text:
Would you like a bag of chips with your frozen loan audit?
Posted on March 23, 2010. Filed under: Banking, Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Truth in Lending Act | Tags: Case Law, fighting foreclosure, Foreclosure, foreclosure prevention, forensic loan audit, how to stop foreclosure, loan document audit, mortgage litigation |
Every day I get calls from attorneys or people facing foreclosure asking about my services as a forensic loan auditor and expert witness. Generally the callers are reasonably well informed about my work and know what they can and cannot expect from an audit. But yesterday a nice lady from Ohio called and asked for information on a frozen loan audit! And increasingly I am getting calls from people who begin by asking what I charge, immediately followed by how many pages long my audits are! Maybe I am getting a little sensitive as I am nearing my 49th birthday but I become irritated when I am made to feel like a server at a fast food joint. Not that there is anything wrong with being a server, but what would be an appropriate response to such a dumb question? Today's special is all you can read for $299 and a bag of chips at no extra cost. Will that be for here or to go?
What is this fascination with size and quantity that drives the average consumer? He wants a McMansion, a Big Mac, an Extra Large Latte, a Jumbo Dog, a Super Sized Pizza, and a Voluminous Frozen Audit. Or is it forensic? Who cares, as long as you get a lot of pages and one of them money back guarantees. Oh yes, we love a money back guarantee. But seriously, why would someone facing foreclosure or having difficulty making mortgage payments care about the size of an audit? Are they calling five auditors and going with the cheapest who offers the most words for the money? Is that how you hire a professional these days?
Of course, I can't place the entire blame on consumers who are simply trying to find the most affordable solution for perhaps the biggest problem they have had to face – losing their home. Understandably they are trying to find a method to measure the value of such an esoteric service as a forensic loan audit, which no one had even heard about until a few months ago. You can't blame them for wanting to shop and compare products before buying and parting with their hard earned money. It is the service providers who are misleading the public and selling them a thick pile of worthless junk packaged as a forensic loan audit with a guarantee that if no violations are discovered a refund will be issued with no questions asked. I wonder how many refunds on these fake audits have been issued.
There are even law firms now peddling these audits for up to $2500 a pop but delivering nothing more than a standardized list of technical violations with some added legalese and fictitious causes of action thrown in for good measure (such as Rescission and Breach of the Covenant of Good Faith and Fair Dealing, none of which are valid or independent causes of action but they sound good). After all, how can you justify charging $2500 for a template audit, if you don't embellish it with a few Latin words no one can pronounce or omit citations to inapposite case law inserted to fill space for lack of meaningful research.
This industry has been flooded with unprofessional ex loan officers and underemployed ambulance chasing lawyers who have setup shop as auditors with cheap copycat websites and a subscription to compliance software, representing themselves as experts offering hope to distressed homeowners, who in their desperation for keeping their homes and stopping foreclosure are easy prey.
What these unsavory characters are selling is essentially overpriced data entry and a template report purporting to be a legal analysis of the homeowner's rights and remedies for alleged violations of the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), Fair Credit Reporting Act, Predatory Lending, Breach of Fiduciary Duty, Negligence, Fraud and Unfair or Deceptive Acts or Practices to name a few. After completion of the audit the borrower is usually encouraged to demand a response from the lender via a Qualified Written Request (QWR), which the auditor/lawyer sometimes offers to draft and submit as an added bonus with the assurance that as soon as the lender is served with their masterfully prepared QWR and sees the auditor's impressive findings, its lawyers begin trembling with fear of being sued and offer to settle for pennies on the dollar. All that for $399 and a money back guarantee! How can anyone turn down such an offer? Yes please, I will have one audit and a bag of chips to munch on while laying back on my couch watching the bank get on its knees and beg for my forgiveness. I want to watch them grovel before they rescind my predatory loan and hand over the deed to my house free and clear. After all this is America.
TILA/RESPA
Of course the reality is markedly different than what is purported by these overenthusiastic yet incompetent advocates. I have seen hundreds of audits and they all have one thing in common – they are worthless. First, many of the so called violations these audits uncover, such as failure to issue a good faith estimate within three days of application, or failure to issue a HUD-1 one day prior to settlement, provide for no private right of action, so their only value may lie in establishing a pattern and practice of misrepresentation, deception or on rare occasions fraud. But even if sufficient facts exist for allegations of broker or loan officer misconduct, liability for such conduct ordinarily remains with the original tortfeasor and not the assignee of the loan, who in all likelihood is a holder in due course, unless you can show, for example, that the holder had notice of your claims prior to purchasing the Note or that the Note was not properly negotiated or for various reasons it does not qualify as a negotiable instrument.
As mentioned ordinarily the holder in due course is not liable for disputes or claims you may have against the originator or mortgage broker who sold you the loan unless certain conditions pursuant to HOEPA have been met, or the TILA violation is apparent on the face of the loan documents, or you are using the claim as a defense in a collection action, or if you can state with particularity facts that would make the note and mortgage void under other legal theories. Some courts, however, have held that you cannot use certain claims in nature of recoupment in non judicial foreclosure proceedings in states such as California, while, on the other hand, a West Virginia court has said: "Securitization model – a system wherein parties that provide the money for loans and drive the entire origination process from afar and behind the scenes – does nothing to abolish the basic right of a borrower to assert a defense to the enforcement of a fraudulent loan, regardless of whether it was induced by another party involved in the origination of the loan transaction, be it a broker, appraiser, closing agent, or another". Generally a fraudulent loan is not enforceable regardless of the holder in due course status of the party with the right to enforce. The trick is in providing sufficient facts to prove fraud, which, under normal circumstances is not an easy task to accomplish.
A popular finding proffered by some practitioners is an alleged violation of fiduciary duty by the lender. In general, however, a lender does not owe a fiduciary duty to a borrower. "A commercial lender is entitled to pursue its own economic interests in a loan transaction. This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another." Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089, 1093 n.1, 283 Cal. Rptr. 53 (1991). "[A]bsent special circumstances . . . a loan transaction is at arm's length and there is no fiduciary relationship between the borrower and lender." Oaks Management Corporation v. Superior Court, 145 Cal. App. 4th 453, 466, 51 Cal. Rptr. 3d 561 (2006).
Determining the existence of a fiduciary relationship involves a highly individualized inquiry into whether the facts of a given transaction establish that there has been a special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one reposing the confidence. Mulligan v. Choice Mortg. Corp. USA, 1998 U.S. Dist. LEXIS 13248 (D.N.H. Aug. 11, 1998).
As such, an audit must inquire in to the circumstances surrounding the borrower's initial introduction to and meeting with the lender's agent and the content of all verbal and written communications between them. It is important for the auditor to determine the level and extent of trust and confidence reposed by borrower in the lender's agent. A lender may owe to a borrower a duty of care sounding in negligence when the lender's activities exceed those of a conventional lender. For example if it can be shown the appraisal was intended to induce borrower to enter into the loan transaction or to assure him that his collateral was sound the lender may have a duty to exercise due care in preparing the appraisal. See Wagner v. Benson, 101 Cal. App. 3d 27, 35, 161 Cal. Rptr. 516 (1980) ("Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender.").
A lender may be secondarily liable through the actions of a mortgage broker, who may have a fiduciary duty to its borrower-client, but only if there is an agency relationship between the lender and the broker. See Plata v. Long Beach Mortg. Co., 2005 U.S. Dist. Lexis 38807, at *23 (N.D. Cal. Dec. 13, 2005); Keen v. American Home Mortgage Servicing, Inc., 2009 U.S. Dist. LEXIS 100803, 2009 WL 3380454, at *21 (E.D. Cal. Oct. 21, 2009).
Therefore, the audit must propound sufficient facts to establish an agency relationship between lender and broker. An agency relationship exists where a principal authorizes an agent to represent and bind the principal. Although lenders offer the brokers incentives to act in ways that further their interests, there needs to be a showing that a lender gave the broker authority to represent or bind it, or that a lender took some action that would have given borrower the impression that such a relationship existed. I have yet to see an audit that provided facts for such a conclusion but instead they are filled with conclusory allegations unsupported by facts. It is not enough to merely state that lender is vicariously liable through the broker or that broker is lender's authorized agent without specific facts to support such conclusions.
Civil Conspiracy
Under the conspiracy theory a party may be vicariously liable for another's tort in a civil conspiracy where the plaintiff shows "(1) formation and operation of the conspiracy and (2) damage resulting to plaintiff (3) from a wrongful act done in furtherance of the common design." Rusheen v. Cohen, 37 Cal. 4th 1048, 1062, 39 Cal. Rptr. 3d 516, 128 P.3d 713 (2006) (citing Doctors' Co. v. Superior Court, 49 Cal.3d 39, 44, 260 Cal. Rptr. 183, 775 P.2d 508 (1989)), see also Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 511, 28 Cal. Rptr. 2d 475, 869 P.2d 454 (1994). The California Supreme Court has held that even when these elements are shown, however, a conspirator cannot be liable unless he personally owed the duty that was breached. Applied Equipment, 7 Cal. 4th at 511, 514.
Civil conspiracy "cannot create a duty . . . . [i]t allows tort recovery only against a party who already owes the duty." Courts have specifically held that civil conspiracy cannot impose liability for breach of fiduciary duty on a party that does not already owe such a duty. Everest Investors 8 v. Whitehall Real Estate Ltd. Partnership XI, 100 Cal. App. 4th 1102, 1107, 123 Cal. Rptr. 2d 297 (2002) (citing Doctors' Co., 49 Cal. 3d at 41-42, 44 and Applied Equipment, 7 Cal. 4th at 510-512).
Thus, civil conspiracy allows imposition of vicarious liability on a party who owes a tort duty, but who did not personally breach that duty. Doctors' Co., 49 Cal. 3d at 44 (A party may be liable "irrespective of whether or not he was a direct actor and regardless of the degree of his activity.").
Participation in a joint venture with a broker or other party in a predatory lending context gives rise to liability for such claims under a claim of joint venture. See Short v. Wells Fargo Bank Minnesota, N.A., 401 F. Supp. 2d 549, 2005 U.S. Dist. LEXIS 28612, available in 2005 WL 3091873, at 14-15 (S.D.W.Va. Nov. 18, 2005); see also generally Armor v. Lantz, 207 W. Va. 672, 677-78, 535 S.E.2d 737, 742-43 (2000); Sipple v. Starr, 205 W. Va. 717, 725, 520 S.E.2d 884, 892 (1999); Price v. Halstead, 177 W.Va. 592, 594, 355 S.E.2d 380, 384 (1987).
Similarly, if one party is directing or exercising control over loan origination in the circumstance of securitized lending, it is a factual question as to whether there is a principal/agency relationship sufficient to impose such liability on all the participants. See Short v. Wells Fargo Bank Minnesota, N.A., supra, 2005 U.S. Dist. LEXIS 28612, 2005 WL 3091873, at 14-15; England v. MG Investments, Inc., 93 F. Supp. 2d 718, 723 (S.D.W.Va. 2000); Arnold, 204 W.Va. at 240, 511 S.E.2d at 865.
An audit must inquire in to the relationships between parties involved in the joint venture and determine the level of control exercised by one party over another. Again, it is not sufficient to merely recite legal conclusions such as "Crooked Funding LLC controlled Scam Brokers Inc.".
Fraud and Deceit
In most jurisdictions, "[t]he elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Small v. Fritz Companies, Inc., 30 Cal. 4th 167, 173, 132 Cal. Rptr. 2d 490, 65 P.3d 1255 (2003).
To prove mail fraud, as an example, the auditor must propound facts with particularity as follows:
Johnny Crookland, Crooked Broker's President, misrepresented his intention to get borrowers the best rate available at their initial meeting in March 2006. The audit should also contain the date and content of all mailings and communications between the Crooked Broker and the borrowers through which the broker with the aid of a warehouse lender (Scam Fundings LLC) effectuated its scheme to defraud: (1) direct mail advertisement from Crooked Broker showing a teaser interest rate of 6.75% with zero broker fees or points (2) a "good faith estimate" of the loan terms mailed by Crooked Broker on March 26 which did not mention anything about a $5,890 fee for origination, (3) the first (rejected) loan document, with an interest rate of 7% which included a $ 5,890 fee, presented to the borrowers on April 13 at the first closing (though presumably mailed or faxed from the warehouse lender's office in New York shortly before that date) (4) borrowers refusal to sign the closing documents because of the unauthorized fee that appeared on the HUD-1 on closing day, (5) a second good faith estimate mailed by Crooked Broker on April 16, showing 7% interest but this time without the unauthorized fee; and the second (accepted) loan document, which was presented in Baltimore on April 19 but at a higher rate of 7.125% and now subject to a yield spread premium that was never disclosed or explained as to how it may impact total finance charges over the length of the loan. (6) Crooked Broker's statement in response to borrowers' inquiry about the yield spread premium that it was standard practice and paid by lender with no impact on total finance charges payable by borrowers.
Show Me the Note
The template audits invariably omit a detailed inquiry in to the securitization process after the loan was funded by the Originator and sold to investors through securitization. Often the only theory proffered by incompetent auditors revolves around the "show me the note" defense, which has been shot down by almost every court in every jurisdiction because it lacks merit. A lost note affidavit can easily overcome this argument, so by itself as a foreclosure defense strategy this does nothing but cast doubt on a borrower's credibility.
A skilled auditor will carefully examine all documents including the Note, Mortgage/DOT, Mortgage/DOT Assignment, Note Endorsement/Allonge, Notice of Default and the Pooling and Servicing Agreement to determine the identity of all parties involved in the chain of securitization and their respective interests in the Note and Mortgage.
Once settlement occurs the Note and Mortgage are normally transferred to a document custodian (e.g. Wells Fargo), while numerous book entries record their movement through the securitization chain which normally begins with the Originator (e.g. Mason Mortgage) who then sells them to an aggregator (e.g. Countrywide Home Loans) who then sells them with a thousand other loans to a Depositor (e.g. Asset Securities Inc.) who then deposits them with a Trustee (e.g Wells Fargo) for the benefit of the securitization trust (e.g Asset Securities Trust IV-290989 – 2003) which issues securities backed with the pool of mortgages (MBS). The trustee also selects a Servicer (e.g Countrywide Home Loans) to collect borrower payments and process foreclosures/short sales on behalf of the investors who own the MBS.
When there is default and in order to effectuate foreclosure, the Servicer asks the document custodian for the collateral file that pursuant to the PSA should contain the original Note indorsed by the Originator (e.g. Mason Mortgage), usually in blank thereby converting it in to a bearer instrument, and the Mortgage/DOT with an executed assignment either already recorded or in recordable form. Usually this is where everything can fall apart for the secured party attempting to foreclose and where the best defense opportunities may be uncovered by a skilled examiner. Without giving away too much proprietary information here is a list of some questions a diligent auditor should be asking:
Was the execution of the Mortgage/DOT by the borrower properly witnessed and acknowledged?
Was the Note legally negotiated and formally transferred from the Originator to the Aggregator, from the Aggregator to the Depositor and from the Depositor to the Trustee?
Was the Note indorsed by an authorized agent of its holder before each transfer?
Is the Indorsement evidenced by an Allonge while there is room for an Indorsement on the original Note?
Was the Note negotiated to its current holder prior to the date of default?
Did the Mortgage travel with the Note through the chain of securitization?
Is the Mortgage held by MERS?
Has the Mortgage assignment been properly recorded?
Was the Mortgage and Note assigned to the Trustee by MERS?
Was MERS authorized or allowed to assign the Mortgage?
Who signed the assignment on behalf of MERS?
MERS and Splitting the DOT from the Note
The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust." Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).
Some courts have found that, because MERS is not the original holder of the promissory note and because there is no evidence that the original holder of the note authorized MERS to transfer the note, the language of the assignment purporting to transfer the promissory note is ineffective. "MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force." 284 S.W.3d at 624; see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard mortgage note language does not expressly or implicitly authorize MERS to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal. 2008) ("[I]f FHM has transferred the note, MERS is no longer an authorized agent of the holder unless it has a separate agency contract with the new undisclosed principal. MERS presents no evidence as to who owns the note, or of any authorization to act on behalf of the present owner."); Saxon Mortgage Services, Inc. v. Hillery, 2008 U.S. Dist. LEXIS 100056, 2008 WL 5170180 (N.D. Cal. 2008) (unpublished opinion) ("[F]or there to be a valid assignment, there must be more than just assignment of the deed alone; the note must also be assigned. . . . MERS purportedly assigned both the deed of trust and the promissory note. . . . However, there is no evidence of record that establishes that MERS either held the promissory note or was given the authority . . . to assign the note.").
IN CONCLUSION, the value of a forensic loan audit lies not in its word count, size or thickness but rather in the knowledge and expertise of the individual performing the work and examining the documents. Many of the worthless template audits produced by scammers consist of more than 100 pages of garbage and pointless recitations of statutes you can find online or in any library. Moreover, finding a technical violation in loan documents is a virtual certainty, so a money back guarantee is merely a marketing gimmick offered by unscrupulous con artists to gain your trust and to distract you from what really counts. If you are worried about word count and a money back guarantee you are missing the point. And if you are looking for the least expensive audit advertised on the web, you will certainly get what you pay for. An authentic audit done right takes at least 3 hours to complete (a more detailed analysis can take over 8 hours) and a skilled auditor charges between $250 to $300 per hour, so do the math.
Remember an audit is merely a tool that should be handled with care by a seasoned attorney. It does not magically stop foreclosure while you lay back on the couch with a bag of chips. A lengthy template audit attached to a lengthy QWR sent to a lender's loss mitigation department will most likely end up in the trash. The best way to measure the quality and value of an auditor's work, short of a referral, is by picking up the phone, speaking to him and making sure he knows what he is talking about. Surround yourself with smart and skilled advocates and you will be a step or two ahead of the bank trying to take your home away. That I can guarantee.
Dean Mostofi, President
National Loan Audits
E-mail: dean@lenderaudits.com
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In re GIFTY SAMUELS, Debtor
Posted on March 16, 2010. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Mortgage Law | Tags: Case Law, fighting foreclosure, Foreclosure Defense, how to stop foreclosure, mortgage litigation |
Chapter 11, Case No. 06-11656-FJB
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS, EASTERN DIVISION
415 B.R. 8; 2009 Bankr. LEXIS 1954
July 6, 2009, Decided
CASE SUMMARY:
PROCEDURAL POSTURE: In contested Chapter 11 proceedings, movant creditor, as trustee–under a pooling and servicing agreement–of a mortgage investment trust, sought summary judgment as to an objection filed by the debtor to its secured claim, which was based on a promissory note and a mortgage given as security. The debtor challenged the creditor's claim that it was the holder of the note and the owner of the mortgage and its standing to enforce its rights.
OVERVIEW: The debtor alleged that defects existed in the creditor's proof of chain of title to the promissory note and the mortgage. The creditor argued that it held the documents as a successor-in-interest to the original bankruptcy claimant. The court agreed, finding that the loan originator had endorsed both the note and the mortgage in blank–converting them into bearer instruments–then delivered them to the creditor as pool trustee. In 2008, an assignee acting under a limited power of attorney (LPA) executed a confirmatory assignment of the mortgage, which it recorded. Although the documents submitted with the proof of claim did not show a valid assignment of rights, depriving the claim of prima facie validity, the creditor met its burden of showing that it held rights to the note and the mortgage. Under Mass. Gen. Laws ch. 106, § 3-205(b) the creditor was the holder of the note, which it had standing to enforce under Mass. Gen. Laws ch. 106, § 3-301. The assignee retroactively ratified the mortgage through the 2008 LPA. The postpetition transfer of the recorded mortgage did not constitute a transfer of an estate asset in violation of the automatic stay in 11 U.S.C.S. § 362(a).
OUTCOME: The court granted summary judgment in favor of the bank.
JUDGES: Frank J. Bailey, United states Bankruptcy Judge.
OPINION BY: Frank J. Bailey
MEMORANDUM OF DECISION ON MOTION OF DEUTSCHE BANK FOR SUMMARY JUDGMENT ON DEBTOR'S OBJECTION TO ITS PROOF OF CLAIM
By the motion before the Court, Deutsche Bank National Trust Company, [*11] as trustee under a pooling and servicing agreement of a certain mortgage investment trust ("Deutsche Bank"), seeks summary judgment as to the objection filed by Chapter 11 debtor Gifty Samuels to its secured claim. Deutsche Bank's claim is based on the contention that Deutsche Bank is the present holder of a promissory note given by Samuels to Argent Mortgage Company, LLC ("Argent"), and the owner of the mortgage given by Samuels to Argent to secure the promissory note. By her objection, Samuels now challenges not the validity of the underlying note and mortgage but only Deutsche Bank's claim to be the holder of the note and owner of the mortgage and thus its standing to enforce these. Finding the motion for summary judgment to be well-supported, the Court will grant summary judgment and overrule the objection to claim.
Gifty Samuels filed a petition for relief under [**2] Chapter 13 of the Bankruptcy Code on June 1, 2006, thereby commencing this bankruptcy case. Upon discovery that her debt exceeded the eligibility limits for Chapter 13, she moved to convert her case to one under Chapter 11, and the Court granted that motion on August 10, 2006. She has remained a debtor in possession under Chapter 11 since that time.
AMC Mortgage Services, Inc., as loan servicer for Argent, filed a proof of a claim in the case on June 23, 2006 for $ 292,206.37, and an amended proof of claim on September 18, 2006 for $ 294,466.50. 1 Both indicated that the claim in question was secured, but neither included an attached promissory note or mortgage or identified the property securing the debt.
1 The original proof of claim appears on the claims register as number 3-1, the amended as -2.
The property securing this debt was certain real property owned by Samuels and located at 316B, Essex Street, Lynn, Massachusetts. AMC Mortgage Services, Inc., as loan servicer for Argent, moved for relief from the automatic stay as to this property on April 2, 2007. [Doc. # 143] After a hearing, the court denied the motion without prejudice to renewal but, in the same order, expressly permitted [**3] AMC Mortgage Services, Inc. to file an affidavit of noncompliance seeking further court action if the Debtor, commencing in July 2007, failed to make timely monthly mortgage payments. [Doc. # 198]
On November 9, 2007, Citi Residential Lending, Inc. ("Citi Residential"), by Mario Vasquez, a duly authorized agent, filed such an affidavit of noncompliance. [Doc. # 239] In the affidavit, Mr. Vasquez stated that Citi Residential "is now the servicer for Argent Mortgage Company" and that Samuels had failed to make her monthly mortgage payments. On November 23, 2007, the Court held a hearing on the affidavit and the underlying motion for relief, resulting in entry of an agreed order of that same date, granting Citi Residential relief from the automatic stay to foreclose, effective January 31, 2008. [Doc. # 251]
On February 1, 2008, in an Omnibus Objection to claims, Samuels objected to the amended claim of AMC Mortgage Services (Claim No. 3-2), stating that "[t]his claim alleges a security interest but fails to identify the property securing the claim or to attach a copy of any documentation in support of the claim." [Doc. # 267] Citi Residential Lending filed a response to the objection [Doc. [**4] # 294] that identified the property in question as the real property at 316B Essex Street, Lynn, Massachusetts, [*12] and included as attachments the relevant promissory note and mortgage. Just prior to the preliminary hearing on the objection, the Debtor filed a report and hearing agenda that, with respect to this claim, stated:
A response was filed by Citi Residential Lending, Inc. regarding this claim []. The response includes a copy of the Note and Mortgage, as requested in the objection, but fails to demonstrate that AMC or Citi Residential is the actual holder of the note and mortgage, such as by attaching a copy of an assignment(s). The response also fails to provide a complete Loan History or to provide an affidavit of the keeper of records regarding the amount owed as of the date of the response.
The Debtor thus essentially retracted her original grounds for objecting–failure to identify the property and lack of supporting documentation–and raised new grounds: lack of evidence that AMC or Citi Residential was the actual holder of the promissory note and mortgage. The court held a preliminary hearing on the objection as so amended on April 15, 2008 and a continued hearing on June [**5] 20, 2008. The court then issued a procedural order requiring (i) that the claimant file documentation establishing true ownership of the note and mortgage that form the basis for its claim and then (ii) that the Debtor file a response indicating whether it accepts the evidence as establishing the validity of the claim, including (in the event of rejection) an explanation as to why.
The documentation required by the first prong of this order was filed by Deutsche Bank National Trust Company, as Trustee, in trust for the registered holders of Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2005-W3 ("Deutsche Bank"). In the response to which the documentation was attached [Doc. # 363], 2 Deutsche Bank claimed to be the present holder of the mortgage at issue. The Debtor filed a response indicating that she did not accept the documents adduced as evidence establishing the validity of the lien. [Doc. # 366]
2 Deutsche Bank also filed a Supplemental Response [Doc. # 364].
On August 19, 2008, Citi Residential, as loan servicer and attorney-in-fact for Deutsche Bank, then moved to amend proof of claim No. 3, stating that AMC Mortgage Services, Inc. had incorrectly named [**6] Argent as the creditor in that proof of claim. [Doc. # 377] Citi Residential said in the motion that in fact the loan is held by Deutsche Bank, and therefore that the proof of claim should name Deutsche Bank as the creditor. The motion further stated that effective October 1, 2007, Citi Residential had replaced AMC Mortgage Services, Inc. as servicer of the loan. On October 21, 2008, and over the Debtor's objection, the court granted this motion. Accordingly, on October 24, 2008, Deutsche Bank National Trust Company, as Trustee, in trust for the registered holders of Argent Securities Inc., Asset-Backed Pass- Through Certificates, Series 2005-W3, filed proof of claim No. 14-2, complete with supporting documents, as an amendment to claim No. 3-2. The supporting documents, filed as exhibits to the proof of claim, included (i) the Samuels Note, (ii) the Samuels Mortgage, (iii) on the Samuels Mortgage, a registry stamp constituting evidence that the Mortgage was recorded on August 23, 2005; (iv) a Confirmatory Assignment of the Samuels Mortgage and Note from Argent to Deutsche Bank, dated August 4, 2008, bearing a registry stamp constituting evidence that the Confirmatory Assignment was [**7] recorded on August 11, 2008; and (v) a Limited Power of Attorney from Argent [*13] to Citi Residential, dated October 18, 2007 (the "2007 LPA").
On September 29, 2008, while the motion to amend proof of claim was pending, and pursuant to FED. R. BANKR. P. 3001(e)(2), Citi Residential filed evidence–essentially a notice–of transfer of claim No. 3 (as amended) other than for security [Doc. # 396]. The notice indicates that Claim No. 3 was transferred from AMC Mortgage Services, Inc., as loan servicer for Argent, to Citi Residential, as loan servicer and attorney in fact for Deutsche Bank. The clerk promptly then notified AMC Mortgage Services, Inc. of the evidence of transfer and established a deadline for the alleged transferor to object, failing which the transferee would be substituted for the original claimant without further order of the court. AMC Mortgage Services, Inc. filed no objection, and the time to object has long since passed.
On December 11, 2008, Deutsche Bank then filed the present Motion for Summary Judgment as to Claim No. 14 [Doc. # 415]. 3 Deutsche Bank construes the Debtor's objection to Claim No. 3 as in fact an objection to Claim No. 14 (because Claim No. 14 is an [**8] amendment to Claim No. 3) and, by its motion for summary judgment, seeks an order overruling the objection and allowing Claim No. 14. In support of the motion, Deutsche Bank submitted the affidavits of Ronaldo Reyes, Diane E. Tiberend, and Margarita Guerreo and the exhibits authenticated by these affiants. The Debtor has filed an opposition to the motion and, in support of her opposition, an unauthenticated deposition of Tamara Price. 4 Price is a Citi Residential employee that was deposed in another case. The court held a hearing on the motion on March 31, 2009 and took the matter under advisement.
3 A motion for summary judgment may appropriately be filed as to an objection to claim. An objection to claim is a contested matter. Pursuant to FED. R. BANKR. P. 9014(c), Rule 7056 of the Federal Rules of Bankruptcy Procedure applies to contested matters. Rule 7056 in turn makes FED. R. CIV. P. 56 applicable.
4 In her opposition, the Debtor also asks the court to take judicial notice of the entire record of this case, but she fails to identify particular documents or parts of the record of which she would have the court take judicial notice.
ARGUMENTS OF THE PARTIES
This contested matter has [**9] evolved in two significant respects since its inception with the Debtor's filing of her objection to Claim No. 3. First, the underlying claim has been amended, such that the claim in issue is no longer Claim No. 3, filed by AMC Mortgage Services, Inc., as loan servicer for Argent, but Claim No. 14-2, filed by Deutsche Bank, with Deutsche Bank claiming to be the successor in interest to Argent as holder of the same promissory note and mortgage that formed the basis of the Claim No. 3. Second, the grounds of objection have changed: the Debtor's original objection–that the proof of claim "alleges a security interest but fails to identify the property securing the claim or to attach a copy of any documentation in support of the claim"–has been satisfied, the note and mortgage having been adduced and the property having been identified. Instead, the objection has now become a challenge to Deutsche Bank's contention that it holds the promissory note and owns the mortgage on which the claim is based. It is this particular objection, as it is leveled against Claim No. 14-2, that is presently before the court as the subject of Deutsche Bank's motion for summary judgment. Neither party disputes [**10] that the issue so framed is properly [*14] before the Court, the lack of a formal objection to Claim No. 14-2 notwithstanding.
Deutsche Bank's argument in support of summary judgment is as follows. Pursuant to a certain Mortgage Loan Purchase and Warranties Agreement, the following sequence of transfers occurred: Argent, as the originator of the loan and payee and original holder of the note, sold the loan in question to Ameriquest Mortgage Company LLC, which, in turn sold the loan to Argent Securities, Inc., which deposited the loan into the ARSI Series 2005-W3 Pool subject to the Pooling and Servicing Agreement ("PSA") dated as of October 1, 2005 between Argent Securities, Inc. as Depositor, Ameriquest as Master Servicer, and Deutsche Bank, as Trustee. Accordingly, Argent endorsed the original promissory note in blank, without recourse–thus converting it into a bearer instrument, negotiable by transfer of possession alone–and delivered it to Deutsche Bank as pool Trustee, which has had actual physical custody of the note since August 18, 2005. The mortgage followed a similar path, twice: first on August 18, 2005, when Argent Mortgage Company LLC, the original mortgagee, assigned the mortgage [**11] in blank and delivered it to Deutsche Bank as pool Trustee; and a second time on August 4, 2008, when Citi Residential, acting under a limited power of attorney from Argent, executed on behalf of Argent a confirmatory assignment of the mortgage to Deutsche Bank as pool Trustee and recorded the same in the applicable registry of deeds. In addition, Deutsche Bank argues, Argent ratified the assignment of the mortgage to Deutsche Bank by raising no objection to the court's notice of evidence of transfer of claim.
The Debtor argues that Deutsche Bank must show that it is the lawful owner of both the note and the mortgage. The Debtor does not dispute that the promissory note was indorsed in blank and transferred to Deutsche Bank and that Deutsche Bank is now, and since August 18, 2005 has been, in possession of the note. The Debtor instead concentrates her opposition on the mortgage, arguing that there exist several defects in Deutsche Bank's chain of title, or at least in Deutsche Bank's proof of the chain of title. First, the Debtor argues that Argent's original assignment of the mortgage in blank was ineffective because a mortgage is an interest in land that, under the statute of frauds, [**12] requires a conveyance in writing that identifies the assignee; Argent's conveyance in blank, though in writing, does not identify an assignee and therefore, the Debtor concludes, was ineffective.
Second, the Debtor contends that the PSA required that all mortgages acquired thereunder had to be funneled to Deutsche Bank, as pool trustee, through the entity designated by the PSA as "depositor," ARSI. A failure to follow this protocol–such as by direct assignment of the mortgage from the loan originator to the pool trustee, bypassing the depositor–would, the Debtor contends, constitute a breach of the PSA, a breach of fiduciary obligations under the PSA to investors, a breach of federal regulations, and an act giving rise to unfavorable tax consequences for the investors. The Debtor argues that because the mortgage assignments described by Deutsche Bank do not indicate that title passed to Deutsche Bank through the depositor, the assignments of the mortgage must be invalid.
Third, the Debtor argues that the confirmatory assignment is invalid because the vice-president of Citi Residential who executed that assignment, a Ms. Tamara Price, indicated in a deposition in an unrelated case that [**13] (1) she signs documents [*15] presented to her for signing without knowing what she is signing and (2) she signs these documents outside the presence of a notary, after which the documents are forwarded to a notary for completion. The Debtor further argues that Price patently lied when she recited in the Confirmatory Assignment that the original assignment "was lost"; the assignment in blank was produced in this proceeding and therefore was not lost. The Debtor does not elaborate on the consequences or import of these allegations. Nor does he dispute that Ms. Price had authority to execute the assignment and that she actually did execute it.
Fourth, the Debtor argues very briefly that, because the execution and recording of the confirmatory assignment occurred after she filed her bankruptcy petition, these acts constituted violations of the automatic stay and of 11 U.S.C. § 549 (permitting a trustee to avoid certain postpetition transfers). In support of this argument, the Debtor cites In re Beaulac, 298 B.R. 31 (Bankr. D. Mass. 2003) without elaboration. She offers no explanation as to how the postpetition transfer of a mortgage already in existence and previously recorded can constitute [**14] a transfer of an asset of the estate or a violation of the automatic stay. She further suggests that she has the power to avoid the "unauthorized postpetition conveyance" but does not explain how or on what grounds and has not moved to avoid the conveyance.
SUMMARY JUDGMENT STANDARD
[HN1] A party is entitled to summary judgment only upon a showing that there is no genuine issue of material fact and that, on the uncontroverted facts, the movant is entitled to judgment as a matter of law. FED R. CIV. P. 56(c). Where, as here, the burden of proof at trial would fall on the party seeking summary judgment, that party must support its motion with evidence–in the form of affidavits, admissions, depositions, answers to interrogatories, and the like–as to each essential element of its cause of action. The evidence must be such as would permit the movant at trial to withstand a motion for directed verdict under FED. R. CIV. P. 50(a). Anderson v Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). If the motion is properly supported, the burden shifts to the adverse party to submit evidence demonstrating the existence of a genuine issue as to at least one material fact. If the adverse party does not so respond, [**15] "summary judgment, if appropriate, shall be entered against the adverse party." FED. R. CIV. P. 56(e); Jaroma v. Massey, 873 F.2d 17, 20 (1st Cir. 1989). The court makes no findings of fact but only determines whether there exists a genuine issue of material fact and, if not, whether, on the uncontroverted facts, the moving party is entitled to judgment as a matter of law.
a. Burden of Proof
The present motion seeks summary judgment as to a proof of claim. The burdens with respect to proofs of claim were summarized by Judge Somma in In re Long, 353 B.R. 1, at 13 (Bankr. D. Mass. 2006):
[HN2] A proof of claim executed and filed in accordance with the Federal Rules of Bankruptcy Procedure constitutes prima facie evidence of the validity and amount of the claim. FED. R. BANKR. P. 3001(f); see also Juniper Dev. Group v. Kahn (In re Hemingway Transp., Inc.), 993 F.2d 915, 925 (1st Cir. 1993). In order to rebut this prima facie evidence, the objecting party must produce "substantial evidence." United States v. Clifford (In re Clifford), 255 B.R. 258, 262 (D. Mass. [*16] 2000) (Hemingway Transport, 993 F.2d at 925). If the objecting party produces substantial evidence in opposition to the proof [**16] of claim and thereby rebuts the prima facie evidence, the burden shifts to the claimant to establish the validity of its claim. Hemingway Transport, 993 F.2d at 925 ("Once the trustee manages the initial burden of producing substantial evidence . . . the ultimate risk of nonpersuasion as to the allowability of the claim resides with the party asserting the claim."). Where the proof of claim is not filed in accordance with the Federal Rules of Bankruptcy Procedure, the proof of claim does not constitute prima facie evidence of the validity and amount of the claim, and therefore the burden of proof rests at all times on the claimant.
In order for a proof of claim to be executed and filed in accordance with the Federal Rules of Bankruptcy Procedure, it must satisfy (among other things) two requirements set forth in Rule 3001 itself. First, "when a claim . . . is based on a writing, the original or a duplicate shall be filed with the proof of claim." FED. R. BANKR. P. 3001(c). Second, "[i]f a security interest in property of the debtor is claimed, the proof of claim shall be accompanied by evidence that the security interest has been perfected." FED. R. BANKR. P. 3001(d).
Deutsche Bank contends [**17] that its amended proof of claim (No. 14-2) enjoys prima facie validity, and that the Debtor has not rebutted this prima facie validity with substantial evidence or any evidence at all. The Debtor disagrees, arguing that the proof of claim was not supported by documents showing a complete chain of title and therefore does not constitute prima facie evidence of the claim, such that the burden rests from the start on the claimant.
The Court agrees with the Debtor: the documents attached to Proof of Claim No. 14-2–in relevant part, the Note, the Mortgage, the Confirmatory Assignment, and the 2007 LPA–do not, by themselves, establish the necessary chain of title. The Note and Mortgage are in fact the underlying documents on which the claim is based, but they identify Argent as payee and mortgagee, not Deutsche Bank. Deutsche Bank attempted to show that it now holds the rights originally given to Argent by attaching the Confirmatory Assignment to its proof of claim. The Confirmatory Assignment, being an assignment in writing from Argent to Deutsche Bank of all rights under the Note and Mortgage, would suffice but for one problem: its validity is contingent on the limited power of attorney [**18] pursuant to which Citi Residential executed it for Argent, but the 2007 LPA that was attached to the proof of claim does not authorize the particular type of mortgage assignment that was involved in the Confirmatory Assignment.
The 2007 LPA expressly authorizes Citi Residential to execute, on behalf of Argent, only two kinds of mortgage assignment: (i) "the assignment of any Mortgage or Deed of Trust and the related Mortgage Note, in connection with the repurchase of the mortgage loan secured and evidenced thereby," and (ii) "the full assignment of a Mortgage or Deed of Trust upon payment and discharge of all sums secured thereby in conjunction the refinancing thereof." 5 The Confirmatory Assignment was not executed in connection with the repurchase of a mortgage loan or the refinancing of [*17] this loan, and the 2007 LPA does not authorize mortgage assignments of any other kind. A further paragraph in the 2007 LPA authorizing Citi Residential to foreclose on mortgages is not an authorization to execute assignments of mortgages, even where the assignment would facilitate a foreclosure of the mortgage. 6 Where the 2007 LPA narrowly circumscribed the two types of mortgage assignment it did [**19] authorize Citi Residential to execute, the further grant of authority to foreclose should not be construed broadly to authorize additional types of mortgage assignment.
5 2007 LPA (attached as Exhibit 4 to Proof of Claim No. 14-2), at PP 6 and 7 (emphasis added).
6 Judge Feeney reached this same conclusion with respect to identical language in another limited power of attorney from Argent to Citi Residential. See In re Hayes, 393 B.R. 259, 268, 270 (Bankr. D. Mass. 2008).
Consequently, the documents submitted with the proof of claim do not by themselves show a valid assignment of rights from Argent to Deutsche Bank and do not fully support the asserted claim. It follows that the proof of claim is not supported by documents adequate to establish the assignment of rights on which it is based, and therefore that the claim does not enjoy prima facie validity. In the alternative, whatever prima facie validity the claim initially enjoyed was rebutted by the Debtor's pointing out of the defect in the chain of title that was evident in the documents submitted with the proof of claim. Either way, for purposes of the present motion, the proof of claim does not enjoy prima facie validity, and the [**20] burden is on the claimant, Deutsche Bank, to establish that it now holds the rights given by the Debtor to Argent in the Note and Mortgage.
b. The Factual Record
The evidence adduced in support of summary judgment, when construed in the light most favorable to Samuels, shows the following. There are no genuine issues as to the material facts.
On August 18, 2005, Samuels, as owner of the real property located at 316B Essex Street, Lynn, Massachusetts ("the Property"), executed in favor of Argent Mortgage Company LLC, as lender, a promissory note ("the Note") in the original principal amount of $ 272,000 and, to secure repayment of the note, a mortgage on the Property ("the Mortgage"). The Mortgage was recorded with the Essex South Registry of Deeds on August 23, 2005.
On the same day that it originated the Samuels loan, Argent endorsed the Note in blank and also executed a written assignment in blank–i.e., without designation of an assignee–of the Note and Mortgage ("the Assignment"). Also on the same day, Argent transmitted the Note, Mortgage, and Assignment to Deutsche Bank in its capacity as custodian of Argent's original collateral files.
Under a Mortgage Loan Purchase and Warranties [**21] Agreement ("MLPWA") 7 dated January 2, 2003 between Argent and its affiliate, Ameriquest Mortgage Company, Inc., Argent regularly and systematically sold and transferred the loans that it originated to Ameriquest for securitization purposes. The MLPWA did not itself effectuate conveyance or sale of any specific loan; under section 2(a) of the MLPWA, a further act would be necessary to effectuate a sale pursuant to the MLPWA: specifically, the execution of an Assignment and Conveyance Agreement. From the affidavit of Diane Tiberand, a senior vice president of ACC Capital Holdings Corporation, the parent company of both Argent and Ameriquest, it is clear that both Argent and [*18] Ameriquest believe that the Samuels loan was conveyed by Argent through Ameriquest to Argent Securities, Inc. ("ARSI") to Deutsche Bank. However, Deutsche Bank has adduced no evidence that the Samuels loan was among those that Argent sold and transferred to Ameriquest, either under the MLPWA or otherwise.
7 Tiberand Affidavit [Doc. 420], Exhibit 1.
Ameriquest securitized its mortgage loans through one of two corporate vehicles; in the case of the Samuels loan, the vehicle Ameriquest used was ARSI. Pursuant to and through [**22] a Mortgage Loan Purchase Agreement dated October 26, 2005 ("MLPA") between Ameriquest and ARSI, 8 Ameriquest sold the Samuels loan–or at least whatever interest Ameriquest had therein–to ARSI for subsequent deposit by ARSI into the ARSI Series 2005-W3 pool trust. The sale and transfer of the loan from Ameriquest to ARSI was effectuated by the MLPA itself, which was not merely an agreement to sell but also the actual written instrument of conveyance. Thus, section 1 of the MLPA states, "[t]he Seller hereby sells, and the Purchaser hereby purchases, as of October 28, 2005, certain . . . residential mortgage loans." The loans in question were identified in a Closing Schedule executed pursuant to Section 2 of the MLPA. The Samuels loan was listed on the closing schedule as Loan No. 83442632, which is the loan number that appears on both the Note and the Mortgage.
8 The Mortgage Loan Purchase Agreement of October 26, 2005 is attached as Exhibit C to the affidavit of Ronaldo Reyes [Doc. 418].
ARSI then deposited the Samuels Loan, or whatever interest ARSI had in that loan, into the ARSI Series 2005-W3 pool trust by transfer to Deutsche Bank as trustee. The deposit into the pool trust was [**23] done pursuant to a Pooling and Servicing Agreement dated October 1, 2005 ("the PSA") among ARSI, Ameriquest, and Deutsche Bank. Under the PSA, ARSI, as Depositor, deposited certain designated mortgage loans, including the Samuels loan, into the pool; Ameriquest, as Master Servicer, agreed to be responsible for servicing of the loans, either itself or through one or more subservicers; and Deutsche Bank agreed to serve as trustee to hold legal title to the pooled mortgage loans for the benefit of investors in the pool. ARSI sold and deposited the Samuels loan (and 9,909 other mortgage loans) into the ARSI Series 2005-W3 pool on October 28, 2005. The PSA itself, in conjunction with the schedule of mortgages deposited through it into the pool trust, served as a written assignment of the designated mortgage loans, including the mortgages themselves. Thus in section 2.01, the PSA states: "The Depositor [ARSI], concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey to the Trustee [Deutsche Bank] without recourse for the benefit of the Certificateholders all the right, title and interest of the Depositor, including any security interest [**24] therein for the benefit of the Depositor, in and to the Mortgage Loans identified on the Mortgage Loan Schedule[.]" (Emphasis added.) Per Section 2 of the MLPA, the Mortgage Loan Schedule for the PSA was the same document as the Closing Schedule executed pursuant to Section 2 of the MLPA, on which was listed the number of the Samuels Loan.
Except only as set forth in the following sentence, Deutsche Bank has had and continues to have possession of the Note and Mortgage evidencing the Samuels loan since August 18, 2005, first as custodian of Argent's original collateral files and then, from and after October 28, 2005, as trustee [*19] of the ARSI Series 2005-W3 pool for the benefit of certificate holders of the trust. In August 2008, Deutsche Bank relinquished physical custody of the collateral file, including the Note, to Citi Residential for purposes of an evidentiary hearing scheduled for August 20, 2008. Citi Residential had by then become servicer of the loan for Deutsche Bank. The collateral file, including the Note, remains in Citi Residential's physical custody for the benefit of Deutsche Bank.
On October 18, 2007, Argent executed a limited power of attorney ("the 2007 LPA") under which [**25] it made Citi Residential its attorney-in-fact for certain purposes. In relevant part, the 2007 LPA gave Citi Residential
full power and authority to sign, execute, acknowledge, deliver, file for record, and record any instrument on its behalf and to perform such other act or acts as may be customarily and reasonably necessary and appropriate to effectuate the following enumerated transactions in respect of any of the mortgages or deeds of trust (the "Mortgages" and "Deeds of Trust", respectively) and promissory notes secured thereby (the "Mortgage Notes"). 9
The enumerated transactions include, in relevant part:
(6) The assignment of any Mortgage or Deed of Trust and the related Mortgage Note, in connection with the repurchase of the mortgage loan secured and evidenced thereby.
(7) The full assignment of a Mortgage or Deed of Trust upon payment and discharge of all sums secured thereby in conjunction the refinancing thereof.
(8) With respect to a Mortgage or Deed of Trust, the foreclosure, the taking of a deed in lieu of foreclosure, or the completion of judicial or non-judicial foreclosure . . . . 10
9 2007 LPA.
10 2007 LPA, PP 6, 7, and 8.
On August 4, 2008, Argent, acting through Citi Residential [**26] as attorney in fact for Argent, executed a confirmatory assignment of the Samuels Mortgage to Deutsche Bank. The document was signed for Citi Residential by its vice president Tamara Price. The Confirmatory Assignment states that it was effective as of April 14, 2006. In the confirmatory assignment, Ms. Price also stated that the confirmatory assignment was being executed with intent "to replace the original assignment which due to inadvertence and/or mistake was lost[.]" 11 Citi Residential recorded this confirmatory assignment in the Essex South Registry of Deeds on August 11, 2008. Though the Mortgage itself had previously been recorded, no earlier assignment of the Mortgage had been recorded.
11 Aside from this statement, Deutsche Bank has adduced no evidence that an assignment of the mortgage has been lost; nor does Deutsche Bank allege that there exists a lost assignment or rely on any lost assignment in this motion. There is evidence of only one assignment that predates the Confirmatory Assignment: the assignment in blank that was executed immediately after origination of the loan. That assignment is in evidence here, and there is no evidence that it was ever lost. There exists [**27] a genuine issue as to whether the original assignment was lost and as to whether Ms. Price's representation to that effect was knowingly false, but, as explained below, the Court also concludes that these facts are not material to resolution of the present controversy. They present no genuine issue of material fact.
On December 5, 2008, Argent executed another limited power of attorney ("the 2008 LPA") under which it made Citi Residential its attorney-in-fact for certain purposes. The 2008 LPA stated that it was [*20] effective retroactively to September 1, 2007, and that Argent ratified any and all actions theretofore taken by Citi Residential within the scope of the powers granted by the 2008 LPA from and after September 1, 2007. The 2008 LPA expressly stated that the powers it conferred on Citi Residential included the power to execute and record the assignment of any mortgage and the related mortgage note.
Since the recording of the Confirmatory Assignment, record title to the Mortgage has stood in the name of Deutsche Bank. Neither Argent nor Ameriquest claims any interest in the Samuels Mortgage and Note.
c. The Promissory Note
The uncontroverted evidence shows, and the Debtor does not [**28] dispute, that the Samuels Note was endorsed in blank by its named payee, that possession of the note was thereafter transferred to Deutsche Bank, and that Deutsche Bank is now, and since August 18, 2005 has been, in possession of the note. As a negotiable instrument, the Note may be transferred in accordance with Article 3 of the Uniform Commercial Code as enacted in Massachusetts: [HN3] "When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed." G.L. c. 106, § 3-205(b). By virtue of its possession of a note indorsed in blank, Deutsche Bank is the holder of the note and as such has standing in this case to seek payment thereof. G.L. c. 106, § 3-301 ([HN4] "Person entitled to enforce" an instrument includes the holder of the instrument."); First National Bank of Cape Cod v. North Adams Hoosac Savings Bank, 7 Mass. App. Ct. 790, 797, 391 N.E.2d 689 (1979) ("As the holder of the note, [plaintiff] also would be entitled to all payments to be made by the mortgagors on the note.").
d. The Mortgage
In order to establish that it holds not only the Samuels Note but also the Samuels Mortgage, Deutsche Bank follows two alternate paths. The [**29] first relies on showing a chain of three assignments of the mortgage: from Argent to Ameriquest, then Ameriquest to ARSI, and then ARSI to Deutsche Bank. The problem with this strategy is that Deutsche Bank has adduced no writing evidencing the first of these transfers, from Argent to Ameriquest. [HN5] A mortgage is an interest in real property, and the statute of frauds accordingly requires that an assignment of a mortgage be in writing. Warden v. Adams, 15 Mass. 233 (1818) ("By force of our statutes regulating the transfer of real estates and for preventing frauds, no interest passes by a mere delivery of a mortgage deed, without an assignment in writing and by deed."). Deutsche Bank has adduced evidence of an agreement pursuant to which Argent agreed to transfer mortgage loans to Ameriquest, but it has adduced no writing evidencing the assignment of the Samuels Mortgage from Argent to Ameriquest. Consequently, the chain of title is incomplete, and Deutsche Bank must, as it anticipated, fall back on its alternate strategy.
In the alternative, Deutsche Bank relies on the Confirmatory Assignment from Argent to Deutsche Bank, executed for Argent by Citi Residential on August 4, 2008 under [**30] a limited power of attorney. The Confirmatory Assignment expressly and in writing conveys from Argent to Deutsche Bank both the Samuels Mortgage and the Samuel Note.
The Confirmatory Assignment was not executed by Argent itself but by Citi Residential purporting to act under a limited power of attorney. Deutsche Bank contends that this action by Citi Residential [*21] should be deemed a valid and effective act by Argent for three independent reasons: Argent authorized it by the 2007 LPA; Argent ratified it by the 2008 LPA; and Argent further ratified it by not objecting to the evidence of transfer of claim filed by Citi Residential in this bankruptcy case. For the following reasons, the Court rejects the first, accepts the second, and, having accepted the second, does not address the third.
The first is that, prior to the Confirmatory Assignment, Argent had executed a limited power of attorney, the 2007 LPA, that empowered Citi Residential to execute this assignment for Argent. This reliance on an already-existing limited power of attorney is unavailing for the reasons articulated above (in the section on Burden of Proof): the 2007 LPA did not authorize Citi Residential to execute the Confirmatory [**31] Assignment.
Second, and in the alternative, Deutsche Bank relies on the 2008 LPA, executed by Argent on December 5, 2008, some four months after the confirmatory assignment. The 2008 LPA was expressly retroactive to September 1, 2007, and ratified any and all actions theretofore taken by Citi Residential within the scope of the powers granted by the 2008 LPA from and after September 1, 2007. The 2008 LPA expressly conferred on Citi Residential the power to execute and record the assignment of any mortgage and the related mortgage note, which powers, I conclude, include the power to execute the Confirmatory Assignment. By its ratification through the 2008 LPA of actions undertaken before it was issued, Argent remedied any lack of authority that may have existed when Citi Residential executed the Confirmatory Assignment. Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, at 18, 679 N.E.2d 191 (1997) ("Where an agent lacks actual authority to agree on behalf of his principal, the principal may still be bound if the principal acquiesces in the agent's action[.]").
The Debtor argues that the Confirmatory Assignment should nonetheless be deemed ineffective for three reasons. First she argues that [**32] the confirmatory assignment is invalid because the vice-president of Citi Residential who executed that assignment, a Ms. Tamara Price, indicated in a deposition in an unrelated case that (1) she signs documents presented to her for signing without knowing what she is signing and (2) she signs such documents outside the presence of a notary, after which the documents are forwarded to a notary for completion. The Debtor further contends that Price patently lied when she recited in the Confirmatory Assignment that the original assignment "was lost." The Debtor does not elaborate on the consequences or import of these allegations. The Court sees no reason that these alleged facts, if true, should invalidate the assignment. There is no evidence that Price signed this Confirmatory Assignment without knowing what she was signing, much less that Citi Residential did not know what it was doing by having her sign the Confirmatory Assignment on its behalf, but even if neither Price nor Citi Residential knew what they were doing, that would not invalidate the assignment. Nor does it matter that Price signed documents outside the presence of a notary and then forwarded them to the notary for completion, [**33] where the Debtor neither disputes that Price did in fact sign the Confirmatory Assignment nor offers argument that this practice was contrary to applicable law and constitutes a defect in the assignment. And any falsity or lie as to the purpose of the confirmatory assignment is immaterial: the Court knows of no requirement that an assignment contain a [*22] statement of purpose, truthful or otherwise.
Second, the Debtor argues that the PSA required that all mortgages acquired thereunder to be funneled to Deutsche Bank, as pool trustee, through the entity designated by the PSA as "depositor," ARSI. A failure to follow this protocol–such as by direct assignment of the mortgage from the loan originator to the pool trustee, bypassing the depositor–would, the Debtor contends, constitute a breach of the PSA, a breach of fiduciary obligations under the PSA to investors, a breach of federal regulations, and an act giving rise to unfavorable tax consequences for the investors. The Debtor argues that because the Confirmatory Assignment is a direct assignment from Argent to Deutsche Bank that bypasses the depositor, it must be invalid. This argument falls far short of its goal. Even if this direct [**34] assignment were somehow violative of the PSA, giving rise to unfavorable tax, regulatory, contractual, and tort consequences, 12 neither the PSA nor those consequences would render the assignment itself invalid. In fact, under the Debtor's own argument, the unfavorable consequences could and would arise only if, and precisely because, the assignment were valid and effective.
12 The Court does not conclude that the Confirmatory Assignment violates the PSA or gives rise to unfavorable tax, regulatory, contractual, or tort consequences; the debtor's argument is so lacking in detail on all these points as to constitute no real argument at all, certainly none permitting the conclusions she urges on the Court.
Third and last, the Debtor argues very briefly that, because the execution and recording of the confirmatory assignment occurred after she filed her bankruptcy petition, these acts constituted violations of the automatic stay and of 11 U.S.C. § 549 (permitting a trustee to avoid certain postpetition transfers). In support of this argument, the Debtor cites In re Beaulac, 298 B.R. 31 (Bankr. D. Mass. 2003) without elaboration. She offers no explanation as to how the postpetition transfer [**35] of a mortgage already in existence and previously recorded can constitute a transfer of an asset of the estate or a violation of the automatic stay. She further suggests that she has the power to avoid the "unauthorized postpetition conveyance" but does not explain how or on what grounds and has not moved to avoid the conveyance.
I find no merit in this argument or any of its parts. The postpetition assignment of a mortgage and the related note from one holder to another is not a transfer of property of the estate. The mortgage and note are assets of the creditor mortgagee, not of the Debtor. Nor is the postpetition assignment of a mortgage and the related note an act to collect a debt; the assignment merely transfers the claim from one entity to another. The Debtor cites no particular subsection of 11 U.S.C. § 362(a), the automatic stay, that she contends such an assignment violates, and the court is aware of none.
I need not address the Debtor's further unsupported contention that the postpetition recording of an assignment of mortgage is a violation of the automatic stay 13 or of 11 U.S.C. § 549(a). 14 As the [*23] Debtor herself acknowledges, [HN6] an assignment of mortgage need not be recorded [**36] in order to be valid against the mortgagor or her grantees. Lamson & Co. v. Abrams, 305 Mass. 238, 241-242, 25 N.E.2d 374 (1940); O'Gasapian v. Danielson, 284 Mass. 27, 32, 187 N.E. 107 (1933). Therefore, even if the recording were void and ineffectual, the assignment to Deutsche Bank would still be valid.
13 The recording of an assignment of mortgage by the assignee of the mortgagee creates a record chain of title for anyone taking through the mortgage and protects the assignee from subsequent transfers by or through the assignor. The Debtor offers no explanation as to how the recording might be an act to collect a debt or a violation of some other section of the automatic stay. In Beaulac, which the Debtor cites without discussion, the mortgage in question had been given to the debtor, not by the debtor; Beaulac is therefore wholly inapposite.
14 The debtor invokes the automatic stay and § 549(a) only defensively.
For the reasons set forth above, the Court concludes that there are no genuine issues of material fact and that, on the uncontroverted facts, Deutsche Bank has established that it is in possession of the note and the owner of the mortgage securing it and therefore is entitled to summary judgment [**37] as a matter of law. A separate order will enter allowing Deutsche Bank's Motion for Summary Judgment and overruling the Debtor's objection to its proof of claim, No. 14-2.
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Wells Fargo Slapped With $155,000 Judgment for Trespass
Posted on March 12, 2010. Filed under: Banking, Case Law, Foreclosure Defense, Mortgage Law | Tags: Case Law, fighting foreclosure, forensic loan audit, Housing Market, mortgage litigation |
Wells Fargo, Plaintiff v. Steven E. Tyson, SUSAN L. TYSON, LEITH ANN TYSON, LINDSAY TYSON and KYRA TYSON, Defendants
SUPREME COURT OF NEW YORK, SUFFOLK COUNTY
2010 NY Slip Op 20079; 2010 N.Y. Misc. LEXIS 410
March 5, 2010, Decided
JUDGES: JEFFREY ARLEN SPINNER, J.S.C.
OPINION BY: JEFFREY ARLEN SPINNER
Jeffrey Arlen Spinner, J.
On September 7, 2007 Plaintiff commenced this action claiming foreclosure of a mortgage by filing its Notice of Pendency and Summons and Complaint with the Clerk of Suffolk County. The mortgage at issue was originally given in favor of New Century Mortgage Corporation, Plaintiff's assignor. Said mortgage was given to secure a note and constitutes a first lien upon premises known as 3 Danville Court, Greenlawn, Town of Huntington, New York. On November 30, 2007, Plaintiff filed an application with this Court seeking the appointment of a referee pursuant to RPAPL § 1321 but withdrew that application on December 5, 2007. Subsequently and on September 18, 2009, Plaintiff filed a second application for the same relief which was granted by Order of this Court dated November 4, 2009.
On January 14, 2010, upon the written request of Defendant STEVEN TYSON, this Court convened a conference in order to address certain serious issues which had arisen with respect to the property under foreclosure. Defendant took the time to appear in person while Plaintiff dispatched a per diem attorney who had absolutely no knowledge of the matter inasmuch as she was not regular counsel, was not provided with any information and hence no meaningful progress could occur. The Court was thereupon compelled to continue the conference to February 24, 2010, at which time the Defendant again appeared in person, on this occasion, with counsel of record for the Plaintiff, appearing as instructed by the Court.
The issue that brings these parties before the Court at this time concerns the entry, without permission, into Defendant's dwelling house, by agents dispatched expressly for that purpose by Plaintiff. Plaintiff vociferously asserts that it has the absolute and unfettered right, under the express terms of the mortgage, to enter the premises at any time, for purposes of inspection and protection of its security interest and that it is free to do so without having to obtain Defendant's consent for the same. Defendant counters that Plaintiff has wrongfully and without justification entered the dwelling on at least two separate occasions, causing damage to the premises and resulting in the loss of various items of personalty.
The following facts are not in dispute. Defendant and his wife are the owners, in fee simple absolute, of the premises known as 3 Danville Court, Greenlawn, New York, which are subject to a first lien in favor of Plaintiff. Plaintiff has commenced an action to foreclose that lien, but there has been no devolution of title. Defendant's personal financial situation is such that he can no longer maintain the high cost of utility service, resulting in the voluntary discontinuance of same. Defendant has previously winterized the plumbing and heating systems in the dwelling, has secured the building, maintains the exterior of the premises and retains virtually all of his personalty in the home including furniture, clothing and foodstuffs. Defendant has, previous to any entry on the premises herein, notified Plaintiff of the discontinuance of utility service and the winterization and securing of the dwelling. Defendant, although he is now residing elsewhere, has not abandoned the property, has not evinced any intent to abandon it and he visits the premises at least once weekly and sometimes with greater frequency. In addition, Defendant has arranged with a neighbor to keep a watchful eye on the property in his absence.
It is also undisputed that without any notice to Defendant, on or about November 13, 2009, Plaintiff dispatched an agent to the premises who thereupon changed the locks, thus barring Defendant from access to his property. When Defendant contacted Plaintiff relative to his wrongful ouster from the dwelling and demanded access, Plaintiff's representative denied any knowledge of the entry and directed him to contact Fein Such & Crane, their counsel of record. Upon contacting them, Defendant was advised by someone named Matt that the entry into the home was standard procedure but a new key to the premises would be provided to him by Plaintiff, and Defendant expressly directed that they remain away from the property. In spite of Defendant's requests Plaintiff caused the property to be entered yet again in late December or early January, at which time Defendant, having been telephoned by his neighbor, actually confronted these persons and urged them to immediately leave the premises. Defendant was able to discover that these persons obtained access by use of a key identical to the one that was previously provided by Plaintiff to Defendant. Defendant then secured the premises only to return later that day to find his garage open and the loss of various items of personal property, including an 8 kilowatt portable generator, a 14 foot aluminum sectional extension ladder, an aluminum step ladder, a convertible hand truck, an AquaBot pool cleaning device and other items, valued, according to documentation supplied by Defendant, at $ 4,892.00. Defendant thereafter contacted the Suffolk County Police Department and made a full report, which was docketed under central complaint no. 10-85647.
It is at this point that the accounts begin to diverge. Defendant offered sworn testimony as follows: he arrived at the premises on November 17, 2009 to discover that he had been "locked out," so to speak; upon communicating with Plaintiff, he was redirected to their attorney who informed him that the property was "inspected and secured" due to its abandoned state; they dispatched a new key to him whereupon he discovered that his door lock cylinders had been drilled out; Plaintiff advised Defendant that he was in possession of the premises, that he had not abandoned the dwelling, that it was replete with his furniture and personal effects and he further instructed them to remain away from the property and to refrain from any entry into the dwelling; according to Defendant, Plaintiff's representative apologized and stated that they would not enter the premises.
On February 24, 2010, Plaintiff produced a witness, one John Denza, who testified under oath, as follows: at the express direction of Plaintiff, his company (a private property inspection and preservation firm) caused the mortgaged premises to be inspected on November 3, 2009, allegedly found the front door to be wide open and the premises completely unsecured and so notified Plaintiff; Plaintiff faxed his company a work order on November 6, 2009 directing that the locks be changed and the dwelling be secured and winterized and further, that on November 13, 2009 his company caused the locks to be changed; he flatly denied that the locks had been drilled or otherwise forcibly removed, instead asserting that the front door to the premises was ajar and the existing lock cylinders were simply unscrewed and set aside. It was only after a rather probing examination by the Court that Mr. Denza conceded that he had no actual knowledge as to the matters about which he testified since he never visited the premises, relying instead upon another individual to whom he had delegated all responsibility. Placing things into simpler terms, the totality of his testimony consisted of nothing more than self-serving statements constituting [*3] inadmissible hearsay not subject to any exception, Latimer v. Burrows 163 NY 7, 57 NE 95 (1900), People v. Huertas 75 NY2d 487, 553 N.E.2d 992, 554 NYS2d 444 (1990). No testimony or evidence from a party with actual knowledge was proffered by Plaintiff.
The law is clear that it is both the province and the obligation of the trial court to assess and determine all matters of credibility, Matter of Liccione v. Miuchael A. 65 NY2d 826, 482 NE2d 917, 493 NYS2d 121 (1985), Morgan v. McCaffrey 14 AD3d 670, 789 NYS2d 274 (2nd Dept. 2005). It is for the trial court to apply and resolve issues of witness credibility. Here, Plaintiff has produced a witness who has absolutely no firsthand knowledge of the controversy, hence his testimony is devoid of all probative value and cannot be the subject of any serious consideration. On the other hand, upon assessment of Defendant's demeanor and comportment, the Court is convinced that he is telling the truth and he is worthy of belief.
At the February 24, 2010 conference, Plaintiff's counsel doggedly insisted that Plaintiff was wholly justified in taking the actions complained of by Defendant (entry upon the property), asserting that it had done so in accordance with the rights conferred upon it under the terms of the mortgage and therefore Plaintiff bore no liability whatsoever to Defendant. At no time was there any denial that Plaintiff had caused Defendant's property to be entered on more than one occasion, counsel simply asserting that Plaintiff had the right to enter into and protect the property as it saw fit.
Though not specifically enumerated by counsel, the Court presumes that Plaintiff derives its claimed rights from Paragraph 7(b) of the mortgage herein, which states, in pertinent part, that "Lender, and others authorized by Lender may enter on and inspect the Property. They will do so in a reasonable manner and at reasonable times. If it has a reasonable purpose, Lender may inspect the inside of the home or other improvements on the Property. Before or at the time an inspection is made, Lender will give me notice stating a reasonable purpose for such [**9] interior inspection." Though this contractual provision clearly requires some kind of notice to Defendant, there is no indication that any notice at all was provided to Defendant. Indeed Plaintiff does not even advance any claim that it has complied with this section but instead baldly asserts, through counsel and not through any person with actual knowledge, that it has what appears to be an unfettered right to enter the premises at any time.
Presumably, counsel for Plaintiff further relies upon the express provisions of Paragraph 9 of the mortgage which states, in pertinent part, that "If…I have abandoned the Property, then Lender may do and pay for whatever is reasonable and appropriate to protect Lender's interest in the Property…Lender's actions may include but are not limited to: (a) protecting and/or assessing the value of the Property; (b) securing and/or repairing the Property;…Lender can also enter the Property to make repairs, change locks…and take any other action to secure the Property." This section presupposes that Defendant has abandoned the property. It logically follows then that abandonment would be a strict pre-requisite to Plaintiff's right of entry upon and within the premises. Here, Defendant's testimony plainly reveals that he has not abandoned the property in any manner whatsoever and therefore the required condition precedent to Plaintiff's entry does not exist.
A fair reading of the contractual provisions set forth, supra makes it abundantly clear that any and all actions taken by Plaintiff must be reasonable and, where entry into improvements on the property s contemplated, then the same must be accomplished only upon notice to the other party. It is apparent that Plaintiff has breached its own contract by its failure to give notice and further, that its actions are not reasonable under the circumstances presented. This is especially true herein since the condition precedent to Plaintiff's right of entry has not occurred.
Since the mortgage at issue is an instrument promulgated by the lender to the borrower and since the operative and binding terms thereof are not negotiable by the borrower, such an instrument is considered to be a contract of adhesion which is typically construed against the drafter thereof, Belt Painting Corp. v. TIG Insurance Company 100 NY2d 377, 795 N.E.2d 15, 763 N.Y.S.2d 790 (2000). Under the circumstances presented to this Court, it is appropriate [**11] and fair that the terms of the instrument be construed in favor of Defendant.
In the matter before the Court, it is apparent that Plaintiff has perpetrated a trespass against the real property of Defendant, which is actionable and subjects Plaintiff to liability for damages. Distilled to its very essence, trespass is characterized by one's intentional entry, with neither permission nor legal justification, upon the real property of another, Woodhull v. Town of Riverhead 46 AD3d 802, 849 NYS2d 79 (2nd Dept. 2007). The injury arising therefrom afflicts the owner's right of exclusive possession of the property, Steinfeld v. Morris 258 AD 228, 16 NYS2d 155 (1st Dept. 1939), Kaplan v. Incorporated Village of Lynbrook 12 AD3d 410, 784 NYS2d 586 (2nd Dept. 2004). [HN3] The elements of a claim for trespass are intent coupled with the entry upon the land that is in possession of another. In order for trespass to lie, general intent is legally insufficient. Instead, there must be a specific intent, either to enter the land or to engage in some act whereby it is substantially certain that such entry onto the land will result therefrom, Phillips v. Sun Oil Co. 307 NY 328, 121 NE2d 249 (1954). The intent [**12] need not be illegal or unlawful, MacDonald v. Parama Inc. 15 AD2d 797, 224 NYS2d 854 (2nd Dept. 1962) but even one who enters the land upon the erroneous belief that he has the right to enter thereon will be held liable in trespass, Burger v. Singh 28 AD3d 695, 816 NYS2d 478 (2nd Dept. 2006). Trespass will lie against a party if entry upon the land was perpetrated by a third party, such as an independent contractor or other party, at the direction of the party to be charged, Gracey v. Van Kamp 299 AD2d 837, 750 NYS2d 400 (4th Dept. 2002). It follows then, both logically and legally, that the injured party must have been in possession, whether actual or constructive, at the time that the alleged wrongful entry occurred, Cirillo v. Wyker 51 AD2d 758, 379 NYS2d 505 (2nd Dept. 1976). In the matter that is presently sub judice, it is clear that a trespass has occurred on at least two separate occasions. It is apparent to the Court that this trespass was perpetrated against the property of Defendant and was done at the special instance and request and upon the affirmative directive of Plaintiff. Since the Court finds that liability for trespass lies against Plaintiff and in favor of Defendant, [**13] the Court must now move forward to consider and to determine the damages, if any, that should properly be awarded to Defendant.
Actual damages may be recovered against the trespasser-tortfeasor though they are not a mandatory component of the claim, Amodeo v. Town of Marlborough 307 AD2d 507, 763 NYS2d 132 (3rd Dept. 2003). The rule applicable herein is that [HN5] where the invasion is de minimis or the actual amount of damages is not capable of calculation nor is it readily quantifiable, then an award of nominal damages will be appropriate under the circumstances, Town of Guilderland v. Swanson 29 AD2d 717, 286 NYS2d 425 (3rd Dept. 1968), aff'd 24 NY2d 802, 249 NE2d 467, 301 NYS2d 622 (1969). Indeed, the damages that are recoverable by the injured party include those resulting from each and every consequence of the trespass, inclusive of both damage to property and injury to the person but only to the extent that such damages arose as a direct result of the wrongful intrusion by the trespasser-tortfeasor, Vandenburgh v. Truax 4 Denio 464, 1847 LEXIS 157 (Supreme Court Of Judicature Of New York, 1847).
Damages for injury to real property are typically calculated and awarded as the lesser amount of the decline in fair market value versus the cost of restoring the property to its state before the trespass, in other words, the injured party is entitled to recover the amount by which the property has been devalued, Hartshorn v. Chaddock 135 NY 116, 31 NE 997 (1892) Slavin v. State 152 NY 45, 46 NE 321 (1897). In this matter, there is no evidence that the value of the property has been diminished or otherwise adversely affected by the trespass, hence this method of calculation of damages is inapplicable.
In instances where the conduct complained of is willful, wanton or egregious, the Court is vested with the power to award exemplary damages. Exemplary damages may lie in a situation where it is necessary not only to effectuate punishment but also to deter the offending party from engaging in such conduct in the future. Such an award may also be made to address, as enunciated by the Court of Appeals in Home Insurance Co. v. American Home Products Corp. 75 NY2d 196, 550 NE2d 930, 551 NYS2d 481 (1989) "…gross misbehavior for the good of the public…on the ground of public policy". Indeed, exemplary damages are intended to have a deterrent effect upon conduct which is unconscionable, egregious, deliberate and inequitable, I.H.P. Corp. v. 210 Central Park South Corp. 12 N.Y.2d 329, 189 NE2d 812, 239 NYS2d 547 (1963).
Since an action to foreclose a mortgage is a suit in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215, 8 NE2d 493 (1937), all of the rules of equity are fully applicable to the proceeding, including those regarding punitive or exemplary damages, I.H.P. Corp. v. 210 Central Park South Corp., supra. Indeed this Court is persuaded that Judge Benjamin Cardozo was most assuredly correct in stating that "The whole body of principles, whether of law or of equity, bearing on the case, becomes the reservoir drawn upon by the court in enlightening its judgment" Susquehannah Steamship Co. Inc. v. A.O. Andersen & Co. Inc. 239 NY 285 at 294, 146 NE 381 (1925). In a suit in equity, the Court is empowered with jurisdiction to do that which ought to be done. While the Court notes that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, Field Code of 1848 §§ 2, 3, 4, 69), the Supreme Court is nevertheless vested with equity jurisdiction and [*5] the distinct rules governing equity are still very much [**16] applicable, Carroll v. Bullock 207 NY 567, 101 NE 438 (1913). Therefore, in a matter where the conduct of the party to be charged is either willful, wanton or reckless, the Court may invoke the principles of equity so as to make an award of exemplary damages.
Here, the Court is constrained to find that the conduct of Plaintiff in this matter was both willful and wanton, as evidenced by not one but two unauthorized entries into Defendant's dwelling, occurring in complete derogation of Defendant's right of possession. This conduct becomes even more glaring when consideration is given to the fact that Defendant affirmatively notified Plaintiff that he had secured the property and that it was not abandoned and still contained his personal property. Even so, Plaintiff maintains that it has entered the property under a color of right, which turns out to be illusory under the circumstances. In spite of these declarations, Plaintiff willfully took it upon itself to enter the property on more than one occasion, doing so unreasonably and without notice, in direct contravention of the terms of its mortgage promulgated to Defendant by its assignor. This is even more distressing when it is considered that Plaintiff breaches its obligations to Defendant under the mortgage, running roughshod over Defendant's rights with a specious claim that it is acting to protect its rights and the property. In short, the conduct of Plaintiff was nothing short of oppressive and would best be described as heavy handed and egregious, to say the very least. Certainly, the trespass was willful and calculated and was not accidental in any way and the Court finds that Plaintiff did not act in good faith. Under these circumstances, an award of both actual and exemplary damages is necessary and appropriate in order to properly compensate Defendant for the losses he has sustained by way of Plaintiff's shockingly wrongful conduct as well as to serve as an appropriate deterrent to any future outrageous, improper and unlawful deeds.
The Court finds the appropriate measure of damages for the trespass to Defendant's possessory interest in the property to be in the amount of $ 200.00. The Court further finds that Defendant is entitled to recover $ 4,892.00 representing the value of the personalty lost as a direct result of Plaintiff's actions in trespass. Finally, the Court finds that Defendant is entitled to recover exemplary damages from Plaintiff in the amount of $ 150,000.00.
For all of the foregoing reasons, it is, therefore
ORDERED, ADJUDGED and DECREED that the Defendant STEVEN E. TYSON residing at 3 Danville Court, Greenlawn, New York 11740 recover judgment against the Plaintiff WELLS FARGO BANK N.A. with an office located at 3476 Stateview Boulevard, Fort Mill, South Carolina 29715 the sum of $ 200.00 for damages resulting from trespass, together with the sum of $ 4,892.00 for actual loss, together with the sum of $ 150,000.00 for exemplary damages, for a total recovery of $ 155,092.00 and that the Defendant have execution therefor. The Clerk of Suffolk County is directed to enter judgment accordingly.
This shall constitute the Decision, Judgment and Order of this Court.
Dated: March 5, 2010
JEFFREY ARLEN SPINNER, J.S.C.
Indymac Bank F.S.B. v. Yano-Horoski
Posted on November 21, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Law | Tags: Case Law, fighting foreclosure, Figting Foreclosure, Foreclosure Defense, foreclosure prevention, forensic loan audit, mortgage litigation, TILA Case Law |
Mortgage and Note voided, cancelled and nullified by the court because lender had acted in bad faith, refusing to negotiate a reasonable loan modification.
Indymac Bank F.S.B. v Yano-Horoski
2009 NY Slip Op 52333(U)
Decided on November 19, 2009
Supreme Court, Suffolk County
Spinner, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Indymac Bank F.S.B., Plaintiff
Diana Yano-Horoski, Wells Fargo Bank Minnesota National Association as Trustee for Soundview Home Equity Loan Trust 2001-1 and Kimberly Horoski, Defendants.
Steven J. Baum P.C.
Attorney for Plaintiff
Diana Yano-Horoski
Defendant Pro Se
8 Oakland Street
East Patchogue, New York 11772-5767
This is an action wherein the Plaintiff claims foreclosure of a mortgage dated August 4, 2004 in the original principal amount of $ 292,500.00 recorded with the Clerk of Suffolk County, New York in Liber 20826 of Mortgages at Page 285. The mortgage secures an adjustable rate note of the same amount with an initial interest rate of 10.375%. The mortgage encumbers real property commonly known as 8 Oakland Street, East Patchogue, Town of Brookhaven, New York and described as District 0200 Section 979.50 Block 05.00 Lot 001.000 on the Tax Map of Suffolk County. Plaintiff commenced this action by filing a Summons, Verified Complaint and Notice of Pendency on July 27, 2005. The Notice of Pendency was extended by Order dated April 28, 2008 and a Judgment of Foreclosure & Sale was granted on January 12, 2009.
Thereafter and in accordance with the Laws of 2008, Ch. 472, Sec. 3-a and in view of the fact that the loan at issue was deemed to be "sub-prime" or "high cost" in nature, Defendant seasonably requested that the Court convene a settlement conference. That request was granted and a conference was commenced on February 24, 2009 which was continued five times in a series of unsuccessful attempts by the Court to obtain meaningful cooperation from Plaintiff. In view of Plaintiff's intransigence in its continuing failure and refusal to cooperate, both with the Court and with Defendant's multiple and reasonable requests, the Court directed that Plaintiff produce an officer of the bank at the adjourned conference scheduled for September 22, 2009.
At the conference held on September 22, 2009, Karen Dickinson, Regional Manager of [*2]Loss Mitigation for IndyMac Mortgage Services, division of OneWest Bank F.S.B. ("IndyMac") appeared on behalf of Plaintiff. IndyMac purports to be the servicer of the loan for the benefit of Deutsche Bank who, it is claimed, is the owner and holder of the note and mortgage (though the record holder is IndyMac Bank F.S.B., an entity which no longer is in existence). At that conference, it was celeritously made clear to the Court that Plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than a complete and forcible devolution of title from Defendant. Although IndyMac had prepared a two page document entitled "Mediation Yano-Horoski" which contained what purported to be a financial analysis, Ms. Dickinson's affirmative statements made it abundantly clear that no form of mediation, resolution or settlement would be acceptable to Plaintiff. IndyMac asserts the total amount due it to be in excess of $ 525,000.00 and freely concedes that the property securing the loan is worth no more than $ 275,000.00. Although Ms. Dickinson insisted that Ms. Yano-Horoski had been offered a "Forbearance Agreement" in the recent past upon which she quickly defaulted, it was only after substantial prodding by the Court that Ms. Dickinson conceded, with great reluctance, that it had not been sent to Defendant until after its stated first payment due date and hence, Defendant could not have consummated it under any circumstances (Defendant, through Plaintiff's duplicity, found herself to be in the unique and uncomfortable position of being placed in default of the "agreement" even before she had received it). Plaintiff flatly rejected an offer by Plaintiff's daughter to purchase the house for its fair market value (a so-called "short sale") with third party financing. Plaintiff refused to consider a loan modification utilizing any more than 25% of the income of Plaintiff's husband and daughter (both of whom reside in the premises with her), the excuse being that "We can't control what non-obligors do with their money" (the logical follow up to this statement is how does the bank control what the obligor does with her money?). The Court found IndyMac's position to be deeply troubling, especially since a plethora of sub-prime loans in this County's Foreclosure Conference Part have been successfully modified with the lender's reliance upon the income of non-obligors who reside in the premises under foreclosure. The Plaintiff also summarily rejected an offer by both Plaintiff's husband and daughter to voluntarily obligate themselves for payment upon the full indebtedness, thus committing their individual incomes expressly to the purpose of a loan modification. It should be noted here that Defendant did not even request any waiver or "forgiveness" of the indebtedness aside from some tinkering with the interest rate, just a modification of terms so as to enable her to repay the same. It was evident from Ms. Dickinson's opprobrious demeanor and condescending attitude that no proffer by Defendant (short of consent to foreclosure and ejectment of Defendant and her family) would be acceptable to Plaintiff. Even a final and desperate offer of a deed in lieu of foreclosure was met with bland equivocation. In short, each and every proposal by Defendant, no matter how reasonable, was soundly rebuffed by Plaintiff. Viewed objectively, it is apparent that Plaintiff's conduct in this matter falls within the definitions set forth in 22 NYCRR § 130-1.1( c)(2), which might well warrant the imposition of monetary sanctions.
On the Court's own motion, a hearing was held on November 18, 2009 in order to explore the issues herein. At the hearing, Ms. Dickinson appeared as well as Mr. Horoski. IndyMac claimed a balance due, as of September 22, 2009 of $ 527,437.73 which included an escrow overdraft of $ 46,627.88 for taxes advanced since the date of default but did not include attorney's fees and costs.. Plaintiff was unable to tell the Court the amount of the principal [*3]balance owed. Mr. Horoski advised the Court that according to two letters received from Plaintiff, the principal balance was said to be $ 285,381.70 as of February 9, 2009 and $ 283,992.48 as of August 10, 2009. Plaintiff stated was that Defendant must have made payments though it was conceded that in fact no payment had been made.Plaintiff insisted that it had remained in regular contact with Defendant in an effort to reach an amicable resolution, that it had extended two modification offers to Defendant which she did not accept and further, that due to her financial status she was not qualified for any modification, even under the Federal HAMP guidelines. Plaintiff denied that it had "singled out" Defendants, simply stating that her status was such that she fell outside applicable guidelines. All of these assertions were disputed by Defendant.
That having been said, the Court is greatly disturbed by Plaintiff's assertions of the amount claimed to be due from Defendant. The Referee's Report dated June 30, 2008, which has its genesis in a sworn affidavit by a representative of Plaintiff (presumably one with knowledge of the account), reflects a total amount due and owing of $ 392,983.42. The principal balance is reported to be $ 290,687.85 with interest computed at the rates of 10.375% from November 1, 2005 through August 31, 2006 ($ 25,118.62), 12.50% from September 1, 2006 to February 28, 2007 ($ 18,018.66), 12.375% from March 1, 2007 to March 31, 2008 ($ 39,126.39) and 11.375% from April 1, 2008 to June 24, 2008 ($ 7,700.24) totalling $ 89,963.91. Plaintiff also claims $ 20.00 in non-sufficient funds charges, $ 295.00 in property inspection fees and $ 12,016.66 for tax and insurance advances. The Judgment of Foreclosure & Sale dated January 12, 2009 was granted in the amount of $ 392,983.42 with interest at the contract rate from June 24, 2008 through January 12, 2009 and at the statutory rate thereafter plus attorney's fees of $ 2,300.00 and a bill of costs in the amount of $ 1,705.00. Even computing the accrual of pre-judgment interest of $ 18,299.18 (using Plaintiff's per diem rate in the Referee's Report) together with post-judgment interest at a statutory 9% through November 19, 2009 (an additional $ 31,740.90), the application of simple addition yields a total amount due of $ 447,028.50. This figure is $ 80,409.23 less than the $ 527,437.73 asserted by Plaintiff to be due and owing from Defendant. The Court is astounded that Plaintiff now claims to be owed an escrow advance amount of $ 46,627.88 when, under oath, its officer swore that as of June 24, 2008 that amount was actually $ 34,611.22 less. Moreover, it now appears that the elusive principal balance is either $ 290,687.85, $ 285,381.70 or $ 283,992.48.
It is the province and indeed the obligation of the trial court to assess and to determine issues regarding credibility, Morgan v. McCaffrey 14 AD3d 670 (2nd Dept. 2005). In the matter before the Court, the pendulum of credibility swings heavily in favor of Defendant. When the conduct of Plaintiff in this proceeding is viewed in its entirety, it compels the Court to invoke the ancient and venerable principle of "Falsus in uno, falsus in omni" (Latin; "false in one, false in all") upon Defendant which, after review, is wholly appropriate in the context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.
The Court, over the course of some six substantive appearances in seven months, has been afforded more than ample opportunity to assess the demeanor, credibility and general state [*4]of relevant affairs of Defendant and Plaintiff. Although not actually relevant to the disposition of this matter, the Court is constrained to note that Defendant is afflicted with multiple health problems which outwardly manifest in her experiencing great difficulty in ambulation, necessitating the use of mechanical supports. Moreover, Defendant's husband, Mr. Gregory Horoski, suffers from a myriad of serious medical conditions which greatly impede most aspects of his daily existence. Nonetheless, both of these persons, together with their adult daughter who resides with them and who is substantially and gainfully employed, receive income which they are more than willing to commit, in good faith, toward repayment of the debt to Plaintiff and indeed, despite their physical challenges, they have appeared at each and every scheduled conference before this Court. At each appearance, they have assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away by Plaintiff. This has been so even in spite of the Court's continuing albeit futile endeavors at brokering a settlement.
As a relevant aside, the scenario presented here raises the specter of a much greater social problem, that of housing those persons whose homes are foreclosed and who are thereafter dispossessed. It is certainly no secret that Suffolk County is in the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing. While foreclosure and its attendant eviction are clearly the inevitable (and in some cases, proper) result in a number of these situations, the Court is persuaded that this need not be the case here. In this matter, Defendant is plainly willing to make arrangements for repayment and both her husband and daughter are likewise willing to allocate their respective incomes in order to reach the same end. Were Plaintiff amenable, she would presumably continue to maintain the property's physical plant, pay taxes thereon and the property would retain or perhaps increase its market value. Plaintiff would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars. In addition, no neighborhood blight would occur from the boarding of the property after foreclosure which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area. In short, a loan modification would result in a proverbial "win-win" for all parties involved. To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.
Since an action claiming foreclosure of a mortgage is one sounding in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215 (1937), the very commencement of the action by Plaintiff invokes the Court's equity jurisdiction. While it must be noted that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, Field Code Of 1848 §§ 2, 3, 4, 69), the Supreme Court nevertheless has equity jurisdiction and distinct rules regarding equity are still extant, Carroll v. Bullock 207 NY 567, 101 NE 438 (1913). Speaking generally and broadly, it is settled law that "Stability of contract obligations must not be undermined by judicial sympathy…" Graf v. Hope Building Corporation 254 NY 1 (1930). However, it is true with equal force and effect that equity must not and cannot slavishly and blindly follow the law, Hedges v. Dixon County 150 US 182, 192 (1893). Moreover, as succinctly decreed by our Court of Appeals in the matter of Noyes v. [*5]Anderson 124 NY 175 (1890) "A party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression…" 124 NY at 179.
In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), Special Term stated that "The maxim of "clean hands" fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or inequitable conduct in the matter with relation to which he seeks relief." 133 NYS2d at 925, citing First Trust & Savings Bank v. Iowa-Wisconsin Bridge Co. 98 F 2d 416 (8th Cir. 1938), cert. denied 305 US 650, 59 S. Ct. 243, 83 L. Ed. 240 (1938), reh. denied 305 US 676, 59 S Ct. 356 83 L. Ed. 437 (1939); General Excavator Co. v. Keystone Driller Co. 65 F 2d 39 (6th Cir. 1933), cert. granted 289 US 721, 53 S. Ct. 791, 77 L. Ed. 1472 (1933), aff'd 290 US 240, 54 S. Ct. 146, 78 L. Ed. 793 (1934).
In attempting to arrive at a determination as to whether or not equity should properly intervene in this matter so as to permit foreclosure of the mortgage, the Court is required to look at the situattion in toto, giving due and careful consideration as to whether the remedy sought by Plaintiff would be repugnant to the public interest when seen from the point of view of public morality, see, for example, 55 NY Jur. Equity § 113, Molinas v. Podloff 133 NYS2d 743 (Sup. Ct., New York County, 1954). Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, Duggan v. Platz 238 AD 197, 264 NYS 403 (3rd Dept. 1933), mod. on other grounds 263 NY 505, 189 NE 566 (1934), neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary, In Re Foreclosure Of Tax Liens 117 NYS2d 725 (Sup. Ct. Kings County, 1952), aff'd on other grounds 286 AD 1027, 145 NYS2d 97 (2nd Dept. 1955), mod. on other grounds on reargument 1 AD2d 95, 148 NYS2d 173 (2nd Dept. 1955), appeal granted 7 AD2d 784, 149 NYS2d 227 (2nd Dept. 1956). The compass by which the questioned conduct must be measured is a moral one and the acts complained of (those that are sufficient so as to prevent equity's intervention) need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong, Pecorella v. Greater Buffalo Press Inc. 107 AD2d 1064, 468 NYS2d 562 (4th Dept. 1985). Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be, Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), York v. Searles 97 AD 331, 90 NYS 37 (2nd Dept. 1904), aff'd 189 NY 573, 82 NE 1134 (1907).
An objective and painstaking examination of the totality of the facts and circumstances herein leads this Court to the inescapable conclusion that the affirmative conduct exhibited by Plaintiff at least since since February 24, 2009 (and perhaps earlier) has been and is inequitable, unconscionable, vexatious and opprobrious. The Court is constrained, solely as a result of Plaintiff's affirmative acts, to conclude that Plaintiff's conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff's actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately [*6]sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions under 22 NYCRR § 130-1.1 et. seq. is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant's benefit. This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.
After careful consideration, it is the determination of this Court that the indebtedness evidenced by the Adjustable Rate Note dated August 4, 2004 in the original principal amount of $ 292,500.00 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. should be cancelled, voided and set aside. In addition, the Mortgage which secures the Adjustable Rate Note, given to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages at Page 285, as assigned by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 should be cancelled and discharged of record. Further, Plaintiff, its successors and assigns should be forever barred and prohibited from any action to collect upon the Adjustable Rate Note. In addition, the Judgment of Foreclosure & Sale granted on January 12, 2009 and entered on January 23, 2009 should be vacated and set aside and the Notice of Pendency should be cancelled and discharged of record. For this Court to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.
Upon the Court's own motion, it is
ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further
ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and it is further
ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the [*7]aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further
ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further
ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further
ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further
ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancellation of the instruments and items of record; and it is further
ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry hereof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices of Pendency and any other fees so levied; and it is further
ORDERED that within ten (10) days of the date of entry hereof, Plaintiff's counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.
Dated: November 19, 2009
Mortgage Assignment & Affidavit Fraud
Posted on October 27, 2009. Filed under: Banking, Finance, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: affidavit, Assignment, fighting foreclosure, Figting Foreclosure, foreclosure prevention, forensic loan audit, how to stop foreclosure, loan document audit, MERS, Mortgage Audit, Mortgage Fraud, mortgage litigation, predatory loan, predatory servicing |
In bankruptcy and government takeovers of financial institutions, missing collateral is a major obstacle for trustees and regulators to overcome. The missing assignment problem is an extension of not carelessness or sloppiness as many have claimed, but of overt acts of fraud.
Skilled attorneys and forensic accounting experts could expose this fraud and as such, the effects and implications are more far reaching than a borrower, simply having their debt extinguished. Debt extinguishment or dismissal of foreclosure actions could be obtained if it can be shown that the entity filing the foreclosure:
• Does not own the note;
• Made false representations to the court in pleadings;
• Does not have proper authority to foreclose;
• Does not have possession of the note; and/or
• All indispensable parties (the actual owners) are not before the
court or represented in the pending foreclosure action.
To circumvent these issues, mortgage servicers and the secondary market have created and maintained a number of practices and procedures. MERS was briefly discussed and will be the sole subject of a major fraud report in the future.
Another common trade practice is to create pre-dated, backdated, and fraudulent assignments of mortgages and endorsements before or after the fact to support the allegations being made by the foreclosing party. Foreclosing parties are most often the servicer or MERS acting on the servicer's behalf, not the owners of the actual promissory note. Often, they assist in concealing known frauds and abuses by originators, prior servicers, and mortgage brokers from both the borrowers and investors by the utilization of concealing the true chain of ownership of a borrower's loan.
Ocwen-Anderson-Report-Sue-First-Ask-Questions-Later
IN RE DARRELL ROYCE SHERIDAN, SHERRY ANN SHERIDAN, Chapter 7 Debtors.
Posted on October 25, 2009. Filed under: bankruptcy, Case Law, Foreclosure Defense, Mortgage Law | Tags: bankruptcy, Case Law, fighting foreclosure, Figting Foreclosure, Foreclosure, Foreclosure Defense, foreclosure prevention, forensic loan audit, MERS, Mortgage Default, Mortgage Law, mortgage litigation |
Sheridan_decision
In this Chapter 7 case, the trustee, Ford Elsaesser ("Trustee"), objects to amotion under § 362(d) for relief from the § 362(a) automatic stay.1 Motions under § 362(d) are common in bankruptcy cases.2 Most stay relief requests proceed promptly to entry of an order, after proper notice, without any objection.
However, changes in mortgage practices over the past several years have created a number of new issues. The one highlighted in this case is the standing of the moving creditor. Serial assignments of the mortgagee's interest(s) and the securitization of mortgages have complicated what was previously a generally straight-forward standing analysis. Though many creditors provide in their motions adequate explanation and documentation of their standing to seek relief on real estate secured debts, Trustee challenges the adequacy of the subject motion in this case.
Following hearing and consideration of the arguments of the parties, the Court determines that Trustee's objection is well taken and the same will be sustained. The motion for stay relief will be denied.
BACKGROUND AND FACTS
On June 24, 2008, Darrell and Sherry Ann Sheridan ("Debtors") filed their joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a fee ownership interest in a residence located in Post Falls, Idaho. See Doc. No. 1 at sched. A (the "Property"). Debtors asserted the Property's value was $225,000.00. Id. They indicated secured claims existed in favor of "Litton Loan Servicing" ($197,000.00) and "Citimortgage" ($34,000.00). Id. at sched. D.
While this left no apparent equity in the Property, Debtors nevertheless claimed the benefit of an Idaho homestead exemption. Id. at sched. C.4
Deutsche Bank v. Debra Abbate Etal.
Posted on October 23, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law | Tags: fighting foreclosure, Figting Foreclosure, Foreclosure Defense, foreclosure prevention, forensic loan audit, how to stop foreclosure, Maryland Foreclosure, Mortgage Default, Mortgage Fraud, Mortgage Law, mortgage litigation, RESPA Case Law, standing |
Deutsche Bank National Trust Company, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CARRINGTON MORTGAGE LOAN TRUST 2005-OPT2, ASSET-BACKED CERTIFICATES, SERIES 2005-OPT2, Plaintiff
Debra Abbate, CARMELA ABBATE, KIM FIORENTINO, BOCCE COURT HOMEOWNERS ASSOCIATION, INC., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK CITY PARKING VIOLATIONS BUREAU, and "JOHN DOE No. 1″ through "JOHN DOE #10," the last ten names being fictitious and unknown to the plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the Mortgaged premises described in the Complaint, Defendants.
Plaintiff was represented by the law firm of Frenkel Lambert Weiss & Weisman.
Defendant was represented by Robert E. Brown, Esq.
Joseph J. Maltese, J.
The defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate's motion to dismiss the plaintiff's complaint is granted in its entirety.
This is an action to foreclose a mortgage dated February 24, 2005, upon the property located at 25 Bocce Court, Staten Island, New York. The mortgage was originated by Suntrust Mortgage Inc. ("Suntrust") and was recorded in the Office of the Clerk of Richmond County on April 26, 2005. The plaintiff filed the Summons, Complaint, and Notice of Pendency on March [*2]1, 2007.[FN1] However, Suntrust assigned the first mortgage on this property to Option One Mortgage Corporation, which was executed on July 6, 2007. Another assignment to plaintiff Deutsche Bank National Trust Company ("Deutsche Bank") was executed on March 7, 2007. Both assignments, which were recorded on July 23, 2007, contained a clause expressing their intention to be retroactively effective: the first one to date back to February 24, 2005, and the second one to February 28, 2007.[FN2] On November 19, 2007, this court issued an order of foreclosure and sale on the subject property. This court also granted two orders to show cause to stay the foreclosure on January 9, 2008 and April 8, 2008.[FN3]
The Appellate Division, Second Department ruled and reiterated in Kluge v. Kugazy the well established law that "foreclosure of a mortgage may not be brought by one who has no title to it . . . ."[FN4] The Appellate Division, Third Department has similarly ruled that an assignee of a mortgage does not have a right or standing to foreclose a mortgage unless the assignment is complete at the time of commencing the action.[FN5] An assignment takes the form of a writing or occurs through the physical delivery of the mortgage.[FN6] Absent such transfer, the assignment of the mortgage is a nullity.[FN7]
Retroactive Assignments of a Mortgage are Invalid
The first issue this court must resolve is whether the clauses in the July 6, 2007 and March 7, 2007 assignments setting the effective date of the assignment to February 24, 2005 and February 28, 2007 respectively are permissible. This court rules that, absent a physical or written transfer before the filing of a complaint, retroactive assignments are invalid.
Recently, trial courts have been faced with the situation where the plaintiff commenced a [*3]foreclosure action before the assignment of the mortgage.[FN8] In those cases the trial courts have held,
. . . where there is no evidence that plaintiff, prior to commencing the foreclosure action, was the holder of the mortgage and note, took physical delivery of the mortgage and note, or was conveyed the mortgage and note by written assignment, an assignment's language purporting to give it retroactive effect prior to the date of the commencement of the action is insufficient to establish the plaintiff's requisite standing. . .[FN9]
In this case, the plaintiff failed to offer any admissible evidence demonstrating that they became assignees to the mortgage on or before March 1, 2007; as such, this court agrees with its sister courts and finds that the retroactive language contained in the July 26, 2007 and March 7, 2007 assignments are ineffective. This court therefore rules that it lacks jurisdiction over the subject matter when the plaintiff has no title to the mortgage at the time that it commenced the action.
The next issue this court must resolve is whether the defendants waived subject matter jurisdiction because they did not raise that issue in their prior applications to this court.
Affirmative Defense of Standing
At the outset of any litigation, the court must ascertain that the proper party requests an adjudication of a dispute.[FN10] As the first step of justiciability, "standing to sue is critical to the proper functioning of the judicial system."[FN11] Standing is a threshold issue; if it is denied, "the pathway to the courthouse is blocked." [FN12]
The doctrine of standing is designed to "ensure that a party seeking relief has a sufficiently cognizable stake in the outcome so as to present a court with a dispute that is capable [*4]of judicial resolution."[FN13] "Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request."[FN14] Where the plaintiff has no legal or equitable interest in a mortgage, the plaintiff has no foundation in law or in fact.[FN15]
A plaintiff who has no standing in an action is subject to a jurisdictional dismissal since (1) courts have jurisdiction only over controversies that involve the plaintiff, (2) a plaintiff found to lack "standing is not involved in a controversy, and (3) the courts therefore have no jurisdiction of the case when such plaintiff purports to bring it."[FN16]
On November 7, 2005, in the case of Wells Fargo Bank Minn. N.A. v. Mastropaolo ["Mastropaolo"], this court found that "Insofar as the plaintiff was not the legal titleholder to the mortgage at the time the action was commenced, [the Bank] had no standing to bring the action and it must be dismissed."[FN17] Erroneously, this court "[o]rdered, that the plaintiff's summary judgment motion is denied in its entirety and that this action is dismissed with prejudice."[FN18]
This Court should have ordered that this matter was dismissed without prejudice, which would have given the plaintiff the right to start the action again after it had acquired title to the note and mortgage. Unfortunately, the plaintiff, did not seek a motion to reargue that error, which would have been corrected promptly. Instead, the plaintiff appealed the decision to the Appellate Division, Second Department, which rightfully reversed the decision 18 months later on May 29, 2007 based upon the dismissal with prejudice as opposed to a dismissal without prejudice to refile the action. However, in what appears to be dicta, the court went on to discuss whether lack of standing is tantamount to lack of subject matter jurisdiction. The court further stated that the failure of the initial pro se defendant to make a pre-answer motion or a motion to dismiss, the defense of lack of standing would be waived. But the Appellate Division did not address the issue of subject matter jurisdiction, which may not be waived. [*5]
In the instant case, this court is again faced with similar facts, which raise the issue that the Bank must have title to the mortgage before it can sue the defendant. Clearly, having title to the subject matter (the mortgage) is a condition precedent to the right to sue on that mortgage. This has always been the case, but since the Appellate Division, Second Department's comments in Mastropaolo, that issue has been clouded.
At the time that the plaintiff improperly commenced the action, the pathway to the Courthouse should have been blocked. Deutsche Bank had no legal foundation to foreclose a mortgage in which it had no interest at the time of filing the summons and complaint. Lack of a plaintiff's interest at the beginning of the action strips the court's power to adjudicate over the action.[FN19] Lack of interest and controversy is protected by the umbrella of subject matter jurisdiction. Whenever a court lacks jurisdiction, a defense can be raised at any time and is not waivable.[FN20] In other words, for there to be a cause of action, there needs to be an injury. At the time that the action was commenced, the instant plaintiff suffered no injury and had no interest in the controversy. Since the plaintiff filed this action to foreclose the mortgage before it had title to it, there was no controversy between the existing parties when the action commenced. Therefore, the court lacked subject matter jurisdiction to adjudicate the present case. The defendants are consequently entitled to a dismissal without prejudice because the court lacked jurisdiction over a non-existent controversy.
Accordingly, it is hereby:
ORDERED, that the defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate's motion to dismiss the plaintiff's complaint is granted, without prejudice to the plaintiff having the right to refile within the time provided by the Statute of Limitations; and it is further
ORDERED, that the parties and counsel shall appear before this court to further conference this matter on November 20, 2009 at 11:00AM.
ENTER,
DATED: October 6, 2009
Joseph J. Maltese
Justice of the Supreme Court
The next financial tsunami unleashed by toxic mortgages
Posted on October 23, 2009. Filed under: Banking, Foreclosure Defense, Fraud, Housing, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: fighting foreclosure, Figting Foreclosure, Foreclosure Defense, forensic loan audit, how to stop foreclosure, loan audit, Loan Modification, MERS, mortgage litigation, mortgage modification, Predatory Lending Case Law, securitization fraud |
By PAM MARTENS
The financial tsunami unleashed by Wall Street's esurient alchemy of spinning toxic home mortgages into triple-A bonds, a process known as securitization, has set off its second round of financial tremors.
After leaving mortgage investors, bank shareholders, and pension fiduciaries awash in losses and a large chunk of Wall Street feeding at the public trough, the full threat of this vast securitization machine and its unseen masters who push the levers behind a tightly drawn curtain is playing out in courtrooms across America.
Three plain talking judges, in state courts in Massachusetts and Kansas, and a Federal Court in Ohio, have drilled down to the "straw man" aspect of securitization. The judges' decisions have raised serious questions as to the legality of hundreds of thousands of foreclosures that have transpired as well as the legal standing of the subsequent purchasers of those homes, who are more and more frequently the Wall Street banks themselves.
Adding to the chaos, the Financial Accounting Standards Board (FASB) has made rule changes that will force hundreds of billions of dollars of these securitizations back onto the Wall Street banks balance sheets, necessitating the need to raise capital just as the unseemly courtroom dramas are playing out.
The problems grew out of the steps required to structure a mortgage securitization. In order to meet the test of an arm's length transaction, pass muster with regulators, conform to accounting rules and to qualify as an actual sale of the securities in order to be removed from the bank's balance sheet, the mortgages get transferred a number of times before being sold to investors. Typically, the original lender (or a sponsor who has purchased the mortgages in the secondary market) will transfer the mortgages to a limited purpose entity called a depositor. The depositor will then transfer the mortgages to a trust which sells certificates to investors based on the various risk-rated tranches of the mortgage pool. (Theoretically, the lower rated tranches were to absorb the losses of defaults first with the top triple-A tiers being safe. In reality, many of the triple-A tiers have received ratings downgrades along with all the other tranches.)
Because of the expense, time and paperwork it would take to record each of the assignments of the thousands of mortgages in each securitization, Wall Street firms decided to just issue blank mortgage assignments all along the channel of transfers, skipping the actual physical recording of the mortgage at the county registry of deeds.
Astonishingly, representatives for the trusts have been foreclosing on homes across the country, evicting the families, then auctioning the homes, without a proper paper trail on the mortgage assignments or proof that they had legal standing. In some cases, the courts have allowed the representatives to foreclose and evict despite their admission that the original mortgage note is lost. (This raises the question as to whether these mortgage notes are really lost or might have been fraudulently used in multiple securitizations, a concern raised by some Wall Street veterans.)
But, at last, some astute judges have done more than take a cursory look and render a shrug. In a decision handed down on October 14, 2009, Judge Keith Long of the Massachusetts Land Court wrote:
"The blank mortgage assignments they possessed transferred nothing…in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed. The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form…The issues in this case are not merely problems with paperwork or a matter of dotting i's and crossing t's. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs' arguments is to allow them to take someone's home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise." [Italic emphasis in original.] (U.S. Bank National Association v. Ibanez/Wells Fargo v. Larace)
A month and a half before, on August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court took an intensive look at a "straw man" some Wall Street firms had set up to handle the dirty work of foreclosure and serve as the "nominee" as the mortgages flipped between the various entities. Called MERS (Mortgage Electronic Registration Systems, Inc.) it's a bankruptcy-remote subsidiary of MERSCORP, which in turn is owned by units of Citigroup, JPMorgan Chase, Bank of America, the Mortgage Bankers Association and assorted mortgage and title companies. According to the MERSCORP web site, these "shareholders played a critical role in the development of MERS. Through their capital support, MERS was able to fund expenses related to development and initial start-up."
In recent years, MERS has become less of an electronic registration system and more of a serial defendant in courts across the land. In a May 2009 document titled "The Building Blocks of MERS," the company concedes that "Recently there has been a wave of lawsuits filed by homeowners facing foreclosure which challenge MERS standing…" and then proceeds over the next 30 pages to describe the lawsuits state by state, putting a decidedly optimistic spin on the situation.
MERS doesn't have a big roster of employees or lawyers running around the country foreclosing and defending itself in lawsuits. It simply deputizes employees of the banks and mortgage companies that use it as a nominee. It calls these deputies a "certifying officer." Here's how they explain this on their web site: "A certifying officer is an officer of the Member [mortgage company or bank] who is appointed a MERS officer by the Corporate Secretary of MERS by the issuance of a MERS Corporate Resolution. The Resolution authorizes the certifying officer to execute documents as a MERS officer."
Kansas Supreme Court Judge Rosen wasn't buying MERS' story. In fact, Wall Street was probably not too happy to land before Judge Rosen. In January 2002, Judge Rosen had received the Martin Luther King "Living the Dream" Humanitarian Award; he previously served as Associate General Counsel for the Kansas Securities Commissioner, and as Assistant District Attorney in Shawnee County, Kansas. Judge Rosen wrote:
"The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS's designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage 'in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.' " (Landmark National Bank v. Boyd A. Kesler)
Lawyers for homeowners see a darker agenda to MERS. Timothy McCandless, a California lawyer, wrote on his blog as follows:
"…all across the country, MERS now brings foreclosure proceedings in its own name — even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers' discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer's home. While up against the wall of foreclosure, consumers that try to assert predatory lending defenses are often forced to join the party — usually an investment trust — that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel. Inquiries to the trustee — if it can be identified — are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a 'vast' number of foreclosures, MERS actually succeeds in foreclosing without producing the original note — the legal sine qua non of foreclosure — much less documentation that could support predatory lending defenses."
One of the first judges to hand Wall Street a serious slap down was Christopher A. Boyko of U.S. District Court in the Northern District of Ohio. In an opinion dated October 31, 2007, Judge Boyko dismissed 14 foreclosures that had been brought on behalf of investors in securitizations. Judge Boyko delivered the following harsh rebuke in a footnote:
"Plaintiff's 'Judge, you just don't understand how things work,' argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process…There is no doubt every decision made by a financial institution in the foreclosure is driven by money. And the legal work which flows from winning the financial institution's favor is highly lucrative. There is nothing improper or wrong with financial institutions or law firms making a profit – to the contrary, they should be rewarded for sound business and legal practices. However, unchallenged by underfinanced opponents, the institutions worry less about jurisdictional requirements and more about maximizing returns. Unlike the focus of financial institutions, the federal courts must act as gatekeepers…" (In Re Foreclosure Cases)
While the illegal foreclosure filings, investor lawsuits over securitization improprieties, and predatory lending challenges play out in courts across the country, a few sentences buried deep in Citigroup's 10Q filing for the quarter ended June 30, 2009 signals that we've seen merely a few warts on the head of the securitization monster thus far and the massive torso remains well hidden in murky water.
Citigroup tells us that the Financial Accounting Standards Board (FASB) has issued a new rule, SFAS No. 166, and this is going to have a significant impact on Citigroup's Consolidated Financial Statements "as the Company will lose sales treatment for certain assets previously sold to QSPEs [Qualifying Special Purpose Entities], as well as for certain future sales, and for certain transfers of portions of assets that do not meet the definition of participating interests. Just when might we expect this new land mine to go off? "SFAS 166 is effective for fiscal years that begin after November 15, 2009." There's more bad news. The FASB has also issued SFAS 167 and, long story short, more of those off balance sheet assets are going to move back onto Citi's books.
Bottom line says Citi:
"… the cumulative effect of adopting these new accounting standards as of January 1, 2010, based on financial information as of June 30, 2009, would result in an estimated aggregate after-tax charge to Retained earnings of approximately $8.3 billion, reflecting the net effect of an overall pretax charge to Retained earnings (primarily relating to the establishment of loan loss reserves and the reversal of residual interests held) of approximately $13.3 billion and the recognition of related deferred tax assets amounting to approximately $5.0 billion…." [Emphasis in original.]
I'm trying to imagine how the American taxpayer is going to be asked to put more money into Citigroup as it continues to bleed into infinity.
Citigroup is far from alone in financial hits that will be coming from the Qualifying Special Purpose Entities. Regulators are receiving letters from Citigroup and other Wall Street firms pressing hard to rethink when this change will take effect.
Putting aside for the moment the massive predatory lending frauds bundled into mortgage securitizations, inadequate debate has occurred on whether securitization of home mortgages (other than those of government sponsored enterprises) should be resuscitated or allowed to die a welcome death. If we understand the true function of Wall Street, to efficiently allocate capital, the answer must be a resounding no to this racket.
Trillions of dollars of bundled home mortgage loans and derivative side bets tied to those loans were being manufactured by Wall Street without any one asking the basic question: why is all this capital being invested in a dormant structure? Houses don't think and innovate. Houses don't spawn new technologies, patents, new industries. Houses don't create the jobs of tomorrow.
Also, by acting as wholesale lenders to the unscrupulous mortgage firms (some in house at Wall Street firms), Wall Street was not responding to legitimate consumer demand, it was creating an artificial demand simply to create mortgage product to feed its securitization machine and generate big fees for itself. Now we see the aftermath of that inefficient allocation of capital: a massive glut of condos and homes pulling down asset prices in neighborhoods as well as in those ill-conceived securitizations whose triple-A ratings have been downgraded to junk.
There's no doubt that one of the contributing factors to the depression of the 30s and the intractable unemployment today stem from a massive misallocation of capital to both bad ideas and fraud. Today's Wall Street, it turns out, is just another straw man for a rigged wealth transfer system.
Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article other than that which the U.S. Treasury has thrust upon her and fellow Americans involuntarily through TARP. She writes on public interest issues from New Hampshire. She can be reached at pamk741@aol.com
Memoranda in Support of Motions to Dismiss Foreclosure
Posted on October 21, 2009. Filed under: Case Law, Foreclosure Defense | Tags: Case Law, fighting foreclosure, Figting Foreclosure, Foreclosure, Foreclosure Defense, foreclosure prevention, forensic loan audit, loan audit, Loan Modification, MERS, Mortgage Audit, Mortgage Default, mortgage litigation, standing Defense |
2.3 Memoranda in Support of Motions to Dismiss Foreclosure
2.3.1 Memorandum in Support of Motion to Dismiss, Case #4
IN THE CIRCUIT COURT, FOURTH
JUDICIAL CIRCUIT, IN AND FOR
DUVAL COUNTY, FLORIDA.
CASE NO.:
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.,
[DEFENDANT], DECEASED, ET AL
SEPARATE DEFENDANT, [SEPARATE DEFENDANT]'S MOTION TO CANCEL SUMMARY JUDGMENT HEARING, DISMISS PLAINTIFF'S COMPLAINT, OR IN THE ALTERNATIVE, MOTION FOR MORE DEFINITE STATEMENT
The Separate Defendant, [Separate Defendant],by and though her undersigned attorney, files this motion to cancel the summary judgment hearing, and dismiss the Plaintiff's Complaint for failure to join an indispensable party, or in the alternative, for more definite statement, pursuant to Rules 1.460, 1.210(a), 1.130(a) and 1.140(b)(7) of the Florida Rules of Civil Procedure and states:
1. This defendant was not able to access legal representation prior to her contact with Attorney [Attorney for Defendant] of Jacksonville Area Legal Aid, Inc., on February 23,
2. This separate defendant was served with a summons and complaint in this foreclosure action on January 1, 2005 and she was noticed for the February 24, 2005 summary judgment hearing on January 24, 2005.
3. Counsel for Defendant has made known to Plaintiff's attorney this request for continuance of the scheduled hearing so that this defendant is able to have the benefit of legal representation to defend and protect her interests in this residential foreclosure. However, counsel for plaintiff advises that he does not have authority without further contact with the plaintiff to consent to such continuance.
5. No prejudice will result to Plaintiff because of this Motion for Continuance.
WHEREFORE, for the above stated reasons, Defendants request that the Court grant a continuance of the hearing on the Plaintiff's Motion for Summary Final Judgment.
MOTION TO DISMISS PLAINTIFF'S COMPLAINT, OR IN THE ALTERNATIVE, MOTION FOR MORE DEFINITE STATEMENT
1. This separate defendant is the owner of the property which is the subject of this mortgage foreclosure Complaint. She requests the Court dismiss this action pursuant to Rule 1.210(a) and 1.140(7), because it appears on the face of the Complaint that a person other than the Plaintiff is the true owner of the claim sued upon and that the Plaintiff is not the real party in interest and is not shown to be authorized to bring this action. In re: Shelter Development Group, Inc., 50 B.R. 588 (Bankr.S.D.Fla. 1985) [It is axiomatic that a suit cannot be prosecuted to foreclose a mortgage which secures the payment of a promissory note, unless the Plaintiff actually holds the original note, citing Downing v. First National Bank of Lake City, 81 So.2d 486 (Fla. 1955)], See also 37 Fla. Jur. Mortgages and Deeds of Trust §240 (One who does not have the ownership, possession, or the right to possession of the mortgage and the obligation secured by it, may not foreclose the mortgage)
2. Fla.R.Civ.P. Rule 1.130(a) requires a Plaintiff to attach copies of all "bonds, notes, bills of exchange, contracts, accounts, or documents upon which action may be brought" to its complaint. The plaintiff has failed to attach a copy of the Promissory Note upon which its claim is based and the assignment attached to plaintiff's complaint is only an assignment of the mortgage and not the note. The assignment attached to the plaintiff's complaint conflicts with the allegation in paragraph 3 of the plaintiff's complaint which alleges that the assignment is of the mortgage and the promissory note.
. 3. Fla.R.Civ.P. Rule 1.310(b) provides that all exhibits attached to a pleading shall be considered a part of the pleading for all purposes. It appears on the face of MERS' Complaint that it is not the proper party to bring this action
4. Further, although the plaintiff names itself in the complaint as "Mortgage Electronic Registration Systems, Inc., as Nominee For Homecomings Financial Network, Inc." the documents attached to the plaintiff's complaint conflict and therefore cancel out said allegations.
5. In this case, MERS' allegations of material facts claiming it is the owner of the subject note are inconsistent with the documents attached to the Complaint. Further, MERS has alleged it does not have the original promissory note. When exhibits are inconsistent with the plaintiff's allegations of material fact as to who the real party in interest is, such allegations cancel each other out. Fladell v. Palm Beach County Canvassing Board, 772 So.2d 1240 (Fla. 2000); Greenwald v. Triple D Properties, Inc., 424 So. 2d 185, 187 (Fla. 4th DCA 1983); Costa Bella Development Corp. v. Costa Development Corp., 441 So. 2d 1114 (Fla. 3rd DCA 1983).
6. Rule 1.210(a) of the Florida Rules of Civil Procedure provides, in pertinent part:
"Every action may be prosecuted in the name of
the real party in interest, but a personal representative,
administrator, guardian, trustee of an express trust, a party
with whom or in whose name a contract has been made for
the benefit of another, or a party expressly authorized by
statute may sue in that person's own name without joining
the party for whose benefit the action is brought…"
The plaintiff in this action meets none of these criteria.
7. The plaintiff must allege that it is the owner and holder of the note and mortgage in question in order to be entitled to maintain an action on the note and mortgage which the plaintiff has not properly alleged in this case. Your Construction Center, Inc. v. Gross, 316 So. 2d 596 (Fl. 4th DCA 1975)
8. Plaintiff Mortgage Electronic Registration Systems, Inc. ("MERS") does not have standing to pursue this action. Standing depends on whether a party has a sufficient stake in a justiciable controversy, whether a legally cognizable interest would be affected by the outcome of the litigation. Nedeau v Gallagher 851 So.2d 214, 2003 Fla. App. LEXIS 9762, 28 Fla. L. Weekly D 1537 (1st District, 2003).
9. Standing encompasses not only the "sufficient stake" definition, but at the at least equally important requirement that the claim be brought by or on behalf of one who is recognized by the law and a "real party in interest", that is "the person in whom rests, by substantive law, the claim sought to be enforced. Kumar Corp. v Nopal Lines, Ltd, et al 462 So. 2d 1178, 1985 Fla.App. LEXIS 11940.41U.C.C. Rep. Serv. (Callaghan) 69; 10 Fla. L. Weekly 189 (3rd District1985).
10. It is axiomatic that a suit cannot be prosecuted to foreclose a mortgage which secures the payment of a promissory note, unless the Plaintiff actually holds the original note. A Plaintiff that does not hold the original notes sued has no standing and such action must be dismissed with prejudice Shelter Development Group v. MMA of Georgia, Inc 50 B.R. 588 (USBC, S.D. Florida 1985) Downing v. First National Bank of Lake City, , 81 So. 2d 486, (Fla., 1955) Tamiami Abstract and Title Company v. Berman, 324 So. 2d 137 (Fla 3rd DCA> 1975) Laing v. Gainey Builders, Inc. 184 So. 2d 897 (Fla. 1st DCA 1966). See also Davanzo v. Resolute Insurance Company, et al. 346 So.2d 1227, 1977 Fla.App. LEXIS 16014 (One who holds legal title to a mortgaged property is an indispensable party in suit to foreclose a mortgage).
WHEREFORE, this separate defendant requests the Court to dismiss the Plaintiff's complaint with prejudice; or alternatively to order the Plaintiff to add the owner and holder of the subject note and mortgage as an indispensable party to this foreclosure action, and award this defendant attorney's fees and all other relief to which she proves herself entitled.
CERTIFICATE OF SERVICE
The undersigned certifies that a true copy of this document has been faxed and mailed by U.S. Mail to [Attorney for Plaintiff] this _______________________________.
JACKSONVILLE AREA LEGAL AID, INC.,
[Attorney for Separate Defendant]
Attorneys for Separate Defendant
Lawyers Tempted By Foreclosure Crisis
Posted on October 14, 2009. Filed under: Foreclosure Defense, Fraud, Loan Modification, Mortgage Law | Tags: fighting foreclosure, Figting Foreclosure, Foreclosure, Foreclosure Defense, how to stop foreclosure, loan audit, Mortgage Law, mortgage litigation, mortgage modification |
The foreclosure crisis has resulted in a lot of work for lawyers hired to try to help struggling owners hang onto their homes.
But it has also resulted in a record number of complaints concerning claimed unscrupulous practices, some of which have already led to disciplinary action, according to a Daily Business Review article reprinted in New York Lawyer (reg. req.).
"There has definitely been a trend in the last six months or year where attorneys are having some involvement in loan modification scams," says Arne Vanstrum of the Florida Bar.
He says the Florida Bar received 100 complaints in the last six months concerning lawyers involved in loan modifications, many of them in South Florida. Meanwhile, the state attorney general's office got 756 complaints through August, a record. In all of 2008, the AG's office got only 61 such complaints, the business publication recounts in a lengthy article.
Meanwhile, the California State Bar has taken the unusual step of making public the names of 16 attorneys accused of misconduct concerning loan modification matters.
Attorneys often get into trouble because of fee issues. Clients should be charged based on the amount of time it takes to handle their matter, not the size of the mortgage, says George Castrataro. He formerly worked for the Legal Aid Service of Broward County and is now in private practice. Clients also need to be clearly informed if representation will not begin until they have made a number of monthly payments to cover a required minimum retainer, he tells the Daily Business Review.
Another potential ethical pitfall is presented if a lawyer is too closely involved with a non-law-firm loan modification company, says Ryan Wiggins, who serves as deputy director of the state AG's office.
Under a 2008 federal law that doesn't apply to attorneys, loan modification companies can't charge upfront fees, he explains to the business publication. This has led a number of firms to affiliate with attorneys, but unless the attorney is acting as a lawyer and actually representing company clients he or she is then in violation of the federal law, too, according to Wiggins.
Many complainants also contend that lawyers take their money and then do little or no wor
via Tempted By Foreclosure Crisis, Some Lawyers Overcharge & Underwork | ABA Journal – Law News Now.