washington.

[ipaper docId=81423312 access_key=key-1mn29xvrh9m4blp1cj9v height=600 width=600 /]

 

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DEUTSCHE BANK NAT. TRUST v. BRUMBAUGH | OK SC “there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note”

DEUTSCHE BANK NAT. TRUST v. BRUMBAUGH | OK SC “there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note”


DEUTSCHE BANK NATIONAL TRUST v. BRUMBAUGH
2012 OK 3
Case Number: 109223
Decided: 01/17/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA


Cite as: 2012 OK 3, __ P.3d __


NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 


DEUTSCHE BANK NATIONAL TRUST, AS TRUSTEE FOR LONG BEACH MORTGAGE LOAN 2002-1, Plaintiff/Appellee,
v.
DENNIS BRUMBAUGH, Defendant/Appellant.

ON APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY
HONORABLE LINDA G. MORRISSEY
DISTRICT JUDGE

¶0 The Plaintiff /Appellee, Deutsche Bank National Trust as Trustee for Long Beach Mortgage Loan 2002-1, filed this foreclosure action against the Defendant/Appellant, Dennis Brumbaugh. Plaintiff filed a motion for summary judgment which was granted by the trial court. Defendant contends there is not enough evidence to show Plaintiff has standing. Plaintiff asserts it is the holder of the note and has standing. We find there are material issues of fact that need to be determined and summary judgment is not appropriate.

REVERSED AND REMANDED WITH INSTRUCTIONS

Phillip A. Taylor, TAYLOR & ASSOCIATES, Broken Arrow, Oklahoma, for Defendant/Appellant.
Ray E. Zschiesche, PHILLIPS MURRAH P.C., Oklahoma City, Oklahoma, for Plaintiff/Appellee.

COMBS, J.

FACTS

¶1 This is an appeal from a foreclosure action initiated by Appellee, Deutsche Bank National Trust As Trustee for Long Beach Mortgage Loan 2002-1 (Appellee) against Appellant Dennis Brumbaugh (Appellant) and others. Appellant and his wife, Debra Brumbaugh, (Brumbaughs) executed a note and mortgage with Long Beach Mortgage Company on February 27, 2002. On December 27, 2006, the Brumbaughs entered into a loan modification agreement with U.S. Bank, N.A., successor trustee to Wachovia Bank, N.A. (formerly known as First Union National Bank), as Trustee for Long Beach Mortgage Loan Trust 2002-1, Asset Backed Certificates, Series 2002-1 in trust for the benefit of the Certificateholders. On July 20, 2007, the Brumbaughs divorced, and in 2008, Debra Brumbaugh executed a quitclaim deed to Dennis Brumbaugh.

¶2 Appellant defaulted on the note in January 2009, and Appellee filed its petition for foreclosure on June 2, 2009. Attached to the petition was a copy of the note, mortgage, loan modification agreement, and copies of statements of judgments and liens by other entities. Appellee claims it is the present holder of the note and mortgage having received due assignment through mesne assignments of record or conveyance via mortgage servicing transfer. The Appellant answered, denying Appellee owns any interest in the note and mortgage, and the copies attached to the petition were not the same as those he signed. He claims Appellee lacked capacity to sue and the trial court lacks jurisdiction over the subject matter. He also denied being in default and asserted the Appellee/servicing agent caused the alleged default.

¶3 On April 1, 2010, Appellee filed a motion for summary judgment. Attached to the motion was an affidavit from an employee of JP Morgan Chase Bank (Chase) as the servicing agent for Appellee. The affidavit states the Appellee is the current owner and holder of the original note, mortgage, and the modification agreements. However, there is no mention of when Appellee became the holder.

¶4 Appellant asserts in his response to the motion for summary judgment that Appellee failed to prove the affiant is a competent witness and no documentation was presented that connects Appellant to Appellee. The note attached to the petition and the motion did not show it had been negotiated to any other party including Appellee. Negotiation requires transfer of possession of the instrument and its indorsement by the holder. 12A O.S. 2001, § 3-201(b). He asserts because there is no indorsement whatsoever by Long Beach Mortgage Company attached to the petition and motion for summary judgment, Appellee cannot be the holder of the note. Therefore, Appellant asserts Appellee cannot be the real party in interest. However, in Appellee’s reply to Appellant’s response to the motion for summary judgment and at the hearing, a copy of the note with a blank, undated indorsement signed by Long Beach Mortgage Company was attached and presented.

¶5 Appellee asserts that even if negotiation of the note was at issue, Appellee has possession of the note and that satisfies the “negotiation” requirements of 12A O.S. 2001, § 3-201. Further, the Chase affiant has personal knowledge because he reviewed and examined the account files and Chase is the servicing agent for Appellee. Appellee further asserts, it has the original note and mortgage, and is therefore, the real party in interest.

¶6 The trial court reviewed the note presented at the hearing and agreed with Appellee that Appellee was the holder of the note because it had possession of the note and it was indorsed in blank. The court granted summary judgment in favor of Appellee on January 27, 2011.

STANDARD OF REVIEW

¶7 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶8 The Uniform Commercial Code adopted in Oklahoma, 12A O.S. 2001, § 1-101 et seq., defines who is a “person entitled to enforce” the note (instrument).1 A “person entitled to enforce” the note requires possession of the note with a very limited exception.2 It will be either one who is a “holder” of the note or a “nonholder in possession of the note who has the rights of a holder.”3

¶9 Appellee must demonstrate it is a person entitled to enforce the note. It must provide evidence it has possession of the note either by being a holder or a nonholder in possession who has the rights of a holder. Appellee attached to its Reply to Defendant’s Response to Plaintiff’s Motion for Summary Judgment a copy of the note with a blank indorsement from Long Beach Mortgage Company. Appellee states this allonge4 was inadvertently omitted from the copy of the note that was attached to its Motion for Summary Judgment. However, this allonge was not attached to the Petition for Foreclosure of Mortgage. Appellee is trying to establish it is a “holder” of the note. Evidence establishing when Appellee became a person entitled to enforce the note must show Appellee was a person entitled to enforce the note prior to filing its cause of action for foreclosure.

¶10 Appellant argues Appellee does not have standing to bring this foreclosure action. The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).

¶11 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.5 Being a person entitled to enforce the note is an essential requirement to initiate a foreclosure lawsuit. In the present case, there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note. Therefore, summary judgment is not appropriate. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party. We reverse the granting of summary judgment by the trial court and remand back for further determinations as to when Appellee acquired its interest in the note.

CONCLUSION

¶12 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so the defendant is duly apprised of the rights of the plaintiff. This is accomplished by establishing that the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. 12A O.S. 2001, § 3-301. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or loan modification, or insulate them from foreclosure proceedings based on proven delinquency. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶13 CONCUR: TAYLOR (This Court’s decision in no way releases or exonerates the debt owed by the defendants on this home.), C.J., KAUGER (joins Taylor, C.J.), WATT, WINCHESTER (joins Taylor, C.J.), EDMONDSON, REIF, COMBS, GURICH (joins Taylor, C.J.), JJ.

¶14 RECUSED: COLBERT, V.C.J.

FOOTNOTES

112A O.S. 2001, § 3-301.

2 A person who is not reasonably able to obtain possession of the note because it was lost, destroyed, in the wrongful possession of another, or it is paid or accepted by mistake. 12A O.S. 2001, § 3-301.

3 A holder is a person in possession of the note that is payable either to bearer (blank indorsement) or to an identified person (special indorsement) that is the person in possession. 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205. A “nonholder in possession who has the rights of a holder” is a person in possession of the note but the note was not indorsed by the previous holder; special indorsement or blank indorsement. No negotiation has occurred because the person now in possession did not become a holder by lack of the note being indorsed as mentioned. An example would be when a sale of notes in bulk is made by the holder to a transferee and the holder is transferring the right to enforce the notes even though there has been no negotiation. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)). Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, § 3-203(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011).

4According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

5 This opinion occurred prior to the enactment of the UCC and as explained in footnote 3 of this opinion, the person entitled to enforce the note in almost all situations is required to be in possession of the note and therefore if the owner of the note is not in possession of the note it is not a person entitled to enforce the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

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Deutsche Bank Nat.Trust v. Byrams | OK SC “Without an indorsement on the note the Appellee cannot be a holder of the note”

Deutsche Bank Nat.Trust v. Byrams | OK SC “Without an indorsement on the note the Appellee cannot be a holder of the note”


DEUTSCHE BANK NATIONAL TRUST COMPANY v. BYRAMS
2012 OK 4
Case Number: 108545
Decided: 01/17/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE IN TRUST FOR THE BENEFIT OF THE CERTIFICATE HOLDERS FOR ARGENT SECURITIES INC., ASSET-BACKED PASS THROUGH CERTIFICATES, SERIES 2006-W2, Plaintiff/Appellee,

v.

JEVESTER BYRAMS, JR. and NATACHA BYRAMS, ET AL Defendant/Appellant,

ON APPEAL FROM THE DISTRICT COURT OF CREEK COUNTY
HONORABLE LAWRENCE W. PARISH
DISTRICT JUDGE

¶0 Appeal of a summary judgment granted in Deutsche Bank National Trust Company’s favor against the Byramses on May 11, 2010. The Byramses filed a petition and motion to vacate, as well as, requests to stay any proceedings regarding the property. The parties appeared before the trial court on June 15, 2010, and the petition, motion and other requests were denied. The order was filed on July 6, 2010. The Byrams appealed on July 28, 2010, and this Court retained the matter on April 21, 2011.

REVERSED AND REMANDED WITH INSTRUCTIONS

Phillip A. Taylor, TAYLOR & ASSOCIATES, Broken Arrow, Oklahoma, for Defendant/Appellants.
A. Grant Schwabe, KIVELL, RAYMENT AND FRANCIS, P.C., Tulsa, Oklahoma, for Plaintiff/Appellee.

COMBS, J.

FACTUAL AND PROCURAL HISTORY

¶1 In a petition filed on December 8, 2009, Deutsche Bank National Trust company, as Trustee in Trust for the benefit of the Certificate Holders for Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2006-W2,claiming to be the present holder of the note (hereinafter Deutsche Bank) filed a foreclosure action against the Byramses. Deutsche Bank claimed at that time to hold the note and mortgage having received due assignment through mesne assignments of record or conveyance via mortgage servicing transfer. A review of the note shows no indorsement. Argent Mortgage Company, LLC, was the original lender. In its brief in support of motion for summary judgment, filed March 9, 2010, Deutsche Bank attached a document entitled “Assignment of Mortgage.” This assignment of mortgage was acknowledged on January 12, 2010, and stamped as being recorded with the County Clerk of Tulsa County on January 26, 2010. This was over one month after the filing of the foreclosure proceeding (December 8, 2009). Additionally, this Assignment of Mortgage, from Argent Mortgage Company, LLC, by Citi Residential Lending, Inc., made to plaintiff, Deutsche Bank as the trustee of Argent Mortgage Company, LLC, was signed by Citi Residential Lending, Inc. Both the assignor and assignee list the same address, “c/oAmerican Home Mtg Servicing, Inc. 1525 S. Beltline Rd, Coppell, TX 75019.” A summary judgment granted in Deutsche Bank’s favor against the Byrams on May 11, 2010, memorialized a final journal entry of judgment order. A petition for new trial to vacate the final journal entry of judgment, and motion to dismiss plaintiff’s petition for lack of standing was filed on May 21, 2010, which was denied by order on June 28, 2010, by the trial court. The Byrams appeal this summary judgment arguing Deutsche Bank National Trust Company failed to demonstrate standing.

STANDARD OF REVIEW

¶2 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 631 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶3 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, there is no evidence in the record supporting it is a holder of the note. The face of the note does not indicate it was indorsed and the purported “assignment of mortgage” was filed after the filing of the foreclosure proceedings.

¶4 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit; . . .” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).

¶5 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.1 An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note.” BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. Thus, a foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶6 To show you are the “holder” of the note you must prove you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).2 Therefore, both possession of the note and an indorsement on the note or attached allonge3 are required in order for one to be a “holder” of the note.

¶7 To be a “nonholder in possession who has the rights of a holder” you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement. The record in this case reflects the note has not been indorsed. No negotiation has occurred because the person now in possession did not become a holder by lack of the note being indorsed as mentioned. Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶8 In the present case, Appellee has only presented evidence of an unindorsed note and an “Assignment of Mortgage.” Without an indorsement on the note the Appellee cannot be a holder of the note. Therefore, from the record presented to this Court, the Appellee must assert it is a nonholder in possession who has the rights of a holder.

¶9 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish it is a nonholder in possession who has the rights of a holder it must bear the burden of establishing its status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the assignment of mortgage in order to establish the purpose of delivery. The assignment of mortgage purports to transfer “the following described mortgage, securing the payment of a certain promissory note(s) for the sum listed below, together with all rights therein and thereto, all liens created or secured thereby, all obligations therein described, the money due and to become due thereon with interest, and all rights accrued or to accrue under such mortgage.” This language has been determined by other jurisdictions to not effect an assignment of a note but to be useful only in identifying the mortgage. Therefore, this language is neither proof of transfer of the note nor proof of the purpose of any alleged transfer. See, In re Veal, 450 B.R. 897, 905 (B.A.P. 9th Cir. 2011).

¶10 Appellee must show it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. In the present case, there is a question of fact as to when and if this occurred and summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶11 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶12 CONCUR: TAYLOR (This Court’s decision in no way releases or exonerates the debt owed by the defendants on this home.), C.J., KAUGER (joins Taylor, C.J.), WATT, WINCHESTER (joins Taylor, C.J.), EDMONDSON, REIF, COMBS, GURICH (joins Taylor, C.J.), JJ.

¶13 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 This opinion occurred prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

2 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205.

3 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

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Deutsche Bank Natl. Trust Co. vs. Alvarado | NYSC “Greg Schleppy, Sr VP of Carrington Affidavit Fail, Not supported by a copy of the purported recorded deed

Deutsche Bank Natl. Trust Co. vs. Alvarado | NYSC “Greg Schleppy, Sr VP of Carrington Affidavit Fail, Not supported by a copy of the purported recorded deed


DEUTSCHE BANK NATIONAL TRUST
COMPANY AS INDENTURE TRUSTEE FOR NEW
CENTURY HOME EQUITY LOA.N TRUST 2005·3,
Plaintiff,

-against-

CECILIA ALVARADO INDIVIDUALLY AND
AS SURVIVING JOINT TENANT OF JORGE
ALVARADO, JORGE ALVARADO A/K/A JORGE
ALVARADO JR. A/K/A GEORGE ALVARADO AS
SURVIVING JOINT TENANT OF JORGE
ALVARADO, NEW CENTURY MORTGAGE
CORPORATION, UNITED STATES OF AMERICA,
NEW YORK STATE DEPARTMENT OF
TAXATION AND FINANCE, TARGET NATIONAL
BANK, CACH LLC, MIDLAND FUNDING LLC,
PORTFOLIO RECOVERY ASSOCIATES LLC,
NORTH STAR CAPITAL ACQUISITION LLC,
DISCOVER BANK, BETHPAGE FEDERAL
CREDIT UNION

[ipaper docId=75727206 access_key=key-1wuto0wfpfd59cpmsblg height=600 width=600 /]

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Posted in STOP FORECLOSURE FRAUDComments (0)

Full Deposition Transcript of  Patricia Berner Foreclosure Special Assets Specialist For American Home Mortgage Servicing, Inc. “AHMSI”

Full Deposition Transcript of Patricia Berner Foreclosure Special Assets Specialist For American Home Mortgage Servicing, Inc. “AHMSI”


Excerpts:

Q Do you have any knowledge of why American
Home Servicing, Inc. no longer does business with
DOCX?

A There were deficiencies in the documents
that they were producing.

Q What sort of deficiencies in general?

A They weren’t deficiencies. They weren’t
 prepared correctly

Q Can you give me any more detail about that?
I’m not asking about this specific case yet. Just in
general what sort of deficiencies?

A Some of the assignments weren’t properly
conveying the assignor/assignee appropriate parties.

Q As to the present mortgage that we’re here
on today, do you know whether American Home
Servicing, Inc. has ever had any ownership of the
beneficial interest in the payments due under the
note and secured by the mortgage?

A No, we’re strictly the servicer.

Q So at no time has American Home Servicing,
Inc. actually owned any interest in the mortgage; is
that correct?

MR. COOK: Object to the form.

THE WITNESS: No, we have not.

[…]

Q Now, do you know a person by the name of
Tywanna Thomas?

A No.

Q Have you ever heard that name?

A Yes.

Q In what context have you heard or become
familiar with that name?

A I’ve seen her name on assignments that they
prepared.

Q That DOCX prepared?

A Yes.

Q Has it ever come to your attention that
there are some irregularities with assignments
allegedly signed by Ms. Thomas and prepared by DOCX?

Mr. COOK: Object to the form.

THE WITNESS: Yes.

BY MR. TRENT:

Q What about Korell Harp, K-O-R-E-L-L,
H-A-R-P? Same question. Do you know Korell Harp?
that particular assignment came about?

MR. COOK: Object to the form.

THE WITNESS: How it came about?

BY MR. TRENT:

Q Yes. Isn’t it a fact, ma’am, that this is
a DOCX assignment? I’ll just hand you the exhibit.

MR. TRENT: It’s Exhibit –

THE WITNESS: Two.

MR. TRENT: — two.
(Thereupon, Defendants’ Exhibit Number 2
was marked for identification.)

BY MR. TRENT:

Q It has the Notice of Filing in the front,
but skip that.

MR. COOK: Do you want some time to
review the document?

THE WITNESS: I forgot the question.

BY MR. TRENT:

Q Isn’t it a fact, ma’am, that this document
was prepared by DOCX?

A Yes.

[ipaper docId=75615258 access_key=key-2jpyg47z8nuerlr0h60f height=600 width=600 /]

 

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Foreclosure mill getting peppered, Linked to the first criminal case brought against alleged robo-signers

Foreclosure mill getting peppered, Linked to the first criminal case brought against alleged robo-signers


In case you wish to read the transcripts from this story check it out: FULL DEPOSITION TRANSCRIPT OF LENDER PROCESSING SERVICES “LPS” SCOTT A. WALTER PART 1 &

FULL DEPOSITION TRANSCRIPT OF LENDER PROCESSING SERVICES SCOTT A. WALTER PART 2 “STEVEN J. BAUM, P.C.”, “O. MAX GARDNER”, “US TRUSTEE”

NY POST-

The stink is growing around the state’s largest foreclosure mill.

The Steven J. Baum law firm, which last month agreed to pay a $2 million fine to settle a federal probe into bogus foreclosure case filings, has now been barred by federal mortgage giants Fannie Mae and Freddie Mac from getting any more referrals of home loan defaults owned by either company.

In addition, the 70-lawyer firm is linked to the first criminal case brought against alleged robo-signers.

The criminal case was brought by the Nevada attorney general against two title officers — Gary Trafford and Gerri Sheppard — charged with forging signatures on 606 foreclosure-related mortgage documents.

.
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IN RE CHALGREN, Bankr. Court, ND California “Lender Processing Services admits faults in the documents produced by the DOCX office”

IN RE CHALGREN, Bankr. Court, ND California “Lender Processing Services admits faults in the documents produced by the DOCX office”


NOTE: Korell Harp misspelled, also see signature variations below.

In re: RICHARD AND KAREN CHALGREN, Chapter 13, Debtors.
RICHARD AND KAREN CHALGREN, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, ET AL., Defendants.

Case No. 09-56729 ASW, Adv. Proc. No. 10-5057.
United States Bankruptcy Court, N.D. California.
October 7, 2011.

MEMORANDUM DECISION ON MOTIONS TO DISMISS

ARTHUR S. WEISSBRODT, Bankruptcy Judge.

Before this Court are two motions to dismiss the First Amended Complaint of debtors Richard Scott Chalgren and Karen Chalgren (” Plaintiffs”). For the following reasons, this Court grants Defendants’ motions with leave to amend with regard to the first, second, third, and sixth causes of action. This Court denies Defendants’ motions to dismiss with regard to the fifth cause of action and grants the motions in part with regard to the fourth cause of action.

This Memorandum Decision constitutes the Court’s findings of fact and conclusions of law, pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.

A. PROCEDURAL HISTORY

Plaintiffs initiated this adversary proceeding on February 25, 2010. On July 27, 2010, defendants American Home Mortgage Corp. d/b/a American Brokers Conduit and AHM SV, Inc. f/k/a American Home Mortgage Servicing, Inc. filed a Suggestion of Bankruptcy in this adversary proceeding. Prior motions to dismiss were granted in part and denied in part at a hearing on September 20, 2010. Plaintiffs filed an amended complaint on November 2, 2010 (“First Amended Complaint”). The First Amended Complaint alleges six causes of action. The first cause of action is for violation of California Civil Code section 2923.5. The second cause of action is for violation of Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617 (“RESPA”). The third cause of action is for violation of the automatic stay of the Bankruptcy Code. The fourth cause of action is for declaratory relief. The fifth cause of action is for injunctive relief. The sixth cause of action is for cancellation of the deed of trust and other instruments and records.

On November 16, 2010, Defendants Deutsche Bank National Trust Company, Deutsche Bank National Trust Company as Trustee of the GSR Mortgage Loan Trust 2006-OA1 (“Deutsche Bank as Trustee”), and American Home Mortgage Servicing, Inc. (“AHMSI”) filed a motion to dismiss the First Amended Complaint (“First Motion to Dismiss”). On November 29, 2010, Defendants Fidelity National Title Company and Default Resolution Network filed a motion to dismiss the First Amended Complaint (“Second Motion to Dismiss”).

The First Motion to Dismiss asserts that Plaintiffs’ response to the First Motion to Dismiss should not be considered by this Court because the response is late-filed, and that Plaintiffs have failed to meet the pleading requirements of Federal Rule of Civil Procedure 8(a). Both motions to dismiss also allege that the First Amended Complaint should be dismissed on the merits for various reasons.

Regarding the purported late-filing of Plaintiffs’ response to the First Motion to Dismiss, the hearing on the First Motion to Dismiss was originally set for December 16, 2010, meaning that Plaintiffs’ response should have been filed by December 2, 2010. No such response was filed. On December 6, 2010, Plaintiffs filed an opposition to a motion for relief from stay with a caption containing this adversary proceeding’s number. On December 10, 2010, pursuant to an amended notice of hearing, the hearing on the First Motion to Dismiss was continued to January 14, 2011. Plaintiffs’ response was filed on December 30, 2010, which is timely under the local rules with respect to the continued hearing date. While Plaintiffs should abide in the future with the deadlines set out in the local rules, there is no prejudice such that the First Amended Complaint should be dismissed and the merits of Plaintiffs’ opposition ignored.

In Plaintiff’s opposition filed on December 30, 2010, Plaintiffs agreed to amend the First Amended Complaint with regard to the first, second, and third causes of action in response to the motions of defendants Fidelity National Title Company, Default Resolution Network, Deutsche Bank National Trust Company, Deutsche Bank as Trustee, and AHMSI (collectively,” Defendants”), as well as to delete the sixth cause of action. The Court held a hearing on both motions to dismiss on January 14, 2011.

At the hearing on January 14, 2011, the Court provided the parties with the Suggestion of Bankruptcy filed by American Brokers Conduit and American Home Mortgage Servicing, Inc. in this adversary proceeding and asked the parties to submit supplemental briefs regarding why the motions to dismiss should proceed notwithstanding the automatic stay of the bankruptcy case of Defendant American Brokers Conduit. The matter was continued to March 1, 2011 with the parties to file a joint statement prior to the hearing.

On February 18, 2011, the parties filed a joint statement which the Court reviewed. The Court subsequently issued an order on February 23, 2011 taking the motions to dismiss off calendar without prejudice to being restored upon the filing of appropriate legal authority and/or declarations showing that this Court can proceed notwithstanding the automatic stay in Defendant American Brokers Conduit’s bankruptcy case.

On May 2, 2011, Plaintiffs dismissed American Brokers Conduit from this adversary proceeding. The motions to dismiss were re-set for hearing on June 30, 2011 at a Case Management Conference held on May 6, 2011. The June 30, 2011 hearing was continued to July 14, 2011 by stipulation of the parties. The July 14, 2011 hearing was taken off calendar to allow the Court to issue a written decision.

Meanwhile, on May 18, 2011, attorney Mitchell Abdallah substituted in as counsel for Plaintiffs.

On July 11, 2011, Plaintiffs filed a Second Amended Complaint.[1] The Second Amended Complaint named American Brokers Conduit as a defendant and did not make any substantive changes to the third, fourth, or sixth causes of action that Plaintiffs had said would be made. The Court suggests that if Plaintiffs file another amended complaint, Plaintiffs should consider that it appears to the Court that the bankruptcy case of American Brokers Conduit, case number 07-11051, is still pending in the District of Delaware. Plaintiffs should also consider that: (1) a cause of action under the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617 (” RESPA”) should specify which section(s) of RESPA Defendants allegedly violated; and (2) Plaintiffs should allege sufficient facts about the contents of Plaintiffs’ alleged letters to AHMSI to show that the letters qualify as “qualified written requests” under RESPA.

B. FACTUAL BACKGROUND

The following facts are drawn from the First Amended Complaint, as alleged by Plaintiffs, but have not yet been proven. On or about April 4, 2006, Plaintiffs obtained a home loan and executed a promissory note in favor of American Brokers Conduit. The note was secured by a deed of trust on 411 Quail Run in Aptos, California (the “Property”). Defendant Mortgage Electronic Registration Systems (“MERS”) was listed as the beneficiary of the deed of trust, but MERS never held the note.

On February 1, 2009, Plaintiff Richard Chalgren became unable to work due to a physical disability and suffered a loss of income. Plaintiffs were unable to make the monthly payment on the note. Plaintiffs wrote letters to the loan servicer, AHMSI, requesting the name, address, and telephone number of the holder of the note and the name and address of any agent of the holder of the note which could discuss loan modification options with Plaintiffs. However, AHMSI did not respond to Plaintiffs’ letters and still, to this day, has failed to respond to Plaintiffs’ letters. The failure of AHMSI to respond caused Plaintiffs to suffer emotional distress.

On May 5, 2009, AHMSI, Default Resolution Network, and Fidelity National Title Company acted in concert to cause a notice of default to be recorded in the official records of the county of Santa Cruz. The notice of default falsely stated that Default Resolution Network had contacted Plaintiffs before the notice of default was recorded as required by California Civil Code section 2923.5.

On June 25, 2009, MERS as nominee for defendant American Brokers Conduit assigned the deed of trust to Deutsche Bank as Trustee. Kolrell Harper signed this document on June 30, 2009 as Vice President of MERS. The assignment was produced by defendant DOCX, LLC which is a subsidiary of defendant Lender Processing Services. Lender Processing Services has admitted that there were faults in the documents produced by the DOCX office and Plaintiffs are informed and believe that there was widespread document fraud.

The note was bundled into a pool of home mortgages which were securitized and sold to investors. At the time the note was assigned to the trust, the trust was closed. Also, at the time of the assignment, American Brokers Conduit was in a Chapter 11 bankruptcy proceeding, but the assignment was made without approval from the bankruptcy court overseeing the American Brokers Conduit bankruptcy case.

On July 6, 2009, an instrument was recorded in the official records of the county of Santa Cruz purporting to be an assignment of the deed of trust from MERS to Deutsche Bank National Trust Company.

On July 17, 2009, Plaintiffs sent demand letters via certified mail to Defendants pursuant to RESPA, wherein Plaintiffs requested the name of the holder of the note or the agent for such holder with authority to discuss loan modifications. Defendants have failed to respond to those demand letters, causing Plaintiffs to be unable to communicate with anyone with the authority to modify Plaintiffs’ loan and threatening Plaintiffs with the loss of Plaintiffs’ home of 15 years.

On August 14, 2009, Plaintiffs filed this chapter 13 bankruptcy petition.

On September 4, 2009, defendants Fidelity National Title Company, AHMSI, and Power Default Services acted in concert to cause a notice of trustee’s sale to be recorded in the official records of the county of Santa Cruz in violation of the automatic stay. This recordation caused Plaintiffs emotional distress.

C. LEGAL STANDARD

The Ninth Circuit has stated that the standard of review for motions to dismiss is:

The nature of dismissal requires us to accept all allegations of fact in the complaint as true and construe them in the light most favorable to the plaintiffs. However we are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint, and we do not . . . necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.

Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (citations and internal quotations omitted).

D. ANALYSIS

The First Motion to Dismiss asserts that the First Amended Complaint fails to differentiate between Defendants in violation of Federal Rule of Civil Procedure 8 (a), as incorporated by Federal Rule of Bankruptcy Procedure 7008. The Court has reviewed the First Amended Complaint and has determined that the First Amended Complaint identifies the transactions giving rise to the causes of action and puts each Defendant on notice of each Defendant’s alleged conduct. The First Motion to Dismiss is denied on this basis.

(1) Plaintiffs’ First Cause of Action

The first cause of action is against AHMSI, Default Resolution Network, and Fidelity National Title Company for violation of California Civil Code section 2923.5. Plaintiffs assert that Default Resolution Network did not contact Plaintiffs about alternatives to foreclosure prior to recording the notice of trustee’s sale. The First Amended Complaint only requests damages for this statutory violation.

The First Motion to Dismiss asserts that Plaintiffs need to allege tender before obtaining a postponement of the foreclosure sale. However, the case of Mabry v. Superior Court, 185 Cal. App. 4th 208, 214 (2010), relied on by Defendants, explicitly held that tender was not required to postpone a foreclosure sale under California Civil Code section 2923.5. Mabry, 185 Cal. App. 4th at 213. In any event, Plaintiffs are only required to allege that Plaintiffs attempted to tender — or were capable of tendering — the value of the property, or that such equitable circumstances existed that conditioning rescission on any tender would be inappropriate. Mangindin v. Washington Mutual Bank, 637 F. Supp. 2d 700, 706 (N.D. Cal. 2009).

However, as conceded by Plaintiffs, the remedy for a violation of California Civil Code section 2923.5 is not damages, but a postponement of the foreclosure sale to allow such communications to take place. Mabry, 185 Cal. App. 4th at 214. Because the requested damages are not available, this Court dismisses this cause of action with leave to amend.

(2) Second Cause of Action

The second cause of action is against AHMSI for violation of RESPA for failure to respond to Plaintiffs’ letters requesting information relating to the identity of the holder of the note and such holder’s authorized agent. Plaintiffs have not provided copies of the letters to this Court. The First Motion to Dismiss asserts that Plaintiffs need to specify which section of RESPA AHMSI allegedly violated, and Plaintiffs have indicated, in Plaintiffs’ opposition to that motion, that Plaintiffs plan to specify 12 U.S.C. section 2605(f)(1) in any amended complaint.

While the First Motion to Dismiss asserts that the First Amended Complaint fails to allege damages caused by AHMSI’s failure to respond, the First Amended Complaint’s statement of facts alleges that the failure of AHMSI to respond caused Plaintiffs great emotional distress. This Court notes that the courts are divided on whether emotional distress damages are recoverable under section 2605(f)(1). Compare Allen v. United Financial Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009), with Espinoza v. Recontrust Co., N.A., 2010 WL 2775753, *4 (S.D. Cal. July 13, 2010). However, this Court will not decide this legal issue at the pleading stage. Therefore, the cause of action is not dismissed on this basis.

The First Motion to Dismiss also asserts that Plaintiffs’ letters do not qualify as “Qualified Written Requests” under RESPA. The statute defines a Qualified Written Request as either (1) a letter saying that the account is in error, or (2) a letter requesting other information. 12 U.S.C. § 2605(e)(1)(b). The RESPA statute provides that a response is required when the letter requests information relating to the servicing of the loan. 12 U.S.C. § 2605(e) (1) (a). Servicing is defined as: “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, . . . and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.” 12 U.S.C. § 2605(i).

While the First Motion to Dismiss asserts that Plaintiffs must allege that the letters stated that the account was in error, the statute defining what constitutes a Qualified Written Response is written in the disjunctive, and Plaintiffs have asserted that the letters contained requests for other information. This Court agrees with United States District Judge Fogel’s reading of 12 U.S.C. § 2605(e)(1)(b) found in Luciw v. Bank of America, N.A., 2010 WL 3958715, *3 (N.D. Cal. Oct. 7, 2010), which holds that a letter can be a Qualified Written Request even if the letter does not state that the account is in error. The Court notes that the statute does not clearly state that a letter is not a Qualified Written Response if the letter requests information both about the servicing of the loan and information not related to the servicing of the loan. Luciw, 2010 WL 3958715 at *3.

However, the First Amended Complaint fails to allege sufficient facts about the contents of the letters to show that Plaintiffs’ letters were related to the servicing of the loan such as to give rise to a statutory obligation by AHMSI to respond. The First Amended Complaint alleges that the letters request the identity of the holder of the note or such holder’s agent, which does not appear to relate to the receipt or application by AHMSI of periodic payments received from Plaintiffs. While Plaintiffs’ December 6, 2010 opposition to a motion for relief from stay provides a copy of the letter sent by Plaintiffs to Defendants, the Court is not considering that letter at this time because the letter was not incorporated into the First Amended Complaint.

The Court dismisses the second cause of action with leave to amend.

(3) Third Cause of Action

The third cause of action is against Fidelity National Title Company and AHMSI for violation of the automatic stay pursuant to Bankruptcy Code section 362(k). While the Second Motion to Dismiss asserts that this cause of action should be dismissed for failure to allege conduct rising to a requisite level of outrageousness, the determination of outrageousness is a factual issue, and the case relied upon in the Second Motion to Dismiss is a California state law case not involving Bankruptcy Code section 362(k).

However, both motions to dismiss assert that the First Amended Complaint fails to allege that the two defendants willfully violated the automatic stay. Bankruptcy Code section 362(k) clearly requires a willful violation. In re Bloom, 875 F.2d 224, 227 (9th Cir. 1989). The First Amended Complaint contains no allegations of willfulness and/or knowledge of the bankruptcy case on the part of Fidelity National Title Company and/or AHMSI, and Plaintiffs have indicated that Plaintiffs plan to amend the First Amended Complaint to so allege. The Court dismisses the third cause of action with leave to amend.

(4) Fourth Cause of Action

The fourth cause of action is against all Defendants for declaratory relief. The First Amended Complaint requests the following declaratory relief: (1) a finding that the deed of trust is unenforceable because the deed of trust was severed from the note, rendering the note unsecured; (2) a finding that the notice of default is void because the deed of trust was unenforceable; (3) a finding that assignment of the deed of trust to Deutsche Bank as Trustee is of no effect because the assignment was (a) made while American Brokers Conduit was in bankruptcy and (b) made after the securitized trust had closed; and (4) a finding that the notice of trustee’s sale is void for being in violation of the automatic stay. This cause of action does not request that the note and deed of trust be rescinded or otherwise set aside.

Both motions to dismiss assert that the fourth cause of action must be dismissed because the First Amended Complaint fails to allege that Plaintiffs either have tendered, or can tender, the amount of the outstanding loan balance. All but one of the cases cited by Defendants are cases in which a party requested quiet title or declaratory relief rescinding a loan contract, and those cases are not applicable.

The reasoning of Chavez v. Recontrust Co., 2008 WL 5210893 (E.D. Cal. Dec. 11, 2008), is not disposative here and this Court does not agree with it in any event. In Chavez, a plaintiff requested — among other things — an injunction against a foreclosure sale without either alleging that the plaintiff had tendered, or was able to tender, the amount outstanding on the loan. The Chavez court held: “[t]he law is long-established that a trustor or his successor must tender the obligation in full as a prerequisite to challenge of the foreclosure sale.” Chavez, 2008 WL 5210893 at *6 (quoting U.S. Cold Storage v. Great Western Savings & Loan Assn., 165 Cal. App. 3d 1214, 1222, (1985)). The quoted language is inapposite because the language of U.S. Cold Storage refers to an attempt to undo a foreclosure sale after the fact, rather than a request for declaratory relief based on a finding that a foreclosure sale cannot proceed because the wrong party is seeking to foreclose.

In the context of Truth in Lending Act (“TILA”) violations, Judge Ware has held that the Ninth Circuit “gives a trial court discretion to condition rescission on a tender by the borrower of the property, or the property’s reasonable value, to the lender. Yamamoto v. Bank of New York, 329 F.3d 1167, 1171 (9th Cir. 2003). Mangindin, 637 F. Supp. 2d at 705-06. Judge Ware stated:

Notably absent from Plaintiffs’ Complaint is any allegation that they attempted to tender, or are capable of tendering, the value of the property pursuant to the rescission framework established by TILA. Nor do Plaintiffs allege that such equitable circumstances exist that conditioning rescission on any tender would be inappropriate. Thus, the Court finds that Plaintiffs have failed to adequately allege that they are entitled to rescission under TILA.

Mangindin, 637 F. Supp. 2d at 706. Thus, Plaintiffs are only required to allege that Plaintiffs attempted to tender — or were capable of tendering — the value of the property, or that such equitable circumstances existed that conditioning rescission on any tender would be inappropriate.

The First Motion to Dismiss also asserts that the California nonjudicial foreclosure statutes do not require a foreclosing lender to produce the original copy of the note in order to foreclose. However, the First Amended Complaint does not request declaratory relief based on a finding that a foreclosure cannot take place because no party holds an original copy of the note. The First Amended Complaint seeks declaratory relief regarding whether the note is secured; whether the assignment of the note is of any legal effect; and whether the notice of trustee’s sale is void.

The First Motion to Dismiss next asserts that the First Amended Complaint fails to allege with sufficient specificity that the purported transfer of the note from American Brokers Conduit took place while American Brokers Conduit was a debtor in a bankruptcy proceeding. The First Amended Complaint clearly alleges that: “at the time of the assignment, American Broker’s Conduit was in a bankruptcy proceeding under chapter 11 of the U.S. Bankruptcy Code. Plaintiffs are informed and believe that the bankruptcy court did not authorize or approve the assignment of the deed of trust. . . .” First Amended Complaint at page 6, ¶ 20. This allegation is more than a mere threadbare recital and is sufficient to withstand this motion to dismiss. Therefore, the cause of action is not dismissed on this basis.

The First Motion to Dismiss asserts that American Brokers Conduit transferred the note and deed of trust on June 5, 2006 and provides a copy of a loan history for the property. This Court will not take judicial notice of the copy at this time because Plaintiffs have objected to the admissibility of this document and the copy was not part of an official record or court decision.

The First Motion to Dismiss also argues that — even if the deed of trust was transferred out of the bankruptcy estate of American Brokers Conduit without bankruptcy court approval — Plaintiffs have no standing to challenge the transfer. Plaintiffs assert that Plaintiffs have standing because the legal effect of the transfer directly affects Defendants’ ability to foreclose on Plaintiffs’ home. American Brokers Conduit filed for relief under chapter 11 as case number 07-11047 in the Bankruptcy Court for the District of Delaware. Bankruptcy Code section 1109(b) provides: “a party in interest . . . may raise and may appear and be heard on any issue in a case under this chapter.” 11 U.S.C. § 1109(b). The term party in interest is meant to be elastic, and whether a party is a party in interest is determined by the facts of the case. In re Amatex Corp., 755 F.2d 1034, 1042 (3d Cir. 1985). The First Amended Complaint clearly alleges that Plaintiffs have a very practical stake in the legal effectiveness of the transfer of the deed of trust. At least insofar as Plaintiffs seek to challenge that transfer, Plaintiffs’ interest in the American Brokers Conduit bankruptcy proceeding is sufficient to make Plaintiffs a party in interest.

The First Motion to Dismiss further asserts that, even if the assignment took place after American Brokers Conduit filed for bankruptcy, the assignment was in the ordinary course of business and did not require bankruptcy court approval. Under these circumstances, any assignment would be valid. 11 U.S.C. § 363(c)(1). The First Amended Complaint only alleges that the assignment was made when American Broker’s Conduit was in bankruptcy and that there was no authorization from the bankruptcy court, which is only required if the assignment was made outside of the ordinary course of business. Because the First Amended Complaint fails to allege that the assignment was not in the ordinary course of business, this Court dismisses the fourth cause of action with leave to amend with respect to the fact that the assignment from American Brokers Conduit was invalid as an unauthorized post-petition transfer from a bankruptcy debtor.

Finally, the First Motion to Dismiss asserts that the First Amended Complaint must be dismissed because Plaintiffs’ bad faith — as evidenced by Plaintiffs’ failure to tender or to make post-petition payments on the note — estops Plaintiffs from seeking equitable relief. However, the issue of Plaintiffs’ bad faith is a factual issue which this Court will not decide at the motion to dismiss stage. Also, as previously mentioned, this Court does not hold — and leaves for trial, a possible summary judgment motion or other context — Defendants’ contention that alleging tender in the particular manner that Defendants say is mandatory is a requirement to obtaining the declaratory relief sought in Plaintiffs’ First Amended Complaint. Mangindin, 637 F. Supp. 2d at 706.

For the above reasons, this Court dismisses the fourth cause of action with leave to amend only insofar as the fourth cause of action requests a finding that the assignment from American Brokers Conduit was without legal effect for being an unauthorized post-petition transfer from a bankruptcy debtor.

(5) Fifth Cause of Action

The fifth cause of action is against all Defendants for injunctive relief. Plaintiffs request an injunction against a foreclosure sale of the property. Both motions to dismiss assert that this cause of action should be dismissed because injunctive relief cannot be granted without the existence of a substantive cause of action. Shell Oil Co. v. Richter, 52 Cal. App. 2d 164, 168 (Cal. App. 1942). The First Amended Complaint has adequately pled a substantive cause of action for declaratory relief, so the motions to dismiss are denied as to the fifth cause of action.

(6) Sixth Cause of Action

The sixth cause of action is against all Defendants for cancellation of the deed of trust and other instruments and records. In Plaintiffs’ responses to both motions to dismiss, Plaintiffs have agreed to delete the sixth cause of action from future amended complaints based on Defendants’ arguments. Because, as noted earlier, Plaintiffs could allege that Plaintiffs attempted to tender — or were capable of tendering — the value of the property, or that such equitable circumstances exist that conditioning rescission on any tender would be inappropriate, this Court dismisses the sixth cause of action with leave to amend.

E. CONCLUSION

For the forgoing reasons, Defendants’ motions are granted in part with leave to amend and denied in part. Counsel for each set of moving parties shall prepare a form of order consistent with this ruling and submit the proposed order to the Court after service on counsel for Plaintiffs. The Court prefers for all counsel to sign off on the form of order.

[1] Defendants oppose Plaintiffs’ filing of the Second Amended Complaint. Plaintiffs filed the Second Amended Complaint without leave from the Court or consent from Defendants as required by Federal Rule of Civil Procedure Rule 15(a)(2), incorporated by Federal Rule of Bankruptcy Procedure Rule 7015. The Court is deciding these motions to dismiss as to the First Amended Compliant only, and not as to the Second Amended Complaint.

Various Signatures of Korell Harp

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NY Appellate Div – 2nd Dept. “Deutsche Bank Affidavit Fail, Submitted Two Different Versions of an Undated Allonge … Purportedly Affixed to the Original Note”

NY Appellate Div – 2nd Dept. “Deutsche Bank Affidavit Fail, Submitted Two Different Versions of an Undated Allonge … Purportedly Affixed to the Original Note”


Decided on October 4, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

.

REINALDO E. RIVERA, J.P.
ANITA R. FLORIO
JOHN M. LEVENTHAL
SHERI S. ROMAN, JJ.
2010-06483
(Index No. 38303/07)

[*1]Deutsche Bank National Trust Company, etc., respondent,
v
Joell C. Barnett, appellant, et al., defendants.

Joell C. Barnett, Brooklyn, N.Y., appellant pro se.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Joell C. Barnett appeals, as limited by her brief, from so much of an order of the Supreme Court, Kings County (Jackson, J.), dated February 23, 2010, as granted those branches of the plaintiff’s motion which were to strike the answer, for summary judgment on the complaint, and for an order of reference, and denied her cross motion pursuant to CPLR 3211(a)(3) to dismiss the complaint.

ORDERED that the order is modified, on the law, by deleting the provisions thereof granting those branches of the plaintiff’s motion which were to strike the answer, for summary judgment on the complaint, and for an order of reference, and substituting therefor provisions denying those branches the motion; as so modified, the order is affirmed insofar as appealed from, with costs to the appellant.

In order to commence a foreclosure action, a plaintiff must have a legal or equitable interest in the mortgage. A plaintiff has standing where it is the holder or assignee of both the subject mortgage and of the underlying note at the time the action is commenced (see Bank of N.Y. v Silverberg, 86 AD3d 274; Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 207; U.S. Bank, N.A. v Collymore, 68 AD3d 752; Countrywide Home Loans, Inc. v Gress, 68 AD3d 709). An assignment of a mortgage without assignment of the underlying note or bond is a nullity, and no interest is acquired by it (see Merritt v Bartholick, 36 NY 44, 45; Bank of N.Y. v Silverberg, 86 AD3d 274; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation” (U.S. Bank, N.A. v Collymore, 68 AD3d at 754; see Aurora Loan Servs., LLC v Weisblum, 85 AD3d at 108). [*2]Here, the plaintiff failed to establish, as a matter of law, that it had standing to commence the action. The Supreme Court thus erred in awarding the plaintiff summary judgment.

Contrary to the contention of the defendant Joell C. Barnett, an affidavit made by the plaintiff was not required, since the plaintiff was not proceeding upon Barnett’s default (cf. CPLR 3215[f]). However, the documentation submitted failed to establish that, prior to commencement of the action, the plaintiff was the holder or assignee of both the note and mortgage. The plaintiff submitted copies of two different versions of an undated allonge which was purportedly affixed to the original note pursuant to UCC 3-202(2) (see Slutsky v Blooming Grove Inn, Inc., 147 AD2d 208, 212). Moreover, these allonges purporting to endorse the note from First Franklin, A Division of National City Bank of Indiana (hereinafter Franklin of Indiana) to the plaintiff conflict with the copy of the note submitted, which contains undated endorsements from Franklin of Indiana to First Franklin Financial Corporation (hereinafter Franklin Financial), then from Franklin Financial in blank.

The plaintiff also failed to establish that the note was physically delivered to it prior to the commencement of this action. The vice president of the plaintiff’s servicing agent and the plaintiff’s counsel both affirmed that the original note is in the possession of the plaintiff’s counsel. However, the affidavits did not state any factual details concerning when the plaintiff received physical possession of the note and, thus, failed to establish that the plaintiff had physical possession of the note prior to commencing this action (see Aurora Loan Servs., LLC v Weisblum, 85 AD3d at 108; U.S. Bank, N.A. v Collymore, 68 AD3d at 754). Finally, the Certificates of Resolution and Incumbency submitted to establish the authority of one Eileen Gonzales to execute a September 14, 2007, assignment of mortgage from Franklin Financial to the plaintiff were executed after the subject assignment and, thus, cannot establish that she had such authority at the time the mortgage assignment was made. These inconsistencies raise an issue of fact as to the plaintiff’s standing to commence this action. Thus, the Supreme Court should have denied those branches of the plaintiff’s motion which were to strike the answer, for summary judgment on the complaint, and for an order of reference; the cross motion was properly denied (see US Bank N.A. v Madero, 80 AD3d 751, 753).
RIVERA, J.P., FLORIO, LEVENTHAL and ROMAN, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court

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DEUTSCHE BANK TRUST CO. AMERICAS v. PICON | NYSC Vacates JDGMT “ASMT Mortgage from MERS to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff”

DEUTSCHE BANK TRUST CO. AMERICAS v. PICON | NYSC Vacates JDGMT “ASMT Mortgage from MERS to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff”


RePOST due to a possible hack.

Don’t be a fool. I can assure you, the AG’s that are investigating have this info.

~

2011 NY Slip Op 31747(U)

DEUTSCHE BANK TRUST COMPANY AMERICAS AS TRUSTEE, 9350 Waxie Way San Diego, CA 92123 Plaintiff,

v.

DANILO PICON, MAGALYS T. PICON, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR FIRST NATIONAL BANK OF ARIZONA, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE,
JOHN DANIELS, YVETTE “DOE” Defendants.

No. 1070/08, Motion Seq. No. 4.

Supreme Court, Queens County.

June 22, 2011.

BERNICE D. SIEGAL, Judge.

EXCERPT:

Once the issue of standing is raised by the Defendant, the burden is placed on the Plaintiff to prove, as in the instant matter, that it owns the Note underlying the action and the validity of any associated assignment (TPZ Corp. v Dabbs, 25 AD3d 787, 789 [2d Dep’t 2006]). A demonstration by the Plaintiff that it owns the Mortgage, without a showing that it also owns the Note is a nullity and any action for foreclosure based on the ownership of the mortgage alone must fail (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]). This result is mandated because the mortgage is “but an incident to the debt which it is intended to secure,” and without more, it provides the holder with no actionable interest on which to commence a foreclosure action (Merritt v Bartholick, 36 NY 44, 45 [1867].

While a written assignment or physical transfer of the Note is sufficient to result in an implicit transfer of an associated Mortgage, an assignment of the Mortgage, without an explicit assignment of the Note, will not result in an assignment of that Note (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754 [2d Dept 2009]).

In the case before us, Plaintiff only proffers evidence that the mortgage was transferred to the Plaintiff (through MERS, as nominee for Firs National Bank of Arizona [“Arizona”]) via an Assignment of Mortgage dated January 7, 2008. It does not, critically, provide evidence that the Note itself was transferred to the Plaintiff.

The only documents the Plaintiff submits in connection with the issue of the ownership and assignment of the Note are a copy of the original Adjustable Rate Note Agreement between Arizona and the Defendant dated March 8, 2006, and a copy of an undated allonge between Arizona and the First National Bank of Nevada [“Nevada”], seemingly transferring Arizona’s interest in the Note to Nevada. Although not dated, it is only logical for the court to assume that the allonge was executed prior to any purported assignment of the Note to the Plaintiff. If we were to assume otherwise, it would imply that Arizona was assigning to Nevada a Note that it did not own (since such Note had already been purportedly assigned to the Plaintiff).

Critically, Plaintiff does not provide documents demonstrating that the Note itself was assigned to Plaintiff, such as from MERS (as nominee for Arizona), from Arizona itself, or from a third-party such as Nevada.

The only interpretation the court can adduce from such evidence is that although it is possible that Nevada may own both the Mortgage and the Note since a valid transfer of a Note (in this case through the undated allonge), effectively transfers an associated Mortgage, the assignment of the Mortgage from MERS (as nominee for Arizona) to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff.

Since the allonge indicates that the Note is the property of Nevada and not Arizona, Arizona was never in a position to assign the Note to Plaintiff. Therefore, even if Plaintiff holds the Mortgage, without evidence that it also owns the Note, it lacks standing to pursue the foreclosure action at bar. Consequently, Plaintiff’s acquisition of the Mortgage without the underlying Note is insufficient to sustain a foreclosure action and Defendant’s motion to dismiss based on the Plaintiff’s lack of standing is granted.

[…]

The other issues raised in Defendant’s Order to Show Cause including the 1) motion to dismiss due to a failure to state a cause of action under CPLR 3211, and 2) a motion to vacate the default judgment and allow an answer under CPLR 317 are deemed moot as they are subsumed or deemed irrelevant in light of this court’s decision above. Based on the forgoing, it is

ORDERED that Defendant’s motion to vacate the default judgment and dismiss the action is granted; it is further

ORDERED that Defendant’s motion to have the case dismissed with prejudice due to fraud is denied.

The foregoing constitutes the decision and order of the court.

[…]

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DEUTSCHE BANK TRUST CO. AMERICAS v. PICON | NYSC Vacates JDGMT “ASMT Mortgage from MERS to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff”

DEUTSCHE BANK TRUST CO. AMERICAS v. PICON | NYSC Vacates JDGMT “ASMT Mortgage from MERS to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff”


[PDF].DEUTSCHE v PICON w RePOST since the content was possibly hacked

2011 NY Slip Op 31747(U)

DEUTSCHE BANK TRUST COMPANY AMERICAS AS TRUSTEE, 9350 Waxie Way San Diego, CA 92123 Plaintiff,

v.

DANILO PICON, MAGALYS T. PICON, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR FIRST NATIONAL BANK OF ARIZONA, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE,
JOHN DANIELS, YVETTE “DOE” Defendants.

No. 1070/08, Motion Seq. No. 4.

Supreme Court, Queens County.

June 22, 2011.

BERNICE D. SIEGAL, Judge.

EXCERPT:

Once the issue of standing is raised by the Defendant, the burden is placed on the Plaintiff to prove, as in the instant matter, that it owns the Note underlying the action and the validity of any associated assignment (TPZ Corp. v Dabbs, 25 AD3d 787, 789 [2d Dep’t 2006]). A demonstration by the Plaintiff that it owns the Mortgage, without a showing that it also owns the Note is a nullity and any action for foreclosure based on the ownership of the mortgage alone must fail (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]). This result is mandated because the mortgage is “but an incident to the debt which it is intended to secure,” and without more, it provides the holder with no actionable interest on which to commence a foreclosure action (Merritt v Bartholick, 36 NY 44, 45 [1867].

While a written assignment or physical transfer of the Note is sufficient to result in an implicit transfer of an associated Mortgage, an assignment of the Mortgage, without an explicit assignment of the Note, will not result in an assignment of that Note (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754 [2d Dept 2009]).

In the case before us, Plaintiff only proffers evidence that the mortgage was transferred to the Plaintiff (through MERS, as nominee for Firs National Bank of Arizona [“Arizona”]) via an Assignment of Mortgage dated January 7, 2008. It does not, critically, provide evidence that the Note itself was transferred to the Plaintiff.

The only documents the Plaintiff submits in connection with the issue of the ownership and assignment of the Note are a copy of the original Adjustable Rate Note Agreement between Arizona and the Defendant dated March 8, 2006, and a copy of an undated allonge between Arizona and the First National Bank of Nevada [“Nevada”], seemingly transferring Arizona’s interest in the Note to Nevada. Although not dated, it is only logical for the court to assume that the allonge was executed prior to any purported assignment of the Note to the Plaintiff. If we were to assume otherwise, it would imply that Arizona was assigning to Nevada a Note that it did not own (since such Note had already been purportedly assigned to the Plaintiff).

Critically, Plaintiff does not provide documents demonstrating that the Note itself was assigned to Plaintiff, such as from MERS (as nominee for Arizona), from Arizona itself, or from a third-party such as Nevada.

The only interpretation the court can adduce from such evidence is that although it is possible that Nevada may own both the Mortgage and the Note since a valid transfer of a Note (in this case through the undated allonge), effectively transfers an associated Mortgage, the assignment of the Mortgage from MERS (as nominee for Arizona) to Plaintiff, under New York law, definitively did not transfer ownership of the Note to Plaintiff.

Since the allonge indicates that the Note is the property of Nevada and not Arizona, Arizona was never in a position to assign the Note to Plaintiff. Therefore, even if Plaintiff holds the Mortgage, without evidence that it also owns the Note, it lacks standing to pursue the foreclosure action at bar. Consequently, Plaintiff’s acquisition of the Mortgage without the underlying Note is insufficient to sustain a foreclosure action and Defendant’s motion to dismiss based on the Plaintiff’s lack of standing is granted.

[…]

The other issues raised in Defendant’s Order to Show Cause including the 1) motion to dismiss due to a failure to state a cause of action under CPLR 3211, and 2) a motion to vacate the default judgment and allow an answer under CPLR 317 are deemed moot as they are subsumed or deemed irrelevant in light of this court’s decision above. Based on the forgoing, it is

ORDERED that Defendant’s motion to vacate the default judgment and dismiss the action is granted; it is further

ORDERED that Defendant’s motion to have the case dismissed with prejudice due to fraud is denied.

The foregoing constitutes the decision and order of the court.

[…]

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DEUTSCHE BANK v. QUINONES | NYSC “Restored to Possession, No Affidavit of Service, Not in Default”

DEUTSCHE BANK v. QUINONES | NYSC “Restored to Possession, No Affidavit of Service, Not in Default”


NEW YORK SUPREME COURT –
QUEENS COUNTY


DEUTSCHE BANK NATIONAL TRUST CO. As TrusteeUnder Pooling and Servicing Agreement Dated as of November 1, 2006 Securitized Asset Backed Receivables Certificates Series 2006-WM3,

-against-

JOSE QUINONES, JOHNNY FERREIRA, MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS, INC., As
Nominee for WMC Mortgage Corp., NYCTAB,
NYCPVB, NYCECB, JOHNNY FERREIRA JR.,
MEKIDA AZCONA, CLARENCE FORD,

EXCERPT:

The referee’s deed dated, March 27, 2009, and filed in the Office of the City Register on April 13, 2009, CFRN 2009000107255 is vacated and set aside and the defendant, Johnny Ferreira is restored to possession.

[…]

Finally, it is pointed out that even if, as plaintiff claims, the defendant was served pursuant to CPLR 308(2), no affidavit of service was filed in this action, thus, the defendant is not in default. Service pursuant to CPLR 308(2) is complete, and the defendant’s time to answer begins to run ten days after filing proof of service (see CPLR 320[a]; 3012[c]; Zareef v. Wong, 61 AD3d 749 [2009]; Marazita v. Nelbach, 91 AD2d 604 [1982], appeal withdrawn 58 NY2d 826 [1983]). No affidavit of service has been filed in this action and the plaintiff has never moved for leave to file the affidavit of service. The plaintiff’s actions, or rather inaction, has contributed if not caused the delay it claims is prejudicial.

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WA State Court Denies MTD “Unfair Deceptive Acts, Fraud, Securitization, Trustee Aiding & Abetting” | VILLALOBOS v. DEUTSCHE BANK, BARCLAYS

WA State Court Denies MTD “Unfair Deceptive Acts, Fraud, Securitization, Trustee Aiding & Abetting” | VILLALOBOS v. DEUTSCHE BANK, BARCLAYS


UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

MARCO VILLALOBOS & ANGELA
YBARRA,
a marital community,
Plaintiffs,

v.

DEUTSCHE BANK NATIONAL TRUST
COMPANY, BARCLAYS CAPITAL REAL
ESTATE, INC.
, et al.,
Defendants.

EXCERPTS:

B. Substantive Claims

Plaintiffs’ claims which sound in the Washington State Consumer Protection Act survive. Plaintiffs have successfully alleged that certain named defendants committed unfair deceptive acts and that these acts have injured their property interest in their home. See Guijosa, 32 P.3d at 255 (listing elements). It goes without saying that such acts have the potential to adversely affect the public interest: The banking defendants allegedly securitized more than three billion dollars of mortgages initiated by Defendant WMC Mortgage alone. The allegedly wrongful acts were therefore “part of a pattern or generalized course of conduct,” and had the potential “to affect many different customers.” See Hangman Ridge, 719 P.2d at 537–38.

Plaintiffs claims which sound in the common law of fraud also survive. Plaintiffs allege that certain named defendants misrepresented terms such as the interest rate and term of their mortgage loans. (Second Amended Complaint 13–16 (Dkt. No. 45)). Plaintiffs further allege that defendants fraudulently charged them for brokerage fees to which they were unentitled, and that the defendants listed these fees as “final settlement fees” on federal disclosure forms. (Id. 15). A reasonable person would consider such key terms to be “material,” and a reasonable person would be entitled to rely on the representations of individuals who hold themselves out as mortgage professionals. See Beckendorf, 457 P.2d at 606–07 (listing the elements of fraud).

C. Theories of Liability

However one wishes to describe the allegedly wrongful participation of Defendant Barclays Capital and Defendant Deutsche Bank—whether sounding in civil conspiracy, aiding and abetting, or joint venture—the analysis is essentially the same: Plaintiffs have successfully alleged that the banking defendants knowingly participated in a scheme to defraud borrowers. To support these allegations, Plaintiffs rely on a letter from the Office of the Comptroller of the Currency and fraudulent misstatements in the loan documents that the banking defendants received. Because a plaintiff may rely upon circumstantial evidence to support each of the proffered theories of liability, see, e.g., Gilbrook, 177 F.3d at 856 (civil conspiracy), Refrigeration Engineering, 486 P.2d at 311 (joint venture), and because Plaintiffs have submitted circumstantial evidence tending to indicate that the banking defendants knowingly participated in a scheme to defraud, their claims survive.

Continue below…

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In re: DOBLE | CA BK Judge Rips Deutsche, MERS, LPS System & Multiple “True & Correct” Copies of Note

In re: DOBLE | CA BK Judge Rips Deutsche, MERS, LPS System & Multiple “True & Correct” Copies of Note


CESAR M. DOBLE,

v.

DEUTSCHE BANK NA T’L TRUST
COMPANY, AS TRUSTEE OF THE
HARBORVIEW MORTGAGE LOAN TRUST
2005-5, MORTGAGE LOAN PASSTHROUGH
CERTIFICATES, SERIES 2005-5
AND ONEWEST BANK, F.S.B.

Excerpts:

Instead, One West forwarded the Complaint to an outside vendor, Lender Processing Services (“LPS”), which is retained by One West to handle routine legal matters, but not litigation. LPS then exacerbated the problem by assigning an incorrect response date and sending the Complaint to the wrong outside counsel.

[…]

The most disconcerting misrepresentation to the Court was Defendants’ submission of multiple “true and correct”  copies of the Note under penalty of perjury without any endorsement from Plaza.  Whether the Note was endorsed is central to the merits ofthis case. When Defendants finally submitted an endorsed copy of the Note on November 8, 2010, they attempted to pass off the first three unendorsed copies of the Note as “illegible.” The first three copies of the Note were fully readable, so the phantom endorsement page was not a problem with legibility. The timing of this tardily produced endorsement, produced after several requests, suggests it was added only in response to the litigation.

To add to the Court’s incredulity, Defendants have never answered the Court’s specific questions as to when and under what circumstances this newly proffered endorsement was executed.

[…]

The first two causes of action seek damages and disallowance of Defendants’ secured and unsecured claims for lack of standing on four separate grounds: (a) MERS’ assignment of the DOT to One West and, in tum, One West’s assignment to Deutsche Bank, were invalid; (b) Defendants have no interest in the Note nor any right to enforce it under California law; (c) the assignment of the DOT to Deutsche Bank was not of public record; and (d) Defendants violated New York Trust law so that Deutsche Bank cannot be the owner of the Loan as a matter oflaw. Where a secured creditor cannot establish a right to enforce a loan, it has no standing to file or defend a claim, or to seek relief from stay. In re Gavin, 319 B.R. 27,32 (B.A.P. 1st Cir. 2004); In re Hayes, 393 B.R. 259,269-70 (Bankr. D. Mass. 2008).

Although the Court rejects Doble’s New York Trust claims and his avoiding power claim, the record here supports Doble’s first three standing claims. MERS had no authority to assign the DOT, under its terms and as a matter oflaw, without the authority to assign the Note. The Note was not assigned until it was endorsed by Plaza. Until that endorsement, the MERS’ assignments were a nullity. Deutsche Bank currently lacks authority to enforce the Loan as the assignee of Plaza, and will continue to lack authority until it records its assignment.

[…]

III. CONCLUSION

The Court denies Defendants’ request to set aside the clerk’s entry of a default, but grants their Motion to Dismiss the portions of the first and second causes of action relating to Doble’s New York Trust claims and avoiding power claims. Defendants’ Motion to Dismiss Doble’s third and fourth causes of action is also granted. As to the remainder of the first and second causes of action, the Court finds MERS’ limited role as beneficiary of the DOT did not provide talismanic protection against the myriad foreclosure deficiencies committed by Defendants [*47] regarding this Loan. MERS’ role did not provide Defendants the authority to enforce the DOT, the ability to assign the Note without an endorsement from Plaza, or an exception to their obligation to record the assignment to Deutsche Bank. The Court will allow Doble to produce additional evidence in support of his claims, but not his wife’s claims. The Court will disallow Defendants’ secured and unsecured claims without prejudice. Defendants may file an amended proof of claim in this case if they fully address the defects identified in this Memorandum Decision.

The Court orders Defendants to appear and show cause why they should not pay Doble’s attorneys fees for their conduct in this action, and schedules a status conference for April 28, 2011 at 3:00 in Department 1 of this Court.

Dated: April 14, 2011

/s/ Margaret M. Mann

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In re: CESAR M. DOBLE, Chapter 13, Debtor,
CESAR M. DOBLE, Plaintiff,
v.
DEUTSCHE BANK NAT’L TRUST COMPANY, AS TRUSTEE OF THE HARBORVIEW MORTGAGE LOAN TRUST 2005-5, MORTGAGE LOAN PASS-THROUGH CERTIFICATES, SERIES 2005-5 AND ONEWEST BANK, F.S.B., Defendants.

Bankruptcy No: 10-11296-MM13, AP: 10-90308-MM.

United States Bankruptcy Court, S.D. California.

April 14, 2011.

MEMORANDUM DECISION RE MOTION TO VACATE CLERK’S ENTRY OF DEFAULT AND MOTION TO DISMISS COMPLAINT; ORDER TO SHOW CAUSE FOR CONTEMPT OF COURT

MARGARET M. MANN, Bankruptcy Judge

Defendants OneWest Bank, F.S.B. (“OneWest”) and Deutsche Bank National Trust Company (“Deutsche Bank”), as Trustee of the HarborView Mortgage Loan Trust 2005-5, Mortgage Loan Pass-Through Certificates, Series 2005-5 Under the Pooling and Servicing Agreement Dated June 1, 2005, were defaulted by debtor Cesar Doble (“Doble”) when they failed to timely respond to the complaint in this action (“Complaint”). The Complaint challenges Defendants’ right to assert claims based upon a loan secured by Doble’s residence, and seeks damages for Defendants’ refusal to modify the loan. After the default, Defendants brought a Motion to Vacate Clerk’s Entry of Default and a Motion to Dismiss Plaintiffs Complaint. The Court held several continued hearings on both motions, at which additional evidence and argument were presented.

Due to Defendants’ misconduct in this case and others that threatens the integrity of the judicial process the Court declines to set aside the default. The Court also issues an order to show cause why Defendants should not be held in contempt and ordered to pay Doble’s attorneys fees. Despite this ruling, the Court will not allow Doble relief he is not entitled to receive. The Court also grants much of the Defendants’ Motion to Dismiss. Further proceedings will be scheduled to determine the judgment to be entered in this case.

I. FACTUAL BACKGROUND

A. The Loan

Doble and his wife Martha Doble own a residence located at 1466 Heatherwood Avenue in Chula Vista, California (“Property”). The Property is encumbered by a deed of trust (“DOT”) securing a promissory note (“Note”) payable on its face to Plaza Home Mortgage, Inc. (“Plaza”), executed in connection with a $650,000 loan (“Loan”) made by Plaza. The DOT identifies Plaza as “Lender,” and Mortgage Electronic Registration Systems, Inc. (“MERS”) as beneficiary. The DOT grants Lender the right to repayment of the Loan and performance of Borrower’s covenants, explicitly stating that MERS “holds only legal title to the interests granted by Borrower” and MERS may exercise “any or all… interests, including … the right to foreclose and sell the Property” only “if necessary to comply with law or custom.”[1]

The Dobles defaulted on the Loan a few years later and sought to take advantage of the federal Home Affordable Mortgage Program (“HAMP”) by modifying the Loan so they could afford the payments. After a trial loan modification was granted, the Dobles made two payments in the modified amount. Despite the last payment under the modified Loan being in default, the Dobles were offered a permanent modification to the Loan, which they attempted to accept. Thereafter, the Dobles made no more payments under the Loan.

B. The Bankruptcies

Martha Doble filed a chapter 13 bankruptcy case in 2009 (Case No. 09-16970-LA13, Bankr. S.D. Cal.), which was dismissed. Doble filed this Chapter 13 bankruptcy case on June 28, 2010. The Complaint filed by Doble the day after he filed bankruptcy seeks damages and equitable relief, alleging that Defendants have no secured or unsecured claims in this case, that they violated the automatic stay by seeking to foreclose on the DOT without owning the Loan, and that they failed to discharge their responsibilities regarding modifying the Loan. Based upon a slew of contradictory documents purporting to transfer interests in the Note and DOT among the Defendants, Plaza and MERS, OneWest and Deutsche Bank have each represented to the Court to be the owner of the Loan in both cases. One West has separately asserted it is the servicer of the Loan.

C. Defendants’ Failure to Respond to the Complaint

The summons to the Complaint established a response date of July 29, 2010. Together with the Complaint, the summons was promptly served and received by Defendants. Pursuant to their servicing agreement, Deutsche Bank forwarded the Complaint to OneWest’s legal headquarters in Pasadena on July 2. Deutsche Bank then apparently did nothing further to respond to the Complaint, and OneWest misplaced the Complaint, failed to calendar a response, and did not otherwise follow-up on the matter.

The Complaint resurfaced after a response was due. When it was found on August 4, OneWest compounded the error. It did not follow internal protocol, which would have required the Complaint be sent to its litigation office in Austin, Texas, for referral to outside counsel. Instead, OneWest forwarded the Complaint to an outside vendor, Lender Processing Services (“LPS”), which is retained by OneWest to handle routine legal matters, but not litigation. LPS then exacerbated the problem by assigning an incorrect response date and sending the Complaint to the wrong outside counsel. In a final mishap, outside counsel neglected to look at the response date on the summons, and then waited another week until August 11 to request an extension. By this point, the default had already been entered.

Defendants filed their Motion to Vacate the Default and their Motion to Dismiss the Complaint on August 31, 2010. Defendants initially offered a declaration of outside counsel to explain their failure to timely respond to the Complaint. Counsel averred that he received the assignment of the Complaint on August 4, with a referral form showing a due date of August 20, although Defendants’ Motion to Vacate contrarily states Defendants mistakenly believed the due date was August 11. Counsel apparently relied upon the incorrect due date on the referral form calculated by the outside vendor, and did nothing to confirm the correct response date, which was apparent from the face of the summons. Not until August 11 did counsel contact Doble to request an extension. Defendants were already in default by this time, and the extension was denied.[2]

Because the Defendants initially provided no reason for their failure to respond to the Complaint until after the response was overdue, the Court asked a series of questions regarding the improper calendaring. In response to the Court’s questions, Defendants submitted the declaration of OneWest employee, Charles Boyle, who was resident in the Austin, Texas office. This employee averred that, after receipt of the Complaint in Pasadena, the Complaint was inadvertently logged into an automated referral system by a non-legal staff employee who has since resigned. Boyle averred this error was discovered the first week of August by a supervisor who re-referred the Complaint to local counsel.

Since Defendants had still not answered many of the Court’s questions, the Court again requested more information. Specifically, the Court requested Defendants provide more information regarding: 1) Boyle’s personal knowledge of the events in Pasadena given his residence in Texas; 2) what happened to the Complaint during the first month after it was served, and 3) why outside counsel waited seven days to contact Doble after receiving the Complaint on August 4. Finally, at the hearing on December 16, 2010, in response to questions asked from the bench, counsel for Defendants provided a more complete story: the Complaint had been lost, there were multiple departures from protocol, and several attorneys had received the Complaint and not bothered to review it. After a final attempt to clarify some of the facts pertaining to ownership of the Loan and why Defendants failed to timely respond to the Complaint, the Court took the matter under submission on February 3, 2011.

II. ANALYSIS

A. Defendants have not Demonstrated Good Cause to Vacate the Clerk’s Default

Rule 55(c) permits the Court to set aside an entry of default only “for good cause.” Defaulting parties have the burden of proving good cause. Franchise Holding II, LLC v. Huntington Restaurants Group, Inc., 375 F.3d 922, 926 (9th Cir. 2004) (quoting TCI Group Life Ins. Plan, Life Ins. Co. of N. Am. v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001)).

To determine whether good cause exists, courts consider (1) whether the default is the result of the defaulting party’s” culpable conduct”; (2) whether the defaulting party has a” meritorious defense”; or (3) whether reopening the default would “prejudice”[3] the innocent party. United States v. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010).[4] The test for good cause is disjunctive, and the defaulting party must prove all three factors favor setting the default aside. Franchise Holding, 375 F.3d at 926; Mesle, 615 F.3d at 1091. If any one factor favors upholding the default, the Court need not set it aside. Id. However, all doubt should be resolved in favor of a trial on the merits. Id. While there was no prejudice to Doble for the delayed response, the Court is without doubt that Defendants’ pervasive misconduct alone precludes a finding of good cause to set aside the default.

To determine whether Defendants have a meritorious defense, the Court has evaluated Defendants’ Motion to Dismiss, including admitting evidence and taking judicial notice as requested of the documents of public record in the case. SeeLee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The Court agrees that Doble cannot state a claim for relief on his third, fourth, and part of his first and second causes of action, and dismisses these claims with prejudice. Upon a proper motion to enter a default judgment under Rule 55(b)(2), the Court will exercise its discretion to permit the submission of evidence from all parties on whether Doble can prove his prima facie case on the other claims. However, Defendants will be prohibited from presenting a case in defense of Doble’s claims because the default will be upheld. Fed. R. Evid. 210; Fed. R. Civ. P. 55(b)(2);

1. Defendants Are Culpable

A defendant’s conduct is culpable if it is consistent with a “devious, deliberate, willful, or bad faith failure to respond.” Mesle, 615 F.3d at 1092. Where a defendant’s actions are negligent, and not intentional, the defendant is not culpable. Id.; TCI, 244 F.3d at 698-99. For “legally sophisticated” defendants, however, intentionality is assumed because legally sophisticated parties are held to understand the consequences of their actions. Mesle, 615 F.3d at 1093. As large financial institutions, OneWest and Deutsche Bank are sophisticated parties.

Where sophisticated defendants are aware of the pendency of a suit, but are indifferent to the consequences of not responding, culpability may be found even when bad faith is absent. Franchise Holding II, 375 F.3d at 926 (defendant was culpable for failing to respond despite plaintiffs warning it would seek a default after side-agreement negotiations broke down); Direct Mail Specialists, Inc. v. Eclat Computerized Technologies, Inc., 840 F.2d 685, 690 (9th Cir. 1988)Oracle USA, Inc. v. Qtrax, Inc., No. C09-3334 SBA, 2010 U.S. Dist. LEXIS 97630, at *12-*13 (N.D. Cal. Sept. 3, 2010) (defendant’s conduct was culpable when defendant did not respond to accommodate the convenience of the CEO, cost considerations, and its hope for a settlement); Markel Ins. Co. v. Dahn Yoga & Health Ctrs., Inc., No. C09-1221RSM, 2010 U.S. Dist. LEXIS 58763, at *11-*15 (W.D. Wash. May 17, 2010) (defendants were culpable where one failed to keep registered service agent updated on its address and another failed to inform itself that the client had waived a service problem). (defendant was culpable in not responding due to a mistaken belief service was improper);

Defendants’ conduct can only be described as an intentional disregard for their obligations to comply with Court procedures and provide candid answers to the Court’s questions. As in Franchise II, Oracle, Direct Mail, and Markel,[5] properly calendared the response date. Whether due to apathy or profit maximizing considerations, Defendants relied exclusively upon a non-attorney outside vendor, contrary to protocol, and failed to properly implement litigation procedures. See Franchise II, 375 F.3d at 926; Oracle, 2010 U.S. Dist. LEXIS 97630, at * 10-12 (defendants failed to appropriately allocate corporate resources to respond to the litigation). This misplaced reliance on a non-attorney to calculate a response time is similar to the conduct of the defendants in Direct Mail and Markel, who erred in their analysis that service was improper. See Direct Mail, 840 F.2d at 690; Markel, 2010 U.S. Dist. LEXIS 58763, at *16 (“[Defendant] will not be heard to object that service was improper, nor blame its failure to respond … on poor document management policies.”). Defendants’ multiple errors are also thus distinguishable from Park v. U.S. Bank Nat’l Ass’n, No. 10cvf1546-WQH-WMc, 2010 U.S. Dist. LEXIS 123119, at *8-*10 (S.D. Cal. Nov. 19, 2010), where the defendants’ failure to answer was the result of an unintentional administrative error rather than culpable misconduct. While the Court appreciates that mistakes happen and isolated negligence can be excusable neglect, see Pioneer, 507 U.S. at 407-08,[6] what happened here was not mere negligence. Defendants were aware of the suit and the consequences of the default, but repeatedly failed to follow their own protocols. Defendants have never explained why none of Defendants’ three attorneys

Compounding their culpability problems, the Court finds that Defendants’ initial explanation of the default was neither candid nor credible. A “devious” failure to respond is culpable. Mesle, 615 F.3d at 1092. The full story belies their initial characterization that their errors in handling the Complaint were minor and isolated. No less than six mistakes or breaches of protocol occurred in how the Complaint was handled: (1) both copies of the Complaint were not sent immediately to Boyle in Austin, Texas, where litigation was to be handled; (2) the Complaint was lost for a month; (3) when the Complaint was found on August 4, 2010, it was not sent to Austin as protocol demanded, but mistakenly logged into the non-attorney LPS system; (4) LPS miscalculated the response date for the Complaint; (5) LPS incorrectly assigned the response to a law firm who was not the appropriate counsel to handle litigation for OneWest; and (6) Outside counsel failed to check the correct response date and relied upon the LPS miscalculation. The Court cannot accept Boyle’s claim that new intake protocols have solved OneWest’s systemic problems. Defendants themselves could not fully explain what went wrong in their efforts to respond to the Complaint. Even after three tries, Defendants have left questions unanswered.

Defendants’ disregard for their obligations of candor to the Court and compliance with Court procedures, not only in connection with the entry of default, but also in the presentation of numerous other documents to the Court on the merits, is culpable. The default will not be set aside.

2. Defendants Acted in Bad Faith

Defendants’ conduct in presenting evidence on the merits of this case and others demonstrates a callousness towards their legal obligations that amounts to bad faith; an additional reason not to set aside the default. Defendants filed numerous pleadings in this case and in the Martha Doble case seeking the Court’s assistance in enforcing the Loan.[7][8][9] tell a convoluted tale as to who owns the Loan and is thus entitled to enforce it. This Court was forced to repeatedly request additional evidence from Defendants to evaluate their own motions. Defendants’ pleadings and transactional documents

The most disconcerting misrepresentation to the Court was Defendants’ submission of multiple “true and correct” copies of the Note under penalty of perjury without any endorsement from Plaza. Whether the Note was endorsed is central to the merits of this case. When Defendants finally submitted an endorsed copy of the Note on November 8, 2010, they attempted to pass off the first three unendorsed copies of the Note as “illegible.” The first three copies of the Note were fully readable, so the phantom endorsement page was not a problem with legibility. The timing of this tardily produced endorsement, produced after several requests, suggests it was added only in response to the litigation. To add to the Court’s incredulity, Defendants have never answered the Court’s specific questions as to when and under what circumstances this newly proffered endorsement was executed. For the purpose of its analysis on the merits, the Court finds that the endorsement was not made until it was presented to the Court on November 8, 2010.[10]

This lack of candor in the presentation of evidence on the merits supports a finding of bad faith in regard to the default. The court system can only function if parties take their representations and responsibilities seriously. Chambers v. NASSCO, Inc., 501 U.S. 32, 43, 47 (1991); see also In re Snyder, 472 U.S. 634, 641 (1985). Courts have held that a lender’s actions amount to bad faith where the lender is shown to have routinely misrepresented its role in bankruptcy cases, caused unnecessary litigation, or prejudiced another party. See Ameriquest Mortg. Co. v. Nosek (In re Nosek), 609 F.3d 6, 9 (1st Cir. 2010). In two previous cases before this Court, Defendant OneWest has been ordered to show cause for failing to comply with its obligations as a party before the Court. See In re Carter, Ch. 13 Case No. 10-10257-MM13 (Bankr. S.D. Cal.); In re Telebrico, Ch. 13 Case No. 10-07643-LA13 (Bankr. S.D. Cal.). Not only in this action, but in others as well, One West has demonstrated a “confusion and lack of knowledge, or perhaps sloppiness, as to their roles.” Ameriquest, 609 F.3d at 9.[11]

Because Defendants’ conduct in not responding to the Complaint was intentional and in bad faith, the Court will not set aside the default.

B. Resolution of the Merits of the Case

To uphold the default entered against Defendants, the Court must consider both the merits of Defendants’ defense and the merits of Plaintiff’s case, as challenged in Defendants’ Motion to Dismiss. Mesle, 615 F.3d at 1094 (defaulting party must present a valid defense before court can set aside a default); Fed.R. Civ. P. 55(b); Eitel v. McColl, 782 F.2d 1470, 1471 (9th Cir. 1986); Cashco Fin. Servs. v. McGee (In re McGee), 359 B.R. 764, 771 (B.A.P. 9th Cir. 2006) (default judgment requires assessment of the merits of plaintiff’s claims).[12] This task is made more difficult since neither Doble’s Complaint, nor Defendants’ Motion to Dismiss, is a model of clarity. Five causes of action are alleged in the Complaint, but more than five are presented.

Defendants’ Motion to Dismiss complicates the analysis further since it questions a few, but not all, of Doble’s claims. Defendants claim MERS had authority to transfer the Loan as a matter of law, but not that the assignment was properly executed or acknowledged. Defendants dispute Doble’s attempt to employ 11 U.S.C. §544(a) to set aside the MERS’ assignment to OneWest. They also argue HAMP does not provide a private cause of action. Defendants do not, however, address the state law claims contained in the fifth cause of action.

Sorting the parties’ claims and defenses, the Court concludes some of Doble’s claims lack merit, and others require further evaluation. Even though the Court will uphold the default entry resulting from Defendants’ culpable conduct, it will nevertheless dismiss with prejudice Doble’s third and fourth causes of action, and part of Doble’s first and second causes of action relating to New York Trust law and 11 U.S.C. § 544(a). See Moore v. United Kingdom, 384 F.3d 1079, 1090 (9th Cir. 2004) (invalid causes of action may be dismissed despite default). The Court will hold further proceedings on the remaining claims to respect the due process rights of Defendants. Danning v. Lavine, 572 F.2d 1386, 1388-89 (9th Cir. 1978) (default judgment proceedings should be consistent with due process).

1. Defendants’ Secured and Unsecured Claims (1st and 2nd Causes of Action)

The first two causes of action seek damages and disallowance of Defendants’ secured and unsecured claims for lack of standing on four separate grounds: (a) MERS’ assignment of the DOT to OneWest and, in turn, OneWest’s assignment to Deutsche Bank, were invalid; (b) Defendants have no interest in the Note nor any right to enforce it under California law; (c) the assignment of the DOT to Deutsche Bank was not of public record; and (d) Defendants violated New York Trust law so that Deutsche Bank cannot be the owner of the Loan as a matter of law. Where a secured creditor cannot establish a right to enforce a loan, it has no standing to file or defend a claim, or to seek relief from stay. In re Gavin, 319 B.R. 27, 32 (B.A.P. 1st Cir. 2004); In re Hayes, 393 B.R. 259, 269-70 (Bankr. D. Mass. 2008).

Although the Court rejects Doble’s New York Trust claims and his avoiding power claim, the record here supports Doble’s first three standing claims. MERS had no authority to assign the DOT, under its terms and as a matter of law, without the authority to assign the Note. The Note was not assigned until it was endorsed by Plaza. Until that endorsement, the MERS’ assignments were a nullity. Deutsche Bank currently lacks authority to enforce the Loan as the assignee of Plaza, and will continue to lack authority until it records its assignment.

a. MERS Cannot Transfer DOT Enforcement Rights to Defendants

Defendants’ Motion to Dismiss relies upon MERS’ status as nominal beneficiary of the DOT[13] to establish their standing to enforce the Loan. They cite several cases which have so held. Lane v. Vitek Real Estate Indus. Group, 713 F. Supp. 2d 1092, 1099 (E. D. Cal. 2010); Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1043 (N.D. Cal. 2009); Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1190 (N.D. Cal. 2009); see also Perry v. Nat’l Default Servicing Corp., No. 10-CV-03167-LHK, 2010 U.S. Dist. LEXIS 92907, at *11 (N.D. Cal. Aug. 20, 2010).[14] The Court does not disagree with these cases to the extent they hold MERS need not have physical possession of the note to commence a foreclosure, and securitization of a mortgage note need not impact the enforceability of the mortgage itself. The key issue before the Court is different: whether MERS had statutory authority to assign the DOT under its terms, particularly when MERS held no rights under the Note. To decide this issue, the Court rejects Defendants’ invitation to overlook the statutory foreclosure mandates of California law, and rely upon MERS as an extra-judicial commercial alternative.[15]

The DOT is a four party instrument among the Dobles as Borrowers, Plaza as Lender, First American Title as trustee, and MERS as beneficiary. The Lender’s rights regarding the Loan are pervasive. The Lender (Plaza) is entitled to receive all payments under the Note, to control enforcement of the DOT under its terms, and only the Lender is entitled to conduct a nonjudicial foreclosure.[16]

MERS has none of these rights under the DOT and is not even mentioned in the Note. MERS is not given any independent authority to enforce the DOT under its terms, and its status as beneficiary under the DOT is only “nominal.” While the Borrowers acknowledge in the DOT that MERS can exercise the Lender’s rights as “necessary to comply with law or custom,[17] this acknowledgement is not accompanied by any actual allocation of authority to nonjudicially foreclose on the Property, nor is such authority allocated in any other document in the record. See also, e.g., LaSalle Bank Nat’l Ass’n v. Lamy, No. 030049/2005, 2006 NY Slip Op 51534U, slip op. 2 (N.Y. Sup. Ct. 2006); MERS v. Saunders, 2 A.3d 289, 295 (Me. 2010) (“MERS’ only right is to record the mortgage. Its designation as the `mortgagee of record’ in the document does not change or expand that right….”). Defendants’ authority to foreclose cannot, therefore, be derived from MERS because MERS never held such authority.[18] Shannon v. General Petroleum Corp., 47 Cal. App. 2d 651, 661 (1941) (assignment can only carry rights owned by the assignor.)

Even though MERS’ status as the nominal beneficiary of the DOT may have allowed it to assign that limited status, this authority does not convey a right to enforce the Loan. An assignment of a mortgage without assignment of the corresponding debt is a nullity under controlling law. Carpenter v. Longan, 83 U.S. 271, 275 (1872); Kelley v. Howarth, 39 Cal. 2d 179, 192 (1952); Johnson v. Razy, 181 Cal. 342, 344 (1919) (“A mortgage is mere security for the debt, and it cannot pass without transfer of the debt.”); Polhemus v. Trainer, 30 Cal. 686, 688 (1866) (interest in the collateral subject to the mortgage does not pass “unless the debt itself [is] assigned.”). Within California’s comprehensive statutory nonjudicial foreclosure scheme found at Civil Code sections 2920-2955, four separate statutes corroborate that the secured debt must be assigned with the deed of trust.[19]

Since MERS could not assign any enforcement rights under the Note or DOT because it held none, Defendants could not rely on the invalid MERS assignment to enforce the DOT. Polhemus, 30 Cal. at 688; see also U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 651 (2011). They had to receive an assignment from Plaza as the payee of the Note before the MERS assignment of its nominal interest in the DOT could have any enforceable impact.

b. Defendants’ Right to Enforce the Note

A negotiable promissory note such as the Note can only be enforced in accordance with Article 3 of the Commercial Code (“CCC”), Cal. Com. Code §§ 1101-16104 (Deering 2011). The CCC permits enforcement of a note by a party who: (1) holds a directly endorsed note (section 1205(21)); (2) previously had the ability to enforce the note, but it was lost, destroyed, or stolen (section 3309); (3) has possession of an endorsed-in-blank instrument (section 1205(21)); or (4) can prove both possession of the enforcement rights received from its transferor (section 3301). Id; In re McMullen Oil Co., 251 B.R. 558, 568 (Bankr.C.D. Cal. 2000); In Re Carlyle, 242 B.R. 881, 887 (Bankr. E.D. Va. 1999). These requirements apply to every link in the chain of transfer of the note. Where a note has been assigned several times, each assignment in the chain must be valid or the party claiming the note cannot enforce it. In re Gavin, 319 B.R. 27, 32 (B.A.P. 1st Cir. 2004); In re Wells, 407 B.R. 873 (Bankr. N.D. Ohio 2009). Even if a party is the owner of a promissory note, it is not entitled to enforce the note unless it meets the statutory criteria for enforcement. Cal.Com. Code §3203(b) cmt. 2.

Enforcement option 1 is not applicable. The Note is not payable to Defendants, but to Plaza. Neither Defendant can enforce the Note as a direct payee or endorsee. In re Wilhelm, 407 B.R. 392, 402 (Bankr. D. Idaho 2009); Chicago Title Ins. Co. v. Allfirst Bank, 905 A.2d 366, 374 (Md. 2006). No claim was made that the Note was lost or stolen, which eliminates option 2.

As to option 3, not until November 8, 2010 did Defendants produce the Note endorsed in blank by Plaza. An endorsement is not effective until it is signed. Com.Code §3203(c); Security Pacific Nat. Bank v. Chess, 58 Cal. App. 3d 555, 564 (1976). Until the note is properly endorsed, assignments of the deed of trust do not serve to transfer enforcement rights. Id. The endorsement must be on the note or attached. Lopez v. Puzina, 239 Cal. App. 2d 708, 714 (1st Dist. 1966).

Defendants did not attempt to demonstrate the requirements of option 4; that they had possession of the Note and that Plaza had transferred to them the right to enforce it even without an endorsement. Instead, they erroneously relied upon the MERS assignment. Com.Code § 3203 (1), (2) n. 17; In re McMullen Oil Co., 251 B.R. 558, 567 (Bankr. CD. Cal. 2000); In re Agard, No. 10-77338-reg, 2011 Bankr. LEXIS 488, at *58 (Bankr. E.D.N.Y. Feb. 10, 2011) (“[E]ven if MERS had assigned the Mortgage acting on behalf of the entity which held the Note at the time of the assignment, this Court finds that MERS did not have authority, as “nominee” or agent to assign the Mortgage absent a showing that it was given specific written directions by its principal.”). Under the circumstances of this case, the Court declines to give the Defendants another chance to “prove the transaction.” Instead, the Court finds that Defendants did not have any right to enforce the Note before November 8, 2010, when they produced an endorsement of the Note from Plaza.

c. Deutsche Bank’s Assignment of the DOT Must Still be Recorded

Although Deutsche Bank met the first of the foreclosure prerequisites to enforce the power of sale in the DOT under Civil Code section 2932.5[20] when it became the holder of the Note on November 8, 2010, it still failed to meet the second. Civil Code section 2932.5 requires that the assignee of the secured debt record its interest before it can exercise the power of sale under the DOT and nonjudicially foreclose. Deutsche Bank admits it has recorded neither of the two assignments from OneWest to Deutsche Bank. Deutsche Bank, therefore, still lacks authority to enforce the DOT, and any enforcement actions taken thus far are void. Ibanez, 458 Mass, at 651; Polhemus, 30 Cal. at 688.

d. New York Trust Law

As part of the first and second causes of action, Doble alleges that Deutsche Bank cannot own the Loan because the Loan was not properly transferred to it in accordance with New York Trust law and the trust documents. Under the terms of the Purchase and Servicing Agreement (“PSA”), Doble alleges all assets to be part of the trust had to be conveyed before June 1, 2005. Since none of the assignments of the Loan met that deadline, Doble claims Deutsche Bank has no interest in the Loan. Defendants, in turn, claim Doble has no standing to challenge the trust, citing Rogan v. Bank One, N.A. (In re Cook), 457 F.3d 561, 567 (6th Cir. 2006). While the Court agrees that Doble has no standing to interfere with trust administration, he does have standing to challenge Defendants’ assertion they had standing to file a claim and to seek to foreclose the Loan. Wilhelm, 407 B.R. at 400.

The Court nevertheless finds the allegations of this claim to be too flawed to remain a part of this suit. See Eitel, 782 F.2d at 1471. Based on the allegations of the Complaint, the Court cannot determine whether the Loan was validly conveyed to the trust, whether the trust is invalid, or what effect such an invalidation would have on Defendants’ claim.[21] Doble has provided no legal support for his claims. His citation to New York Estate Powers and Trusts Law section 7-2.4 (Consol. 2010), to support that any “sale, conveyance, or other act” in “contravention” of the trust is void, is incorrect.[22]

Doble’s New York trust claim within the first and second causes of action therefore will be dismissed with prejudice.

2. The Assignments May Not be Avoided (2nd Cause of Action)

The Court agrees that Doble has no viable avoiding power claim to assert as a result of Defendants’ recordation of assignments after the Martha Doble bankruptcy case was filed. Doble was provided constructive notice of Defendants’ lien from the recordation of the DOT, regardless of whether interests in the Loan were later transferred. In re Cook, 457 F.3d at 568; Kapila v. Atl. Mortg. & Inv. Corp. (In re Halabi), 184 F.3d 1335, 1338 (11th Cir. 1999); see also In re Probasco, 839 F.2d 1352, 1354 (9th Cir. 1988) (applying California law, a bona fide purchaser who records prevails over a prior transferee who failed to record). The Court also notes these claims are property of the Martha Doble bankruptcy estate, not this case. Doble thus lacks standing to assert this claim. See Estate of Spirtos v. One San Bernardino County, 443 F.3d 1172, 1176 (9th Cir. 2006) (husband does not have authority to assert claims on the part of wife without substantial proof of standing). This part of the second cause of action is also dismissed with prejudice.

3. Violation of Stay (3rd Cause of Action)

Doble’s third cause of action alleges[23] that Assignments 2 and 3 from OneWest to Deutsche Bank were executed post-petition in Martha Doble’s case, and are void and in violation of his co-debtor stay under 11 U.S.C. §1301. In response, Defendants assert that the stay is not violated by assignments of their mortgage interests post-petition, because those interests do not belong to Martha Doble’s bankruptcy estate.

The Court agrees that this is not a valid cause of action. Because the automatic stay only applies to transfers of a debtor’s property interests under 11 U.S.C. § 362(a)(3), Defendants’ transfers of their interests in the Loan do not violate the automatic stay. Halabi, 184 F.3d at 1337; Cook, 457 F.3d at 568. This cause of action will be dismissed with prejudice.

4. Violation of Bankruptcy Code (4th Cause of Action)

Doble specifically seeks damages and sanctions relating to Defendants’ proof of claim and false declaration filed in the relief from stay motion in Martha Doble’s case. Defendants’ only response to this is to reiterate that the unrecorded assignment is not avoidable under § 544(a). Defendants fail to address any other allegations in this cause of action.

Despite Defendants’ failure to cogently respond to this cause of action, the Court finds Doble has no standing to assert damages in his wife’s bankruptcy case. Doble was not a joint debtor in that case, and Martha Doble is not a party in this case. See In re Scott, 437 B.R. 376, 379-80 (B.A.P. 9th Cir. 2010). This cause of action is not viable to the extent it seeks damages for Doble in his wife’s case, and it will be dismissed with prejudice.

5. Loan Modification Claims (5th Cause of Action)

In the fifth cause of action, Doble alleges an array of theories complaining of Defendants’ conduct in the loan modification process, including that they engaged in unlawful business practices, violated California’s Consumer Legal Remedies Act, California Civil Code Section §§ 1750-1759, and breached the covenant of good faith and fair dealing. In response, Defendants only challenge whether HAMP establishes a private cause of action, based on Doble’s allegation he is an intended third party beneficiary under the HAMP contract.

The facts alleged in the Complaint, as well as the additional evidence proffered by the parties in response to the Court’s inquiries, reflect ongoing efforts by Doble to modify the Loan over a period of eighteen months. Doble claims the efforts were successful, and Defendants should be bound by the permanent loan modification they offered him in May 2010. Defendants claim the Loan modification effort failed because Doble failed to make all of the payments due during the trial period. To resolve this basic controversy requires further evidentiary proceedings, since the communications by Defendants were confusing and contradictory, but Doble did fail to make all of the required payments even if there was a binding loan modification with Defendants. To facilitate the evidentiary hearing, the Court will preliminarily address Doble’s theories of recovery.

Courts have differed on whether HAMP permits a private right of action. Compare Benito v. Indymac Mortg. Servs.,and Escobedo v. Countrywide, No. 09-cv-1557 BTM (BLM), 2009 U.S. Dist. LEXIS 117017, at * 4-*7 (S.D. Cal. Dec. 15, 2009) (same), with Marques v. Wells Fargo Home Mortgage Inc., No. 09-cv-1985-L (RBB), 2010 U.S. Dist. LEXIS 81879, at *19-*20(S.D. Cal. Aug. 12, 2010) (finding a borrower is a third party beneficiary with regard to certain contract terms that are not discretionary, and HAMP otherwise has no enforcement remedies). In determining whether a party is an intended beneficiary of a government contract, a court must examine “the precise language of the contract for a clear intent to rebut the presumption that the third parties are merely incidental beneficiaries.” County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1244 (9th Cir. 2009), cert. granted sub. nom, Astra USA, Inc. v. Santa Clara County, 131 S.Ct. 61 (2010) (failure to include express language identifying parties as intended beneficiaries is not dispositive). To the extent Doble can prove a specific provision of HAMP was violated, and compliance with the provision was mandatory for Defendants, he may be able to prove a valid cause of action as a third party beneficiary of HAMP. No. 2:09-CV-001218-PMP-PAL, 2010 U.S. Dist. LEXIS 51259, at *20-*21 (D. Nev. May 21, 2010) (holding a borrower is not a third party beneficiary),

Doble’s other claims are not invalid as a matter of law even if he cannot establish a direct cause of action under HAMP. Failure to establish a HAMP third party beneficiary contract cause of action does not preclude state law claims relating to the Lender’s alleged misconduct. Escobedo, 2009 U.S. Dis. LEXIS 117017, at * 10 (allowing claims for violation of unfair business practices under Cal. Bus. & Prof. Code § 17200); Villa v. Wells Fargo Bank, N.A., No. 10CV81 DMS (WVG), 2010 U.S. Dist. LEXIS 23741, at *9 (S.D. Ca. 2010) (allowing an amendment to allege misrepresentation claims); Aceves v. U.S. Bank, N.A., 192 Cal. App. 4th 218, 233 (2d Dist. 2011) (allowing promissory estoppel and fraud claims). Doble’s claims under the California Legal Remedies Act, Cal. Civ. Code §§ 1750-1759, and his claims for breach of the covenant of good faith and fair dealing, therefore, cannot be dismissed as a matter of law at this time.

C. Order To Show Cause

Based on the facts and circumstances described in this Memorandum Decision, the Court orders that Defendants appear and show cause why they should not pay Doble’s attorney’s fees for their conduct in this action. This order to show cause is issued pursuant to this Court’s authority under 28 U.S.C. § 157, 11 U.S. C. § 105, Bankruptcy Rule 9011(c)(1)(b) and the Court’s inherent power to monitor the proceedings before it for the benefit of the Court, the profession and the public. Chambers v. NASCO, Inc., 501 U.S. 32, 43, 47 (1991); In re Sunshine Jr. Stores, Inc., 456 F.3d 1291, 1305 (11th Cir. 2006) (“it is within a court’s discretion to assess attorney’s fees on a party … for actions taken in bad faith”).

III. CONCLUSION

The Court denies Defendants’ request to set aside the clerk’s entry of a default, but grants their Motion to Dismiss the portions of the first and second causes of action relating to Doble’s New York Trust claims and avoiding power claims. Defendants’ Motion to Dismiss Doble’s third and fourth causes of action is also granted. As to the remainder of the first and second causes of action, the Court finds MERS’ limited role as beneficiary of the DOT did not provide talismanic protection against the myriad foreclosure deficiencies committed by Defendants regarding this Loan. MERS’ role did not provide Defendants the authority to enforce the DOT, the ability to assign the Note without an endorsement from Plaza, or an exception to their obligation to record the assignment to Deutsche Bank. The Court will allow Doble to produce additional evidence in support of his claims, but not his wife’s claims. The Court will disallow Defendants’ secured and unsecured claims without prejudice. Defendants may file an amended proof of claim in this case if they fully address the defects identified in this Memorandum Decision.

The Court orders Defendants to appear and show cause why they should not pay Doble’s attorneys fees for their conduct in this action, and schedules a status conference for April 28, 2011 at 3:00 in Department 1 of this Court.

[1] See infra Part II.B.1.a.

[2] Doble’s reason for not agreeing to set aside the default was his frustration with the “false documents” submitted regarding ownership of the Loan.

[3] To be prejudicial, reopening the default must result in greater harm than a mere delay in relief. Mesle, 615 F.3d at 1095; see also Franchise Holding II, 375 F.3d at 926 (plaintiff was prejudiced where there was a possibility that a delay in judgment would allow defendant an opportunity to hide assets). Here, Defendants have asserted that Doble is not prejudiced by their delay and there is no evidence before the Court to the contrary. Ultimately, however, since Rule 55(c)’s good cause factors are disjunctive, and Defendants’ conduct is culpable, a prejudice analysis is unnecessary.

[4] The Rule 55(c) good cause factors are identical to those used to consider whether relief should be granted from a default judgment under Rule 60(b). See Mesle, 615 F.3d at 1091; TCI, 244 F.3d at 696. However, while the factors are the same, the standards for evaluating the factors are distinct. O’Brien v. R.J. O’Brien & Assocs., Inc., 998 F.2d 1394, 1401 (7th Cir. 1993). Rule 55(c)’s relief from default standard is less rigorous than the relief from judgment standard of Rule 60(b). Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) (“The different treatment of default entry and judgment by Rule 55(c) frees a court considering a motion to set aside a default entry from the restraint of Rule 60(b) and entrusts determination to the discretion of the court.”); accord Tessill v. Emergency Physician Assocs., 230 F.R.D. 287, 289 (W.D.N.Y. 2005).

[5] These three attorneys are the Deutsche Bank counsel who forwarded the Complaint to OneWest, the OneWest Corporate Legal Department who received both the OneWest Complaint it received on its own behalf and the Complaint sent by Deutsche Bank, and Burnett & Matthews, the first outside counsel who received the Complaint.

[6] This reading of culpability is consistent with the Supreme Court’s interpretation of the analogous “excusable neglect” standard of Rule 60(b)(1). Pioneer Inv. Serv. Co. v. Brunswick Assocs. Ltd., 507 U.S. 380, 393, 395-97 (1993) (a party’s failure to respond is excusable if inadvertent or negligent); Mesle, 615 F.3d at 1092; Franchise Holding II, 375 F.3d at 927.

[7] In the Martha Doble case, in a Declaration filed May 4, 2010, Deutsche Bank, through its purported power of attorney, One West, claimed to be the owner of the Loan based upon a chain of assignments. Deutsche Bank claimed the same in its proof of claim. However, in this case, OneWest filed the proof of claim for the Loan identifying itself as the creditor. In this adversary case, Defendants averred MERS assigned all beneficial interest under the DOT to OneWest on October 22, 2009 and OneWest assigned all beneficial interest to Deutsche Bank in an unrecorded assignment dated May 19, 2010. This assignment to Deutsche Bank on May 19, 2010, however, is dated after Deutsche Bank averred to this Court on May 4, 2010 that it was the owner of the Loan. Separately, Deutsche Bank has also claimed it owned the Loan as of 2008 without evidentiary support.

[8] The Court on October 5, 2010 issued a tentative ruling continuing the hearing on the Motions and seeking additional evidence regarding who had the right to foreclose the Loan, and whether the Loan Modification Agreement, which Doble alleges he executed on June 3, 2010, was also executed by Defendants. The Court issued another tentative ruling on December 15, 2010 seeking an “explanation from Defendants regarding the contradictory statements submitted by Defendants under penalty of perjury in both Debtor’s and Martha Doble’s bankruptcy cases regarding the identity of the owner of the Note,” the role of OneWest, and the circumstances of the endorsement of the Note. The Court inquired twice more regarding the circumstances of the alleged loan modification and the Defendants’ default.

[9] Defendants provided the Court with an “Assignment of Deed of Trust” executed on June 26, 2009 through which MERS, as the original beneficiary, purports to assign to OneWest all beneficial interest under the DOT, “together with the Note” (“Assignment 1″). However, One West did not record its interest until after its foreclosure proceedings were started. On July 14, 2009, a Notice of Default on the loan was recorded by OneWest, even though OneWest lacked any recorded interest in the Loan at the time. Only when OneWest recorded a Notice of Sale on the Loan on October 22, 2009, did it finally record Assignment 1.

On November 24, 2009, OneWest executed, but did not record, an Assignment of Deed of Trust to Deutsche Bank “together with the Note” (“Assignment 2″). Then on May 19, 2010, OneWest executed but did not record another Assignment of Deed of Trust “together with the Note” (“Assignment 3″) to Deutsche Bank. Deutsche Bank curiously produced a copy of a power of attorney it granted to OneWest regarding ownership of the Loan. Whatever significance this power of attorney has, it does not support the assignment from OneWest to Deutsche Bank because Deutsche Bank had no apparent rights to the Loan before it received them from OneWest.

[10] This sanction is similar to the entry of a default judgment against Defendants for their bad faith failure to comply with the orders of this Court. See, e.g., Carter v. Brooms (In re Brooms), No. NC-10-1117-KiSah, 2011 Bankr. LEXIS 648, at *21 (B.A.P. 9th Cir. Jan. 18, 2011) (upholding the court’s default judgment pursuant to 7016(d) for a party’s failure to comply with a pre-trial order).

[11] Specifically, an inability to coherently prove ownership is both endemic to the industry, and a common problem. Ameriquest, 609 F.3d at 9; see also, e.g., U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637 (2011) (holding US Bank did not sufficiently demonstrate it held title to a mortgage under Massachusetts law prior to foreclosure where US Bank alleged it received title pursuant to a trust agreement and did not provide the trust agreement but, instead, provided an unsigned offer of mortgage-backed securities to potential investors that did not specifically identify the mortgage in question).

The Court’s finding here is consistent with the findings of the academics and reporters who note this pattern of behavior is common in the mortgage industry. Studies have shown that mortgage holders and servicers routinely file inaccurate claims, some of which may not be lawful. See Katherine Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims, 87 Tex. L. Rev. 121, 123-24 (2008); Andrew J. Kazakes, Developments in the Law: the Home Mortgage Crisis, 43 Loy. L.A. L. Rev. 1383, 1430 (2010) (citing David Streitfeld, Bank of America to Freeze Foreclosure Cases, N.Y. Times, Oct. 2, 2010, at B1) (reporting that after revelation of Porter’s study several Banks froze foreclosures); Eric Dash, A Paperwork Fiasco, N.Y. Times, Oct. 24, 2010, at WK5 (reporting the repeal of the initial freeze and the problems banks faced in clearing up foreclosure paperwork). The Inspector General overseeing the recent financial crisis has studied this issue and concluded:

Anecdotal evidence of [loan servicers’] failures [have] been well chronicled. From the repeated loss of borrower paperwork, to blatant failure to follow program standards, to unnecessary delays that severely harm borrowers while benefiting servicers themselves, stories of servicer negligence and misconduct are legion, and . . . they too often have financial interests that don’t align with those of either borrowers or investors.

Office of the Special Inspector General for the Troubled Asset Relief Program, Quarterly Report to Congress 12 (Jan. 26, 2011), available at http://www.sigtarp.gov/ (follow link for “Quarterly Report to Congress”).

[12] After entry of a default, a court may exercise its discretion to enter a default judgment on the merits of the case. Fed. R. Civ. P. 55(b); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The Ninth Circuit in Eitel identified the following factors for a court to consider in exercising that discretion:

(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

Eitel, 782 F.2d at 1471-72.

[13] The DOT states “MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the beneficiary under this Security Instrument.” DOT at p. 1.

[14] Under Ninth Circuit law this Court may decline to follow these decisions because it is not bound. State Compensation Ins. Fund v. Zamora (In re Silverman), 616 F.3d 1001, 1005 (9th Cir. 2010). While the Ninth Circuit reserved the issue of whether bankruptcy courts are bound by district court decisions within the district where the bankruptcy court sits, it recognized that such a requirement “could create the same problem of subjecting bankruptcy courts to a non-uniform body of law.” Id.

[15] The Court notes that circumventing the public recordation system is, in fact, the purpose for which the MERS system was created. Merscorp, Inc. v. Romaine, No. 179, 2006 NY Slip Op. 9500, slip op. 6 (Ct. of Appeals 2006). Creation of a private system, however, is not enforceable to the extent that it departs from California law as explained in this Memorandum Decision.

[16] Under the DOT, the Lender is secured the right to: “(i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower’s covenants and agreements under this Security Instrument and the Note.” In addition, under the covenants executed between the Lender and Doble, the Lender is granted exclusive authority to accelerate repayment, “give notice to Borrower prior to acceleration,” “invoke the power of sale” through written notice to the Trustee in the event of default, and appoint successor trustees. DOT at pp. 2, 11, 12.

[17] The DOT provides, “Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee of Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing or cancelling this Security Instrument.” DOT at p. 3 (emphasis added).

[18] Since the briefing on this matter was completed, Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1151-58 (4th Dist. 2011) was decided. Gomes held that there is no cause of action under Civil Code section 2924(a)(1) that would permit a borrower to test MERS’ authority to initiate a nonjudicial foreclosure without a specific factual basis for the challenge. Neither Gomes nor Civil Code section 2924(a)(1) however, address Civil Code section 2932.5, applicable when an assignee forecloses. Id. at 1155. Instead, Gomes relied upon the borrower’s acknowledgement of MERS’ authority in the DOT to allow MERS to foreclose as nominal beneficiary. Gomes, 192 Cal. App. 4th at 1157-58. MERS, here, had no such authority under the DOT. The Lender, not MERS, has the right to “invoke the power of sale” under the DOT.

[19] These statutes are: Civil Code sections 2932.5 (assignee of secured debt cannot nonjudicially foreclose without right to payment and a recorded assignment), 2935 (notice of an assignment of a mortgage does not change the borrowers’ obligation to make payments to the holder of the note), 2936 (transfer of a note carries with it an assignment of the debt, not vice versa), and 2937 (borrowers must be notified of transfers of servicing rights).

[20] Civil Code section 2932.5 provides:

Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.

Civ. Code § 2932.5 (Deering 2011) (emphasis added). While the exact language of Civil Code section 2932.5 mentions mortgages and not deeds of trust, the distinction between the two instruments is obsolete. N. Brand Partners v. Colony GFP Partners, L.P. (In re 240 N. Brand Partners), 200 B.R. 653, 658 (B.A.P. 9th Cir. 1996) (“The terminology creates a difference without distinction.”); Yulaeva v. Greenpoint Mortg. Funding, Inc., No. S-09-1504, 2009 U.S. Dist. LEXIS 79094, at *4 (E.D. Cal. Sept. 3, 2009) (citing 4 B.E. Witkin, Summary of California Law, ch. VIII, § 5 (10th ed. 2005)); Bank of Italy Nat. Trust & Sav. Assn. v. Bentley, 217 Cal. 644, 656 (1933) (legal title under a deed of trust, though held by the trustee to the extent necessary for execution of the trust, does not carry any “incidents of ownership of the property”); see also 1 Roger Bernhardt, California Mortgages, Deeds of Trust, and Foreclosure Litigation, § 1.35 (4th ed. 2009); Bank of Italy Nat. Trust & Sav. Assn. v. Bentley, 217 Cal. 644, 656 (1933) (legal title under a deed of trust, though held by the trustee to the extent necessary for execution of the trust, does not carry any “incidents of ownership of the property”); 4 Harry D. Miller & Marvin B. Stan, Miller & Starr California Real Estate, § 10:1 n. 9 (3d 2010) (citing Dowarad v. Fisher & Burke, Inc., 270 Cal. App. 2d 543, 553 (1st Dist. 1969)) (mortgages and deeds of trust have the same effect and economic function and are “subject to the same procedures and limitations on judicial and nonjudicial foreclosure”).

[21] Specifically, the Court is unclear as to (1) whether the PSA intended to transfer the Loan to the trust (Was Doble’s Loan listed on the mortgage schedule?); (2) whether, if the PSA did intend to transfer the Loan to the trust, whether it made the transfer and documentation of the transfer was lost or whether the Loan was never transferred at all (Was the mortgage file conveyed to the trustee? Did the trustee certify the receipt of the mortgage file? Did the trustee attempt to exercise the Repurchase Provisions of the trust?); (3) whether, if the PSA intended to transfer the Loan, the parties failed to properly transfer it or whether the Loan was properly transferred but subsequent documentation was lost; and (4) whether, if the PSA did not intend to transfer the Loan to the trust, a subsequent transfer to the trust is valid under the terms of the PSA (Did the trustee receive an REMIC opinion? Did the trustee make other arrangements prior to the subsequent transfer to protect the trust’s REMIC status? Does a violation of the trust’s REMIC status negate the transfer or simply leave the trust vulnerable to an REMIC adverse event for purposes of the Tax Code?)

[22] New York Estate Powers and Trusts Law is not relevant here. Under section 11-1.1(a), New York Estate Powers and Trusts Law explicitly excludes business trusts. The Trust here is registered with the SEC, and the PSA provides for the issuance of certificates and the election of REMIC status with the IRS. Trusts whose shares are traded on the American Stock Exchange and that qualify as “real estate investment trusts” under the Internal Revenue Code are considered business trusts. Prudent Real Estate Trust v. Johncamp Realty, Inc., 599 F.2d 1140, 1141 (C.A.N.Y. 1979). As a business trust, New York’s Estate Powers and Trusts Law does not govern Deutsche Bank’s ownership of the Loan. Rather, the ownership issue is governed by law applicable to trusts generally. See, e.g., Fogelin v. Nordblom, 521 N.E.2d 1007, 1012 (Mass 1988); In re Great Northern Iron Ore Props., 263 N.W.2d 610 (Minn. 1978).

[23] While Doble does not limit the cause of action to just this allegation, and instead states “the actions of [Defendants] as set forth hereinabove” constitute violations of the stay, these allegations are too diffuse to address without more specificity.

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Posted in STOP FORECLOSURE FRAUDComments (5)

In re: GILBERT | NC Appeals Court Reversal “Improper Indorsement, No Evidence of Debt” JEFFREY STEPHAN AFFIDAVIT, DEUTSCHE BANK, GMAC, RESIDENTIAL FUNDING

In re: GILBERT | NC Appeals Court Reversal “Improper Indorsement, No Evidence of Debt” JEFFREY STEPHAN AFFIDAVIT, DEUTSCHE BANK, GMAC, RESIDENTIAL FUNDING


Here’s a snippet and highly recommend reading this in its entirety!

Excerpt:

The record is void of any evidence the Note was assigned and securitized to a trust.

[ipaper docId=54673705 access_key=key-1dch86ck9zy229rl5p87 height=600 width=600 /]

IN THE MATTER OF THE FORECLOSURE BY DAVID A. SIMPSON, P.C., SUBSTITUTE TRUSTEE, OF A DEED OF TRUST EXECUTED BY REX T. GILBERT, JR. AND DANIELA L. GILBERT, HUSBAND AND WIFE, DATED MAY 5, 2006 AND RECORDED ON MAY 10, 2006, IN BOOK 219 AT PAGE 53 OF THE HYDE COUNTY PUBLIC REGISTRY.

No. COA10-361.

Court of Appeals of North Carolina.

Filed May 3, 2011.

Katherine S. Parker-Lowe, for respondent-appellants.

The Law Office of John T. Benjamin, Jr., P.A., by John T. Benjamin, Jr. and James R. White for petitioner-appellee.

HUNTER, JR., Robert N., Judge.

Respondents Rex T. Gilbert, Jr. and his wife Daniela L. Gilbert, appeal from the trial court’s Order authorizing David A. Simpson, P.C., as Substitute Trustee, to proceed with foreclosure under a power of sale in the Deed of Trust recorded in Book 219 at Page 53 in the Hyde County Register of Deeds. We reverse.

I. Factual and Procedural History

On 5 May 2006, Respondent Rex T. Gilbert, Jr. executed an adjustable rate note (“the Note”) to refinance an existing mortgage on his home. According to the terms of the Note, Mr. Gilbert promised to pay a principal amount of $525,000.00 plus interest to First National Bank of Arizona. The Note was secured by a Deed of Trust, executed by Mr. Gilbert and his wife, Daniela L. Gilbert, on real property located at 134 West End Road, Ocracoke, North Carolina. The Deed of Trust identified First National Bank of Arizona as the lender and Matthew J. Ragaller of Casey, Grimsley & Ragaller, PLLC as the trustee.

The record reveals that, during 2008, Respondents ceased making payments on the Note and made an unsuccessful attempt to negotiate a modification of the loan. On 9 March 2009, a Substitution of Trustee was recorded in the Hyde County Register of Deeds, which purports to remove Matthew Ragaller as the trustee of the Deed of Trust and appoint his successor, David A. Simpson, P.C. (“Substitute Trustee”). The Substitution of Trustee identified Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 (“Petitioner”) as the holder of the Note and the lien created by the Deed of Trust.

On 12 March 2009, the Substitute Trustee commenced this action by filing a Notice of Hearing on Foreclosure of Deed of Trust with the Hyde County Clerk of Superior Court pursuant to section 45-21.16 of our General Statutes. N.C. Gen. Stat. § 45-21.16 (2009). The Notice of Hearing stated, “the current holder of the foregoing Deed of Trust, and of the debt secured thereby, is: Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6.”

In a letter dated 5 April 2009, Mr. Gilbert purported to exercise his right to rescind the loan transaction he entered into with the original lender, First National Bank of Arizona, pursuant to the federal Truth in Lending Act, 15 U.S.C. § 1635. As justification for his purported rescission, Gilbert alleged that the Truth in Lending Disclosure Statement provided by First National Bank of Arizona failed to accurately provide all required material disclosures including, inter alia, the correct annual percentage rate and payment schedule. The Substitute Trustee responded with a letter from GMAC ResCap, in which it denied any material disclosure errors were made and refused to rescind the loan transaction.

The foreclosure hearing was held on 2 June 2009 before the Clerk of Superior Court of Hyde County. The Honorable Sharon G. Sadler entered an Order on 17 June 2009, permitting the Substitute Trustee to proceed with the foreclosure. In the Order, the Clerk specifically found, inter alia, that Petitioner was the holder of the Note and Deed of Trust that it sought to foreclose and the Note evidenced a valid debt owed by Mr. Gilbert. Respondents appealed the Order to superior court.

The matter came on for a de novo hearing on 18 August 2009 before the Honorable Marvin K. Blount, III, in Hyde County Superior Court. During the hearing, the trial court admitted into evidence a certified copy of the Note and the Deed of Trust and two affidavits attesting to the validity of Gilbert’s indebtedness pursuant to the Note, and that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note. Additionally, Petitioner introduced the original Note and Allonge for the trial court’s inspection.

Reviewing the record before this Court, the Allonge contains a series of indorsements evidencing the alleged assignments of the Note, as follows:

PAY TO THE ORDER OF: First National Bank of Nevada WITHOUT RECOURSE BY: [Signature] ___________________________ AMY HAWKINS, ASSISTANT VICE PRESIDENT FIRST NATIONAL BANK OF ARIZONA Pay to the order of: RESIDENTIAL FUNDING CORPORATION Without Recourse FIRST NATIONAL BANK OF NEVADA By: [Signature] __________________________ Deutsche Bank National Trust Company, F/K/A Bankers Trust Company of California, N.A. as Custodian as Attorney in Fact [Illegible Name and Title] PAY TO THE ORDER OF Deutsche Bank Trust Company Americas as Trustee WITHOUT RECOURSE Residential Funding Corporation BY [Signature] ________________________ Judy Faber, Vice President

Respondents made two arguments at the hearing. First, Respondents argued that the debt evidenced by the Note no longer existed, as Mr. Gilbert had rescinded the transaction for the loan with First National Bank of Arizona. Petitioner objected to Respondents’ rescission argument as being a defense in equity and, as such, inadmissible in a proceeding held pursuant to N.C. Gen. Stat. § 45-21.16. The trial court agreed and refused to let Respondents’ expert witness testify as to alleged material errors in the Truth in Lending Disclosure Statement, which Mr. Gilbert alleged permitted him the right to rescind the loan. Second, Respondents argued that Petitioner had not produced sufficient evidence to establish that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 was the holder of the Note.

Based on the preceding evidence, the trial court entered an order on 18 August 2009 in which it found, inter alia: Mr. Gilbert executed the Note and, with his wife, executed a Deed of Trust in favor of First National Bank of Arizona, secured by the real property described in the Deed of Trust; a valid debt exists and is owed by Gilbert to Petitioner; Gilbert is in default under the Note and Deed of Trust; proper notice of the foreclosure hearing was given to all parties as required by N.C. Gen. Stat. § 45-21.16; Petitioner was the current holder of the Note and the Deed of Trust. The trial court concluded as a matter of law that the requirements of N.C. Gen. Stat. § 45-21.16 had been satisfied. Based on these findings and conclusion of law, the trial court authorized the Substitute Trustee to proceed with the foreclosure. Respondents timely entered notice of appeal.

II. Analysis

A party seeking permission from the clerk of court to proceed with a foreclosure pursuant to a power of sale contained in a deed of trust must prove the following statutory requirements: (1) the party seeking foreclosure is the holder of a valid debt, (2) default on the debt by the debtor, (3) the deed of trust provides the right to foreclose, (4) proper notice was given to those parties entitled to notice pursuant to section 45-21.16(b). N.C. Gen. Stat. § 45-21.16(d) (2009). The General Assembly added a fifth requirement, which expired 31 October 2010: “that the underlying mortgage debt is not a subprime loan,” or, if it is a subprime loan, “that the pre-foreclosure notice under G.S. 45-102 was provided in all material respects, and that the periods of time established by Article 11 of this Chapter have elapsed[.]” Id. The role of the clerk of court is limited to making a determination on the matters specified by section 45-21.16(d). See Mosler ex rel. Simon v. Druid Hills Land Co., Inc., 199 N.C. App. 293, 295-96, 681 S.E.2d 456, 458 (2009). If the clerk’s order is appealed to superior court, that court’s de novo hearing is limited to making a determination on the same issues as the clerk of court. See id.

The trial court’s order authorizing the foreclosure to proceed was a final judgment of the superior court, therefore, this Court has jurisdiction to hear the instant appeal. N.C. Gen. Stat. § 7A-27(b) (2009). Our standard of review for this appeal, where the trial court sat without a jury, is “`whether competent evidence exists to support the trial court’s findings of fact and whether the conclusions reached were proper in light of the findings.'” In re Adams, __ N.C. App. __, __, 693 S.E.2d 705, 708 (2010) (quoting In re Foreclosure of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 50, 535 S.E.2d 388, 392 (2000)).

We note the trial court classified multiple conclusions of law as “findings of fact.” We have previously recognized “[t]he classification of a determination as either a finding of fact or a conclusion of law is admittedly difficult.” In re Helms, 127 N.C. App. 505, 510, 491 S.E.2d 672, 675 (1997). Generally, “any determination requiring the exercise of judgment or the application of legal principles is more properly classified a conclusion of law.” Id. (citations omitted). Any determination made by “`logical reasoning from the evidentiary facts,'” however, “is more properly classified a finding of fact.” Id. (quoting Quick v. Quick, 305 N.C. 446, 452, 290 S.E.2d 653, 657-58 (1982)). When this Court determines that findings of fact and conclusions of law have been mislabeled by the trial court, we may reclassify them, where necessary, before applying our standard of review. N.C. State Bar v. Key, 189 N.C. App. 80, 88, 658 S.E.2d 493, 499 (2008) (citing In re Helms, 127 N.C. App. at 510, 491 S.E.2d at 675).

Looking to the trial court’s Order, we conclude that the following “findings of fact” are determinations that required the application of legal principles and are more appropriately classified as conclusions of law: a valid debt exists and is owed to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6; proper notice was given to and received by all parties as required by N.C. Gen. Stat. § 45-21.16 and the Rules of Civil Procedure; Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust. See In re Watts, 38 N.C. App. 90, 92, 247 S.E.2d 427, 428 (1978) (noting upon the appeal of a N.C. Gen. Stat. § 45-21.16 special proceeding the trial court’s conclusions of lawsee also Connolly v. Potts, 63 N.C. App. 547, 549, 306 S.E.2d 123, 124 (1983) (same). In light of this reclassification of the trial court’s findings of fact and conclusions of law, we turn to the issues raised on appeal. included the existence of a valid debt, the right to foreclose under the deed of trust, and proper notice to the mortgagors);

1. Rescission of the Loan Transaction

Respondents raise several arguments alleging the trial court erred by refusing to consider their defense to the foreclosure action, that the debt Petitioner sought to foreclose was not a valid debt——a required element under the statute for foreclosure by power of sale. See N.C. Gen. Stat. § 45-21.16(d)(i) (requiring, inter alia, that the clerk of court must determine that a valid debt exists). Respondents contend the debt is not valid because Mr. Gilbert rescinded the transaction by which he obtained the loan from First National Bank of Arizona pursuant to the federal Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f, and the Federal Reserve Board’s Regulation Z, 12 C.F.R. § 226.1-.58. We conclude the trial court did not err.

The admissibility of evidence in the trial court is based upon that court’s sound discretion and may be disturbed on appeal only upon a finding that the decision was based on an abuse of discretion. Gibbs v. Mayo, 162 N.C. App. 549, 561, 591 S.E.2d 905, 913 (2004). Here, we conclude the trial court properly refused to consider Respondents’ evidence of rescission. Rescission under the TILA is an equitable remedy. See Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 819 (4th Cir. 2007) (“`[A]lthough the right to rescind [under the TILA] is [statutory], it remains an equitable doctrine subject to equitable considerations.'” (quoting Brown v. Nat’l Permanent Fed. Sav. & Loan Ass’n, 683 F.2d 444, 447 (D.C. Cir. 1982)). While legal defenses to a foreclosure under a power of sale are properly raised in a hearing held pursuant to section 45-21.16, equitable defenses are not. Watts, 38 N.C. App. at 94, 247 S.E.2d at 429. As we have previously stated, a hearing under section 45-21.16 is “not intended to settle all matters in controversy between mortgagor and mortgagee, nor was it designed to provide a second procedure for invoking equitable relief.” Id. A party seeking to raise an equitable defense may do so in a separate civil action brought in superior court under section 45-21.34. Id.; N.C. Gen. Stat. § 45-21.34 (2009) (stating that a party with a legal or equitable interest in the subject property may apply to a superior court judge to enjoin a sale of the property upon legal or equitable grounds). Accordingly, the trial court properly concluded Respondents’ argument that Mr. Gilbert had rescinded the loan transaction, invaliding the debt Petitioner sought to foreclose, was an equitable defense and not properly before the trial court. Respondents’ argument is without merit.[1]

2. Evidence that Petitioner was the Owner and Holder of Mr. Gilbert’s Promissory Note

Respondents also argue the trial court erred in ordering the foreclosure to proceed, as Petitioner did not prove that it was the holder of the Note with the right to foreclose under the instrument as required by section 45-21.16(d)(i) and (iii). We agree.

A “foreclosure under a power of sale is not favored in the law and its exercise will be watched with jealousy.” In re Foreclosure of Goforth Props., Inc., 334 N.C. 369, 375, 432 S.E.2d 855, 859 (1993) (citations and internal quotation marks omitted). That the party seeking to foreclose on a promissory note is the holder of said note is an essential element of the action and the debtor is “entitled to demand strict proof of this element.” Liles v. Myers, 38 N.C. App. 525, 528, 248 S.E.2d 385, 388 (1978).

For the trial court to find sufficient evidence that Petitioner is the holder of a valid debt in accordance with section 45-21.16(d), “this Court has determined that the following two questions must be answered in the affirmative: (1) `is there sufficient competent evidence of a valid debt?'; and (2) `is there sufficient competent evidence that [the party seeking to foreclose is] the holder[ ] of the notes [that evidence that debt]?'” Adams, __ N.C. App. at __, 693 S.E.2d at 709 (quoting In re Cooke, 37 N.C. App. 575, 579, 246 S.E.2d 801, 804—05 (1978)); see N.C. Gen. Stat. § 45-21.16(d) (2009) (in order for the foreclosure to proceed, the clerk of court must find, inter alia, the existence of a “valid debt of which the party seeking to foreclose is the holder,” and a “right to foreclose under the instrument” securing the debt) (emphasis added).

Establishing that a party is the holder of the note is essential to protect the debtor from the threat of multiple judgments on the same note.

If such proof were not required, the plaintiff could negotiate the instrument to a third party who would become a holder in due course, bring a suit upon the note in her own name and obtain a judgment in her favor. . . . Requiring proof that the plaintiff is the holder of the note at the time of her suit reduces the possibility of such an inequitable occurrence.

Liles, 38 N.C. App. at 527, 248 S.E.2d at 387.

We have previously determined that the definition of “holder” under the Uniform Commercial Code (“UCC”), as adopted by North Carolina, controls the meaning of the term as it used in section 45-21.16 of our General Statutes for foreclosure actions under a power of sale. See Connolly, 63 N.C. App. at 550, 306 S.E.2d at 125; Adams, __ N.C. App. at __, 693 S.E.2d at 709. Our General Statutes define the “holder” of an instrument as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” N.C. Gen. Stat. § 25-1-201(b)(21) (2009); Econo-Travel Motor Hotel Corp. v. Taylor, 301 N.C. 200, 203, 271 S.E.2d 54, 57 (1980). Furthermore, a “`[p]erson’ means an individual, corporation, business trust, estate, trust . . . or any other legal or commercial entity.” N.C. Gen. Stat. § 25-1-201(b)(27) (2009).

As addressed above, we conclude the trial court properly found that a valid debt existed. The remaining issue before this Court is whether there was competent evidence that Petitioner was the holder of the Note that evidences Mr. Gilbert’s debt.

In support of its argument that it provided competent evidence to support the trial court’s findings, Petitioner first points to its production of the original Note with the Allonge at the de novo hearing, as well as its introduction into evidence true and accurate copies of the Note and Allonge. Petitioner asserts this evidence “plainly evidences the transfers” of the Note to Petitioner. We cannot agree.

Under the UCC, as adopted by North Carolina, “[a]n instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.” N.C. Gen. Stat. § 25-3-203(a) (2009). Production of an original note at trial does not, in itself, establish that the note was transferred to the party presenting the note with the purpose of giving that party the right to enforce the instrument, as demonstrated in Connolly, 63 N.C. App. at 551, 306 S.E.2d at 125, and Smathers v. Smathers, 34 N.C. App. 724, 726, 239 S.E.2d 637, 638 (1977) (holding that despite evidence of voluntary transfer of promissory notes and the plaintiff’s possession thereof, the plaintiff was not the holder of the note under the UCC as the notes were not drawn, issued, or indorsed to her, to bearer, or in blank. “[T]he plaintiff testified to some of the circumstances under which she obtained possession of the notes, but the trial court made no findings of fact with respect thereto.”)

In Connolly, determining who had possession of the note became the critical question for the foreclosure proceeding. 63 N.C. App. at 551, 306 S.E.2d at 125. Several years prior to the foreclosure proceedings at issue in Connolly, the petitioners obtained a loan from a bank and pledged as collateral a promissory note that was payable to the petitioners by assigning and delivering the note to the bank. Id. at 549, 306 S.E.2d at 124. After obtaining their loan, the petitioners sought to foreclose on the promissory note and deed of trust, which was in the bank’s possession, but were denied at the special proceeding before the clerk of court. Id. at 548, 306 S.E.2d at 124. The petitioners appealed the decision to superior court. Id. During the de novo hearing, the petitioners testified their loan to the bank had been paid, but “they had left the [] note at the bank, for security purposes.” Id. at 551, 306 S.E.2d at 125. The petitioners, however, “introduced the originals of the note and deed of trust” during the hearing. Id. The trial court found the bank was in possession of the note and concluded, as a matter of law, the petitioners were not the holders of the note at the institution of the foreclosure proceedings; the foreclosure was again denied. Connolly, 63 N.C. App. at 550, 306 S.E.2d at 124-25. On appeal, this Court concluded that despite the fact that the party seeking foreclosure introduced the original note at the time of the de novo hearing, the trial court’s findings of fact did not address whether the petitioners were in possession of the note at the time of the trial; the trial court’s judgment was vacated and remanded. Id. at 551, 306 S.E.2d at 125-26.

Similarly, here, the trial court’s findings of fact do not address who had possession of Mr. Gilbert’s note at the time of the de novo hearing. Without a determination of who has physical possession of the Note, the trial court cannot determine, under the UCC, the entity that is the holder of the Note. See N.C. Gen. Stat. § 25-1-201(b)(21) (defining “holder” as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession“) (emphasis added); Connolly, 63 N.C. App. at 550, 306 S.E.2d at 125 (“It is the fact of possession which is significant in determining whether a person is a holder, and the absence of possession defeats that status.“) (emphasis added). Accordingly, the trial court’s findings of fact do not support the conclusion of law that Petitioner is the holder of Mr. Gilbert’s note.

Assuming arguendo that production of the Note was evidence of a transfer of the Note pursuant to the UCC and that Petitioner was in possession of the Note, this is not sufficient evidence that Petitioner is the “holder” of the Note. As discussed in detail below, the Note was not indorsed to Petitioner or to bearer, a prerequisite to confer upon Petitioner the status of holder under the UCC. See N.C. Gen. Stat. § 25-1-201(b)(21) (requiring that, to be a holder, a person must be in possession of the note payable to bearer or to the person in possession of the note). “`[M]ere possession’ of a note by a party to whom the note has neither been indorsed nor made payable `does not suffice to prove ownership or holder status.'” Adams, __ N.C. App. at __, 693 S.E.2d at 710 (quoting Econo-Travel Motor Hotel Corp., 301 N.C. at 203, 271 S.E.2d at 57).

Petitioner acknowledges that following the signing of the Note by Mr. Gilbert, the Note was sequentially assigned to several entities, as indicated by the series of indorsements on the Allonge, reprinted above. Respondents argue these indorsements present two problems. First, Respondents state that Petitioner did not provide any evidence to establish that Deutsche Bank National Trust Company had the authority, as the attorney-in-fact for First National Bank of Nevada, to assign the Note to Residential Funding Corporation in the second assignment. Respondents make no argument——and cite no authority to establish——that such evidence is needed. Therefore, we do not address the merits of this alleged error and deem it abandoned. See N.C. R. App. P. 28(6) (2011) (“Issues not presented in a party’s brief, or in support of which no reason or argument is stated, will be taken as abandoned.”)

Second, Respondents argue Petitioner has not offered sufficient evidence that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 was the holder of the Note and, thus, the party entitled to proceed with the foreclosure action. We agree.

Respondents note the third and final assignment on the Allonge was made to “Deutsche Bank Trust Company Americas as Trustee,” which is not the party asserting a security interest in Respondents’ property; this action was brought by Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6, the entity the trial court found to be the owner and holder of the Note. Section 3-110 of the UCC, as codified in our General Statutes, states in pertinent part:

For the purpose of determining the holder of an instrument, the following rules apply:

. . . .

(2) If an instrument is payable to (i) a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named . . . .

N.C. Gen. Stat. § 25-3-110(c) (2009) (emphasis added). Additionally, the official comments to this section of the UCC state, in part, “This provision merely determines who can deal with an instrument as a holder. It does not determine ownership of the instrument or its proceeds.” Id. § 25-3-110, Official Comment 3.

In the present case, the Note is clearly indorsed “PAY TO THE ORDER OF Deutsche Bank Trust Company Americas as Trustee.” Thus, pursuant to section 25-3-110(c)(2), the Note is payable to Deutsche Bank Trust Company Americas as Trustee. See Id. Because the indorsement does not identify Petitioner and is not indorsed in blank or to bearer, it cannot be competent evidence that Petitioner is the holder of the Note. See N.C. Gen. Stat. § 25-1-201(b)(21) (defining “holder” as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession“); Econo-Travel Motor Hotel Corp., 301 N.C. at 204, 271 S.E.2d at 57 (concluding that where the defendants produced a copy of the note indorsed to an entity other than the plaintiff, the “defendants established that plaintiff was not the owner or holder of the note”).

In addition to the Note and Allonge, Petitioner points to two affidavits provided by two GMAC Mortgage employees as further evidence that the trial court’s findings are based on sufficient competent evidence. Again, we disagree.

The first affidavit is an Affidavit of Indebtedness by Jeffrey Stephan (“Stephan”).[2] In his affidavit, Stephan averred, inter alia, he was a limited signing officer for GMAC Mortgage, the sub-servicer of Mr. Gilbert’s loan, and as such, was “familiar with the books and records of [GMAC Mortgage], specifically payments made pursuant to the Note and Deed of Trust.” Accordingly, Stephan testified as to the principal amount of Mr. Gilbert’s loan and to his history of loan payments. Stephan further testified that after the Note and Deed of Trust were executed they were “delivered” to the original lender, First National Bank of Arizona; the original lender then “assigned and transferred all of its right, title and interest” to First National Bank of Nevada, which, in turn, assigned all its rights, title, and interest in the instruments to Residential Funding Corporation. The final assignment to which Stephan averred is an assignment and securitization of the Note and Deed of Trust from Residential Funding Corporation to “Deutsche Bank Trust Company Americas as Trustee.” Stephan then makes the conclusory statement, “Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust described herein.”

Whether Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of the Note and Deed of Trust is a legal conclusion that is to be determined by a court of law on the basis of factual allegations. As such, we disregard Stephan’s conclusion as to the identity of the “owner and holder” of the instruments. See Lemon v. Combs, 164 N.C. App. 615, 622, 596 S.E.2d 344, 349 (2004) (“`Statements in affidavits as to opinion, belief, or conclusions of law are of no effect.'” (quoting 3 Am. Jur. 2d, Affidavits § 13 (2002))); see also Speedway Motorsports Int’l Ltd. v. Bronwen Energy Trading, Ltd., __ N.C. App. __, __ n.2, __ S.E.2d __, __ n.2, slip op. at 12 n.2, No. 09-1451 (Feb. 15, 2011) (rejecting a party’s contention that this Court must accept as true all statements found in the affidavits in the record, stating, “our standard of review does not require that we accept a witness’ characterization of what `the facts’ mean”). While Stephan referred to a Pooling and Servicing Agreement (“PSA”) that allegedly governs the securitization of the Note to Deutsche Bank Trust Company Americas as Trustee, the PSA was not included in the record and will not be considered by this Court. See N.C. R. App. P. 9(a) (2011) (“In appeals from the trial division of the General Court of Justice, review is solely upon the record on appeal, the verbatim transcript of proceedings, if one is designated, and any other items filed pursuant to this Rule 9.”) The record is void of any evidence the Note was assigned and securitized to a trust.

We also note that Stephan alleged no facts as to who possesses Mr. Gilbert’s note, other than his averment that the Note was “delivered” to the original lender, First National Bank of Arizona. Stephan referred to a statement made by counsel for GMAC Mortgage that the original Note “would be brought to the foreclosure hearing,” but he did not provide any facts from which the trial court could determine who has possession of the Note. As demonstrated by Connolly,63 N.C. App. at 551, 306 S.E.2d at 125. Thus, we conclude Stephan’s affidavit is not competent evidence to support the trial court’s conclusion that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of Mr. Gilbert’s note. discussed above, production of a note at trial is not conclusive evidence of possession.

Petitioner also provided the affidavit of Scott Zeitz (“Zeitz”), who alleged in his affidavit to be a litigation analyst for GMAC Mortgage. Zeitz’s basis for his affidavit testimony is that he works with “the documents that relate to account histories and account balances of particular loans” and that he is familiar with Mr. Gilbert’s account. Accordingly, Zeitz testified to the details of Mr. Gilbert’s loan and the terms of the Note. Zeitz’s affidavit, substantially similar to the affidavit of Jeffrey Stephan, also averred to the transfer of the Note and Deed of Trust through the series of entities indicated on the Allonge, stating in part:

Residential Funding Corporation sold, assigned and transferred all of its right, title and interest in and to the Note and Deed of Trust to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6. This is reflected on the Allonge to the Note, a true and accurate copy of which is attached and incorporated hereto as EXHIBIT 5. (Emphasis added.)

This statement is factually incorrect; the Allonge in the record contains no indorsement to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6. Zeitz further stated that “Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust.” This statement is a legal conclusion postured as an allegation of fact and as such will not be considered by this Court. See Lemon, 164 N.C. App. at 622, 596 S.E.2d at 349.

Unlike Jeffrey Stephan, Zeitz stated that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 “has possession of the original Note and Deed of Trust.” We note, however, that “[w]hen an affiant makes a conclusion of fact, it must appear that the affiant had an opportunity to observe and did observe matters about which he or she testifies.” Lemon, 164 N.C. App. at 622, 596 S.E.2d at 348-49 (quoting 3 Am. Jur. 2d Affidavits § 13) (internal quotation marks omitted). Moreover,

[t]he personal knowledge of facts asserted in an affidavit is not presumed from a mere positive averment of facts but rather the court should be shown how the affiant knew or could have known such facts and if there is no evidence from which an inference of personal knowledge can be drawn, then it is presumed that such does not exist.

Id. at 622-23, 596 S.E.2d at 349 (quoting 3 Am. Jur. 2d Affidavits § 14, cited with approval in Currituck Associates Residential P’ship v. Hollowell, 170 N.C. App. 399, 403-04, 612 S.E.2d 386, 389 (2005)). Thus, while Zeitz concluded as fact that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 has possession of the Note, his affidavit provides no basis upon which we can conclude he had personal knowledge of this alleged fact. Because of these deficiencies, we conclude that neither the affidavit of Jeffrey Stephan nor the affidavit of Scott Zeitz is competent evidence to support the trial court’s finding that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of Mr. Gilbert’s note.

III. Conclusion

We conclude the record is lacking of competent evidence sufficient to support that Petitioner is the owner and holder of Mr. Gilbert’s note and deed of trust. The trial court erred in permitting the Substitute Trustee to proceed with foreclosure proceedings and its order is

Reversed.

Judges MCGEE and BEASLEY concur.

[1] During the pendency of this action, the Gilberts filed a separate action against Deutsche Bank Trust Company Americas, Residential Funding, LLC, GMAC Mortgage, LLC, and David A. Simpson, P.C. to litigate, inter alia, their TILA claim in Hyde County Superior Court. The defendants removed the action to federal court. See Gilbert v. Deutsche Bank Trust Co. Americas, slip op. at 1, 4:09-CV-181-D, 2010 WL 2696763 (E.D.N.C. July 7, 2010), reconsideration denied, 2010 WL 4320460 (E.D.N.C. Oct. 19, 2010). Because the Gilberts’ claim was filed more than three years after the loan transaction was completed, the federal trial court dismissed the action for failure to state a claim upon which relief could be granted. Id. at __, slip op. at 5.

[2] This Court finds troubling that GMAC Mortgage, LLC was recently found to have submitted a false affidavit by Signing Officer Jeffrey Stephan in a motion for summary judgment against a mortgagor in the United States District Court of Maine. Judge John H. Rich, III concluded that GMAC Mortgage submitted Stephan’s false affidavit in bad faith and levied sanctions against GMAC Mortgage, stating:

[T]he attestation to the Stephan affidavit was not, in fact, true; that is, Stephan did not know personally that all of the facts stated in the affidavit were true. . . . GMAC [Mortgage] was on notice that the conduct at issue here was unacceptable to the courts, which rely on sworn affidavits as admissible evidence in connection with motions for summary judgment. In 2006, an identical jurat signed under identical circumstances resulted in the imposition of sanctions against GMAC [Mortgage] in Florida. James v. U.S. Bank Nat. Ass’n, 272 F.R.D. 47, 48 (D. Me. 2011).

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Posted in STOP FORECLOSURE FRAUDComments (2)

[VIDEO] NH Supreme Court Oral Argument of DEUTSCHE BANK v. KEVLIK

[VIDEO] NH Supreme Court Oral Argument of DEUTSCHE BANK v. KEVLIK


Via: Mike Dillon

Excerpt:

Judge: I went through the material that you attached and I was very confused about IndyMac’s role and how we ended up with a foreclosure deed that didn’t reflect IndyMac’s role…can you explain?

Attorney Sheridan for the Kevlik’s  replies… There’s nothing in the record that explains MERS’ role! […] No power to assign… What happened to OneWest bank???

Go on to the link to video below…

  • 2010-0249

[View Video/Audio]

Deutsche Bank National Trust Co.
OM
(John T. Precobb)
(15 min.)
v. James Kevlik & a.
William C. Sheridan
(15 min.)

After you watch the video come back and read…

New Hampshire Supreme Court Reversal “Plaintiff has not carried its burden to show ownership of the property” DEUTSCHE BANK v. KEVLIK

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUDComments (0)

New Hampshire Supreme Court Reversal “Plaintiff has not carried its burden to show ownership of the property” DEUTSCHE BANK v. KEVLIK

New Hampshire Supreme Court Reversal “Plaintiff has not carried its burden to show ownership of the property” DEUTSCHE BANK v. KEVLIK


DEUTSCHE BANK NATIONAL TRUST COMPANY

v.

JAMES KEVLIK & a.

No. 2010-249.

Supreme Court of New Hampshire.

Argued: February 17, 2011.

Opinion Issued: April 28, 2011.

Orlans Moran, PLLC, of Boston, Massachusetts (John T. Precobb on the brief and orally), for the plaintiff.

William C. Sheridan, of Londonderry, on the brief and orally, for the defendants.

CONBOY, J.

The defendants, James Kevlik, Catherine Kevlik, and Patricia Durgin, appeal an order of the Derry District Court (Coughlin, J.) denying their motion to dismiss and granting judgment to the plaintiff, Deutsche Bank National Trust Company, in its action for possession of real estate located in Chester. See RSA 540:12 (2007). We reverse.

The following facts are supported by the record or are undisputed. Through its attorney, the plaintiff filed a landlord and tenant writ, alleging that: (1) the plaintiff was entitled to possession of the property; (2) the defendants had been provided with an eviction notice; and (3) the defendants had refused to deliver the property. In the eviction notice, attached to its writ, the plaintiff alleged that it was the current owner of the property “as a result of the foreclosure of a [m]ortgage, which foreclosure sale was held at the [p]roperty on June 12, 2009.” On the day of the merits hearing, the defendants filed a motion to dismiss asserting that a foreclosure sale had never taken place.

At the merits hearing, the Kevliks appeared without counsel. Defendant Durgin did not appear. The plaintiff’s attorney appeared without his client and proffered copies of the landlord and tenant writ with an “affidavit of ownership,” a foreclosure deed with an attached statutory affidavit, and a mortgage assignment, all of which the trial court allowed into evidence over the defendants’ objection. The assignment, dated on January 25, 2009, indicates a transfer of a mortgage executed by defendant Patricia Durgin from Mortgage Electronic Registration Systems, Inc. (as nominee of SouthStar Funding, LLC) to IndyMac Bank F.S.B. The July 20, 2009 foreclosure deed purports to describe a sale of the property from One West Bank, F.S.B., to the plaintiff at a June 12, 2009 foreclosure auction.

At the hearing, the plaintiff’s attorney admitted that the foreclosure and assignment documents were not certified and that he could not attest to their authenticity. Plaintiff’s attorney acknowledged that his firm had not handled the foreclosure sale and that he did not know what the mortgage payments had been. Until the hearing, he was not aware that the Kevliks were related to Patricia Durgin, the mortgagor, and did not know what, if any, rental agreement they had. When asked by the trial court to name a reasonable rent for the property, plaintiff’s attorney suggested five hundred dollars per month. When questioned further on that point by the trial court, he admitted he was “not from this area.”

The Kevliks argued that they had videotape evidence that no foreclosure sale had occurred. The trial court, however, refused to consider this evidence, characterizing the defendants’ argument as contesting title to the property. The trial court told the Kevliks that they would have to pay “recognizance” to the plaintiff of $348.84 per week pending their entry of an action in superior court.

The Kevliks told the trial court they did not wish to pursue the matter in superior court, but requested a continuance in order to consult with counsel. Plaintiff’s attorney did not oppose this request, stating that, “in the interest of fairness, they should have an attorney here.” However, the trial court denied the motion to continue as well as the motion to dismiss, and took the matter under advisement. Subsequently, the trial court ordered judgment in favor of the plaintiff. In its order, the trial court also stated that, “One week after the [h]earing on the [m]erits . . .[,] the tenants paid $348.84 into the Court and the Court accepted the payment. However, the Court accepted said payment with regards to an appeal to the New Hampshire Supreme Court regarding the Landlord/Tenant action and not a plea of title transfer to the Superior Court.”

The defendants moved for reconsideration, again asserting that a foreclosure sale had not, in fact, taken place. They explained that the auctioneer arrived thirty minutes late for the scheduled sale, sat in his car for five minutes, and then drove away. No buyer or anyone else appeared. The defendants argued that the plaintiff could not have purchased the mortgage at the foreclosure sale and therefore did not have standing to evict the defendants. The court denied this motion.

On appeal, the defendants argue that the plaintiff failed to carry its burden of demonstrating that it was the owner of the property, and, thus, the plaintiff is not entitled to judgment. Specifically, the defendants maintain that the documents submitted by the plaintiff’s attorney were insufficient to establish ownership because the evidence was based on “incompetent and unauthenticated hearsay.” Further, the defendants assert, the trial court should have permitted them to challenge the plaintiff’s “offer[s] of proof.”

The issue before us presents a question of statutory interpretation. We are the final arbiter of the intent of the legislature as expressed in the words of the statute considered as a whole. Kenison v. Dubois, 152 N.H. 448, 451 (2005). We first examine the language of the statute, and, where possible, we ascribe the plain and ordinary meanings to the words used. Id. We review the trial court’s interpretation of a statute de novo. Id.

RSA 540:17 (2007) provides:

If the defendant shall plead a plea which may bring in question the title to the demanded premises he shall forthwith recognize to the plaintiff, with sufficient sureties, in such sum as the court shall order, to enter his action in the superior court for the county at the next return day, and to prosecute his action in said court, and to pay all rent then due or which shall become due pending the action, and the damages and costs which may be awarded against him.

Although the statute requires title issues to be resolved in superior court, it does not relieve a possessory plaintiff of the obligation to establish ownership of the subject property. Possessory actions are authorized by RSA 540:12, which provides that, “[t]he owner, lessor, or purchaser at a mortgage foreclosure sale of any [property] may recover possession thereof from a lessee, occupant, mortgagor, or other person in possession . . . after notice in writing to quit the same . . . .” In Liam Hooksett, LLC v. Boynton, 157 N.H. 625 (2008), we addressed the required ownership element of a possessory action brought pursuant to RSA 540:12. In that case, the defendants asserted that an individual other than the plaintiff actually owned the property. Liam Hooksett, 157 N.H. at 627. At the hearing, the plaintiff’s manager appeared on its behalf, but she did not testify that the plaintiff was the owner of the property. Id. at 628. Rather, she presented to the court an “Affidavit of Ownership/Tenancy” that purported to “certify” that the plaintiff was the owner, but the document was not notarized, signed under oath, or admitted into evidence. Id. On that record, we agreed that the plaintiff had not carried its burden to demonstrate that it was the actual owner of the property. Id. “The plaintiff filed a writ seeking possession of the property. Thus, to prevail in this action, the plaintiff was required to prove that it was the `owner, lessor, or purchaser at a mortgage foreclosure sale’ of the property.” Id. The same is true here.

Here, the plaintiff’s attorney presented, as proof of ownership, uncertified copies of a foreclosure deed and affidavit and a mortgage assignment. He did not, however, have first-hand knowledge as to the authenticity of the documents and presented no other proof of their authenticity. The rules of evidence provide that a copy of a public record is admissible only when it is either: (1) certified as correct by a custodian or other authorized person; or (2) accompanied by the testimony of a witness who has compared it to the original and found it to be correct. See N.H. R. Ev. 902(4), 1005. Because the plaintiff satisfied neither requirement, the trial court erred in admitting and relying upon these documents.

Plaintiff’s attorney also submitted a copy of the landlord and tenant writ and attachments, including an “affidavit of ownership.” This “affidavit” stated that plaintiff’s attorney was “certifying” that the plaintiff was the owner of the subject property, but the purported affidavit was not notarized or signed under oath. Further, the initials next to the name on the signature line indicate that it was actually signed by another individual, “C.M.S.” Thus, it was error for the trial court to admit and rely on that document. See Liam Hooksett, 157 N.H. at 628.

On this record, we conclude that the plaintiff has not carried its burden to show ownership of the property. Accordingly, we reverse the trial court’s decision to grant judgment to the plaintiff.

We note the limited nature of our holdings herein. Had the plaintiff proffered authenticated documents, with supporting testimony if necessary, regarding the foreclosure sale, or other proof of its ownership of the property, the trial court could have properly ruled on the issue of the plaintiff’s entitlement to possession because the defendants stated they did not wish to file a title action in superior court. The defendants would not have been able to pursue their challenge to the plaintiff’s title in the district court. See Bank of N.Y. Mellon v. Cataldo, 161 N.H. 135 (2010).

Reversed.

DALIANIS, C.J., and DUGGAN, HICKS and LYNN, JJ., concurred.

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IN RE: TIFFANY M. KRITHARAKIS | US Bankruptcy Trustee Slams Deutsche Bank and their “Retroactive” Assignments of Mortgage

IN RE: TIFFANY M. KRITHARAKIS | US Bankruptcy Trustee Slams Deutsche Bank and their “Retroactive” Assignments of Mortgage


UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
BRIDGEPORT DIVISION

In re
TIFFANY M. KRITHARAKIS,
Debtor.

UNITED STATES TRUSTEE’S MOTION FOR RULE 2004 EXAMINATION OF
REPRESENTATIVE(S) OF DEUTSCHE BANK NATIONAL TRUST COMPANY, AS
TRUSTEE FOR SOUNDVIEW HOME LOAN TRUST 2005-OPTI,
ASSET BACKED CERTIFICATES, SERIES 2005-OPTI

EXCERPT:

21. Also annexed to the Amended Proof of Claim is a copy of the Sand Canyon AOM whereby Sand Canyon Corporation f/k/a Option One Mortgage Corporation assigned its rights to the Mortgage to Deutsche. See Amended POC at Part 8. The Sand Canyon AOM is dated June 11, 2010 but has an effective date of assignment of May 1, 2005. Id. The Sand Canyon AOM is signed by Rhonda Werdel (“Werdel”) as Assistant Secretary of Sand Canyon Corporation FKA Option One Mortgage Corporation. Id. The May 1, 2005 effective date contained in the Sand Canyon AOM conflicts with the January 19, 2005 dated contained in the Option One Allonge. See Amended POC at Part 5 and Part 8.

22. On information and belief, American Home Mortgage Servicing, Inc. purchased the mortgage servicing rights of Sand Canyon in April 2008. See Declaration of Dale M. Sugimoto, As President of Sand Canyon Corporation, dated March 18, 2009, doc id # 141 in In re Ron Wilson, Sr. and LaRhonda Wilson, 07-11862 (EWM), United States Bankruptcy Court for the Eastern District of Louisiana attached here to as Exhibit 3 (“March 2009 Sugimoto Declaration”). According to the March 2009 Sugimoto Declaration, Sand Canyon does not own any mortgage servicing rights or any residential real estate mortgages. See Exhibit 3 at ¶ ¶ 5, 6. As such, it appears that the Sand Canyon AOM executed in June 2010 may be deficient because Sand Canyon did not own any mortgages in 2010.

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