DEPOSITION OF NOTARY SHANNON SMITH OF THIS CASE

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MORE ON THIS CASE & FIRM BELOW

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Take Two: *New* Full Deposition of Law Office of David J. Stern’s Cheryl Samons

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Law Offices of David J. Stern, MERS | Assignment of Mortgage NOT EXECUTED but RECORDED

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Cheryl Samons | No Signature, No Notary, 1 Witness…No Problem!

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STERN’S CHERYL SAMONS| SHANNON SMITH Assignment Of Mortgage| NOTARY FRAUD!

In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. GRG [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]

Just in yesterday’s post we were puzzled about how exactly JPMC is foreclosing on WAMU loans without finalizing the deal. This case is a perfect example.

2010 NY Slip Op 32126(U)

23 EAST 39th STREET DEVELOPERS LLC, FARZANEH YEROUSHALMI, and BEHROUZ BENYAMINPOUR, Plaintiffs,
v.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as successor to WASHINGTON MUTUAL BANK, ALLEN GUTTERMAN, 23 EAST 39th STREET MANAGEMENT CORP. JOSEPH J. BLAKE & ASSOCIATES, INC., MARIE RIOS, “JOHN DOE,” “ROBERT DOE” and “JANE DOE NO. 1 to 50,” the last being fictitious names, Defendants.

603703/09, Motion seq. No 001.

Supreme Court, New York County.

July 30, 2010

DECISION/ORDER

MARCY S. FRIEDMAN, Judge.

This action arises out of plaintiffs’ purchase of a $10.4 million townhouse located at 23 East 39th Street in Manhattan. Plaintiffs sue for rescission of the purchase and mortgage agreements based on fraud and misrepresentation of the value of the property. By separate motions, JPMorgan Chase Bank, National Association, as successor to Washington Mutual Bank (“Chase”) and Joseph J. Blake & Associates (“J.J. Blake”) move, pursuant to CPLR 3211(a)(1) and (7), to dismiss the complaint based on documentary evidence and for failure to state a cause of action.^[1]

The relevant facts are as follows: Plaintiffs purchased the townhouse pursuant to a five-year “lease back” agreement in which the sellers of the property agreed to rent the space from plaintiffs for $700,000 annually with an option to terminate after one year. Although the $7.25 million mortgage on the property was issued by Washington Mutual Bank (“Wamu”), Chase acquired the mortgage from the FDIC after the FDIC took over Wamu in late 2008. JJ. Blake prepared an appraisal of the property for Wamu. Within a few months after plaintiffs closed title, the sellers ceased paying rent to plaintiffs. Plaintiffs then defaulted on the mortgage and Chase commenced an action to foreclose on the property entitled JPMorgan Chase Bank, N.A. v 23 E. 39th St. Devs. LLC, et. al., (Sup Ct, New York County, Index No. 104639/09). By order in the foreclosure action dated February 11, 2010, this court granted Chase’s motion for summary judgment to foreclose, issued an order of reference to compute, and appointed a receiver to manage the property.

It is well settled that on a motion to dismiss addressed to the face of the pleading, “the pleading is to be afforded a liberal construction (see, CPLR 3026). Wc accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.” (Leon v Martinez, 84 NY2d 83. 87-88 [1994]. See 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144 [2002].) However, “the court is not required to accept factual allegations that are plainly contradicted by the documentary evidence or legal conclusions that are unsupportable based upon the undisputed facts.” (Robinson v Robinson, 303 AD2d 234, 235 [1st Dept 2003]. See also Water St. Leasehold LLC v Deloitte & Touche LLP, 19 AD3d 183 [1st Dept 2005], lv denied 6 NY3d 706 [2006].) When documentary evidence under CPLR 3211 (a)(1) is considered, “a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law.” (Leon v Martinez, 84 NY2d at 88; Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & Steiner, L.L.P., 96 NY2d 300 [2001].)

In order to plead a claim for fraud, plaintiff must allege “a material misstatement, known by the perpetrator to be false, made with an intent to deceive, upon which the plaintiff reasonably relies and as a result of which he sustains damages.” (Megaris Furs. Inc. v Gimbel Bros., Inc., 172 AD2d 209, 213 [1st Dept 1991] [emphasis omitted].) Moreover, “each element must be pleaded with particularity” and “the circumstances constituting the wrong shall be stated in detail.” (LaSalle Nat. Bank v Ernst & Young L.L.P., 285 AD2d 101, 109 [1st Dept 2001] [internal citation omitted]; CPLR 3016[b].) A cause of action seeking rescission based on fraud must be plead “with the specificity required by CPLR 3016(b)” (Accurate Copy Serv. of Am. v Fisk Bldg. Assocs. L.L.C., 72 AD3d 456 [1st Dept 2010]), and “is to be invoked only when there is lacking complete and adequate remedy at law.” Rudman v Cowels Communications. Inc., 30 NY2d 1, 13 [1972].)

Plaintiffs’ sole cause of action against Chase is to rescind the mortgage, mortgage note, and guarantee “[d]ue to the inflated appraised value and/or the 5-year lease.” (Ps.’ Amended Compl., Fourth Cause of Action, ¶ 61 [Ex. 3 to Supp. Aff. of Joseph Muccia].) However, plaintiffs fail to allege with any particularity that Chase engaged in any fraudulent acts that would provide a basis for rescission of the mortgage. Further, plaintiffs do not claim that, when Wamu issued the mortgage to them, Wamu (as opposed to the seller) made misrepresentations on which they relied that would constitute a fraud. Even if plaintiffs adequately plead a cause of action that would permit them to rescind the mortgage agreement, the specific language of the Purchase and Assumption Agreement between the FDIC and Chase states that Chase specifically does not assume “any liability associated with borrower claims for payment of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower . . ., related in any way to any loan or commitment to lend made by [Wamu] prior to failure . . ., or otherwise arising in connection with [Wamu’s] lending or loan purchase activities.” (Muccia Aff., Ex. ¶ 2.5.) Thus, pursuant to the express terms of the Purchase and Assumption Agreement, any potential liability by Wamu to plaintiffs was not transferred to Chase. (See Cassesc v Washington Mut., Inc., 2008 WL 7022845, *3 [ED NY 2008].) Accordingly, plaintiffs’ fourth cause of action will be dismissed.

Plaintiffs’ sole cause of action against J.J. Blake appears to allege fraudulent misrepresentation. Specifically, plaintiffs claim that JJBlake “inflated the value of the property so WAMU will underwrite the Mortgage,” “exaggerated the square footage of the Property,” and “knew that there was no 5-year lease with one-year option to renew.” (Ps.’ Amended Compl., Fifth Cause of Action, ¶¶ 38a, 38f, 38g.) Plaintiffs fail, however, to allege any facts demonstrating that they relied on any of the alleged misrepresentations in the appraisal when they purchased the property. Moreover, J.J. Blake conclusively shows, based on the affidavit of plaintiff Behrouz Benyaminpour, that plaintiffs did not receive the appraisal until after they closed on the property. (Aff. of Jonathan Bruno, Ex. H., ¶ 26.) Contrary to plaintiffs’ apparent suggestion, this large-scale commercial transaction docs not implicate a consumer fraud. Plaintiffs’ fifth cause of action against J.J. Blake will accordingly be dismissed.

In light of plaintiffs’ complete failure to set forth any misrepresentations to them by Chase or J.J. Blake, or otherwise to adequately plead causes of action against Chase and J.J. Blake, plaintiffs’ claimed need for discovery is not a basis for denying the instant motions.

It is hereby ORDERED that the motions of JPMorgan Chase Bank, National Association, as successor to Washington Mutual Bank, and Joseph J. Blake & Associates to dismiss the complaint is granted to the extent of dismissing the complaint as against them; and it is further

ORDERED that the remaining claims are severed and shall continue; and it is further

ORDERED that the remaining parties are directed to appear in Part 57 (60 Centre Street, Room 335) for a preliminary conference on Thursday, September 30, 2010, at 11:00 a.m.

This constitutes the decision and order of the court.

[1] Although Chase moved to dismiss plaintiffs’ original complaint (Chase’s Motion, Ex. A), in its supplemental reply, Chase addresses the allegations in plaintiffs’ amended complaint (Supp. Aff. of Joseph Muccia, ¶ 3). Accordingly, the court will consider Chase’s motion as to plaintiffs’ amended complaint. (Sec Sage Realty Corp. v Proskauer Rose LLP, 251 AD2d 35, 38 [1st Dept 1998].)

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. v. SAUNDERS

2010 ME 79

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
v.
JON E. SAUNDERS et al.

Docket: Cum-09-640.

Supreme Judicial Court of Maine.

Argued: June 15, 2010.

Decided: August 12, 2010.

Michael K. Martin, Esq. Petruccelli, Martin & Haddow 50 Monument Square Portland, Maine 04101, Thomas A. Cox, Esq. (orally), PO Box 1314 Portland, Maine 04104, Attorneys for Belinda and Jon Saunders.

John A. Turcotte, Esq. (orally) Ainsworth, Thelin & Raftice, P.A. 7 Ocean Street PO Box 2412 South Portland, Maine 04116-2412, Attorneys for Mortgage Electronic Registration Systems, Inc.

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.

GORMAN, J.

[¶ 1] Jon E. Saunders and Belinda L. Saunders appeal from entry of a summary judgment in the District Court (Bridgton, Powers, J.) in favor of Deutsche Bank National Trust Company^{[ 1 ]} on Mortgage Electronic Registration Systems, Inc.’s (MERS) complaint for foreclosure and sale of the Saunderses’ home, pursuant to 14 M.R.S. §§ 6321-6325 (2009). The Saunderses contend that the court erred in granting summary judgment to the Bank because: (1) MERS did not have a stake in the proceedings and therefore had no standing to initiate the foreclosure action, (2) the substitution of parties could not be used to cure the jurisdictional defect of lack of standing and was therefore improper, and (3) there are genuine issues of material fact.

[¶ 2] We conclude that although MERS is not in fact a “mortgagee” within the meaning of our foreclosure statute, 14 M.R.S. §§ 6321-6325, and therefore had no standing to institute foreclosure proceedings, the real party in interest was the Bank and the court did not abuse its discretion by substituting the Bank for MERS. Because, however, the Bank was not entitled to summary judgment as a matter of law, we vacate the judgment and remand for further proceedings.

I. BACKGROUND

[¶ 3] In June of 2006, Jon Saunders executed and delivered a promissory note in the amount of $258,750 to Accredited Home Lenders, Inc. At the same time, both Jon and Belinda Saunders executed a mortgage document, securing that note, in favor of MERS, solely as “nominee for [Accredited] and [Accredited]’s successors and assigns.”

[¶ 4] When the Saunderses failed to make certain payments on the note, MERS filed a complaint for foreclosure in the District Court on February 4, 2009. The Saunderses filed an answer that denied the complaint’s allegations and asserted, among others, the affirmative defense of lack of standing. MERS moved for summary judgment on its complaint on May 27, 2009. In its accompanying statement of material facts, MERS asserted that it was the “holder” of both the mortgage and the note, but neither indicated whether real property secured the note nor identified the real property of the Saunderses. The Saunderses controverted MERS’s ownership of the note in their opposing statement of material facts, citing admissions that MERS had made pursuant to M.R. Civ. P. 36 that the Bank was in fact the holder of the note. The parties also disputed whether the Saunderses had received proper notice, whether the Saunderses were in default, and the amount owed on the loan. The court denied summary judgment on September 9, 2009, stating only: “Motion for summary judgment is denied as to [MERS], as there are issues of material fact preventing same and [MERS] is not entitled to judgment as a matter of law.”

[¶ 5] One day after the court denied that motion, the Bank moved pursuant to M.R. Civ. P. 25(c) to substitute itself for MERS in the foreclosure proceedings and also filed a reply to the Saunderses’ additional statement of material facts. Just over one week later, the Bank, which was not yet a party, filed a motion to reconsider or amend the order denying MERS’s motion for summary judgment, pursuant to M.R. Civ. P. 59(e), and a motion for further findings pursuant to M.R. Civ. P. 52(b).^{[ 2 ]} In support of its motions, the Bank filed: (1) an undated, two-page allonge indicating that Accredited transferred the note to the Bank, and (2) an assignment indicating that MERS had transferred any rights it had in the note or mortgage to the Bank. These transfers occurred on July 8, 2009, during the course of litigation. The Saunderses opposed both motions and filed a cross-motion for summary judgment arguing that they were entitled to judgment as a matter of law because neither MERS nor the Bank could show that MERS held the note at the time the suit commenced.

[¶ 6] On November 18, 2009, the court granted the Bank’s motion for substitution of parties, denied the Saunderses’ cross-motion for summary judgment, and granted summary judgment to the Bank. On December 16, 2009, the court entered a judgment of foreclosure and sale. The Saunderses filed a timely appeal pursuant to M.R. App. P. 2 and 14 M.R.S. § 1901 (2009).

II. DISCUSSION

A. MERS’s Standing

[¶ 7] The Saunderses contend that MERS had no stake in the outcome of the proceedings and therefore did not have standing to institute foreclosure. We review the threshold “issue of a party’s status for standing to sue de novo.” Lowry v. KTI Specialty Waste Servs., Inc., 2002 ME 58, ¶ 4, 794 A.2d 80, 81. At a minimum, “[s]tanding to sue means that the party, at the commencement of the litigation, has sufficient personal stake in the controversy to obtain judicial resolution of that controversy.” Halfway House Inc. v. City of Portland, 670 A.2d 1377, 1379 (Me. 1996) (citing Sierra Club v. Morton, 405 U.S. 727, 731 (1972)). Typically, a party’s personal stake in the litigation is evidenced by a particularized injury to the party’s property, pecuniary, or personal rights. See, e.g., Tomhegan Camp Owners Ass’n v. Murphy, 2000 ME 28, ¶ 6, 754 A.2d 334, 336; Stull v. First Am. Title Ins. Co., 2000 ME 21, ¶ 11, 745 A.2d 975, 979; cf. Fitzgerald v. Baxter State Park Auth., 385 A.2d 189, 196 (Me. 1978).

[¶ 8] The relationship of MERS to the transaction between the Saunderses and Accredited—mortgagors and the original mortgagee—is “not subject to an easy description” or classification. See Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 164 (Kan. 2009). Then Chief Judge Kaye of the New York Court of Appeals described the role and purpose of MERS thusly:

[MERS’s] purpose is to streamline the mortgage process by eliminating the need to prepare and record paper assignments of mortgage, as had been done for hundreds of years. To accomplish this goal, MERS acts as nominee and as mortgagee of record for its members nationwide and appoints itself nominee, as mortgagee, for its members’ successors and assigns, thereby remaining nominal mortgagee of record no matter how many times loan servicing, or the [debt] itself, may be transferred.

MERSCORP, Inc. v. Romaine, 861 N.E.2d 81, 86 (N.Y. 2006) (Kaye, C.J., dissenting). In Maine, we follow the title theory of mortgages; a mortgage is a conditional conveyance vesting legal title to the property in the mortgagee, with the mortgagor retaining the equitable right of redemption and the right to possession. See Johnson v. McNeil, 2002 ME 99, ¶ 10, 800 A.2d 702, 704. To determine whether MERS has standing in the present case, we must first examine what rights MERS had in the Saunderses’ debt and the mortgage securing that debt.

[¶ 9] In the note that Jon Saunders executed in favor of Accredited, there is no mention of MERS, and the Bank admitted in its statement of material facts that MERS never had an interest in the note. MERS is, however, included in the Saunderses’ mortgage document. The mortgage first defines MERS as:

(C) “MERS” is Mortgage Electronic Registrations Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is organized and existing under the Laws of Delaware, and has an address and telephone number of P.O. Box 2026, Flint, MI 48501-2026, tel. (888) 679-MERS. FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD.

The remaining references to MERS in the mortgage document are in the subsequent sections conveying the mortgage and describing the property conveyed:

[Borrowers] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender’s successors and assigns), with mortgage covenants, subject to the terms of this Security Instrument, to have and to hold all of the Property to MERS (solely as nominee for Lender and Lender’s successors and assigns), and to its successors and assigns, forever.

. . . .

[Borrowers] understand and agree that MERS holds only legal title to the rights granted by [Borrowers] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right:

(A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and

(B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.

. . . .

[Borrowers] grant and mortgage to MERS (solely as nominee for Lender and Lender’s successors in interest) the Property described [below].

Each reference to MERS within the Saunderses’ mortgage describes MERS solely as the “nominee” to the lender.

[¶ 10] The only rights conveyed to MERS in either the Saunderses’ mortgage or the corresponding promissory note are bare legal title to the property for the sole purpose of recording the mortgage and the corresponding right to record the mortgage with the Registry of Deeds. This comports with the limited role of a nominee. A nominee is a “person designated to act in place of another, usu[ally] in a very limited way,” or a “party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.” Black’s Law Dictionary 1149 (9th ed. 2009); see also E. Milling Co. v. Flanagan, 152 Me. 380, 382-83, 130 A.2d 925, 926 (1957) (demonstrating the limited role of a nominee in a contract case). The remaining, beneficial rights in the mortgage and note are vested solely in the lender Accredited and its successors and assigns. The mortgage clearly provides that, by signing the instrument, the Saunderses were “giving [the] Lender those rights that are stated in this Security Instrument and also those rights that Applicable Law gives to Lenders who hold mortgages on real property.” (Emphasis added.) Not one of the mortgage covenants in the document, including the Saunderses’ obligations to make timely payments on the note, pay property taxes, obtain property insurance, and maintain and protect the property, is made to MERS or in favor of MERS. Each promise and covenant gives rights to the lender and its successors and assigns, whereas MERS’s rights are limited solely to acting as a nominee. The Bank argues that MERS’s status as a “nominee” for the lender and as the “mortgagee of record” within the document qualifies it as a “mortgagee” within 14 M.R.S. § 6321. We disagree.

[¶ 11] As discussed above, MERS’s only right is the right to record the mortgage. Its designation as the “mortgagee of record” in the document does not change or expand that right; and having only that right, MERS does not qualify as a mortgagee pursuant to our foreclosure statute, 14 M.R.S. §§ 6321-6325. Section 6321 provides: “After breach of condition in a mortgage of first priority, the mortgagee or any person claiming under the mortgagee may proceed for the purpose of foreclosure by a civil action . . . .” (Emphasis added.) It is a “fundamental rule of statutory interpretation that words in a statute must be given their plain and ordinary meanings.” Joyce v. State, 2008 ME 108, ¶ 11, 951 A.2d 69, 72 (quotation marks omitted); accord Hanson v. S.D. Warren Co., 2010 ME 51, ¶ 12, ___ A.2d ___, ___. The plain meaning and common understanding of mortgagee is “[o]ne to whom property is mortgaged,” meaning a “mortgage creditor, or lender.” Black’s Law Dictionary 1104 (9th ed. 2009). In other words, a mortgagee is a party that is entitled to enforce the debt obligation that is secured by a mortgage.^{[ 3 ]}

[¶ 12] In order to enforce a debt obligation secured by a mortgage and note, a party must be in possession of the note.^{[ 4 ]} See Premier Capital, Inc. v. Doucette, 2002 ME 83, ¶ 7, 797 A.2d 32, 34 (describing a note associated with a mortgage as a negotiable instrument). Pursuant to Maine’s adoption of the Uniform Commercial Code, the only party entitled to enforce a negotiable instrument is:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 3-1309 or 3-1418, subsection (4). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

11 M.R.S. § 3-1301 (2009). MERS does not qualify under any subsection of section 3-1301 because, on this record, there is no evidence it held the note, was in possession of the note, was purporting to enforce a lost, destroyed, or stolen instrument pursuant to 11 M.R.S. § 3-1309 (2009), or was purporting to enforce a dishonored instrument pursuant to 11 M.R.S. § 3-1418(4) (2009).

[¶ 13] Alternatively, the Bank asserts that because the mortgage document itself purported to give MERS the right to foreclose the mortgage, MERS was entitled to enforce the mortgage as the “mortgagee of record.” In other jurisdictions utilizing non-judicial foreclosure, MERS has been able to institute foreclosure proceedings based on its designation in the mortgage as the “mortgagee of record.” See, e.g., In re Huggins, 357 B.R. 180, 184 (Bankr. Mass. 2006) (concluding that MERS had standing to institute foreclosure proceedings pursuant to the statutory power of sale in Massachusetts); Jackson v. Mortg. Elec. Registration Sys. Inc., 770 N.W.2d 487, 500-01 (Minn. 2009) (approving MERS’s ability to commence foreclosure as the legal title holder of the mortgage in non-judicial foreclosure proceedings in Minnesota). These cases are inapposite because non-judicial foreclosures do not invoke the jurisdiction of the courts. Non-judicial foreclosures proceed wholly outside of the judiciary, typically utilizing local law enforcement to evict a mortgagor and gain possession of the mortgaged property.

[¶ 14] Here, MERS sought to foreclose on the Saunderses’ mortgage by filing a lawsuit, and, like any other plaintiff filing suit within our courts, must prove its standing to sue. Halfway House, 670 A.2d at 1379. Because standing to sue in Maine is prudential, rather than of constitutional dimension, we may “limit access to the courts to those best suited to assert a particular claim.” Lindemann v. Comm’n on Govtl. Ethics & Election Practices, 2008 ME 187, ¶ 8, 961 A.2d 538, 541-42 (quoting Roop v. City of Belfast, 2007 ME 32, ¶ 7, 915 A.2d 966, 968). In the present context, MERS, as the complaining party, must show that it has suffered an injury fairly traceable to an act of the mortgagor and that the injury is likely to be redressed by the judicial relief sought. See Collins v. State, 2000 ME 85, ¶ 6, 750 A.2d 1257, 1260 (citing Allen v. Wright, 468 U.S. 737, 751 (1984)); see also Stull, 2000 ME 21, ¶ 11, 745 A.2d at 979.

[¶ 15] Nothing in the trial court record demonstrates that MERS suffered any injury when the Saunderses failed to make payments on their mortgage. When questioned directly at oral argument about what injury MERS had suffered, the Bank responded that MERS did not need to prove injury to foreclose, only that it was a “mortgagee.” As we have already explained, MERS is not a mortgagee pursuant to 14 M.R.S. § 6321 because it has no enforceable right in the debt obligation securing the mortgage. In reality, the Bank was unable to suggest an injury MERS suffered because MERS did not suffer any injury when the Saunderses failed to make payments on their mortgage. See Mortg. Elec. Registration Sys., Inc. v. Neb. Dep’t of Banking & Fin., 704 N.W.2d 784, 788 (Neb. 2005) (stating that “MERS has no independent right to collect on any debt because MERS itself has not extended credit, and none of the mortgage debtors owe MERS any money”). The only right MERS has in the Saunderses’ mortgage and note is the right to record the mortgage. The bare right to record a mortgage is unaffected by a mortgagor’s default. The Bank admitted in its statement of material facts that Accredited had never assigned, transferred, or endorsed the note executed by Jon Saunders to MERS, and represented that Accredited had transferred the note directly to the Bank. Without possession of or any interest in the note, MERS lacked standing to institute foreclosure proceedings and could not invoke the jurisdiction of our trial courts.

B. Substitution of the Bank for MERS

[¶ 16] Having determined that MERS lacked standing, our next inquiry is whether the substitution of the Bank for MERS allowed the proceedings to continue. The Saunderses contend that the substitution of the Bank for MERS pursuant to M.R. Civ. P. 25(c) was improper because: (1) MERS did not have standing, and a substitution of parties cannot be used to cure a jurisdictional defect; and (2) the Bank, as a non-party, cannot file a motion to substitute parties. The Bank argues that the substitution of parties cured any impropriety in MERS commencing the foreclosure proceedings and that M.R. Civ. P. 17(a) prohibits dismissal until there has been a reasonable time to substitute the real party in interest.^{[ 5 ]} We review the grant or denial of a party’s motion to substitute parties pursuant to both M.R. Civ. P. 17(a) and 25(c) for an abuse of the court’s discretion. See M.R. Civ. P. 25(c) (“In case of any transfer of interest, the action may be continued by or against the original party . . . .” (emphasis added)); Tisdale v. Rawson, 2003 ME 68, ¶ 17, 822 A.2d 1136, 1141 (stating that Rule 17 authorizes “a court to substitute an incorrectly named plaintiff with the real party in interest”); Bates v. Dep’t of Behavioral & Developmental Servs., 2004 ME 154, ¶ 38, 863 A.2d 890, 901 (“Judgmental decisions . . . in areas where the court has choices will be reviewed for sustainable exercise of the court’s discretion.”).

[¶ 17] Both Rule 17 and 25 are concerned with ensuring that the real party in interest is conducting the litigation. Rule 17 is used to correct an action that was filed and then maintained by the wrong party, or was filed in the name of the wrong party. See Tisdale, 2003 ME 68, ¶¶ 15-19, 822 A.2d at 1140-42 (approving the court’s substitution of the road commissioner as the plaintiff for an unincorporated association that lacked capacity to sue); Royal Coachman Color Guard v. Marine Trading & Transp., Inc., 398 A.2d 382, 384 (Me. 1979); 1 Field, McKusick, & Wroth, Maine Civil Practice § 17.1 at 348 (2d ed. 1970) (“The purpose of Rule 17(a) is to provide that the plaintiff in an action shall be the person who by the substantive law possesses the right to be enforced.”). Rule 25, in comparison, is used to substitute a second party for the original party when, in the course of litigation or pendency of an appeal, the original party’s interest ends or is transferred, or the original party becomes incompetent. See Estate of Saliba v. Dunning, 682 A.2d 224, 225 n.1 (Me. 1996) (noting the substitution of an estate, pursuant to Rule 25, for the plaintiff after his death during the pendency of the suit); Gagne v. Cianbro Corp., 431 A.2d 1313, 1315 n.1 (Me. 1981) (noting the Rule 25 substitution of Cianbro for the original defendant on appeal after the originally named defendant transferred its interest to Cianbro).

[¶ 18] The present case involves both situations: a suit brought by the wrong party and a transfer of interest mid-litigation. Although the court granted the Bank’s Rule 25(c) motion for substitution, the proper procedural vehicle for substitution in this case was Rule 17(a). See Bouchard v. Frost, 2004 ME 9, ¶ 8, 840 A.2d 109, 111 (indicating we may affirm a judgment on a ground not relied upon by the trial court). Our cases allow the Rule 17(a) substitution of plaintiffs when the correct party is difficult to determine or an understandable mistake has been made and the substitution “does not alter in any way the factual allegations pertaining to events or participants involved in th[e] suit.” Tisdale, 2003 ME 68, ¶¶ 18-19, 822 A.2d at 1142.

[¶ 19] Accredited, as the party entitled to enforce the rights granted in the mortgage, was the real party in interest at the time MERS instituted foreclosure proceedings. Five months after MERS filed for foreclosure, the Bank became the real party in interest when Accredited transferred the Saunderses’ mortgage and note to it. As we had not previously spoken on MERS’s standing to foreclose a residential mortgage, the prosecution of the case in its name is an understandable mistake to which Rule 17(a) can be applied. See Tisdale, 2003 ME 68, ¶ 19, 822 A.2d at 1142. Further, the transfer of interest did not alter the cause of action or create any prejudice to the Saunderses. MERS sought to foreclose on the Saunderses’ real property after they failed to make payments on the note, and the Bank now seeks to foreclose on the same mortgage for their failure to make payments on the same note. See id. (pointing to the unchanged facts and circumstances after substitution). In defending MERS’s motion for summary judgment, the Saunderses themselves argued that the Bank was the proper party to bring this action.^{[ 6 ]} The substitution of parties in this case was proper, and the court did not abuse its discretion by granting the Bank’s motion for substitution. See Bates, 2004 ME 154, ¶ 38, 863 A.2d at 901.

C. Summary Judgment

[¶ 20] Finally, the Saunderses contend that the court erred in granting summary judgment because of the flawed procedure that led to the court’s entry of foreclosure and sale and because there are genuine issues of material fact and summary judgment was inappropriate.^{[ 7 ]} We agree with both contentions.

[¶ 21] First, the procedure leading up to the summary judgment was fatally flawed. Except in certain circumstances not applicable here, substitution relates back to the date of the original complaint, and the effect of the substitution of parties was to treat the Bank as if it had been the party that commenced the litigation. See M.R. Civ. P. 17(a); 1 Field, McKusick, & Wroth, Maine Civil Practice § 17.1 at 349. As previously noted, the Bank filed a motion to alter or amend the order denying MERS’s motion for summary judgment, which the court granted. Our rules do not allow a motion to alter or amend pursuant to M.R. Civ. P. 59(e)—or a motion for further findings of fact pursuant to M.R. Civ. P. 52(b)—in the absence of a final judgment. Because the denial of MERS’s motion for summary judgment in the present case was not a final judgment upon which the Bank could file its motion, the court erred by granting the motion. See Dep’t of Human Servs. v. Hart, 639 A.2d 107, 107 (Me. 1994) (stating the general rule that a “denial of a summary judgment motion does not result in a final judgment”). After substitution, the Bank should have filed its own independent motion for summary judgment with a statement of material facts and supporting affidavits. The Saunderses would then have had the opportunity to respond to the new motion and appropriately defend the foreclosure action against the real party in interest.

[¶ 22] Second, the summary judgment record does not support the Bank’s entitlement to judgment as a matter of law. See Chase Home Fin. LLC v. Higgins, 2009 ME 136, ¶ 10, 985 A.2d 508, 510. “We review the grant of a motion for summary judgment de novo,” and view “the evidence in the light most favorable to the party against whom judgment has been entered to decide whether the parties’ statements of material facts and the referenced record evidence reveal a genuine issue of material fact.” Wells Fargo Home Mortg., Inc. v. Spaulding, 2007 ME 116, ¶ 19, 930 A.2d 1025, 1029; see also Salem Capital Grp., LLC v. Litchfield, 2010 ME 49, ¶ 4, ___ A.2d ___, ___. We consider “only the portions of the record referred to, and the material facts set forth, in the [M.R. Civ. P. 56(h)] statements to determine whether . . . the successful party was entitled to a judgment as a matter of law.” Higgins, 2009 ME 136, ¶ 10, 985 A.2d at 510 (quotation marks omitted). Further, we have said that

[i]n the unique setting of summary judgment, strict adherence to the Rule’s requirements is necessary to ensure that the process is both predictable and just. Even when a hearing is held in a summary judgment motion, the only record that may be considered is the record created by the parties’ submissions.

Deutsche Bank Nat’l Trust Co. v. Raggiani, 2009 ME 120, ¶ 7, 985 A.2d 1, 3; see also Camden Nat’l Bank v. Peterson, 2008 ME 85, ¶ 21, 948 A.2d 1251, 1257 (stating that a mortgagee seeking foreclosure must strictly comply with all the steps required by the foreclosure statute).

[¶ 23] In Higgins, we outlined the minimum facts, “supported by evidence of a quality that could be admissible at trial [that] must be included in the mortgage holder’s statement[] of material facts.” 2009 ME 136, ¶ 11, 985 A.2d at 510-11. Pursuant to 14 M.R.S. § 6321, a party attempting to foreclose a mortgage must provide proof of the existence of a mortgage and its claim on the real estate and intelligibly describe the mortgaged premises, including the street address of the mortgaged property, if any, and the book and page number of the recorded mortgage. See also Higgins, 2009 ME 136, ¶ 11, 985 A.2d at 510-11 (explaining the remaining facts that must be submitted in the statements of material facts before foreclosure can proceed by summary judgment).

[¶ 24] The requirements of a street address and the book and page number were added to section 6321 after the commencement of foreclosure, but before the Bank filed its motion to alter or amend the judgment pursuant to M.R. Civ. P. 59(e). See P.L. 2009, ch. 402, § 17 (effective June 15, 2009). The prior version of the statute, in effect at the time MERS filed for foreclosure, only required the complaint to “describe the mortgaged premises intelligibly.” 14 M.R.S. § 6321 (2008). As we explained in Higgins, amendments to the foreclosure statute apply to all summary judgment motions filed after their effective date, regardless of the date foreclosure proceedings commenced. 2009 ME 136, ¶ 11 n.2, 985 A.2d at 510.

[¶ 25] In the present case, even if the Bank’s motion to alter or amend were deemed procedurally sound, it would fail under either standard because it failed to include any mention of the location of the mortgaged property in its statement of material facts. While the book and page number—but not the mortgaged property’s address—were included in the affidavit supporting one of MERS’s original statements of material fact, facts not set forth in the parties’ statements of material facts are not part of the summary judgment record and not properly before us on appeal. See M.R. Civ. P. 56(h)(1); Higgins, 2009 ME 136, ¶ 12, 985 A.2d at 511 n.4. Viewed in the light most favorable to the Saunderses, the summary judgment record does not establish what property owned by the Saunderses actually secures the mortgage and the court erred by granting summary judgment to the Bank. See 14 M.R.S. § 6321 (2009); Higgins, 2009 ME 136, ¶ 13, 985 A.2d at 512.

III. CONCLUSION

[¶ 26] In summary, we hold that MERS could not institute this foreclosure action and invoke the jurisdiction of our courts because it lacks an enforceable right in the debt that secures the mortgage. Although MERS lacked standing in the present case, the jurisdictional flaw was corrected when the court appropriately granted the Bank’s motion for substitution. The court erred, however, in granting the Bank’s “renewed” motion for summary judgment, both because the Rules of Civil Procedure do not allow for reconsideration or amendment in the absence of a final judgment, and because the motion, even as amended, did not support a conclusion that the Bank was entitled to judgment as a matter of law.

The entry is:

Judgment vacated. Remanded to the District Court for further proceedings consistent with this opinion.

This copy provided by Leagle, Inc.

Don’t we love New York!

This is another case for you all to learn from…Now again, shouldn’t their be a conflict of any documents where MERS is the nominee for any of these banks?

I think we are going to see lenders, servicers et al slowly begin to turn on MERS!

2010 NY Slip Op 51127(U)

IndyMAC BANK F.S.B., Plaintiff(s),
v.
LUDDY BRITO GARCIA, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ACTING SOLELY AS A NOMINEE FOR STERLING NATIONAL MORTGAGE COMPANY, INC., SUBSIDIARY OF FEDERALLY CHARTERED BANK, ITS SUCCESSORS AND ASSIGNS, AND “JOHN DOE # 1” THROUGH “JOHN DOE # 10”, THE LAST TEN NAMES BEING FICTITIOUS AND UNKNOWN TO plaintiff, THE PERSONS OR PARTIES INTENDED BEING THE PERSONS OR PARTIES, IF ANY, HAVING OR CLAIMING AN INTEREST IN OR LIEN UPON THE MORTGAGED PREMISES DESCRIBED IN THE COMPLAINT, Defendant(s).

7282-2008

Supreme Court, Suffolk County.

Eschen, Frenkel & Weisman, LLP, 20 West Main Street, Bay Shore, New York 11706, Attorneys for Plaintiff.

Luddy Brito Garcia, 124 East 13th Street, Huntington Station, New York 11746, Defendant Pro Se.

PETER H. MAYER, J.

Upon the reading and filing of the following papers in this matter: (1) Notice of Motion by the plaintiff, dated June 2, 2009, and supporting papers; and now

UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, the motion is decided as follows: it is

ORDERED that plaintiff’s application (seq. # 002) for an order of reference in this foreclosure action is considered under 2009 NY Laws, Ch. 507, enacted December 15, 2009, and 2008 NY Laws, Ch. 472, enacted August 5, 2008, as well as the related statutes and case law, and is hereby denied without prejudice and with leave to resubmit upon proper papers, for failure to submit proper evidentiary proof, including an affidavit from one with personal knowledge, of a valid indorsement of the note or assignment of the mortgage, sufficient to establish the plaintiff’s ownership of the note and mortgage at the time the action was commenced; and it is further

ORDERED that the plaintiff shall promptly serve a copy of this Order upon the defendant-homeowner(s) at all known addresses and upon all other answering defendants, via first class mail, and shall promptly file the affidavit(s) of such service with the County Clerk and annex a copy of this Order and the affidavit(s) of service as exhibits to any motion resubmitted pursuant to this Order; and it is further

ORDERED that with regard to any scheduled court conferences or future applications by the plaintiff, if the Court determines that such conferences have been attended, or such applications have been submitted, without proper regard for the applicable statutory and case law, or without regard for the required proofs delineated herein, the Court may, in its discretion, dismiss this case or deny such applications with prejudice and/or impose sanctions pursuant to 22 NYCRR §130-1, and may deny those costs and attorneys fees attendant with the filing of such future applications.

By Order dated November 24, 2009, this Court scheduled a foreclosure settlement conference for December 23, 2009, which was adjourned to February 24, 2010. The defendant-homeowner, Luddy Brito Garcia, failed to appear at both. The plaintiff now seeks a default order of reference and requests amendment of the caption to substitute a tenant in the place and stead of the “Doe” defendants. For the reasons set forth herein, the plaintiff’s application is denied.

In this foreclosure action, the plaintiff filed a summons and complaint on January 3, 2008, which essentially alleges that Ms. Garcia defaulted in her payments of a mortgage, dated August 15, 2006, in the principal amount of $411,500.00, for the premises located at 124 East 13th Street, Huntington, New York. The original lender, Sterling National Mortgage Company, Inc., purportedly indorsed the promissory note to the plaintiff prior to the commencement of this action. According to the plaintiff, this indorsement made the plaintiff the lawful holder of the note and mortgage with standing to commence the action. Although the plaintiff’s affidavit in support indicates that the “original note with a proper indorsement is [now] in the plaintiff’s possession,” the plaintiff does not prove — or even assert — that the plaintiff actually possessed the note and mortgage at the time the action was filed.

Instead, citing Mortgage Electronic Registration Systems, Inc. v Coakley, 41 AD3d 674, 838 NYS2d 622 (2d Dept 2007), the plaintiff summarily argues that because the promissory note was indorsed to the plaintiff, the mortgage passed as an incident to the note. Under the circumstances presented herein, however, the plaintiff’s reliance on Coakley is misguided. In Coakley, the record showed that the promissory note had been indorsed by the original lender to another bank, who then indorsed it in blank and ultimately transferred and tendered it to the foreclosing plaintiff. On that particular record, the court found that at the time the action was commenced, the plaintiff was the lawful holder of the promissory note and of the mortgage, which had passed as an incident to the promissory note. In this case, however, the alleged “indorsement” appears to be on a separate page from the promissory note and, in any event, is clearly undated.

New York UCC §3-202 (1) states, in pertinent part, that “[i]f the instrument is payable to order it is negotiated by delivery with any necessary indorsement” (emphasis added). In addition, UCC §3-202(2) requires that “[a]n indorsement must be written by or on behalf of the holder and on the instrument or on a paper so firmly affixed thereto as to become a part thereof (emphasis added). Here, the purported indorsement is payable to order, but there is no evidence of delivery of the note prior to the action’s commencement. Furthermore, the alleged indorsement appears to be on a separate page, makes no specific reference to the subject note, and is, in any event, undated. As such, the so-called “indorsement” is, at best, unreliable and fails to support plaintiff’s claim that the “note and mortgage were assigned by a properly indorsed note prior to the commencement of this action” (see, Slutsky v Blooming Grove Inn, Inc., 147 AD2d 208, 542 NYS2d 721 [2d Dept 1989]). This is particularly true where, as here, the plaintiff’s affidavit in support of the motion fails to affirmatively state that the plaintiff did, in fact, possess the note and mortgage at the time the action was commenced. Without either proof of a proper written assignment of the underlying note or proper proof of the physical delivery of the note prior to the commencement of the foreclosure action, the plaintiff has failed to sufficiently show either the proper transfer of the obligation, or that the mortgage passed as an inseparable incident to the debt (see, U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]).

A plaintiff has no foundation in law or fact to foreclose upon a mortgage, unless the plaintiff has shown it has legal or equitable interest in such mortgage (Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; Katz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [1st Dept 1998]). A written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action would be sufficient to transfer the obligation, and have the mortgage pass as an inseparable incident to the debt (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]). With regard to a written assignment, the execution date is generally controlling and a written assignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivery of the note and mortgage was, in fact, previously effectuated (see, Bankers Trust Co. v Hoovis, 263 AD2d 937, 938, 694 NYS2d 245 [1999]). A retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action commenced prior to the execution of the assignment (Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 888 NYS2d 914 [2d Dept 2009]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]).

Applying this analysis to the case before this Court, a statement by the plaintiff merely indicating that the original note is in plaintiff’s possession as of the making of a motion for an order of reference is insufficient to show that the plaintiff had standing to bring the action in the first instance (Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 888 NYS2d 914 [2d Dept 2009]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]). Plaintiff’s failure to submit proper proof of a valid indorsement or assignment, and failure to otherwise prove that the plaintiff was the holder of the note and mortgage at the time the action was commenced, requires denial of the plaintiff’s motion for an order of reference.

This constitutes the Decision and Order of the Court.

Most of us can make the assumption that instead of Mr. Gaupp place we might as well enter MERS in his place right?

The real issue with the case as stated is that DBNT magically appears!  Where is the assignment from Ameriquest to *them*??  (I’d like to see the signatures on the note!)

DEUTSCHE BANK NATIONAL TRUST COMPANY, As Trustee of Ameriquest Mortgage Securities, Inc., Asset-Backed Pass Through Certificates, Series 2004-X3, Under the Pooling and Servicing Agreement Dated as of September 1, 2004, Without Recourse, Plaintiff-Appellant,
v.
DAVID J. GAUPP, ALEXANDRA C. GAUPP, NATHAN PARTON and SPOUSE OF NATHAN PARTON, REBEKAH J. BARTON and SPOUSE OF REBEKAH J. BARTON, WELLS FARGO BANK, N.A., and PARTIES IN POSSESSION,, Defendants-Appellees.

No. 0-272/09-0700.

Court of Appeals of Iowa.

Filed June 30, 2010.

Matthew E. Laughlin and Sarah K. Franklin of Davis Brown Law Firm, Des Moines, for appellant.

Charles R. Hannan, IV, Council Bluffs, for appellees David J. Gaupp and Alexandra C. Gaupp.

Aaron W. Rodenburg, Council Bluffs, for appellees G&G Properties and Troy Granger.

Brian D. Nolan of Nolan, Olson & Stryker, P.C., L.L.O., Omaha, Nebraska, for appellees Wells Fargo Bank, N.A., Nathan Parton, Spouse of Nathan Parton, Rebekah J. Barton, and Spouse of Rebekah J. Barton.

Alexandra Gaupp, Council Bluffs, appellee pro se.

David Gaupp, Council Avenue, appellee pro se.

Heard by Vogel, P.J., and Potterfield and Danilson, JJ.

VOGEL, P.J.

I. Background Facts and Proceedings.

In 2002, David Gaupp and Troy Granger formed a partnership, G & G Properties. On March 23, 2002, Gaupp and Granger purchased a duplex to use as a rental home for their partnership. Charles and Betty Bowes conveyed the property to “David J. Gaupp and Troy Granger” by warranty deed, which was recorded on April 9, 2002. On July 3, 2002, Gaupp, his wife, Alexandra Gaupp, and Granger conveyed the property to “G & G Properties” by warranty deed, which was recorded on September 24, 2002.

On December 8, 2003, Gaupp borrowed $162,000 from Ameriquest Mortgage Company (Ameriquest), which was evidenced by a promissory note and signed by Gaupp individually. In spite of the fact that Gaupp was not the titleholder of the property, the note purported to be secured by a mortgage on the property showing the borrower/mortgagor as “David J. Gaupp, married,” and bearing the signatures of “David J. Gaupp” and “Alexandra C. Gaupp,”^{[ 1 ]} but the acknowledgment is only as to “David J. Gaupp” and was notarized by a Nebraska notary public. The mortgage instrument was recorded on January 8, 2004. Ameriquest subsequently sold and assigned the mortgage to Deutsche Bank National Trust Company (Deutsche Bank).

Although G & G Properties was the record titleholder of the property, the Gaupps and Granger subsequently executed two deeds regarding the property. On December 31, 2003, a “Corrected Warranty Deed” attempted to convey the property from “David J. Gaupp and Alexandra C. Gaupp” and “Troy S. Granger” to “David J. Gaupp and Alexandra C. Gaupp,” which was then recorded on January 8, 2004. On February 2, 2005, the Gaupps attempted to convey the real estate from “David J. Gaupp and Alexandra C. Gaupp” to “G & G Properties” by a quitclaim deed, which was recorded on July 28, 2005. In David Gaupp’s deposition testimony, he explained that these conveyances were done so that Granger’s name would not appear in the title, in an effort to keep Granger’s child support obligations from being a lien against the real estate.

In April 2006, G & G Properties agreed to sell the real estate. On May 5, 2006, “G & G Properties” conveyed the property to “Nathan D. Parton, a single person and Rebekah J. Barton, a single person” by warranty deed, which was recorded on May 19, 2006.^{[ 2 ]} In order to purchase the property, the Partons obtained a loan from Wells Fargo Bank, N.A. (Wells Fargo) that was secured by a mortgage on the real estate, which was recorded on May 19, 2006. G & G Properties received proceeds in the amount of $188,273.02 from the sale of the real estate.

At some point, Gaupp defaulted on the note held by Deutsche Bank. On January 30, 2007, Deutsche Bank filed a petition to foreclose its mortgage, seeking judgment in rem against the real estate in the amount of $154,147.19, plus attorney’s fees, costs, and interest, naming the Gaupps as defendants, parties in possession. On March 16, 2007, Deutsche Bank amended its petition to add the Partons and Wells Fargo as additional defendants. On November 1, 2007, the Partons filed a third-party complaint against G & G properties and Granger.

On October 21, 2008, the Partons and Wells Fargo filed a motion for summary judgment asserting that (1) the mortgage held by Deutsche Bank was invalid; and (2) the mortgage held by Deutsche Bank could not be foreclosed because the Partons were bona fide purchasers for value. On February 12, 2009, the district court issued its ruling finding that the Gaupps and Granger conveyed their interest in the property to G & G Properties on July 3, 2002, and when G & G Properties recorded the deed on September 24, 2002, it became the record titleholder. Gaupp did not have any interest in the property when he executed the mortgage in favor of Ameriquest/Deutsche Bank and after the mortgage was executed, Gaupp never obtained title to the property. G & G Properties did not convey the property to anyone prior to May 19, 2006, when the Partons purchased the property. As a result, the mortgage held by Deutsche Bank was “null and void.” The district court granted the Partons’ and Wells Fargo’s motion for summary judgment and dismissed the petition for foreclosure. Deutsche Bank appeals.

II. Standard of Review.

We review a district court’s ruling on a motion for summary judgment for correction of errors at law. Iowa R. App. P. 6.907; City of Johnston v. Christenson, 718 N.W.2d 290, 296 (Iowa 2006). Summary judgment should be granted when the entire record demonstrates there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3).

Thus, on review, we examine the record before the district court to decide whether any material fact is in dispute, and if not, whether the district court correctly applied the law. In considering the record, we view the facts in the light most favorable to the party opposing the motion for summary judgment.

Shriver v. City of Okoboji, 567 N.W.2d 397, 400 (Iowa 1997) (internal citations and quotation omitted).

III. Analysis.

Deutsche Bank asserts that the district court erred in granting the defendants’ motion for summary judgment. The parties do not dispute that at the time Gaupp executed the promissory note and mortgage, he did not hold title to the property and that G & G Properties was the record titleholder. Deutsche Bank cannot avoid the fundamental principal that a party that has no interest in a particular piece of real property cannot validly mortgage that property. See, e.g., Lee v. Lee, 207 Iowa 882, 885, 223 N.W. 888, 890 (Iowa 1929) (holding a mortgage invalid because the mortgagor had no interest in the property at the time the mortgage was given); 59 C.J.S. Mortgages § 111, at 102-03 (2009) (discussing that “[o]ne who has no ownership interest in property has no right to mortgage it” and if one does so, the mortgage creates no interest in the property). At the time Gaupp obtained the loan from Ameriquest, he did not have any interest in the property and therefore, the mortgage instrument attempting to secure the promissory note was invalid.

Deutsche Bank argues that Gaupp acquired title to the property on December 31, 2003, when the Gaupps and Granger executed the “Corrected Warranty Deed,” which Deutsche Bank further argues resulted in the mortgage becoming valid.^{[ 3 ]} However, this argument fails because Gaupp did not acquire an interest in the property when the “Corrected Warranty Deed” was executed on December 31, 2003. On July 3, 2002, the Gaupps and Granger conveyed the property to G & G Properties. After this conveyance, Gaupp had no interest in the property and could not convey the property to anyone. See Iowa Code § 557.3 (2007) (“Every conveyance of real estate passes all the interest of the grantor therein, unless a contrary intent can be reasonably inferred from the terms used.”). After the July 3, 2002 conveyance, only G & G Properties was able to convey title to the property. Any such attempt by Gaupp to do so would be and was invalid as he was no longer the titleholder. Therefore, the attempts by the Gaupps and Granger to convey the property on December 31, 2003, and February 2, 2005, were not valid conveyances.^{[ 4 ]} Additionally, because the invalid conveyances were outside the chain of title, they were stray deeds when recorded. See William Stoebuck and Dale Whitman, The Law of Property § 11.11 (3^rd ed. 2000) (“The term `chain of title’ is a shorthand way of describing the collection of documents which one can find by the use of the ordinary techniques of title search.”); 1 C.J.S. Abstracts of Title § 15, at 320 n.8 (2009) (“Instrument executed by owner [that] is recorded before acquisition or after relinquishment of title by owner is outside chain of title . . . .”).^{[ 5 ]} Title remained with G & G Properties from July 3, 2002 until May 5, 2006, when G & G Properties conveyed its solely held interest in the property to the Partons. Therefore the chain of title went from G & G Properties to the Partons. Gaupp did not have title to the property when he executed the mortgage instrument now held by Deutsche Bank nor did he subsequently obtain title. We affirm the district court’s findings and ruling.

AFFIRMED.

This copy provided by Leagle, Inc.

Pointers for FDCPA, TILA, MERS, OCSPA

EUGENE KLINE, et al., Plaintiffs,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., et al., Defendants.

Case No. 3:08cv408.

United States District Court, S.D. Ohio, Western Division.

March 29, 2010.

DECISION AND ENTRY SUSTAINING IN PART AND OVERRULING IN PART PLAINTIFFS’ OBJECTIONS (DOC. #143) TO REPORT AND RECOMMENDATIONS OF THE UNITED STATES MAGISTRATE JUDGE (DOC. #133); REPORT AND RECOMMENDATIONS ADOPTED IN PART AND REJECTED IN PART; MOTION TO DISMISS FILED BY DEFENDANT MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (DOC. #31), SUSTAINED IN PART AND OVERRULED IN PART

WALTER HERBERT RICE, District Judge. In this putative class action, the Plaintiffs have set forth claims under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692a et seq.; the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq.; and the Ohio Consumer Sales Practices Act (“OCSPA”), Ohio Revised Code § 1345.01 et seq,; as well as for breach of contract and unjust enrichment under the common law of Ohio. See Doc. #1 at ¶ 2. In their Complaint, the Plaintiffs have named eleven Defendants, including Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”). MERS has filed a motion, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, requesting that this Court dismiss Plaintiff’s Complaint for failure to state a claim upon which relief can be granted. See Doc. #31. This Court referred that motion to United States Magistrate Judge Sharon Ovington for a Report and Recommendations. Judge Ovington has submitted such a judicial filing, recommending that this Court sustain in part and overrule in part MERS’ motion. See Doc. #133. The Plaintiffs have submitted Objections (Doc. #143) thereto, upon which the Court now rules. The Court begins by setting forth the standard by which it reviews Judge Ovington’s Report and Recommendations (Doc. #133), as well as a brief summary of the procedural standards which must be applied whenever a court rules on a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure, seeking dismissal for failure to state a claim upon which relief can be granted. Under 28 U.S.C. § 636(b)(1)(A), a District Court may refer to a Magistrate Judge “any pretrial matter pending before the court,” with certain listed exceptions. Motions to dismiss are among the listed exceptions. Section 636(b)(1)(B) authorizes District Courts to refer “any motion excepted from subparagraph (A)” to a Magistrate Judge for “proposed findings of fact and recommendations.” When a District Court refers a matter to a Magistrate Judge under § 636(b)(1)(B), it must conduct a de novo review of that judicial officer’s recommendations. See United States v. Raddatz, 447 U.S. 667, 673-74 (1980); United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001). In Prater v. City of Burnside, Ky., 289 F.3d 417 (6th Cir. 2002), the Sixth Circuit reiterated the fundamental principles which govern the ruling on a motion to dismiss under Rule 12(b)(6): The district court’s dismissal of a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is also reviewed de novo. Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999), overruled on other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002). When deciding whether to dismiss a claim under Rule 12(b)(6), “[t]he court must construe the complaint in a light most favorable to the plaintiff, and accept all of [the] factual allegations as true.” Id. (citation omitted). Id. at 424. In Swierkiewicz v. Sorema N.A., 532 U.S. 506 (2002), the Supreme Court noted that Rule 8(a)(2) of the Federal Rules of Civil Procedure merely requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Id. at 212. Therein, the Court explained further: Such a statement must simply “give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims. See id., at 47-48; Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168-169 (1993). “The provisions for discovery are so flexible and the provisions for pretrial procedure and summary judgment so effective, that attempted surprise in federal practice is aborted very easily, synthetic issues detected, and the gravamen of the dispute brought frankly into the open for the inspection of the court.” 5 C. Wright & A. Miller, Federal Practice and Procedure § 1202, p. 76 (2d ed. 1990). Id. at 512-13. In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court rejected the standard established in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that a claim should not be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 550 U.S. at 562-63. The Supreme Court recently expounded upon Twombly in Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937 (2009), writing: Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in Twombly, 550 U.S. 544, the pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S., at 555. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line between possibility and plausibility of `entitlement to relief.'” Id., at 557 (brackets omitted). Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id., at 555 (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d, at 157-158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not “show[n]”—”that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2). Id. at 1949-50. In their Complaint, four Plaintiffs have set forth claims against MERS, to wit: Eugene Kline (“Kline”), Diana Hughes (“Hughes”) and George and Carol Ross (collectively the “Rosses”). In that pleading, Kline alleges that he entered into a loan transaction with WMC Mortgage (“WMC”) and that the mortgage securing that loan was held by MERS, as nominee for WMC. Doc. #1 at ¶ 64. During the course of the foreclosure proceeding on that property, Kline’s foreclosure counsel communicated to the attorney representing MERS, requesting that the latter give him a figure at which Kline could pay off that loan. MERS’ counsel indicated that Kline’s payoff figure included, inter alia, $350, for attorney’s fees, and $225, for previous service costs. Id. at ¶¶ 65-69. According to Kline, MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. In addition, Kline alleges that MERS violated the TILA, 15 U.S.C. § 1666d, by demanding these sums. Id. at ¶¶ 133-136. Hughes alleges that, in or about July, 2005, she entered into a mortgage agreement with Heartland Home Finance (“Heartland”), covering her home at 437 Donnington Drive, Dayton, Ohio. Doc. #1 at ¶ 107. That mortgage was subsequently assigned to MERS, as nominee for Heartland. Id. at ¶ 108. Subsequently, Hughes initiated proceedings under Chapter 13 of the Bankruptcy Code, during which MERS filed a proof of claim, with which it sought to recover, inter alia, $675 for post-petition attorney’s fees. Id. at ¶ 109 and ¶ 111. According to Hughes, the recovery of such fees, even pursuant to a fee-shifting provision in a mortgage, violates Ohio law. Id. at ¶ 113. Hughes alleges that MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. Hughes has not set forth a claim under the TILA against MERS. The Rosses allege that, in or about December, 2002, they took out a mortgage loan from Preferred Mortgage Consultants, with MERS acting as the mortgagee. Doc. #1 at ¶ 114. In December, 2006, the Rosses fell behind in their payments, which resulted in their mortgage being accelerated. Id. at ¶¶ 116-117. In April, 2007, the Rosses initiated proceedings under Chapter 13 of the Bankruptcy Code, during which MERS filed a proof of claim seeking to recover, inter alia, $475, for pre-petition bankruptcy fees, and $495.22, for accrued late charges. Id. at ¶¶ 119-120. The Rosses allege that MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. The Rosses have not set forth a claim under the TILA against MERS. In her Report and Recommendations (Doc. #133), Judge Ovington has recommended that this Court dismiss the claims of Kline, Hughes and the Rosses against MERS under the FDCPA, because that Defendant was not a “debt collector,” as that term is defined by the federal statute. See Doc. #133 at 9-15. That judicial officer has also recommended that the Court dismiss, with prejudice, those Plaintiffs’ state law claims for breach of contract and unjust enrichment against MERS. Id. at 21-24. As to those Plaintiffs’ claims under the OCSPA, the Magistrate Judge has recommended that the Court dismiss their class action claims with prejudice, and that it decline to continue to exercise supplemental jurisdiction over the individual claims of Hughes and the Rosses, while continuing to exercise such jurisdiction over Kline’s individual claim under the state statute. Id. at 25-26. Finally, Judge Ovington has recommended that the Court decline to dismiss Kline’s claim under the TILA against MERS. Id. at 19-21. Kline, Hughes and the Rosses do not challenge Judge Ovington’s recommendation that this Court dismiss their claims under the FDCPA against MERS, because the latter is not a debt collector within the meaning of that statute. This Court, having conducted a de novo review of the recommendation, concurs with same. Accordingly, the Court sustains MERS’ Motion to Dismiss (Doc. #31), as it relates the claims of Kline, Hughes and the Rosses under the FDCPA. MERS supported its Motion to Dismiss (Doc. #31), by appending seven documents to its memorandum in support thereof (Doc. #33). In particular, MERS has provided the mortgages of Kline, Hughes and the Rosses pertaining to it, the proof of claim filed on behalf of MERS in Hughes’ bankruptcy proceedings, the amended and second amended proofs of claim filed on behalf of MERS in the Rosses’ bankruptcy and a decision of Judge Thomas Rose issued in Kline v. Home Eq Servicing Corp., Case No. 3:07cv084 (S.D.Ohio). The Plaintiffs initially object to the Report and Recommendations of the Magistrate Judge, because she did not exclude those documents from consideration, since they are matters outside the pleadings. For reasons which follow, this Court cannot agree. Rule 12(d) of the Federal Rules of Civil Procedure provides: (d) Result of Presenting Matters Outside the Pleadings. If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion. In Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), the Supreme Court cited with approval 5B Wright & Miller, Federal Practice and Procedure § 1357, as setting forth types of such materials which can be considered when ruling on a motion to dismiss. Id. at 322. That section of the treatise provides, in pertinent part: In determining whether to grant a Federal Rule 12(b)(6) motion, district courts primarily consider the allegations in the complaint. The court is not limited to the four corners of the complaint, however. Numerous cases, as the note below reflects, have allowed consideration of matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned; these items may be considered by the district judge without converting the motion into one for summary judgment. 5B Wright & Miller, Federal Practice and Procedure § 1357 at 375-76 (footnote omitted). The Sixth Circuit has approved of the use of each of those types of materials, when ruling on a motion to dismiss, without converting same to a motion for summary judgment. See e.g., Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999) (District Court may consider documents referred to in plaintiff’s complaint and central to his claim, public records, matters of which a court may take judicial notice and decisions of governmental agencies). See also Wyser-Pratte Management Corp. Inc. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir. 2005); Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997) (quoting Wright & Miller, supra, with approval). Of course, where the submitted materials “capture[] only part of the incident and would provide a distorted view of the events at issue, . . . we do not require a court to consider that evidence on a 12(b)(6) motion.” Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008) (internal quotation marks omitted). Herein, Kline, Hughes and the Rosses have referred in their Complaint to the mortgages and the proofs of claim supplied by MERS, documents central to their claims against it. As to Judge Rose’s decision, as well as the proofs of claim, courts are authorized to take judicial notice of other court proceedings, without converting a motion under rule 12(b)(6) into one for summary judgment. Buck v. Thomas Cooley Law School, ___ F.3d ___, 2010 WL 935364 (6th Cir. 2010) at *3 (noting that, “[a]lthough typically courts are limited to the pleadings when faced with a motion under Rule 12(b)(6), a court may take judicial notice of other court proceedings without converting the motion into one for summary judgment” and citing Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 576 (6th Cir. 2008)). Accordingly, the Court overrules the Plaintiffs’ Objections (Doc. #143), as they relate to the question of whether the Magistrate Judge erred by failing to exclude the documents MERS attached to its memorandum. Hughes and the Rosses argue that Judge Ovington erred in recommending that this Court decline to continue to exercise supplemental jurisdiction, because not all claims over which this Court can exercise original jurisdiction have been dismissed. The supplemental jurisdiction statute provides, in relevant part: (a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties. * * * (c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—* * * (3) the district court has dismissed all claims over which it has original jurisdiction . . . . 28 U.S.C. § 1367. Whether a court may exercise supplemental jurisdiction over a state law claim, in accordance with § 1367(a), is to be determined under the standards established by the Supreme Court in United Mine Workers of Am. v. Gibbs, 383 U.S. 715 (1966), wherein the Court wrote that to exercise pendent (nka supplemental) jurisdiction, “[t]he state and federal claims must derive from a common nucleus of operative fact.” Id. at 725.[1] When a court dismisses a plaintiff’s only claim over which it has original jurisdiction (i.e., a federal claim), for failure to state a claim upon which relief can be granted, it should decline to continue to exercise supplemental jurisdiction over the plaintiff’s state law claims. See e.g., Musson Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1255-56 (6th Cir. 1996) (noting that there is a strong presumption that District Court declines to continue to exercise supplemental jurisdiction over state law claims after it has dismissed federal claims pursuant to a 12(b)(6) motion). Herein, this Court can exercise original jurisdiction over Plaintiffs’ claims under the FDCPA and the TILA. Accordingly, it must exercise supplemental jurisdiction over all other claims set forth by Plaintiffs. Whether it will continue to do so, from this point forward, is the issue. The only federal claims set forth by Hughes are claims under the FDCPA against MERS and the law firm of Lerner, Sampson and Rothfuss (“LS&R”). In this Decision, the Court has dismissed Hughes’ claim under the FDCPA against MERS, and it previously dismissed her claim under that statute against LS&R. See Doc. #116. Accordingly, it is inappropriate for the Court to continue to exercise supplemental jurisdiction over any of Hughes’ state law claims, i.e., her claim under the OCSPA, regardless of whether such claim is for class action relief, and her claims for breach of contract and for unjust enrichment. Those state law claims are ordered dismissed without prejudice to refiling in a state court of competent jurisdiction.[2] Similarly, the Rosses only federal claims are under the FDCPA against MERS and LS&R. Although this Court has determined herein that the Rosses’ claim under the FDCPA against MERS must be dismissed, it has previously concluded that their claim under that statute survived LS&R’s Motion to Dismiss (Doc. #17). See Doc. #116. Since that claim arises out of the same nucleus of fact as those Plaintiffs’ state law claims against MERS, it is permissible to continue to exercise supplemental jurisdiction over those state law claims. Accordingly, the Court sustains the Plaintiffs’ Objections (Doc. #143), to the extent that they are based on the assertion that the Magistrate Judge erred in recommending that the Court decline to continue to exercise supplemental jurisdiction over the Rosses’ individual claims under the OCSPA. The Court overrules those Objections, to the extent that they are based on the assertion that the Magistrate Judge erred in recommending that the Court decline to continue to exercise supplemental jurisdiction over Hughes’ individual claim under the OCSPA.[3] In addition, Kline, Hughes and the Rosses object to the recommendation of Judge Ovington that the Court dismiss their claims for breach of contract, unjust enrichment and for a class action under the OCSPA. As an initial matter, this Court has declined to continue to exercise supplemental jurisdiction over Hughes’ state law claims; therefore, it need not address these objections as they relate to that Plaintiff. Rather, the Court orders that all of Hughes’ state law claims be dismissed, without prejudice to refiling in a state court of competent jurisdiction. The Court now turns to Kline’s and the Rosses’ claims for breach of contract, for unjust enrichment and for a class action under the OCSPA. Judge Ovington recommended that the Court dismiss, with prejudice, the breach of contract claims of Kline and the Rosses, because those Plaintiffs had failed to allege any of elements of a breach of contract claim against MERS. See Doc. #133 at 21-23. This Court agrees with Judge Ovington that Kline and the Rosses have failed to state claims for breach of contract against MERS in their Complaint. However, since those Plaintiffs have identified potentially plausible claims for breach of contract in their Objections (see Doc. #143 at 6-9), this Court will order that those claims be dismissed, without prejudice to being re-plead in an amended complaint, which sets forth the theories of Kline and the Rosses as to how charging the fees, of which those Plaintiffs complain, breached their contracts with MERS, i.e., the mortgages to which they were parties with MERS. Similarly, Judge Ovington recommended that this Court dismiss the claims of Kline and the Rosses against MERS, because they failed to allege that they had conferred a benefit upon MERS. See Doc. #133 at 23-24. Those Plaintiffs have objected to that particular recommendation. See Doc. #143 at 10-12. Once again, although this Court agrees with Judge Ovington that Kline and the Rosses have failed to identify the benefit which they conferred on MERS,[4] it will, however, afford those Plaintiffs the opportunity of amending their Complaint to allege how they conferred such a benefit. Judge Ovington recommended that this Court dismiss, with prejudice, the class action aspect of the claims of Kline and the Rosses under the OCSPA. That recommendation is based upon § 1345.09(B) of the Ohio Revised Code. Under that statutory provision, a consumer may not maintain a class action for a violation of the OCSPA, unless “the violation was an act or practice declared to be deceptive or unconscionable by rule adopted under division (B)(2) of section 1345.05 of the Revised Code before the consumer transaction on which the action is based, or an act or practice determined by a court of this state to violate section 1345.02, 1345.03, or 1345.031 of the Revised Code and committed after the decision containing the determination has been made available for public inspection under division (A)(3) of section 1345.05 of the Revised Code.” (Emphasis added). Herein, since Kline and the Rosses have not alleged that any of the asserted violations of the Ohio statute by MERS also violated such a rule or court decision, Judge Ovington recommended that the Court dismiss that aspect of Kline’s and the Rosses’ claims under the OCSPA, with prejudice. Although this Court agrees with Judge Ovington that the Plaintiffs’ Complaint is devoid of such allegations, it will afford them the opportunity of amending to cure that pleading deficiency.[5] Based upon the foregoing, the Court sustains in part and overrules in part the Plaintiffs’ Objections (Doc. #143) to Judge Ovington’s Report and Recommendations (Doc. #133). The Court overrules those Objections as they relate to the utilization of the documents supplied by MERS and the recommendation that the Court dismiss certain of the state law claims of Kline, Hughes and the Rosses, while rejecting the recommendation that said dismissal be with prejudice. The Court also sustains those Objections (Doc. #143), as they relate to the recommendation that the Court decline to continue to exercise supplemental jurisdiction over the Rosses’ individual claims under the OCSPA. Accordingly, the Court adopts in part and rejects in part the Magistrate Judge’s Report and Recommendations (Doc. #133). In addition, the Court sustains MERS’ Motion to Dismiss (Doc. #31), as it relates to the claims of Kline, Hughes and the Rosses under the FDCPA and overrules that motion as it relates to Kline’s claim under the TILA. Kline and the Rosses are given leave to file an amended complaint, properly pleading their state law claims of breach of contract, unjust enrichment and for class action status under the OCSPA, subject to the strictures of Fed. R. Civ. P. 11, within 14 days from date. Hughes’ state law claims are ordered dismissed, without prejudice to refiling in a state court of competent jurisdiction, as the Court declines to continue to exercise supplemental jurisdiction over same. [1] See e.g., De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 308 (3d Cir.2003) (noting that “a district court may exercise supplemental jurisdiction where state-law claims share a `common nucleus of operative fact’ with the claims that supported the district court’s original jurisdiction”) (quoting Gibbs, 383 U.S. at 725). [2] To the extent that Hughes’ position is that as long as any federal claim remains pending in this litigation, it is permissible to exercise supplemental jurisdiction over all state law claims set forth by every Plaintiff herein, this Court cannot agree. This Court can exercise supplemental jurisdiction over only those state law claims that arise out of the same nucleus of fact as a federal law claim. Therefore, the pendency of Kline’s claim under the TILA does not authorize this Court to exercise supplemental jurisdiction over Hughes’ state law claims, given that those claims do not arise out of the same nucleus of operative facts. Moreover, this Court rejects Hughes’ assertion that it can exercise subject matter jurisdiction over Hughes’ state law claims in accordance with the Class Action Fairness Act, 28 U.S.C. § 1332(d). This Court’s original jurisdiction over claims under that statute is predicated upon the amount in controversy for a class action exceeding $5,000,000. See 28 U.S.C. § 1332(d)(2). Herein, the Plaintiffs have failed to allege that the amount in controversy in a class action based upon Hughes’ state law claims would exceed that sum. [3] Given that Judge Ovington did not recommend that this Court decline to continue to exercise supplemental jurisdiction over any of Kline’s state law claims, Kline did not object to the aspect of Judge Ovington’s Report and Recommendations, addressing the continuing exercise of supplemental jurisdiction. [4] The Court rejects the Plaintiffs’ assertion that one can infer that they conferred a benefit on MERS, merely because they allege that it demanded the payment of certain fees during foreclosure or bankruptcy proceedings. [5] The portion of § 1345.09(B), which this Court has emphasized above refers to “a court of this state.” Kline and the Rosses have cited decisions by federal courts sitting in Ohio to support their assertion that their class claims under the OCSPA should not be dismissed. Whether a federal court sitting in Ohio is “a court of this state” is an issue which this Court does not address herein.

Via: Livinglies

GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC

Once the securities have been sold, the SPV is not actively involved.

IN RE WEISBAND

In re: BARRY WEISBAND, Chapter 13, Debtor.

Case No. 4:09-bk-05175-EWH.

United States Bankruptcy Court, D. Arizona.

March 29, 2010.

Barry Weisband, Tucson, AZ, Ronald Ryan, Ronald Ryan, P.C., Tucson, AZ, Attorney for Debtor.

MEMORANDUM DECISION

EILEEN W. HOLLOWELL, Bankruptcy Judge

I. INTRODUCTION

The debtor, Barry Weisband (“Debtor”), has challenged the standing of creditor, GMAC Mortgage, LLC (“GMAC”), to seek stay relief on his residence. After reviewing the documents provided by GMAC and conducting an evidentiary hearing, the court concludes that GMAC, the alleged servicer of the Debtor’s home loan, lacks standing to seek stay relief. The reasons for this conclusion are explained in the balance of this decision.

II. FACTUAL AND PROCEDURAL HISTORY

A. Creation of Debtor’s Note And Asserted Subsequent Transfers

On or about October 6, 2006, the Debtor executed and delivered to GreenPoint Mortgage Funding, Inc. (“GreenPoint”) an adjustable rate promissory note in the principal sum of $540,000 (“Note”) secured by a Deed of Trust (“DOT”) on real property located at 5424 East Placita Apan, Tucson, Arizona 85718 (“Property”).

On a separate piece of paper, GreenPoint endorsed the Note to GMAC (“Endorsement”). The Endorsement is undated. The DOT was signed by the Debtor on October 9, 2006, and recorded on October 13, 2006. The DOT lists GreenPoint as the lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary of the DOT “solely as nominee for [GreenPoint], its successors and assigns.”

Approximately five months before the creation of the Note and DOT, on April 10, 2006, GreenPoint entered into a Flow Interim Servicing Agreement (“FISA”) (Exhibit D)^{[ 1 ]} with Lehman Capital, a division of Lehman Brothers Holdings, Inc. (collectively “Lehman”), pursuant to which Lehman agreed to purchase conventional, residential, fixed and adjustable rate first and second lien mortgage loans from GreenPoint. Under the FISA, GreenPoint agreed to service the mortgage loans it sold to Lehman. According to GMAC, GreenPoint transferred the Note and DOT to Lehman under the FISA.

On November 1, 2006, Lehman entered into a Mortgage Loan Sale and Assignment Agreement (“MLSAA”) with Structured Asset Securities Corporation (“SASC”) (Exhibit E). Under that agreement, Lehman transferred a number of the mortgage loans it acquired under the FISA to SASC. GMAC claims that the Note was one of the mortgage loans transferred to SASC. SASC created a trust to hold the transferred mortgages — GreenPoint Mortgage Funding Trust (“Trust”). The MLSAA also transferred the right to receive principal and interest payments under the transferred mortgage loans from Lehman to the Trust.

Also, on November 1, 2006, SASC entered into a Trust Agreement (Exhibit F) with Aurora Loan Services (“Aurora”) as the master servicer, and U.S. Bank National Association (“U.S. Bank”) as the trustee. A Reconstituted Servicing Agreement (Exhibit G) was executed the same day, which provided that GreenPoint would continue to service the mortgages transferred to the Trust under the MLSAA, but that the Trust could change servicers at any time. Also, according to GMAC, on November 1, 2006, GMAC, Lehman, and Aurora entered into a Securitization Servicing Agreement (“SSA”) (Exhibit H), pursuant to which GMAC would service the loans transferred to the Trust. GMAC claims that under the SSA it is the current servicer of the Note and DOT.

Thus, according to GMAC, as of November 1, 2006, the Note and DOT had been transferred to the Trust, with SASC as the Trustor, U.S. Bank as the Trustee, Aurora as the master servicer, and GMAC as the sub-servicer. GreenPoint went out of business in 2007. According to GMAC, it remains the sub-servicer of the Note, and that is its only financial interest in the Note and DOT. (Transcript Nov. 10, 2009, pp. 44, 47, 75.)

B. Bankruptcy Events

As of March 1, 2009, the Debtor was in default of his obligations under the Note. Debtor filed his petition for relief under Chapter 13 of the Bankruptcy Code on March 19, 2009. On May 16, 2009, GMAC filed a proof of claim (“POC”), which attached the Note and DOT. The Endorsement from GreenPoint to GMAC was not attached to GMAC’s proof of claim. On May 12, 2009, MERS, as nominee for GreenPoint, assigned its interest in the DOT to GMAC (“MERS Assignment”). The MERS Assignment was recorded on July 16, 2009.

GMAC filed a Motion for Relief from Stay (“Motion”) on May 29, 2009, on the grounds that the Debtor had no equity in the Property and the Property was not necessary for an effective reorganization. The Motion also requested adequate protection payments to protect GMAC’s alleged interest in the Property. GMAC attached the Note with the Endorsement and DOT as exhibits to the Motion.

The Debtor filed a response challenging GMAC’s standing to seek relief from stay. After various discovery disputes, GMAC sent a letter dated September 17, 2009, to the Debtor which purported to explain the various transfers of the Note and the DOT. (Docket #90). The letter explained that GreenPoint transferred the “subject loan” to Lehman under the FISA, that Lehman sold the “subject loan” to SASC under the MLSAA, that SASC, Aurora Loan Services, and U.S. National Bank entered into a trust agreement, which created the Trust and made Aurora the master servicer for the “subject loan,” and, that GMAC was the servicer of the “subject loan” under the SSA. According to GMAC, its status as servicer, along with the Endorsement of the Note to GMAC and the assignment of the DOT from MERS to GMAC, demonstrated that it had standing to bring the Motion.

On November 10, 2009, the Court conducted an evidentiary hearing on the Motion. GMAC offered the original Note at the hearing and admitted into evidence a copy of the Note, DOT, copies of the FISA, MLSAA, Trust Agreement, the Reconstituted Servicing Agreement and the SSA. However, GMAC did not offer any documents demonstrating how the Note and DOT were conveyed by GreenPoint to the FISA. No document was offered demonstrating how the Note and DOT were conveyed from the FISA to the MLSAA or from the MLSAA into the Trust. Schedule A-1 of the MLSAA, where the transferred mortgages presumably would have been listed, only has the words “Intentionally Omitted” on it, and Schedule A-2 has the word “None.” (Exhibit F, pp. 19-20). Similarly, there is no evidence that the Note and DOT are subject to the SSA. Exhibit A to the SSA, titled “Mortgage Loan Schedule,” is blank. At the conclusion of the hearing, this Court ordered the Debtor to begin making adequate protection payments commencing on December 1, 2009 to the Chapter 13 Trustee. The Court further ordered GMAC and the Debtor to negotiate the amount of the adequate protection payments. When the parties were unable to reach agreement, the Court set the amount of the monthly payments at $1,000.

III. ISSUE

Does GMAC have standing to bring the Motion?

IV. JURISDICTIONAL STATEMENT

Jurisdiction is proper under 28 U.S.C. §§ 1334(a) and 157(b)(2)(G).

V. DISCUSSION

A. Introduction

Section 362(a) of the Bankruptcy Code provides that the filing of a bankruptcy petition operates as a stay of collection and enforcement actions. 11 U.S.C. § 362(a). The purpose of the automatic stay is to provide debtors with “protection against hungry creditors” and to assure creditors that the debtor’s other creditors are not “racing to various courthouses to pursue independent remedies to drain the debtor’s assets.” In re Tippett,Dean v. Trans World Airlines, Inc., 72 F.3d 754, 755-56 (9th Cir. 1995)); see also In re Johnston, 321 B.R. 262, 2737-4 (D. Ariz. 2005). Despite the broad protection the stay affords, it is not without limits. 542 F.3d 684, 689-90 (9th Cir. 2008) (citing Section 362(d) allows the court, upon request of a “party in interest,” to grant relief from the stay, “such as terminating, annulling, modifying, or conditioning such stay.” 11 U.S.C. § 362(d)(1). The court may grant relief “for cause, including the lack of adequate protection.” Id. The court may also grant relief from the stay with respect to specific property of the estate if the debtor lacks equity in the property and the property is not necessary to an effective reorganization. 11 U.S.C. § 362(d)(2).

Any party affected by the stay should be entitled to seek relief. 3 COLLIER’S ON BANKRUPTCY ¶ 362.07[2] (Henry Somers & Alan Resnick, eds. 15th ed., rev. 2009); Matter of Brown Transp. Truckload, Inc., 118 B.R. 889, 893 (Bankr. N.D. Ga. 1990); In re Vieland, 41 B.R. 134, 138 (Bankr. N.D. Ohio 1984)). Relief from stay hearings are limited in scope — the validity of underlying claims is not litigated. In re Johnson, 756 F.2d 738, 740 (9th Cir. 1985). As one court has noted, “[s]tay relief hearings do not involve a full adjudication on the merits of claims, defenses or counterclaims, but simply a determination as to whether a creditor has a colorable claim.” In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009).

Nevertheless, in order to establish a colorable claim, a movant for relief from stay bears the burden of proof that it has standing to bring the motion. In re Wilhelm, 407 B.R. 392, 400 (Bankr. D. Idaho 2009). The issue of standing involves both “constitutional limitations on federal court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498 (1975). Constitutional standing concerns whether the plaintiff’s personal stake in the lawsuit is sufficient to have a “case or controversy” to which the federal judicial power may extend under Article III. Id.; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992); Pershing Park Villas Homeowners Ass’n v. United Pac. Ins. Co., 219 F.3d 895, 899 (9th Cir. 2000).

Additionally, the “prudential doctrine of standing has come to encompass several judicially self-imposed limits on the exercise of federal jurisdiction.'” Pershing Park Villas, 219 F.3d at 899. Such limits are the prohibition on third-party standing and the requirement that suits be maintained by the real party in interest. See Warth v. Seldin, 422 U.S. at 498-99; Gilmartin v. City of Tucson, 2006 WL 5917165, at *4 (D. Ariz. 2006). Thus, prudential standing requires the plaintiff to assert its own claims rather than the claims of another. The requirements of Fed. R. Civ. P. 17, made applicable in stay relief motions by Rule 9014, “generally falls within the prudential standing doctrine.” In re Wilhelm, 407 B.R. at 398.

B. GMAC’s Standing

GMAC advances three different arguments in support of its claim to be a “party in interest” with standing to seek relief from stay. First, GMAC asserts it has standing because the Note was endorsed to GMAC and GMAC has physical possession of the Note. Second, GMAC asserts that by virtue of the MERS Assignment, it is a beneficiary of the DOT and entitled to enforce and foreclose the DOT under Arizona law. Third, GMAC asserts it has standing because it is the servicer of the Note. The court addresses each of GMAC’s claims in turn.

1. GMAC Has Not Demonstrated That It Is A Holder Of The Note

If GMAC is the holder of the Note, GMAC would be a party injured by the Debtor’s failure to pay it, thereby satisfying the constitutional standing requirement. GMAC would also be the real party in interest under Fed. R. Civ. P. 17 because under ARIZ. REV. STAT. (“A.R.S.’) § 47-3301, the holder of a note has the right to enforce it.^{[ 2 ]} However, as discussed below, GMAC did not prove it is the holder of the Note.

Under Arizona law, a holder is defined 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.” A.R.S. § 47-1201(B)(21)(a).^{[ 3 ]} GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on “a paper affixed to the instrument.” A.R.S. § 47-3204; see also In re Nash, 49 B.R. 254, 261 (Bankr. D. Ariz. 1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.^{[ 4 ]}

In Adams v. Madison Realty & Dev., Inc., 853 F.2d 163 (3d Cir. 1988), the plaintiffs executed promissory notes which, after a series of transfers, came into the defendant’s possession. At issue was whether the defendant was the rightful owner of the notes. The court held that the defendant was not entitled to holder in due course status because the endorsements failed to meet the UCC’s fixation requirement. Id. at 168-69. The court relied on UCC section 3-202(2) [A.R.S. § 47-3204]: “An indorsement must be written by or on behalf of the holder and on the instrument or on a paper so firmly affixed thereto as to become a part thereof.” Id. at 165. Since the endorsement page, indicating that the defendant was the holder of the note, was not attached to the note, the court found that the note had not been properly negotiated. Id. at 166-67. Thus, ownership of the note never transferred to the defendant. Applying that principle to the facts here, GMAC did not become a holder of the Note due to the improperly affixed special endorsement.

While the bankruptcy court in In re Nash, 49 B.R. 254 (Bankr. D. Ariz. 1985) found that holder in due course status existed even though an allonge was not properly affixed to an instrument, the court based its determination on the clear intention that the note assignment be physically attached because: (1) the assignment was signed and notarized the same day as the trust deed; (2) the assignment specifically referenced the escrow number; (3) the assignment identified the original note holder; and (4) the assignment recited that the note was to be attached to the assignment. Id. at 261.

In this case, however, there is no proof that the allonge containing the special endorsement from GreenPoint to GMAC was executed at or near the time the Note was executed. Furthermore, the Endorsement does not have any identifying numbers on it, such as an account number or an escrow number, nor does it reference the Note in any way. There is simply no indication that the allonge was appropriately affixed to the Note, in contradiction with the mandates of A.R.S. § 47-3204. Thus, there is no basis in this case to depart from the general rule that an endorsement on an allonge must be affixed to the instrument to be valid.

GMAC cannot overcome the problems with the unaffixed Endorsement by its physical possession of the Note because the Note was not endorsed in blank and, even if it was, the problem of the unaffixed endorsement would remain.^{[ 5 ]} As a result, because GMAC failed to meet its burden of demonstrating that the Endorsement was proper, it has failed to demonstrate that it is the holder of the Note.

2. The MERS Assignment Of The DOT Did Not Provide GMAC With Standing

GMAC argues that it has standing to bring the Motion as the assignee of MERS.^{[ 6 ]} In this case, MERS is named in the DOT as a beneficiary, solely as the “nominee” of GreenPoint, holding only “legal title” to the interests granted to GreenPoint under the DOT. A number of cases have held that such language confers no economic benefit on MERS. See, e.g., In re Sheridan, 2009 WL 631355, *4 (Bankr. D. Idaho 2009); In re Mitchell, 2009 WL 1044368, *3-4 (Bankr. D. Nev. 2009); In re Jacobson, 402 B.R. 359, 367 (Bankr. W.D. Wash. 2009). As noted by the Sheridan court, MERS “collect[s] no money from [d]ebtors under the [n]ote, nor will it realize the value of the [p]roperty through foreclosure of the [d]eed of [t]rust in the event the [n]ote is not paid.” 2009 WL 631355 at *4.

Because MERS has no financial interest in the Note, it will suffer no injury if the Note is not paid and will realize no benefit if the DOT is foreclosed. Accordingly, MERS cannot satisfy the requirements of constitutional standing. GMAC, as MERS’ assignee of the DOT, “stands in the shoes” of the assignor, taking only those rights and remedies the assignor would have had. Hunnicutt Constr., Inc. v. Stewart Title & Trust of Tucson, Trust No. 3496, 187 Ariz. 301, 304 (Ct. App. 1996) citing Van Waters & Rogers v. Interchange Res., Inc., 14 Ariz. App. 414, 417 (1971); In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007). Because GMAC is MERS’ assignee, it cannot satisfy the requirements of constitutional standing either.^{[ 7 ]}

3. GMAC Does Not Have Standing As The Servicer Of The Note

(a) Servicer’s Right To Collect Fees For Securitized Mortgages

Securitization of residential mortgages is “the process of aggregating a large number of notes secured by deeds of trust in what is called a mortgage pool, and then selling security interests in that pool of mortgages.” Kurt Eggert, Held Up In Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 CREIGHTON L. REV. 503, 536 (2002). The process begins with a borrower negotiating with a mortgage broker for the terms of the loan. Then, the mortgage broker either originates the loan in its own name or in the name of another entity, which presumably provides the money for the loan. Almost immediately, the broker transfers the loan to the funding entity. “This lender quickly sells the loan to a different financial entity, which pools the loan together with a host of other loans in a mortgage pool.” Id. at 538.

The assignee then transfers the mortgages in the pool to another entity, which in turn transfers the loans to a special purpose vehicle (“SPV”,) whose sole role is to hold the pool of mortgages. Id. at 539. “The transfer to the special purpose trust must constitute a true sale, so that the party transferring the assets reduces its potential liability on the loans and exchanges the fairly illiquid loans for much more liquid cash.” Id. at 542. Next, the SPV issues securities which the assignee sells to investors. Id. at 539.

Once the securities have been sold, the SPV is not actively involved. It “does not directly collect payments from the homeowners whose notes and deeds of trust are held by the SPV.” Id. at 544. Rather, servicers collect the principal and interest payments on behalf of the SPV. Id. Fees are associated with the servicing of loans in the pool. Therefore, GMAC would have constitutional standing if it is the servicer for the Note and DOT because it would suffer concrete injury by not being able to collect its servicing fees.^{[ 8 ]}In re O’Kelley, 420 B.R. 18, 23 (D. Haw. 2009) . In this case, however, the evidence does not demonstrate that the Note and DOT were transferred to the Trust, and, without that evidence, there is no demonstration that GMAC is the servicer of the Note.

(b) There Is Insufficient Evidence That The Note Was Sold To Lehman And Became Part Of The Trust

When the Debtor executed the Note and DOT, GreenPoint was the original holder of the Note and the economic beneficiary of the DOT. GreenPoint, allegedly, transferred the Note to Lehman pursuant to the FISA. However, the term “mortgage loans” is not defined in the FISA and GMAC’s documents regarding the securitization of the Note and DOT provide no evidence of actual transfers of the Note and DOT to either the FISA or the Trust. Because such transfers must be “true sales,” they must be properly documented to be effective. Thus, to use an overused term, GMAC has failed “to connect the dots” to demonstrate that the Note and DOT were securitized. Accordingly, it is immaterial that GMAC is the servicer for the Trust.

C. Debtor’s Other Arguments

1. Securities Investors Are Not The Only Individuals Who Can Satisfy Standing Requirements When Dealing With A 362 Motion on a “Securitized” Mortgage

The Debtor argues that, in an asset securitization scheme, only the securities investors have standing to seek stay relief because they are the only parties with a financial interest in the securitized notes. However, because the Debtor executed the Note and received consideration (which he used to purchase the house), the contract is enforceable regardless of who provided the funding. In other words, the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan. A number of cases and treatises recognize that consideration for a contract, including a promissory note, can be provided by a third party. See, e.g., DCM Ltd. P’ship v. Wang, 555 F. Supp. 2d 808, 817 (E.D. Mich. 2008); Buffalo County v. Richards, 212 Neb. 826, 828-29 (Neb. 1982); 3 WILLISTON ON CONTRACTS § 7:20 (Richard A. Lord, 4th ed. 2009); RESTATEMENT (SECOND) OF CONTRACTS § 71(4) (2009).

Notes are regularly assigned and the assignment does not change the nature of the contract. The assignee merely steps into the shoes of the assignor. In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007); In re Trejos, 374 B.R. 210, 215 (9th Cir. BAP 2007). No additional consideration is required, as opposed to a novation which creates a new obligation. Id. at 216-17 citing RESTATEMENT (SECOND) OF CONTRACTS § 280, cmt. e. Therefore, the Debtor’s argument that the Note is unenforceable because the funder of the Note was not the payee fails. The Note is still valid and can be enforced by the party who has the right to enforce it under applicable Arizona law.

2. Proof Of A Note’s Entire Chain Of Ownership Is Not Necessary For Stay Relief

A movant for stay relief need only present evidence sufficient to present a colorable claim — not every piece of evidence that would be required to prove the right to foreclose under a state law judicial foreclosure proceeding is necessary. In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009). Accordingly, not every movant for relief from stay has to provide a complete chain of a note’s assignment to obtain relief.

Arizona’s deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee’s Sale. Blau v. Am.’s Serv. Co., 2009 WL 3174823, at *6 (D. Ariz. 2009); Mansour v. Cal-W. Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009). It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure. Moreover, if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 2009 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this Court declines to impose a blanket requirement that all movants must offer proof of a note’s entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so.

3. The Movant Has Not Violated Rule 9011

The Debtor argues that GMAC “violated Rule 7011” by presenting insufficient and misleading evidence. Given that there is no Rule 7011, the Court assumes that the Debtor was actually referring to Bankruptcy Rule 9011. Rule 9011 allows a court to impose sanctions for filing a frivolous suit. FED. R. BANKR. P. 9011(c); see also FED. R. CIV. P. 11(c). As noted at the evidentiary hearing, the Court did not find that GMAC filed its motion for relief stay in bad faith, nor does this Court believe GMAC filed its motion thinking it did not have proper evidentiary support. There are numerous, often conflicting, decisions on the issues of “real party in interest” and constitutional standing, and what evidence must be presented by a servicer seeking stay relief. The record in this case does not support imposition of 9011 sanctions.

VI. CONCLUSION

GMAC has not demonstrated that it has constitutional or prudential standing or is the real party in interest entitled to prosecute a motion for relief from stay.

Accordingly, its motion is DENIED without prejudice.

Things that make you go Hmmm…

Patent infringement lawsuit seeks damages from Zillow, LPS, others

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[ipaper docId=30915340 access_key=key-2nyz50q3xi9omwffgdky height=600 width=600 /]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

COMPLAINT FOR VIOLATION OF
19 ^§11, 12 AND 15 OF THE                            DEMAND FOR JURY TRIAL,
SECURITIES ACT OF 1933

MAINE STATE RETIREMENT Individually and On Behalf
of All Others Similarly Situated,

Plaintiffs,

vs.

COUNTRYWIDE FINANCIAL CORPORATION, a Delaware corporation; COUNTRYWIDE HOME LOANS, INC.; CWALT, INC., a Delaware corporation; CWMBS, INC., a Delaware corporation; CWABS, INC., a Delaware corporation; CWHEQ, INC., a Delaware corporation; COUNTRYWIDE CAPITAL MARKETS, COUNTRYWIDE SECURITIES CORPORATION-J.P. MORGAN SECURITIES If4c; DEUTSCHE BANK SECURITIES INC., BEAR, STEARNS & CO. INC., BANC OF AMERICA SECURITIES LLC; UBS SECURITIES, LLC; MORGAN STANLEY & CO. INCORPORATED; EDWARD D. JONES & CO., L.P.; CITIGROUP GLOBAL MARKETS INC.; GOLDMAN, SACHS & CO.; CREDIT SUISSE SECURITIES (USA) LLC; GREENWICH CAPITAL MARKETS, INC. A.K.A. RBS GREENWICH CAPITAL; BARCLAYS CAPITAL INC.; HSBC SECURITIES (USA); BNP PARIBAS SECURITIES CORP.; MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED; STANFORD L. KURLAND; DAVID A. SPECTOR; ERIC P. SIERACKI; N. JOSHUA ADLER; RANJIT KRIPALANI; JENNIFER S. SANDEFUR; DAVID A. SAMBOL,

Defendants

Continue below: Be patient this is a big file

[ipaper docId=29020373 access_key=key-4qfxlliwkziovi64j3l height=600 width=600 /]

First, Lynn Szymoniak ESQ. presented “Compare these Titles & Signatures” & “Too Many Jobs”…Now the next of many of compare these signatures & titles series. “Officers of Way, Way too many banks”…Part Deux “The Twilight Zone”.

How can you be an OFFICER of all these banks and Why is your signature never signed the same??? Minnesota? LPS? Bueller? …anyone?…Bueller?