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1 Louis J. Esbin, Esq. (Cal. Bar No. 119705)
The Law Offices of Louis J. Esbin
2 25129 The Old Road, Suite 114, Stevenson Ranch, CA 91381
Tel: (661) 254-5050 | Facsimile (661) 254-5252 | Email: esbinlaw@sbcglobal.net
3
Michael S. Riley (Fla. Bar #265918 Pro Hac Vice)
4 The Law Offices of Michael S. Riley
242 Algiers Ave., Fort Lauderdale, FL 33308
5 Tel: (818) 877-6423 | Facsimile: (661) 254-5252 | Email: mriley8@aol.com

6 Attorney for Reorganized Debtor and Plaintiff, Allana Baroni

7
8 UNITED STATES BANKRUPTCY COURT

9 CENTRAL DISTRICT OF CALIFORNIA - SAN FERNANDO VALLEY DIVISION

10 In re ) Chapter 11 Case
)
11 Allana A. Baroni, ) Bank. Case No. 1:12-bk-10986-MB
)
12 Reorganized Debtor. ) Adv. Proc. No. 1:13-ap-01070-MB
)
13 )
ALLANA BARONI, )
14 )
Plaintiff, )
15 )
v. ) PLAINTIFF’S NOTICE OF MOTION AND
16 ) MOTION FOR SUMMARY ADJUDICATION OR,
GREEN TREE SERVICING, LLC, a Delaware ) IN THE ALTERNATIVE, PARTIAL SUMMARY
17 limited liability company; BANK OF AMERICA, ) ADJUDICATION; MEMORANDUM OF POINTS
N.A., fdba BAC HOME LOAN SERVICING, LP, and ) AND AUTHORITIES; DECLARATIONS IN
18 as successor in interest to Countrywide Home ) SUPPORT THEREOF
Loans Servicing, LP, BANK OF AMERICA )
19 CORPORATION, as successor in interest to )
Countrywide Home Loans, Inc and Countrywide )
20 Home Loans Servicing, LP and THE BANK OF )
NEW YORK MELLON AS TRUSTEE FOR THE )
21 CERTIFICATE HOLDERS OF CWHEQ )
REVOLVING HOME EQUITY LOAN TRUST, ) Date: September 21, 2015
22 SERIES 2005-D. ) Time: 10:00am
) Place: Courtroom 303
23 Defendants. ) 21041 Burbank Blvd., Woodland Hills, CA
)
24
25 TO THE HONORABLE MARTIN R. BARASH , UNITED STATES BANKRUPTCY JUDGE, THE

26 UNITED STATES TRUSTEE, PARTIES IN INTEREST AND COUNSEL OF RECORD:

27 NOTICE IS GIVEN that the Reorganized Debtor, and Plaintiff Allana Baroni ("Plaintiff"or “Baroni”)

28 will and does respectfully submit for consideration by this Court and parties in interest, so as to move and

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1 have heard by this Court on September 21, 2015, at 10:00 am, pursuant to Fed.R.Civ.P 56(g) this

2 PLAINTIFF'S NOTICE OF MOTION AND MOTION FOR SUMMARY ADJUDICATION OR, IN THE

3 ALTERNATIVE, PARTIAL SUMMARY ADJUDICATION; MEMORANDUM OF POINTS AND

4 AUTHORITIES; DECLARATIONS IN SUPPORT THEREOF (the “MSJ” or “Motion”) of the following issues

5 with respect to Plaintiff’s Third Amended Adversary Complaint filed on December 30, 2014:

6 1. The Bank of New York Mellon f/k/a The Bank of New York as successor Indenture Trustee to

7 JPMorgan Chase Bank, National Association for CWHEQ Revolving Home Equity Loan Trust, Series 2005-

8 D (“Indenture Trustee”) is not the beneficiary of the Deed of Trust attached to Claim 4-2 (“Deed of Trust”),

9 and therefore, is not the allowed claimant of Claim 4-2;

10 2. Claim 4-2 is not a secured claim under 11 U.S.C. §506(a);

11 3. The Home Equity Line of Credit Agreement (“HELOC”) attached to Claim 4-2 is not a negotiable

12 instrument under the California Commercial Code Commercial Code § 3104(a);

13 4. The undated, stamped, purported endorsement appearing on the HELOC does not render the

14 HELOC a bearer instrument under the California Commercial Code § 3205(b);

15 5. The Indenture Trustee is not the owner of the HELOC;

16 6. The HELOC and Deed of Trust were rescinded and no longer enforceable or collectible.
17 The Motion is brought pursuant to FRCP Rule 56 (made applicable to these proceedings through

18 FRBP Rule 7056), and is based upon this Notice, the Memorandum of Points and Authorities filed

19 concurrently herewith, on the Statement of Uncontroverted Facts and Conclusions of Law, the Request

20 for Judicial Notice, the Declaration of Louis J. Esbin filed concurrently herewith, upon the pleadings and

21 records on file in the Case and in this Adversary, and on such other and further argument as may be

22 presented in a Reply to any Opposition to this MSJ, or at the hearing on this Motion.

23 PLEASE TAKE FURTHER NOTICE that this Motion is being heard on 42 days’ notice pursuant to

24 LBR 7056-1. If you wish to oppose this Motion, you must file a written response to this Motion with the

25 Bankruptcy Court and serve a copy of such response upon the Moving Party’s attorney at the address set

26 forth above no less than twenty one (21) days prior to the above hearing date. If you fail to timely file and

27 serve a response, the Court may treat such failure as consent to the Court granting the relief described

28 above.

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1 WHEREFORE, Plaintiff does respectfully request the Court grant Plaintiff’s Motion for Summary

2 Adjudication or, in the alternative, Partial Summary Judgment.

3
4 Dated: August 11, 2015 LAW OFFICES OF LOUIS J. ESBIN
5 /s/ Louis J. Esbin
6 BY______________________________
LOUIS J. ESBIN
7 Attorneys for Reorganized Debtor
8
Dated: August 11, 2015 LAW OFFICES OF MICHAEL S. RILEY
9
/s/ Michael S. Riley
10
BY______________________________
11 MICHAEL S. RILEY
Attorneys for Reorganized Debtor
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1 TABLE OF CONTENTS

2
I. INTRODUCTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3
II. STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4 A. PROCEDURAL AND FACTUAL BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

5 III. ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. STANDARD FOR GRANTING SUMMARY JUDGMENT. . . . . . . . . . . . . . . . . . . . . . . . 4
6 B. GREEN TREE HAS THE BURDEN OF PROOF FOR AN ALLOWED CLAIM. . . . . . . . 5
C. THE INDENTURE TRUSTEE IS NOT THE BENEFICIARY OF THE DEED OF TRUST
7 . .................................................................. 6
(1) CLAIM 4-2 IS UNSECURED AND SHOULD BE DISALLOWED. . . . . . . . . . . . 7
8 D. THE HELOC IS NOT A NEGOTIABLE INSTRUMENT UNDER CALIFORNIA
COMMERCIAL CODE
9 § 3104(a) NOR IS THE HELOC A BEARER INSTRUMENT UNDER §3205(b). . . . . . 7
E. THE INDENTURE TRUSTEE IS NOT THE OWNER OF THE HELOC. . . . . . . . . . . . . 8
10 F. THE LOAN WAS RESCINDED BY OPERATION OF LAW. . . . . . . . . . . . . . . . . . . . . 12
(1) RESCISSION IS EFFECTIVE UPON NOTICE FROM THE BORROWER. . . . 12
11 (2) UNDER TILA DEFENDANT IS NOT THE CREDITOR AND HAS NO STANDING
TO REFUTE THE RESCISSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12 (3) TILA DOES NOT DISTINGUISH BETWEEN DISPUTED OR UNDISPUTED
RESCISSIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13 (4) AFTER NOTICE OF RESCISSION THE BURDEN SHIFTS TO THE CREDITOR
TO PERFORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14 (5) THE RIGHT TO RESCIND RUNS FROM THE DATE OF CONSUMMATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15 (i) THE LOAN WAS TIMELY RESCINDED. . . . . . . . . . . . . . . . . . . . . . . . 14
(ii) AN ACTUAL LENDER OF MONEY MUST BE IDENTIFIED. . . . . . . . . 14
16 (iii) REORGANIZED DEBTOR COMPLIED WITH TILA, AS HELD UNDER
JESINOSKI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17 G. DEFENDANTS ARE JUDICIALLY ESTOPPED FROM ASSERTING OWNERSHIP OF A
BEARER NOTE AND THAT IT IS HOLDING A SECURED CLAIM AGAINST
18 PLAINTIFF’S ESTATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

19 V. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

20 DECLARATION OF LOUIS J. ESBIN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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1 TABLE OF AUTHORITIES

2 Case Authorities

3 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). . . . . . . . . . . . 4

4 Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). . . . . . . . . . . . . . . . . . 4

5 Cockerell v. Title Ins. Trust Co., 42 Cal. 2d 284, 292 (1954). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

6 Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) . . . . . . . . . . . . . . . . . . . . . . . . . 4

7 Fontenot v. Wells Fargo Bank, 198 Cal. App.4th 256, 270 (2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

8 Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782–83 (9th Cir. 2001). . . . . . . . . . . . . . . . . 16

9 Hardin v. Gianni (In re King Investments Inc.), 219 B.R. 848, 858 (B.A.P. 9th Cir. 1998)
............................................................................... 7
10
In re Armstrong, 320 B.R. 97, 104 (N.D. Tex 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11
In re Consol. Pioneer Mort., 178 B.R. 222, 226 (Bankr. 9th Cir. 1995), aff'd, 91 F.3d 151 (9th Cir. 1996)
12 ............................................................................... 5

13 In re E.F. Hutton Southwest Properties II v. Union Planters, 953 F.2d 963 (5th Cir. 1992). . . . . . . . . 11

14 In re Fidelity Mortgage Holding Company, Ltd., 837 F.2d 696,698 (5th Cir. 1988). . . . . . . . . . . . . . . . 5

15 In re Garvida, 347 B.R. 697, 706 (9th Cir. BAP 2006).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

16 In re Holm, 931 F.2d 620, 623 (9th Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

17 In re Lundell, 223 F.3d 1035, 1039 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

18 Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

19 Jesinoski v. Countrywide Home Loans, Inc. (Jesinoski), 135 S.Ct. 790 (2015). . . . . . . . . . . . 12, 14, 15

20 Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574. . . . . . . . . . . . . . . . . . . . . . . . . 4

21 Milton H. Green Archives, Inc. v. Marilyn Monroe, LLC, 692 F.3d 983 (9th Cir. 2012).. . . . . . . . . . . . 16

22 Nat'l Union Fire Ins. Co. v. Ready Pac Foods, Inc., 782 F. Supp. 2d 1047, 1052 (2011) . . . . . . . . . . 17

23 Neptune Society Corp. V. Longanecker, 194 Cal. App. 3d 1233, 1242 (1987). . . . . . . . . . . . . . . . . . . 6

24 New Hampshire v. Maine, 532 U.S. 742, 749 (2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

25 Rockwell Int’l Corp. v. Hanford Atomic Metal Trades Council, 851 F.2d 1208, 1210 (9th Cir. 1988). . 16

26 Wainwright Bank & Trust Co. v. Railroadmens FS&LA, 806 F.2d 146, 149 (7th Cir.1986). . . . . . . . . . 5

27
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1 Statutory Authorities and Rules

2 11 U.S.C. § 502(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3 12 C.F.R. §226.2(a)(13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4 12 U.S.C. §2605 the Real Estate Settlement Procedures Act (“RESPA”). . . . . . . . . . . . . . . . . . . . . . . 3

5 15 U.S.C. § 77000(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

6 California Civil Code Section 1558. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

7 California Civil Code §1550.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

8 California Commercial Code §3104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 18

9 California Commercial Code Section 9203(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

10 California Commercial Code § 3205(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

11 Federal Rule Bankruptcy 3001(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

12 Federal Rule Bankruptcy 9014 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

13 Federal Rule of Bankruptcy Procedure 7056. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

14 Federal Rules Civil Procedure Rule 56(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

15 Federal Rules of Civil Procedure Rule 56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

16 TILA Section 1635(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

17 TILA Section 1666(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

18
Treatises and Other Authorities
19
3 L. King, Collier on Bankruptcy § 502.02, at 502-22 (15th ed. 1991). . . . . . . . . . . . . . . . . . . . . . . . . . 5
20
Adam J. Levitin, The Paper Chase: Securitization, Foreclosure, And The Uncertainty of Mortgage Title
21 Duke Law Journal (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

22 J. Spiotto, Defaulted Securities: The Prudent Indenture Trustee’s Guide, at IV-13 (1990). . . . . . . . . 11

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1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I.

3 INTRODUCTION

4 The Motion arises out of the continuing deceptive acts and misrepresentations of Defendants, and

5 each of them, whose actions were designed with intent to hinder, delay and defraud Plaintiff. For over four

6 years Plaintiff has requested the identity of the party who will be economically injured if they do not receive

7 payments from Plaintiff. Defendants concealed and continue to conceal the identity of this party and the

8 transactions that occurred as a result of the HELOC and Deed of Trust.

9 Although clearly judicially estopped from continually arguing conflicting positions, Defendants

10 nonetheless have put forth an entourage of ever changing parties as the “real party in interest.” Most

11 recently, on May 15, 2015, a Transfer of Claim was filed in the Case identifying for the first time,

12 Specialized Loan Servicing (“SLS”) as servicing agent for The Bank of New York Mellon f/k/a The Bank

13 of New York as successor Indenture trustee to JPMorgan Chase Bank, National Association for CWHEQ

14 Revolving Home Equity Loan Trust, Series 2005-D, as the real party in interest.

15 As demonstrated by the chart below, from the period of June 17, 2010, through to May 15, 2015,

16 Defendants identified at least 6 different real parties in interest, causing Plaintiff to amend her pleadings

17 to keep up with Defendants’ changing positions. Prior to moving the Court for leave to amend the complaint

18 to account for Defendants’ most recent assertions, Plaintiff is seeking from the Court a adjudication of the

19 6 issues brought through this Motion.

20 Date Document Creditor: The Party to Whom the Debt is Owed
21 June 17, 2010 Notice of Debt Validation The Bank of New York Mellon, as successor to
JPMorgan Chase Bank, N.A., as Trustee for the
22 Certificate Holders of CWHEQ Revolving Home
Equity Loan Trust, Series 2005-D
23
July 5, 2011 Demand for Payment Countrywide Home Loans, Inc.
24 from The Dryfuss Firm,
PLC
25
July 8, 2011 Debt Validation from The Countrywide Home Loans, Inc.
26 Dryfuss Firm, PLC,
Counsel for Green Tree
27
August 9, 2011 Complaint filed in Los Countrywide Home Loans, Inc.
Angeles Superior Court
28

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1 February 28, 2012 Complaint filed in Los Countrywide Home Loans, Inc.
Angeles Superior Court
2
March 30, 2012 Proof of Claim filed in Green Tree Servicing, LLC
3 Case
4 February 1, 2013 Amended Proof of Claim Green Tree Servicing, LLC
filed in Case
5
February 2, 2013 Response to Green Tree Countrywide Home Loans, Inc., now Bank of
6 2004 Motion and Order America, N.A. its Assignees or Successors in
Interest
7
October 22, 2013 Motion for Bank of America, N.A. fka BAC Home Loans
Reconsideration and to Servicing Inc. and a subsidiary of the original
8
Set Aside Default filed in Lender Countrywide Home Loans, Inc., for the
Adversary holder and beneficiary
9
October 23, 2013 Errata to Motion for The Bank of New York Mellon as successor to
10 Reconsideration and to JPMorgan Chase Bank, N.A., as Trustee for the
Set Aside Default filed in Certificate Holders of CWHEQ Revolving Home
11 Adversary Equity Loan Trust, Series 2005-D
12 December 2, 2013 Motion to Dismiss The Bank of New York Mellon, as successor to
Plaintiff's Adversary JPMorgan Chase Bank, N.A., as Trustee for the
13 Complaint Certificate Holders of CWHEQ Revolving Home
Equity Loan Trust, Series 2005-D
14
May 15, 2015 Transfer of Claim Specialized Loan Servicing as servicing agent for
15 The Bank of New York Mellon, f/k/a The Bank of
New York as successor Indenture trustee to
16 JPMorgan Chase Bank, N.A., for CWHEQ
Revolving Home Equity Loan Trust, Series
17 2005-D

18 II.
19 STATEMENT OF FACTS
20 A.
21 PROCEDURAL AND FACTUAL BACKGROUND
22 On May 19, 2005, Plaintiff executed a Home Equity Credit Line Agreement And Disclosure
23 Statement ("HELOC") and a deed of trust ("Deed of Trust")(together, the "Loan” or “Loan Documents”) to
24 effectuate the purchase of her real property located at 2240 Village Walk Drive, #2311, Henderson, NV
25 89052 ("Village Walk Property" or “Property”). Countrywide Home Loans, Inc. ("CHL") is identified as the
26 Lender on the Loan. Mortgage Electronic Registration Systems, Inc. ("MERS") "acting solely as a nominee
27 for the Lender" is identified as the Beneficiary on the Deed of Trust. The MERS Identification Number
28 ("MIN") assigned to the Loan is 1001337-0000626254-0.

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1 On March 30, 2012, the Defendants caused a proof of claim to be filed in the Case as Claim No.

2 4-1, that Defendants caused to be amended on February 1, 2013, with the filing of an amended proof of

3 claim in the Case as Claim No. 4-2 (collectively, the "Claim"), through which the Defendants assert a

4 secured claim against Plaintiff's Estate and identify Green Tree Servicing, LLC (“Green Tree”) as the

5 creditor of the claim. See “Exhibit 1" of Plaintiff’s Request for Judicial Notice (“RJN”).

6 Two documents are attached to the Claim as evidence of the Defendants’ contention of standing

7 as the creditor: the HELOC and the Deed of Trust. Neither the HELOC nor the Deed of Trust attached to

8 the Claim validates Green Tree’s, nor the Indenture Trustee’s, standing as a secured creditor. Neither of

9 the documents identifies the Indenture Trustee as having any capacity with respect to the Loan or the

10 Claim. On the Claim, Defendant Green Tree does not assert they are an agent acting for any other entity,

11 nor is there attached any documents verifying or validating the Loan was effectively transferred or assigned

12 to any other entity after the Loan’s origination on May 19, 2005, nor are any such documents recorded in

13 the records of the Clark County, Nevada, Recorders Office.

14 On May 15, 2015, a Transfer of Claim was filed in the case as Docket Number 679, identifying for

15 the first time - pre or postpetition - Specialized Loan Servicing, as servicing agent for The Bank of New

16 York Mellon f/k/a The Bank of New York as successor Indenture Trustee to JP Morgan Chase Bank,

17 National Association for CWHEQ Revolving Home Equity Loan Trust, Series 2005-D. See “Exhibit 2" of

18 Plaintiff’s RJN. However, the Claim was not amended in any way to establish the Indenture Trustee as the

19 beneficiary of the Deed of Trust or the owner of the HELOC.

20 On December 13, 2010, in response to Plaintiff’s Qualified Written Request sent under 12 U.S.C.

21 §2605 the Real Estate Settlement Procedures Act (“RESPA”), the Loan Servicer produced to Plaintiff the

22 MERS Milestone Report in connection with the HELOC. As established by the report, MERS in its capacity

23 as the beneficiary under the Deed of Trust, never transferred the beneficial interest in the Deed of Trust

24 to the Indenture Trustee. A true and correct copy of the MERS Milestone Report is attached and

25 incorporated by reference as “Exhibit 1” to the Declaration of Louis Esbin.

26 On January 9, 2013, Plaintiff caused to be served on Green Tree the Notice of Motion and Motion

27 Pursuant to Fed. R. Bankr. P. 2004 for the Production of Documents and the Oral Examination of the

28 Person Designated by GreenTree Servicing LLC to Be Most Knowledgeable of the Topics Identified Herein

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1 (“Green 2004 Motion”)(Case Doc. No .251), upon which, on January 11, 2013, there was entered an Order

2 Granting Motion for Rule 2004 Examination (“Green Tree 2004 Order”)(Case Doc. No. 270) that was

3 served on Green Tree for the production of documents set forth in the Green Tree 2004 Motion. On March

4 11, 2013, Plaintiff caused to be served upon Bank of America N.A. (“BANA”) the Order Granting Motion

5 Pursuant to Fed. R. Bankr. P. 2004 for the Production of Documents and the Oral Examination of the

6 Person Designated by Countrywide Home Loans Inc and Bank of America National Association to be Most

7 Knowledgeable of the Topics Identified Herein (“BANA 2004 Order”) (Case Doc. No. 373). Neither

8 Defendant Green Tree, nor Defendant Bank of America, produced any assignment of the Deed of Trust.

9 On June 26, 2015, the Indenture Trustee filed a Motion for Protective Order (Adv. Proc. Doc.

10 No.95) in which the Indenture Trustee claimed to be the owner of the HELOC and, “asserts its right to

11 payment as owner of a bearer note.” See “Exhibit 3" of Plaintiff’s RJN.

12 III.

13 ARGUMENT

14 A.

15 STANDARD FOR GRANTING SUMMARY JUDGMENT

16 In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria

17 set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by

18 Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:

19 [T]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers

20 to interrogatories, and admissions on file, together with the affidavits, if any, show that there

21 is no genuine issue as to any material fact and that the moving party is entitled to a

22 judgment as a matter of law.

23 In 1986, the United States Supreme Court decided a trilogy of cases which encourage the use of

24 summary judgment as a means to dispose of factually unsupported claims. Anderson v. Liberty Lobby,

25 Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106

26 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574,

27 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "The primary purpose for granting a summary judgment motion

28 is to avoid unnecessary trials when there is no genuine issue of material fact in dispute." Farries v.

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1 Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v.

2 Railroadmens Federal Sav. & Loan Assoc., 806 F.2d 146, 149 (7th Cir.1986)). The burden is on the

3 moving party to show that no genuine issue of material fact is in dispute. Anderson, 477 U.S. at 256;

4 Celotex, 477 U.S. at 322; Matsushita, 475 U.S. at 585-586. There is no genuine issue for trial if the

5 record, taken as a whole, does not lead a rational trier of fact to find for the non-moving party. Matsushita,

6 475 U.S. at 587. "If the evidence is merely colorable or is not significantly probative, summary judgment

7 may be granted." Anderson, 477 U.S. at 249-250 (citations omitted.) Plaintiff’s MSJ meets the burdens

8 of proof of summary adjudication or, in the alternative, partial adjudication.

9 B.

10 GREEN TREE HAS THE BURDEN OF PROOF FOR AN ALLOWED CLAIM

11 A proof of claim is deemed allowed unless a party in interest objects under 11 U.S.C. § 502(a) and

12 constitutes “prima facie evidence of the validity and amount of the claim" pursuant to Federal Rule

13 Bankruptcy 3001(f). See also, Fed.R.Bankr.Proc. 3007. The filing of an objection to a proof of claim

14 "creates a dispute which is a contested matter" within the meaning of Federal Rule Bankruptcy 9014 and

15 must be resolved after notice and opportunity for hearing upon a motion for relief. See, Adv. Comm. Notes

16 to Fed.R.Bankr.Proc. 9014. Upon objection, the proof of claim provides "some evidence as to its validity

17 and amount" and is "strong enough to carry over a mere formal objection without more." In re Holm, 931

18 F.2d 620, 623 (9th Cir. 1991) (quoting 3 L. King, Collier on Bankruptcy § 502.02, at 502-22 (15th ed.

19 1991)); see also In re Consol. Pioneer Mort., 178 B.R. 222, 226 (Bankr. 9th Cir. 1995), aff'd, 91 F.3d 151

20 (9th Cir. 1996). In this instance, Plaintiff commenced the within Adversary to proceed with an objection

21 to Claim No. 4-2.

22 Bankruptcy Rule 3001(f) however "operates merely as an evidentiary presumption that is

23 rebuttable." In re Garvida, 347 B.R. 697, 706 (9th Cir. BAP 2006). If the Reorganized Debtor rebuts this

24 presumption with counter-evidence, the burden going forward shifts to the claimant. In re Lundell, 223

25 F.3d 1035, 1039 (9th Cir. 2000). While the "burden of going forward is primarily a procedural matter

26 pertaining to the order of presenting evidence," the substantive burden remains upon the claimant.

27 Garvida, 347 B.R. at 706; see Lundell, 223 F.3d at 1039 (ultimate burden of persuasion remains at all

28 times on the claimant); In re Fidelity Mortgage Holding Company, Ltd., 837 F.2d 696,698 (5th Cir. 1988).

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1 As such, Green Tree, or the Indenture Trustee, has the ultimate burden of persuasion as to the allowance

2 of the Claim and its alleged lien.

3 C.

4 THE INDENTURE TRUSTEE IS NOT THE BENEFICIARY OF THE DEED OF TRUST

5 Although the Indenture Trustee argues it is a secured claimant, there is not an iota of evidence to

6 support its assertion. Countrywide Home Loans, Inc., is identified as the Lender on the Loan. No

7 assignment of the Deed of Trust is recorded in the Clark County, Nevada, Recorder’s Office. No

8 assignment of the beneficial interest in the Deed of Trust was requested by MERS in its capacity as

9 nominee for the beneficiary. No unrecorded assignment of the Deed of Trust was produced by

10 Defendants. Absolutely no nexus between the Indenture Trustee and the Deed of Trust has been

11 proffered. Thus, the Indenture Trustee does not have a perfected interest in the Deed of Trust, nor does

12 the Indenture Trustee have a legal, equitable, or pecuniary interest in the Deed of Trust. Numerous cases

13 stand “for the general principal that the party asserting a right under an assigned instrument bears the

14 burden of demonstrating the assignment.” Fontenot v. Wells Fargo Bank, 198 Cal. App.4th 256, 270

15 (2011), citing Neptune Society Corp. v. Longanecker, (Neptune Society) 194 Cal. App. 3d 1233, 1242

16 (1987). Neptune Society in turn relied upon Cockerell v. Title Ins. Trust Co., 42 Cal. 2d 284, 292 (1954),

17 where the Court held:

18 “The burden of proving an assignment falls upon the party asserting rights thereunder. The

19 evidence must not only be sufficient to establish the fact of assignment, but the measure

20 of sufficiency requires that the evidence of assignment be clear and positive to protect an

21 obligor from any further claim by the primary oblige.”

22 Two years ago, Defendants were ordered under FRBP 2004, to produce any and all assignments,

23 recorded or unrecorded, and yet no assignment of the Deed of Trust was produced. Any surprise

24 assignment of the Deed of Trust proffered at this late date would be contemptuous in nature. Based

25 thereon, this Motion must be granted, as there are no factual disputes and the Claim must be disallowed

26 as a matter of law and the Deed of Trust avoided against title to the Property.

27
28

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1 (1)

2 CLAIM 4-2 IS UNSECURED AND SHOULD BE DISALLOWED

3 A claim should not be allowed if that claim is unenforceable against the debtor and property of the

4 debtor under any agreement or applicable law. 11 U.S.C. § 502(b)(1). Further, a party filing a proof of

5 claim must attach copies upon which claims are based in order to carry its burden of establishing a prima

6 facia case against the debtor. Hardin v. Gianni (In re King Investments Inc.), 219 B.R. 848, 858 (B.A.P.

7 9th Cir. 1998). In addition, Fed.R.Bankr. P. 3001(d) provides in pertinent part that “[i]f a security interest

8 in the property of the debtor is claimed, the proof of claim shall be accompanied by evidence that the

9 security interest has been perfected.” The Indenture Trustee does not have a perfected interest Plaintiff’s

10 Property. Official Form 10, as prescribed by the Judicial Conference of the United States, also requires

11 a creditor to attach supporting documentation to the proof of claim. “[T]he documentation required by

12 Bankruptcy Rule 3001 and Official Form 10 allows the debtor ...to have enough information to fully

13 determine whether or not a valid claim in the proper amount has been filed.” In re Armstrong, 320 B.R. 97,

14 104 (N.D. Tex 2005). Neither Claim 4-2 nor the Transfer of Claim 4-2 contains information to fully

15 determine that the Indenture Trustee owns the HELOC or that the Indenture Trustee has any security

16 interest in the Deed of Trust. If such documentation existed, it was required to be produced under FRBP

17 2004 over two years ago. No such documentation has been produced. To the extent that a lien secures

18 a claim against the debtor that is not an allowed secured claim, such lien is void. 11 U.S.C. § 506 (d).

19 Here, the facts support a finding that any lien claimed by the Indenture Trustee is void.

20 D.

21 THE HELOC IS NOT A NEGOTIABLE INSTRUMENT UNDER CALIFORNIA COMMERCIAL CODE

22 § 3104(a) NOR IS THE HELOC A BEARER INSTRUMENT UNDER §3205(b)

23 No argument can be made that renders the HELOC a negotiable instrument under California

24 Commercial Code §3104, which provides, in pertinent, part that

25 “... a "negotiable instrument" (1) contains an unconditional promise to pay a fixed amount

26 of money; (2) is payable to bearer or to order at the time it is issued or first comes into

27 possession of a holder; (3) is payable on demand or at a definite time; and (4) does not

28 state any other undertaking or instruction by the promisor to do any action in addition to the

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1 payment of money.”

2 If any one of these conditions is not met, the Loan note is not "negotiable." The HELOC is a line

3 of credit, not payable for a fixed amount of money and states other undertakings and instructions by the

4 promisor to take action in addition to the payment of money. The HELOC is, therefore, as a matter of law

5 a nonnegotiable instrument that cannot be validly transferred via endorsement, including an endorsement

6 “in blank.” Thus, the undated, stamped purported endorsement appearing on the HELOC has no effect

7 on the underlying HELOC and does not render the HELOC a bearer instrument under the California

8 Commercial Code § 3205(b). Therefore, summary judgment must be granted on the issue concerning the

9 transfer of the interest in the Loan and, further, that neither Green Tree nor the Indenture Trustee is the

10 allowed claimant of Claim 4-2 who may enforce or collect on the Loan.

11 E.

12 THE INDENTURE TRUSTEE IS NOT THE OWNER OF THE HELOC

13 The Indenture Trustee asserts “ownership” of the HELOC. See “Exhibit 3" P. 7:14-15, of Plaintiff’s

14 RJN. Although not produced by Defendants, a reading of the Securities and Exchange Commission’s

15 EDGAR website finds, the TRUST AGREEMENT Dated as of August [24], 2005, between CWHEQ, Inc.

16 Depositor and WILMINGTON TRUST COMPANY Owner Trustee. See “Exhibit 4" of Plaintiff’s RJN,

17 wherein Section 2.06. Declaration of Trust provides in pertinent part:

18 “Section 2.06. Declaration of Trust

19 The Trust is a statutory trust under the Statutory Trust Statute and this Agreement is the

20 governing instrument of the statutory trust.”

21 and also states:

22 “Section 2.08. Title To Trust Property

23 Legal title to all the Assets shall be vested in the Trust as a separate legal entity except

24 where applicable law in any jurisdiction requires title to any part of the Assets to be vested

25 in a trustee, in which case title shall be vested in the Owner Trustee.”

26 If the HELOC was ever sold and properly transferred to the CWHEQ 2005-D Trust (the “Trust”),

27 then according to its governing documents the Trust itself is the owner of the loan pool, or in the

28 alternative, title is vested in the Owner Trustee, Wilmington Trust, but never vested in the Indenture

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1 Trustee. No provision of the Trust’s governing documents allow for The Bank of New York Mellon f/k/a

2 The Bank of New York as successor Indenture trustee to JPMorgan Chase Bank, National Association,

3 to “own” assets of the Trust.

4 EDGAR also houses a SALE AND SERVICING AGREEMENT REVOLVING HOME EQUITY

5 ASSET BACKED NOTES SERIES 2005-D, between CWHEQ, INC. Depositor, COUNTRYWIDE HOME

6 LOANS, INC. Sponsor and Master Servicer, CWHEQ REVOLVING HOME EQUITY LOAN TRUST,

7 SERIES 2005-D the Trust, and JPMORGAN CHASE BANK, N.A. Indenture Trustee. See “Exhibit 5" of

8 Plaintiff’s RJN, wherein under Article II CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT,

9 Section 2.01 Conveyance of Mortgage Loans; Retention of Obligation to Fund Advances Under Credit Line

10 Agreements, the agreement states:

11 “(a) Concurrently with the execution and delivery of this Agreement, the Depositor hereby

12 transfers to the Trust without recourse (subject to Sections 2.02 and 2.04) all of its right,

13 title, and interest in

14 (i) each Mortgage Loan, including its Asset Balance (including all additional Balances), the

15 related Mortgage File, all property that secures the Mortgage Loan, and all collections

16 received on it after the Cut-off Date (excluding payments due by the Cut-off Date);

17 (ii) property that secured a Mortgage Loan that is acquired by foreclosure or deed in lieu

18 of foreclosure;

19 (iii) the Depositor's rights under the Purchase Agreement;

20 (iv) the Depositor's rights under the hazard insurance policies;

21 (v) all rights under any guaranty executed in connection with a Mortgage Loan;

22 (vi) all other assets included or to be included in the Trust for the benefit of the Noteholders

23 and the Credit Enhancer; and

24 (vii) all proceeds of the foregoing.

25 This transfer to the Trust is to the Owner Trustee, on behalf of the Trust, and each

26 reference in this Agreement to this transfer shall be construed accordingly. In addition, by

27 the Closing Date, the Depositor shall cause the Credit Enhancer to deliver the Policy to the

28 Indenture Trustee for the benefit of the Noteholders.”

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1 Further, ARTICLE III. THE TRANSFEROR CERTIFICATES Section 3.01. Initial Beneficiary of

2 Trust of the Trust Agreement provides in pertinent part:

3 “Upon the formation of the Trust by the contribution by the Depositor pursuant to Section

4 2.05 and until the issuance of the Transferor Certificates, the Depositor shall be the sole

5 beneficiary of the Trust.”

6 Hence, under the Trust Agreement and the Sales and Servicing Agreement, CWHEQ, Inc., was

7 allegedly the sole beneficiary of the Trust at the time the Sales and Servicing Agreement was purportedly

8 executed. Where CWHEQ, Inc., apparently intended to transfer all of its right title and interest in the

9 underlying loan pool to Wilmington Trust as the Owner Trustee, The Bank of New York Mellon f/k/a The

10 Bank of New York as successor Indenture trustee to JPMorgan Chase Bank, National Association, cannot

11 be the “owner” of assets of the Trust. Therefore, it cannot be the allowed claim holder of Claim 4-2.

12 EDGAR further houses an INDENTURE, Dated August 30, 2005, between CWHEQ REVOLVING

13 HOME EQUITY LOAN TRUST, SERIES 2005-D, Issuer, and JPMORGAN CHASE BANK, N.A. Indenture

14 Trustee. See “Exhibit 6" of Plaintiff’s RJN, wherein under Article III COVENANTS Section 3.01.Payment

15 of Principal and Interest, the Indenture provides that the payments are owed from the Trust to the

16 Noteholders via the Indenture Trustee. There are, therefore, no payments owed directly from the Plaintiff

17 to the Indenture Trustee. If the Indenture Trustee does not receive the payments owed under the Indenture

18 then its recourse is against the Trust, not Plaintiff:

19 “The Issuer will duly and punctually pay the principal and interest and other amounts

20 payable on the Notes in accordance with the terms of the Notes and this Indenture.”

21 The Indenture Granting Clause further provides that the Indenture Trustee is not the owner of the loans

22 allegedly populating the Trust, but rather the Issuer intended to grant a secured interest in the property of

23 the Trust to the Indenture Trustee and the Credit Enhancer:

24 “The Issuer agrees that the foregoing Grants are intended to grant in favor of the Indenture

25 Trustee, for the respective benefit of the Holders of the Class 1-A Notes and Class 2-A

26 Notes and for the benefit Credit Enhancer, a first priority, continuing lien and security

27 interest in all of the Issuer's personal property.”

28

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1 In this case, a lien in favor of the Credit Enhancer or the Indenture Trustee was never created or

2 perfected. In any event, the Indenture does not grant ownership rights in assets of the Trust to the

3 Indenture Trustee. Simply put, it is impossible for the Indenture Trustee to be the rightful owner of the Loan

4 and, therefore, the Indenture Trustee“ownership of a bearer note” argument untenable and does not

5 support it being the allowed claim holder of Claim 4-2. Summary judgment must be granted on this issue.

6 As a matter of law, the HELOC cannot become a bearer instrument, but rather is governed by

7 Section 9203(b) of the California Commercial Code and contract law to determine ownership. In relevant

8 part, California Commercial Code Section 9203(b) states that in order to sell a promissory note, under

9 Article 9, the seller and buyer must enter into a signed agreement that includes a description of the

10 promissory note, the buyer must give value, and the seller must have rights in the property being

11 transferred. With the Trust Agreement, the Sale and Assignment Agreement and the Indenture

12 Agreements specifying that the Indenture Trustee does not “own” assets of the Trust, no agreement exists

13 under which the Indenture Trustee can “own” the HELOC. Summary judgment must be granted on this

14 issue.

15 The Indenture Trustee’s duties are limited to those expressly set forth in the related indenture or

16 similar contract. See, e.g., Trust Indenture Act (TIA), § 315(a)(1), 15 U.S.C. § 77000(a)(1); the

17 Commentaries § 6-1, at 248 (¯Before the occurrence of an event of default, Subsection (a) [of section

18 315 of the TIA] requires the Trustee to perform only those duties that are specifically set forth in the

19 indenture..); and J. Spiotto, Defaulted Securities: The Prudent Indenture Trustee’s Guide, at IV-13 (1990).

20 The court in the case, In re E.F. Hutton Southwest Properties II v. Union Planters, 953 F.2d 963 (5th Cir.

21 1992), stated that ¯the corporate trustee has very little in common with the ordinary trustee........ The

22 trustee under a corporate indenture . . . has his rights and duties defined, not by the fiduciary relationship,

23 but exclusively by the terms of the agreement. Here, the Trust Agreement and the Sale and Assignment

24 Agreement do not allow the Indenture Trustee to own assets of the estate in which Wilmington Trust has

25 been identified as the Owner Trustee. Article IV, Section 4.01 of the Trust Agreement provides that the

26 Owner Trustee, Wilmington Trust Company, is required to initiate any claim or lawsuit by the Loan Trust.

27 See “Exhibit 4" of Plaintiff’s RJN. Neither Green Tree nor the Indenture Trustee have standing to enforce

28 or collect upon Claim 4-2, and the Claim must be disallowed. Summary judgment must be granted.

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1 F.

2 THE LOAN WAS RESCINDED BY OPERATION OF LAW

3 (1)

4 RESCISSION IS EFFECTIVE UPON NOTICE FROM THE BORROWER

5 Rescission is effective upon notice to the creditor by the borrower and no tender or lawsuit is

6 required by the borrower to effectuate rescission. Jesinoski v. Countrywide Home Loans, Inc. (Jesinoski),

7 135 S.Ct. 790 (2015). On March 23, 2015 and March 19, 2015, respectively, Reorganized Debtor and her

8 husband mailed to Countrywide Home Loans, Inc. (“CHL”), the lender identified on the Loan, and the

9 servicers, Bank of America, N.A. (“BANA”) and Specialized Loan Servicing, LLC, their notice of rescission

10 of the Loan. See “Exhibit 2" to the Declaration of Louis Esbin.

11 (2)

12 UNDER TILA DEFENDANT IS NOT THE CREDITOR AND HAS NO STANDING TO REFUTE THE

13 RESCISSION

14 TILA Section 1666(d) defines a "creditor" to include only an entity that both “(1) regularly extends…

15 consumer credit … for which the payment of a finance charge is or may be required, and (2) is the person

16 to whom the debt arising from the consumer credit transaction is initially payable on the face of the

17 evidence of indebtedness [emphasis added].” This definition is restrictive and precise, referring only to a

18 person who satisfies both requirements of the provision as the creditor. Defendant, The Bank of New York

19 Mellon f/k/a The Bank of New York as successor Indenture trustee to JPMorgan Chase Bank, National

20 Association for CWHEQ Revolving Home Equity Loan Trust, Series 2005-D does not regularly extend

21 consumer credit nor is it the person to whom the debt arising from the consumer credit transaction is

22 initially payable. The Official Commentary to Reg Z that mirrors TILA'S "creditor" definition, provides in

23 pertinent part that "[i]f an obligation is initially payable to one person, that person is the creditor even if the

24 obligation by its terms is simultaneously assigned to another person." Defendant is a party to the

25 Reorganized Debtor’s adversary complaint, but under TILA is not the creditor.

26
27
28

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1 (3)

2 TILA DOES NOT DISTINGUISH BETWEEN DISPUTED OR UNDISPUTED RESCISSIONS

3 Justice Scalia, writing for a unanimous Court, clarified that TILA does not distinguish between

4 adisputed or undisputed rescission: “Section 1635(a) nowhere suggests a distinction between disputed

5 and undisputed rescissions, much less that a lawsuit would be required for the latter.” Jesinoski.

6 ReorganizedDebtor is not asking the Court to adjudicate rescission, as, pursuant to TILA and Jesinoski,

7 rescission is effective upon notice given by Reorganized Debtor. The common law requirement for tender

8 is deemed preempted under TILA, requiring merely notice of rescission from the borrower. Jesinoski. The

9 burden of proof is upon the creditor to bring a legal action within 20 days of notice of rescission to claim

10 the note and deed of trust should not be rescinded. If no timely declaratory relief action is filed under TILA,

11 all claims and issues that could have been raised are waived. By failing to comply in all respects with TILA,

12 the rescission is undisputed and performance is required without further order of the Court. This Court,

13 therefore, lacks jurisdiction to consider whether the rescission is effective.

14 (4)

15 AFTER NOTICE OF RESCISSION THE BURDEN SHIFTS TO THE CREDITOR TO PERFORM

16 TILA is remedial and must be liberally construed in favor of borrowers, as it is a strict liability

17 statute. TILA Section 1635 provides in pertinent part:

18 “(a) When a consumer rescinds a transaction, the security interest giving rise to the right

19 of rescission becomes void; and (b) Within 20 calendar days after receipt of a notice of

20 rescission, the creditor shall return any money or property that has been given to anyone

21 in connection with the transaction and shall take any action necessary to reflect the

22 termination of the security interest. [emphasis added]”

23 Here, payments made by Reorganized Debtor in connection with the Loan were not returned. No

24 reconveyance of the Deed of Trust was recorded in the Clark County, Nevada, Recorder’s Office. No

25 declaratory relief action was commenced within 20 days of notice of rescission.

26
27
28

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1 (5)

2 THE RIGHT TO RESCIND RUNS FROM THE DATE OF CONSUMMATION

3 (i)

4 THE LOAN WAS TIMELY RESCINDED

5 TILA grants borrowers the right to rescind a loan up until three years following the consummation

6 of the transaction or the failure of delivery of the disclosures required by TILA. Had a timely declaratory

7 relief action been commenced by the creditor, Reorganized Debtor would argue that the required

8 disclosures were never delivered nor was the Loan consummated and, therefore, Baroni is within the

9 statutory time period to rescind the Loan. Under Reg Z,“consummation” of the loan occurs when the

10 borrower is “contractually obligated.” 12 C.F.R. §226.2(a)(13). Under the TILA, the date of consummation

11 is governed by state law. Official Commentary 2(a)(13). Under California law, a contract is formed when

12 all four elements are present: (1) the parties are capable of contracting (2) there is mutual consent (3) the

13 contract concerns a lawful object or subject (4) there is sufficient consideration. Cal.Civ.Code §1550.

14 Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) (Jackson v. Grant).

15 (ii)

16 AN ACTUAL LENDER OF MONEY MUST BE IDENTIFIED

17 “It is essential not only that the parties to the contract exist, but that it is possible to identify them.1

18 Cal.Civ.Code Sec. 1558.” Jackson v. Grant. To this day the true lender of any money remains unknown,

19 such that an essential element for a contract is missing from the transaction giving rise to Reorganized

20 Debtor’s Loan. Under FRBP 2004, CHL was ordered to produce all documents and documentation in

21 connection with the lender, including all consideration paid or received relating to the Loan, including bank

22 account numbers, checks, and wire transfers relating to the purchase and sale of the Loan (Main Case

23 Doc. No. 373). As in Jesinoski, BANA responded on behalf of CHL. In this case, BANA and CHL refuse

24 to produce documentation or orally testify in connection with the same. Although CHL is identified as the

25
1
26 Addressing this issue is the learned text of the prom inent Law Professor from Georgetown University
Law Center, Adam J. Levitin, in his Abstract for Duke Law Journal, The Paper Chase: Securitization,
27 Foreclosure, And The Uncertainty of Mortgage Title (2013), wherein Professor Levitin explains:"The lack of
solid evidence of transfer is particularly im portant given the occurrence of "warehouse fraud,"wherein the
28 sam e m ortgage m ight be sold m ultiple tim es to different buyers by the sam e seller." See in pertinent part as
“Exhibit 3" of the Declaration of Louis Esbin.

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1 lender on the TILA disclosures and on the face of the Loan Documents, Reorganized Debtor reasonably

2 believes CHL was not the actual lender and that CHL knew it was not the actual lender, but concealed this

3 fact from Reorganized Debtor to facilitate the practice of “warehouse fraud.”1 TILA provides that should

4 a creditor become aware of a material change to the original disclosures, they are required to make

5 additional disclosures.

6 In this case, CHL is acting as a straw man for an unidentified lender; an undisclosed arrangement

7 for which there was no consent. Where CHL knew it intended to improperly use the Reorganized Debtor’s

8 loan application, social security number, property address, and down payment to facilitate “warehouse

9 fraud,” as described by Professor Levitin, there was no lawful object for which to contract. Although

10 ordered produced by this Court’s FRBP 2004 Order, evidence of sufficient consideration was not produced

11 by CHL. With the January 2011, Financial Crisis Inquiry Report establishing the conduct of CHL as a

12 significant cause of the 2008 financial crisis, all presumptions that CHL acted properly under TILA and with

13 respect to the Loan are rebutted.

14 (iii)

15 REORGANIZED DEBTOR COMPLIED WITH TILA, AS HELD UNDER JESINOSKI

16 The Supreme Court found that “The Jesinoskis mailed respondents written notice of their intention

17 to rescind within three years of their loan’s consummation. Because this is all that a borrower must do in

18 order to exercise his right to rescind under the Act, the court below erred in dismissing the complaint.

19 Accordingly, we reverse the judgment of the Eighth Circuit and remand the case for further proceedings

20 consistent with this opinion.” Jesinoski. The Jesinoskis filed a complaint against CHL, wherein the

21 Jesinoskis and CHL agreed that consummation occurred on February 23, 2007. In this case, for the

22 aforementioned reasons, the Loan was never consummated and, therefore, the limitations period under

23 TILA, as addressed in Jesinoski, has not arisen. Reorganized Debtor is not required to prove

24 consummation or any other issues in order to rescind the Loan. Congress specifically contemplated

25 rescission under TILA could be accomplished by consumers through written notice to the creditor without

26 the need to retain counsel. With the burden shifting to the creditor who timely files an action, all other

27
28

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1 issues concerning rescission, including consummation and standing, are therein adjudicated. Neither TILA,

2 nor the Supreme Court’s interpretation of TILA, require Reorganized Debtor to file a lawsuit or defend the

3 circumstances under which the Loan was rescinded. Once Reorganized Debtor rescinded the transaction,

4 the burden shifted to the creditor to perform under TILA. A creditor does not have authority to determine

5 which loans are subject to rescission, because to allow such TILA would be under minded and consumers

6 would be required to file an action to effectuate rescission. That is the exact opposite of what the

7 unanimous Supreme Court found; no lawsuit is required.

8 G.

9 DEFENDANTS ARE JUDICIALLY ESTOPPED FROM ASSERTING OWNERSHIP OF A BEARER

10 NOTE AND THAT IT IS HOLDING A SECURED CLAIM AGAINST PLAINTIFF’S ESTATE

11 The myriad of inconsistent positions in various judicial venues established in the chart above,

12 creates a judicial estoppel against the Indenture Trustee asserting ownership of a bearer note and a

13 secured claim against Plaintiff’s Estate. See Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782–83

14 (9th Cir. 2001)(explaining the doctrine of judicial estoppel in relatively neutral language: “Judicial estoppel

15 is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and

16 then later seeking an advantage by taking a clearly inconsistent position.”). The Ninth Circuit used more

17 strident language appropriate to the actions of Defendants in Rockwell Int’l Corp. v. Hanford Atomic Metal

18 Trades Council, 851 F.2d 1208, 1210 (9th Cir. 1988). “Unlike collateral estoppel, res judicata, and

19 equitable estoppel, judicial estoppel focuses exclusively on preventing the use of inconsistent assertions

20 that would result in an “affront to judicial dignity” and “a means of obtaining unfair advantage.” Id. In

21 Rockwell Int’l, the Ninth Circuit explained that the purpose of the doctrine of judicial estoppel is “to protect

22 against a litigant playing ‘fast and loose with the courts’ by asserting inconsistent positions.” Id. In Milton

23 H. Green Archives, Inc. v. Marilyn Monroe, LLC, 692 F.3d 983 (9th Cir. 2012), the Ninth Circuit discussed

24 the current law on judicial estoppel under its own precedents in light of the factors identified by the

25 Supreme Court in New Hampshire v. Maine, 532 U.S. 742, 749 (2001), wherein the Supreme Court held:

26 “Judicial estoppel is a doctrine distinct from the res judicata doctrines of claim and issue

27 preclusion. Under the judicial estoppel doctrine, where a party assumes a certain position

28 in a legal proceeding, and succeeds in maintaining that position, he may not thereafter,

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1 simply because his interests have changed, assume a contrary position, especially if it be

2 to the prejudice of the party who has acquiesced in the position formerly taken by him.

3 Davis v. Wakelee, 156 U.S. 680, 689. The purpose of the doctrine is to protect the integrity

4 of the judicial process by prohibiting parties from deliberately changing positions according

5 to the exigencies of the moment. Several factors typically inform the decision whether to

6 apply the doctrine in a particular case. First, a party's later position must be clearly

7 inconsistent with its earlier position. Second, courts regularly inquire whether the party has

8 succeeded in persuading a court to accept that party's earlier position, so that judicial

9 acceptance of an inconsistent position in a later proceeding would create the perception

10 that either the first or the second court was misled. Third, courts ask whether the party

11 seeking to assert an inconsistent position would derive an unfair advantage or impose an

12 unfair detriment on the opposing party if not estopped.”

13 Here, Defendants’ conduct satisfies each prong for proper application of the doctrine. First, it is not

14 in dispute that Defendants positions in connection with identifying the real party in interest are clearly

15 inconsistent. Second, Defendants’ inconsistent positions were persuasive to the Court. Third, Defendants

16 seek an unfair advantage and have imposed an unfair detriment on Plaintiff by continually changing the

17 identity of the real party in interest causing Plaintiff to amend pleadings, and incur countless hours of legal

18 resources chasing down an ever illusive real party in interest. Having been unsuccessful in deterring

19 Plaintiff from seeking to discover the party who will be economically harmed by not receiving payments,

20 Defendants ask the Court to ignore their inconsistent positions. The record clearly establishes that

21 Defendants are “playing fast and loose with the courts” rendering the application of judicial estoppel

22 appropriate and granting of summary judgment entirely appropriate.

23 V.

24 CONCLUSION

25 Summary adjudication under Rule 56(g) is appropriate with respect to each of the above issues for

26 which Plaintiff seeks summary adjudication or, in the alternative, partial summary judgment with findings

27 that will significantly narrow the scope of the issues at the trial in this matter. See e.g. Nat'l Union Fire Ins.

28 Co. v. Ready Pac Foods, Inc., 782 F. Supp. 2d 1047, 1052 (2011) (holding that “under FRCP Rule 56(g),

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1 partial summary judgment or summary adjudication is appropriate as to specific issues if it will narrow the

2 issues for trial”).

3
4 WHEREFORE, Plaintiff respectfully requests the Court find: (1) The Bank of New York Mellon f/k/a

5 The Bank of New York as successor Indenture trustee to JPMorgan Chase Bank, National Association for

6 CWHEQ Revolving Home Equity Loan Trust, Series 2005-D (“Indenture Trustee”) is not the beneficiary

7 of the Deed of Trust attached to Claim 4-2 (“Deed of Trust”); (2) Claim 4-2 is not secured; (3) The Home

8 Equity Line of Credit Agreement (“HELOC”) attached to Claim 4-2 is not a negotiable instrument under the

9 California Commercial Code Commercial Code §3104(a); (4) The undated, stamped, purported

10 endorsement appearing on the HELOC does not render the HELOC a bearer instrument under the

11 California Commercial Code § 3205(b); (5) the Indenture Trustee is not the owner of the HELOC; (6) the

12 Loan has been rescinded by operation of law; and (7) Claim 4-2 is disallowed.

13
14
Dated: August 11, 2015 LAW OFFICES OF LOUIS J. ESBIN
15
/s/ Louis J. Esbin
16
BY______________________________
LOUIS J. ESBIN
17
Attorneys for Reorganized Debtor
18
Dated: August 11, 2015 LAW OFFICES OF MICHAEL S. RILEY
19
/s/ Michael S. Riley
20
BY______________________________
21 MICHAEL S. RILEY
Attorneys for Reorganized Debtor
22
23
24
25
26
27
28

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1 DECLARATION OF LOUIS J. ESBIN

2 I, Louis J Esbin, declare and state as follows:

3 1. I am an attorney at law duly licensed by the state of California, am admitted to practice before this

4 and each of the United States District Courts in the state of California, the Bankruptcy Appellate Panel and

5 the Ninth Circuit Court of Appeals, am certified as a bankruptcy specialist by the California Board of Legal

6 Specialization, am counsel for the Reorganized Debtor, Allana Baroni, such that in that capacity, except

7 as so stated the following are of my own personal knowledge, such that if called to testify I could and would

8 competently and truthfully.

9 2. On December 13, 2010, in response to Plaintiff’s Qualified Written Request sent under 12 U.S.C.

10 §2605 the Real Estate Settlement Procedures Act (“RESPA”), the Loan servicer produced to Plaintiff the

11 MERS Milestone Report in connection with the HELOC. As established by the report, MERS in its capacity

12 as the beneficiary under the Deed of Trust, never transferred the beneficial interest in the Deed of Trust

13 to the Indenture Trustee. A true and correct copy of the MERS Milestone Report is attached and

14 incorporated by reference as “Exhibit 1.”

15 3. On March 23, 2015 and March 19, 2015, respectively, Reorganized Debtor and her husband mailed

16 to Countrywide Home Loans, Inc. (“CHL”), the lender identified on the Loan, and the servicers, Bank of

17 America, N.A. (“BANA”) and Specialized Loan Servicing, LLC, their notice of rescission of the Loan, true

18 and correct copies of which are attached and incorporated by reference as “Exhibit 2."

19 4. Addressing the issue of warehouse fraud is the learned text of the prominent Law Professor from

20 Georgetown University Law Center, Adam J. Levitin, in his Abstract for Duke Law Journal, The Paper

21 Chase: Securitization, Foreclosure, And The Uncertainty of Mortgage Title (2013), wherein Professor

22 Levitin explains: "The lack of solid evidence of transfer is particularly important given the occurrence of

23 "warehouse fraud," wherein the same mortgage might be sold multiple times to different buyers by the

24 same seller" a true and correct excerpt of which is attached and incorporate by reference as “Exhibit 3."

25 5. I declare under penalty of perjury under the laws of the state of California and of the United States

26 that the foregoing is true and correct.

27
28

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1 Executed on August 11, 2015, in Stevenson Ranch, California.

2
3 /s/ Louis J Esbin
4
Louis J. Esbin, declarant
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
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23
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EXHIBIT "1"
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--------- Forwarded message ----------
From: Avedisian, Loris <loris.avedisian@bankofamerica.com>
Date: Mon, Dec 13, 2010 at 11:18 AM
Subject: Updated MIN Info
To: allana@getsocial.com

Hello,

Please see Milestone for these two loans. Thank you.
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Loris Avedisian

Final Document Services

Post Closing and Central Services
Office: 805-577-4213

FAX: 805-577-4543

Loris.avedisian@bankofamerica.com

***Please send all MERS related correspondence to MERS.2@bankofamerica.com or call (805) 577-4794***
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EXHIBIT "2"
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EXHIBIT "3"
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THE PAPER CHASE:
SECURITIZATION, FORECLOSURE, AND THE
UNCERTAINTY OF MORTGAGE TITLE
ADAM J. LEVITIN†

ABSTRACT
The mortgage foreclosure crisis raises legal questions as important
as its economic impact. Questions that were straightforward and
uncontroversial a generation ago today threaten the stability of a $13
trillion mortgage market: Who has standing to foreclose? If a
foreclosure was done improperly, what is the effect? And what is the
proper legal method for transferring mortgages? These questions
implicate the clarity of title for property nationwide and pose a too-
big-to-fail problem for the courts.
The legal confusion stems from the existence of competing systems
for establishing title to mortgages and transferring those rights.
Historically, mortgage title was established and transferred through
the “public demonstration” regimes of UCC Article 3 and land
recordation systems. This arrangement worked satisfactorily when
mortgages were rarely transferred. Mortgage finance, however, shifted
to securitization, which involves repeated bulk transfers of mortgages.
To facilitate securitization, deal architects developed alternative
“contracting” regimes for mortgage title: UCC Article 9 and MERS, a
private mortgage registry. These new regimes reduced the cost of
securitization by dispensing with demonstrative formalities, but at the
expense of reduced clarity of title, which raised the costs of mortgage
enforcement. This trade-off benefitted the securitization industry at
the expense of securitization investors because it became apparent
only subsequently with the rise in mortgage foreclosures. The harm,
however, has not been limited to securitization investors. Clouded

Copyright © 2013 Adam J. Levitin.
† Professor of Law, Georgetown University Law Center. The author would like to thank
William Bratton, Kathleen Cully, Anna Gelpern, Edward Janger, Andrew Kaufman, Robert
Lawless, Katherine Porter, John Pottow, Elizabeth Renuart, Joseph Singer, David Super,
Robert Thompson, Rebecca Tushnet, Alan White and the participants in the Harvard Law
School Faculty Workshop for their comments, and Devin Mauney and Laura Mumm for
outstanding research assistance.

Electronic copy available at: http://ssrn.com/abstract=2162508
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638 DUKE LAW JOURNAL [Vol. 63:637

mortgage title has significant negative externalities on the economy as
a whole.
This Article proposes reconciling the competing title systems
through an integrated system of note registration and mortgage
recordation, with compliance as a prerequisite to foreclosure. Such a
system would resolve questions about standing, remove the potential
cloud to real-estate title, and facilitate mortgage financing by
clarifying property rights.

TABLE OF CONTENTS
Introduction ............................................................................................. 639
I. Traditional Mortgage Title Systems ................................................. 652
A. UCC Article 3 ........................................................................ 655
1. Scope ................................................................................... 655
2. UCC Article 3 as a Note Transfer System ....................... 657
3. UCC Article 3 as a Note Title System .............................. 659
4. UCC Article 3 as a Mortgage Title-and-Transfer
System ............................................................................... 664
B. Land Recordation Systems .................................................. 665
C. The Uneasy Coexistence of UCC Article 3 and Land
Records ................................................................................... 669
II. The Shift in Mortgage Financing to Securitization ....................... 670
III. Securitization-Era Mortgage Title Systems .................................. 676
A. MERS ..................................................................................... 677
1. MERS Background ........................................................... 677
2. Structural Problems with MERS ...................................... 680
B. Revised UCC Articles 1 and 9 ............................................. 688
C. Pooling and Servicing Agreements ..................................... 697
D. The Political Economy of Title Systems ............................. 702
IV. The Reform of Mortgage Title Systems ........................................ 711
A. Existing Reform Proposals................................................... 711
1. Reformation of Land Recordation Systems .................... 712
2. Reformation of MERS ...................................................... 712
3. Creation of a National Lien Registry ............................... 713
4. Elimination of Negotiability ............................................. 715
5. Merger of Note and Mortgage .......................................... 716
B. Reconciling Title Systems .................................................... 717
Conclusion ................................................................................................ 723
Appendix .................................................................................................. 727

Electronic copy available at: http://ssrn.com/abstract=2162508
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INTRODUCTION
Since 2007, an estimated seven-million or more homes have been
1
sold in foreclosure or distressed sales, a loss in homeownership
unparalleled in American history. The impact of these foreclosures on
households, communities, and the macroeconomy is widely
2
recognized. The foreclosure crisis, however, raises equally weighty
legal issues. The foreclosure crisis is forcing a reexamination of the
nineteenth-century commercial- and real-property-law systems that
continue to undergird critical sectors of the U.S. economy in the
twenty-first century. This reexamination is occurring in the shadow of
a too-big-to-fail problem, because a court’s decision to uphold well-
established law could trigger a financial crisis.
Problems in the foreclosure process have been apparent since the
3
start of the foreclosure crisis, but the issue burst onto the national
scene in the fall of 2010 with the emergence of the “robosigning”
scandal involving banks’ use of fraudulent affidavits to establish
4
standing to foreclose. Then, in January 2011, the Massachusetts
Supreme Judicial Court sent shockwaves through the real-estate- and
commercial-law world by issuing a unanimous ruling in U.S. Bank

1. I arrived at the seven-million figure by adding industry extrapolations and metrics from
July 2007–June 2013 (6.5 million foreclosure sales completed), see Industry Extrapolations and
Metrics (June 2013), HOPE NOW 5 (Aug. 12, 2013), http://www.hopenow.com/industry-
data/2013-06-04-HopeNow.Ful_%20Report_(June).DRAFT.pdf, and my own estimate of
foreclosure sales from January–June 2007 and July–December 2013 (more than 0.5 million
foreclosure sales completed).
2. See, e.g., CONG. OVERSIGHT PANEL, OCTOBER OVERSIGHT REPORT: AN ASSESSMENT
OF FORECLOSURE MITIGATION EFFORTS AFTER SIX MONTHS 5–6 (2009), available at
http://www.gpo.gov/fdsys/pkg/CPRT-111JPRT52671/pdf/CPRT-111JPRT52671.pdf (detailing
the effect of foreclosures on neighboring property values, educational and religious institutions,
foreclosing banks, and the economy as a whole); KATHLEEN C. ENGEL & PATRICIA A. MCCOY,
THE SUBPRIME VIRUS: RECKLESS CREDIT, REGULATORY FAILURE, AND NEXT STEPS 124
(2011) (partially attributing the national economic woes of early 2009 to skyrocketing
foreclosures); FIN. CRISIS INQUIRY COMM’N, FINAL REPORT OF THE NATIONAL COMMISSION
ON THE CAUSES OF THE FINANCIAL AND ECONOMIC CRISIS IN THE UNITED STATES 402–10
(2011), available at http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf (documenting
the impact of the foreclosure crisis on individual homeowners, housing markets, and financial
institutions); DAN IMMERGLUCK, FORECLOSED: HIGH-RISK LENDING, DEREGULATION, AND
THE UNDERMINING OF AMERICA’S MORTGAGE MARKET 133–66 (2009) (examining the costs of
high-risk mortgage lending for borrowers, lenders, investors, neighborhoods, cities, renters, and
the national and international economies).
3. See Gretchen Morgenson, Foreclosures Hit a Snag for Lenders, N.Y. TIMES, Nov. 15,
2007, at C1 (reporting on a 2007 federal judicial decision that “rais[ed] questions about the legal
standing of investors in mortgage securities pools”).
4. See Gretchen Morgenson, Banks’ Flawed Paperwork Throws Some Foreclosures into
Chaos, N.Y. TIMES, Oct. 4, 2010, at A1 (noting banks’ use of “dubiously prepared” affidavits).
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5
National Ass’n v. Ibanez. Ibanez held that a pair of foreclosure sales
was invalid because the foreclosing banks were not the mortgagees of
6
record at the time of the foreclosure sale.
Ibanez was soon followed by two related decisions from the
7
Massachusetts Supreme Judicial Court, Bevilacqua v. Rodriguez and
8
Eaton v. Federal National Mortgage Ass’n. Bevilacqua held that the
purchaser at an invalid nonjudicial foreclosure sale did not have title
9
to the property, while Eaton held that a foreclosure sale was invalid
because the foreclosing bank did not hold the promissory note at the
10
time of the sale.
A generation ago, none of these opinions would have been
controversial. They would have been viewed as straightforward
applications of well-established commercial and real-property law: a
party cannot foreclose on a mortgage unless it is the mortgagee (or its
11
agent); a mortgage can be enforced only by a person who can
12
enforce the underlying debt; a mortgage is but incidental to the

5. U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011). For some discussion of
the upheaval that Ibanez caused or was thought likely to cause, see, for example, Gretchen
Morgenson, Massachusetts Ruling on Foreclosures Is a Warning to Banks, N.Y. TIMES, Jan. 7,
2011, at B1 (noting that Ibanez “open[ed] the door to other foreclosure do-overs” in
Massachusetts); Chad Bray, Massachusetts High Court Ruling Focuses on Foreclosure
Paperwork, WALL ST. J. L. BLOG (Jan. 7, 2011, 5:48 P.M.), http://blogs.wsj.com/law/2011/01/07/
massachusetts-high-court-ruling-focuses-on-foreclosure-paperwork (describing Ibanez as a
decision that “spooked bank investors”); Felix Salmon, The Ibanez Case and Housing-Market
Catastrophe Risk, REUTERS (Jan. 7, 2011), http://blogs.reuters.com/felix-salmon/2011/01/07/the-
ibanez-case-and-housing-market-catastrophe-risk (predicting a flood of “legal craziness”); Rich
Vetstein, Apocalypse Now? Will the Massachusetts Ibanez Case Unravel Widespread
Irregularities in the Residential Securitized Mortgage Market?, MASS. REAL ESTATE L. BLOG
(Jan. 8, 2011), http://www.massrealestatelawblog.com/2011/01/08/apocalypse-now-will-the-
massachusetts-ibanez-case-unravel-widespread-irregularities-in-the-residential-securitized-
mortgage-market (anticipating that “[o]ther courts across the country will likely be influenced
by the ruling”).
6. Ibanez, 941 N.E.2d at 55. For commentary on Ibanez, see generally Recent Case, U.S.
Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011), 125 HARV. L. REV. 827 (2012).
7. Bevilacqua v. Rodriguez, 955 N.E.2d 884 (Mass. 2011).
8. Eaton v. Fed. Nat’l Mortg. Ass’n, 969 N.E.2d 1118 (Mass. 2012).
9. Bevilacqua, 955 N.E.2d at 898.
10. Eaton, 969 N.E.2d at 1134.
11. See, e.g., New England Sav. Bank v. Bedford Realty Corp., 680 A.2d 301, 309–10
(Conn. 1996) (holding that the mere holder of a promissory note, if not the owner of the
underlying debt, cannot exercise the equitable power of foreclosure).
12. RESTATEMENT (THIRD) OF PROP.: MORTGAGES § 5.4(c) (1997) (“A mortgage may be
enforced only by, or in [sic] behalf of, a person who is entitled to enforce the obligation the
mortgage secures.”); id. § 5.4 cmt. e (“Mortgage[s] may not be enforced except by a person
having the right to enforce the obligation or one acting on behalf of such a person. As
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13
promissory note; and one cannot generally convey better title than
14
one has.
These cases did not arise because of prior uncertainty about the
law, but because a too-big-to-fail industry—the housing-finance
industry—found the prior law inconvenient and both changed and
disregarded it, banking on its too-big-to-fail status to guarantee
favorable legal outcomes. The confusion wrought by the conflict
between housing-finance industry practice and well-established law
made resolution of such issues so pressing that the Massachusetts
Supreme Judicial Court took these three cases on expedited, direct
appeal from the trial court, and the Permanent Editorial Board for
the Uniform Commercial Code (UCC) felt compelled to issue a
15
special report on the application of the UCC to mortgage notes.
Although the Massachusetts Supreme Judicial Court’s rulings upheld
well-established legal principles, the Court was also deeply cognizant
that its rulings risked clouding title across Massachusetts and
departed from its usual practice by making its ruling in Eaton apply
16
only prospectively to future foreclosures.

mentioned, in general a mortgage is unenforceable if it is held by one who has no right to
enforce the secured obligation.” (emphasis omitted)).
13. See, e.g., Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 275 (1873) (“All the authorities
agree that the debt is the principal thing and the mortgage an accessory.”).
14. BRUCE A. MARKELL, JOHN DOLAN & LAWRENCE PONOROFF, CORE CONCEPTS IN
COMMERCIAL LAW: PAST, PRESENT AND FUTURE 1 (2004) (discussing nemo dat quod non
habet as the foundational principle of commercial law). The UCC is replete with provisions that
allow a good-faith purchaser to take better title than the seller had, but these are distinct
situational exceptions to the nemo dat rule. See, e.g., U.C.C. § 2-403(1) (2011) (protecting good-
faith purchasers of goods); id. § 3-203(b) (vesting in transferees “any right of the transferor to
enforce the instrument, including any right as a holder in due course”); id. § 7-504(a) (allowing
transferees to retain title and rights that a transferor purported to convey in cases in which a
document has been delivered but not duly negotiated); id. § 8-302(a) (entitling purchasers of
even uncertificated securities to “all rights in the security that the transferor had or had power
to transfer”); id. §§ 9-320(a)–(b) (enabling buyers of goods to take the goods free of security
interests in most circumstances). Similarly, there are exceptions to nemo dat in property law.
For example, in the four states that still recognize the fee tail—Delaware, Maine,
Massachusetts, and Rhode Island—it is possible for someone with an entailed estate to convey
the estate in fee simple.
15. See generally PERMANENT EDITORIAL BD. FOR THE UNIF. COMMERCIAL CODE,
REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE:
APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO
MORTGAGE NOTES (2011), available at http://www.ali.org/00021333/PEB%20Report%20-%20
November%202011.pdf. The Permanent Editorial Board for the UCC is a joint committee of
the American Law Institute and the Uniform Law Commission that curates the UCC, issuing
reports regarding what it believes are the proper legal interpretations of the UCC when
particular controversies arise, as well as drafting occasional amendments to the UCC.
16. Eaton v. Fed. Nat’l Mortg. Ass’n, 969 N.E.2d 1118, 1132–33 (Mass. 2012).
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The Massachusetts trilogy is but the most prominent and
comprehensive group of a growing number of state and federal
17
rulings dealing with standing to foreclose. There have been nearly
three thousand reported opinions dealing with this issue in some way
18
over the past five years. Standing doctrine differs between federal

17. See, e.g., In re Kemp, 440 B.R. 624, 626 (Bankr. D.N.J. 2010) (sustaining an objection to
proof of a claim when the plaintiff could not prove an enforceable right to the note under state
law); In re Tarantola, No. 4:09-bk-09703-EWH, 2010 WL 3022038, at *6 (Bankr. D. Ariz. July
29, 2010) (denying a motion for relief from a stay for a lack of real interest in the property when
the plaintiff could not prove the valid assignment of the note); In re Canellas, No. 6:09-bk-
12240-ABB, 2010 WL 571808, at *5 (Bankr. M.D. Fla. Feb. 9, 2010) (finding no evidence of a
proper assignment of the mortgage nor the note to the foreclosing party prior to foreclosure); In
re Wilhelm, 407 B.R. 392, 405 (Bankr. D. Idaho 2009) (denying a motion for relief from a stay
for a lack of real interest in the property when the plaintiff could not prove valid assignment of
the note); In re Jacobson, 402 B.R. 359, 370 (Bankr. W.D. Wash. 2009) (holding that the servicer
for the holder of the note, who had no beneficial interest in the note, was not the real party of
interest and was not entitled to relief from a stay); In re Hwang, 396 B.R. 757, 765 (Bankr. C.D.
Cal. 2008) (holding that a noteholder plaintiff must join the owner of the note, the real party in
interest, before it could seek relief from a stay), rev’d, 438 B.R. 661 (Bankr. C.D. Cal. 2010); In
re Hayes, 393 B.R. 259, 268 (Bankr. D. Mass. 2008) (holding that a putative mortgagee lacked
standing for failing to provide proof of a valid assignment of the mortgage); Glaski v. Bank of
Am., 160 Cal. Rptr. 3d 449, 452 (Ct. App. 2013) (holding that “borrowers have standing to
challenge void assignments of their loans even though they are not a party to, or a third party
beneficiary of, the assignment agreement”); U.S. Bank v. Coley, No. CV076001426, 2011 WL
2734603, at *3 (Conn. Super. Ct. June 10, 2011) (dismissing a foreclosure complaint for lack of
standing because the mortgage assignment was four months subsequent to the foreclosure suit’s
initiation); Davenport v. HSBC Bank USA, 739 N.W.2d 383, 385 (Mich. Ct. App. 2007) (holding
that the foreclosure must be vacated when the bank “did not yet own the indebtedness that it
sought to foreclose”); Edelstein v. Bank of N.Y. Mellon, 286 P.3d 249, 252 (Nev. 2012)
(requiring the party seeking to foreclose to demonstrate that it was both the holder of the
promissory note and the beneficiary of the deed of trust); Wells Fargo Bank Nat’l Ass’n v.
Erobobo, No. 31648/2009, 2013 WL 1831799, at *10 (N.Y. Sup. Ct. 2013) (denying a motion for
summary judgment in a foreclosure because the assignment of the note and mortgage were void
for not complying with the pooling and servicing agreement (PSA)); Wells Fargo Bank, Nat’l
Ass’n v. Jordan, No. 91675, 2009 WL 625560, at *9–10 (Ohio Ct. App. Mar. 12, 2009) (dismissing
a foreclosure action for a lack of standing because the putative mortgagee could not prove it
owned the mortgage at the time the complaint was filed); Deutsche Bank Nat’l Trust Co. v.
Byrams, 275 P.3d 129, 133 (Okla. 2012) (reversing and remanding summary judgment for the
foreclosure plaintiff because standing did not exist at the time an action was instituted); Niday v.
GMAC Mortg., LLC, 284 P.3d 1157, 1169 (Or. Ct. App. 2012) (holding that a deed-of-trust
beneficiary who uses the Mortgage Electronic Registration System, Inc. (MERS) cannot
undertake a nonjudicial foreclosure); U.S. Bank Nat’l Ass’n v. Kimball, 27 A.3d 1087, 1096 (Vt.
2011) (upholding the denial of standing to foreclose because the bank could not demonstrate
that it was the holder of the note at the time the foreclosure action was initiated). For citations
to other cases addressing the issue of standing in foreclosure actions, see supra notes 5–8 and
accompanying text and infra notes 22, 34, 265 and accompanying text. A sampling of leading
cases are also collected in the Appendix.
18. A search on November 1, 2013, of the Lexis State & Federal Cases database lists for
“(foreclosure w/s standing) AND (mortgage or “deed of trust” or “trust deed”)” yields 2,999
cases since 2007. An identical search in the Westlaw ALLCASES database yields 2,781
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and state courts, but there is broad agreement among courts that
some sort of standing or similar status is necessary for both judicial
19
and nonjudicial foreclosure, just as it is for any sort of debt-
20
collection action. There is also broad agreement that the party

decisions since 2007. A search for the same terms in the previous seven-year period yields only
297 cases on Lexis and 234 cases on Westlaw. This search is both over- and underinclusive, but it
is nonetheless illustrative.
19. See Dale Whitman & Drew Milner, Foreclosing on Nothing: The Curious Problem of
the Deed of Trust Foreclosure Without Entitlement To Enforce the Note, 66 ARK. L. REV. 21, 23
(2013) (“While plenty of uncertainty existed, one concept clearly emerged from litigation during
the 2008–2012 period: in order to foreclose a mortgage by judicial action, one had to have the
right to enforce the debt that the mortgage secured. It is hard to imagine how this notion could
be controversial.”). Some states permit only judicial foreclosures. Others allow for either
judicial or nonjudicial foreclosure, whereas yet others have solely nonjudicial foreclosure
procedures. See generally MORTG. BANKERS ASS’N, JUDICIAL VERSUS NON-JUDICIAL
FORECLOSURE, available at http://www.mbaa.org/files/ResourceCenter/ForeclosureProcess/
JudicialVersusNon-JudicialForeclosure.pdf.
20. The standing issue has also arisen in the context of credit cards. See, e.g., B-Line, LLC
v. Wingerter, 594 F.3d 931 (6th Cir. 2010) (reversing sanctions against the purchaser of an
undocumented credit-card-debt claim in bankruptcy); Sykes v. Mel Harris & Assocs., 285
F.R.D. 279 (S.D.N.Y. 2012) (certifying a class in a suit against a debt collector for alleged Fair
Debt Collection Practices Act (FDCPA) and Racketeer Influenced and Corrupt Organizations
Act (RICO) violations regarding credit-card-debt collection); Sykes v. Mel Harris & Assocs.,
757 F. Supp. 2d 413 (S.D.N.Y. 2010) (denying a motion to dismiss in a suit against a debt
collector for alleged FDCPA and RICO violations regarding credit-card-debt collection);
LVNV Funding LLC v. Guest, 953 N.Y.S.2d 550 (City Ct. 2012) (sanctioning a plaintiff’s
counsel in a debt collection lawsuit for failing to provide sufficient documentation to establish
standing); Midland Funding LLC v. Wallace, 946 N.Y.S.2d 67 (City Ct. 2012) (same); MBNA
Am. Bank, N.A. v. Nelson, 841 N.Y.S.2d 826 (Civ. Ct. 2007) (dismissing the bank’s motion to
affirm an arbitration award for, among other things, failure to provide a copy of the actual retail
credit contract); Jessica Silver-Greenberg, JPMorgan Sued over Credit Card Debt Cases, N.Y.
TIMES, May 10, 2013, at B1 (discussing California’s suit against JPMorgan for credit-card-debt-
collection issues); Jessica Silver-Greenberg, Problems Riddle Moves To Collect Credit Card
Debt, N.Y. TIMES, Aug. 13, 2012, at A1 (“Lenders . . . are churning out lawsuits without regard
for accuracy, and improperly collecting debts from consumers.”); Jeff Horwitz, ‘Robo’ Credit
Card Suits Menace Banks, AM. BANKER (Jan. 30, 2012, 10:16 A.M.), http://www.
americanbanker.com/issues/177_20/robosigning-credit-card-suits-1046175-1.html (“If banks
prove unsuccessful in defending themselves from claims that their records are shoddy, they run
the risk of inviting a new regulatory crackdown and legal battles over the validity of claims
involving tens of billions of dollars in unsecured debt.”). Some state and local governments have
adopted their own chain-of-title requirements for debt collection. See Daniel J. Langin,
Introducing Certainty to Debt Buying: Account Chain of Title Verification for Debt 3 (Jan. 5,
2011) (unpublished manuscript), available at http://ftc.gov/os/comments/debtcollecttech
workshop/00027-60064.pdf.
Credit-card and other consumer loans present somewhat different issues than
mortgages regarding chain of title, not least because unsecured loans only have a promissory
note or other credit agreement, not a security instrument. As a result, there will not be
confusion regarding which title system applies, only questions of what is sufficient proof to show
standing and prove a debt. Even in these regards, credit-card debt differs from mortgages, as it
is much less formal. Whereas a mortgage will usually involve an in-person closing and a single
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bringing the foreclosure action or sale must have standing at the time
the litigation or sale process is commenced. There is far less
agreement, however, about what determines who has standing to
21
bring the foreclosure.
Standing or similar doctrines require the party pursuing a
foreclosure to have a legally cognizable interest in the mortgage. The
modern mortgage market is financed largely through securitization, a
financing method that involves multiple bulk transfers of mortgages.
If loans have not been successfully transferred to the party seeking to
foreclose, then that party has no privity with the loan—and therefore
lacks standing to foreclose. Courts, however, cannot agree even on
what law governs transfers or determines ownership of mortgages,
22
which creates confusion over standing. This confusion over standing
thus stems from confusion about what is required to transfer a
mortgage loan. Are mortgage loans transferred by negotiation—
meaning indorsement and physical delivery of the promissory note—
or by sale contract, or by recordation in land records? Can mortgages

extension of credit, there is unlikely to be anyone with true personal knowledge of credit-card
debt, which is applied for remotely, underwritten and repeatedly authorized, cleared, and
settled through automated systems. Likewise, the small size of credit-card debt may make it
uneconomical to take greater care documenting chains of title. For divergent views on what is
sufficient proof of indebtedness in the credit-card context, compare Manuel Newburger, Should
Sellers of Debt Warrant the Accuracy of Data They Provide?, DBA MAG., Spring 2013, at 16, 42
(arguing that debt buyers are entitled to rely on warranties), with Dalié Jiménez, Illegality in the
Sale and Collection of Consumer Debts 25 (June 3, 2013) (unpublished manuscript), available at
http://ssrn.com/abstract=2250784 (advancing the opposite argument).
21. There is also subsidiary disagreement about what documentation suffices as evidence to
show standing. This is where the standing issue in general intersects with robosigning. For
discussion of evidentiary showings in credit-card-debt-collection actions, see supra note 20.
22. This is the case, for example, in Arizona. Compare Varbel v. Bank of Am. Nat’l Ass’n,
No. 1 CA-CV 12-0263, 2013 WL 817290, at *2 (Ariz. Ct. App. Mar. 5, 2013) (holding that a
nonjudicial foreclosure sale does not require the production of the note or its chain of custody),
with In re Tarantola, No. 4:09-bk-09703-EWH, 2010 WL 3022038, at *5 (Bankr. D. Ariz. July 29,
2010) (denying a motion for relief from a stay for a lack of real interest in the property when the
plaintiff could not prove the valid assignment of the note). It is also the case in Michigan.
Compare Davenport v. HSBC Bank USA, 739 N.W.2d 383, 385 (Mich. Ct. App. 2007) (holding
that a foreclosure must be vacated when the bank “did not yet own the indebtedness that it
sought to foreclose”), with Residential Funding Co. v. Saurman, 805 N.W.2d 183, 183 (Mich.
2011) (holding that MERS had standing to foreclose nonjudicially). Oregon, as compared to
Michigan and Arizona, does not allow MERS standing to foreclose nonjudicially. See Niday v.
GMAC Mortg., LLC, 284 P.3d 1157, 1169 (Or. Ct. App. 2012) (determining that a deed-of-trust
beneficiary who used MERS could not undertake a nonjudicial foreclosure). Washington also
does not give MERS standing to foreclose nonjudicially. See Bain v. Metro. Mortg. Grp., Inc.,
285 P.3d 34, 36–37 (Wash. 2012) (holding that MERS could not utilize the Washington
nonjudicial foreclosure procedure because it was not the lawful beneficiary of a deed of trust
because it does not hold the note).
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be transferred separately from promissory notes? What is the effect
of unrecorded mortgage transfers? It is necessary to determine how
mortgage loans are transferred in order to verify who has title to the
23
mortgage, meaning here the right to enforce it.
Understanding the emergence of the mortgage-title-system
problem and how it might be fixed requires spelunking into some of
the hoariest and most technical minutiae of commercial and real-
property law. These byzantine rules serve as the legal infrastructure
for critical parts of the economy. A $13 trillion residential mortgage
24
market depends directly on clarity of mortgage title, but the
implications of mortgage-title-system problems are further reaching.
At stake is not only the integrity of the legal system and its insistence
on the rule of law when dealing with economically vulnerable and
25
often unrepresented defendants, but also potentially ruinous liability
for the nation’s largest financial institutions. Also at stake is clarity of
title to a large part of the real property in the United States, because
mortgage-title-system problems implicate the alienability of real
property itself. Clouded mortgage title poses a systemic risk to the
economy because clarity of property title is a fundamental sine qua
26
non of modern economies. As the bursting of the housing bubble has
27
shown, housing markets are uniquely linked to the macroeconomy.

23. See Henry Hansmann & Reinier Kraakman, Property, Contract, and Verification: The
Numerus Clausus Problem and the Divisibility of Rights, 31 J. LEGAL STUD. S373, S384–85
(2002) (describing different types of property-rights verification regimes).
24. BD. OF GOVERNORS OF THE FED. RESERVE SYS., FEDERAL RESERVE STATISTICAL
RELEASE Z.1, FINANCIAL ACCOUNTS OF THE UNITED STATES: FLOW OF FUNDS, BALANCE
SHEETS, AND INTEGRATED MACROECONOMIC ACCOUNTS FIRST QUARTER 2013, tbl.L.216, l. 1
(2013).
25. See, e.g., In re Foreclosure Cases, Nos. 1:07CV2282, 07CV2532, 07CV2560, 07CV2602,
07CV2631, 07CV2638, 07CV2681, 07CV2695, 07CV2920, 07CV2930, 07CV2949, 07CV2950,
07CV3000, 07CV3029, 2007 WL 3232430, *3 n.3 (N.D. Ohio Oct. 31, 2007).
26. See, e.g., HERNANDO DE SOTO, THE MYSTERY OF CAPITAL: WHY CAPITALISM
TRIUMPHS IN THE WEST AND FAILS EVERYWHERE ELSE 6–8, 46–58 (2000) (arguing that the
success of Western capitalism depends on the ability of individuals to leverage clear legal title as
capital); Daron Acemoglu, Simon Johnson & James A. Robinson, The Colonial Origins of
Comparative Development: An Empirical Investigation, 91 AM. ECON. REV. 1369, 1395 (2001)
(arguing that institutional differences affecting the protection of property rights account for
some of the differences in per capita income among former European colonies); Daron
Acemoglu & Simon Johnson, Unbundling Institutions, 113 J. POL. ECON. 949, 984 (2005)
(finding that property-rights institutions are key determinants of economic growth); J. Bradford
DeLong & Andrei Shleifer, Princes and Merchants: European City Growth Before the Industrial
Revolution, 36 J.L. & ECON. 671, 692–93 (1993) (finding a negative correlation between
absolutist regimes with insecure property rights and city growth); Simon Johnson, John
McMillan & Christopher Woodruff, Property Rights and Finance, 92 AM. ECON. REV. 1335,
1352–53 (2002) (finding that private-sector investment is constrained by a perception of weak
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The mortgage title issue is narrowly a question about the transfer
of mortgages loans, not the transfer of real estate. There is no real
question today about how to transfer Blackacre. The conveyance of
present possessory estates in real property is a matter of state real-
property law. Conveyance procedures vary by state, but these
procedures are not in doubt. Similarly, there is no question about how
to mortgage real property. Instead, the issue is one of subsequent
transfers of mortgages.
Nonetheless, the mortgage chain of title does affect the ability to
transfer clear title to real property. The Massachusetts Supreme
Judicial Court’s Bevilacqua decision illustrates a concept familiar to a
generation of property-law students: an invalid foreclosure sale is
28
ineffective to pass title. If the seller is not the person entitled to
foreclose, the foreclosure sale is no different from a sale of the
Brooklyn Bridge. Accordingly, the foreclosure-sale purchaser has no
ability to transfer title to the property, no matter her equities, because
29
she lacks title, just like the hapless buyer of the Brooklyn Bridge.

property rights, even when financing is available). See generally Armen A. Alchian & Harold
Demsetz, The Property Right Paradigm, 33 J. ECON. HIST. 16 (1973) (noting that vulnerable
property rights result in underinvestment); Harold Demsetz, Toward a Theory of Property
Rights, 57 AM. ECON. REV. 347 (1967) (same).
27. See Adam J. Levitin & Susan M. Wachter, Why Housing?, 23 HOUSING POL’Y DEBATE
5, 19–20 (2013) (identifying three transmission channels between housing and the
macroeconomy). The risk is through both clouded title itself and resulting litigation liability for
financial institutions. See CONG. OVERSIGHT PANEL, NOVEMBER OVERSIGHT REPORT:
EXAMINING THE CONSEQUENCES OF MORTGAGE IRREGULARITIES FOR FINANCIAL
STABILITY AND FORECLOSURE MITIGATION 65 (2010), available at http://cybercemetery.unt.
edu/archive/cop/20110402010313/http://cop.senate.gov/documents/cop-111610-report.pdf.
28. See Bevilacqua v. Rodriguez, 955 N.E.2d 884, 898 (Mass. 2011). The case of Rockafellor
v. Gray, 191 N.W. 107 (Iowa 1922) (taking back a property sold at an invalid foreclosure sale
after several subsequent transfers), is included in the leading property-law textbook. See JESSE
DUKEMINIER & JAMES E. KRIER, PROPERTY (1st ed. 1981).
29. Judicial foreclosures are generally difficult to challenge postsale even if there was no
authority to foreclose because of finality doctrines, see GRANT S. NELSON & DALE A.
WHITMAN, REAL ESTATE FINANCE LAW 632 (5th ed. 2007), and sometimes specific statutory
provisions, see, e.g., 735 ILL. COMP. STAT. ANN. 5/15-1509 (West 2011) (limiting the remedy to a
postsale challenge to the proceeds of the sale, rather than the return of the property); OHIO
REV. CODE ANN. § 2329.45 (West 2004) (providing that the reversal of a foreclosure-sale
judgment does not affect the title of the purchaser, but instead requires restitution by the
foreclosing creditor of the former homeowner). But see N.Y. C.P.L.R. § 2003 (McKinney 2012)
(allowing a sale to be set aside for up to a year if a substantial right of the debtor was prejudiced
by a defect in sale procedure). In nonjudicial-foreclosure states, however, finality doctrines do
not apply, and a postsale challenge is generally possible. See Elizabeth Renuart, Toward a More
Equitable Balance: Homeowner and Purchaser Tensions in Non-Judicial Foreclosure States, 24
LOY. CONSUMER L. REV. 562, 579–80 (2012). Some states impose statutes of limitations for
postsale challenges. See id. at 583 n.95. Moreover, it is not clear whether these limits would
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This means that there are potentially questions about title to many of
the millions of properties that have gone through foreclosure sales
during the past five years.
The mortgage-title-system problem may reach even farther,
extending beyond properties that have gone through foreclosure. A
mortgage lien is a contingent form of ownership. If a property is
mortgaged, it is difficult to sell unless the mortgage lien is released.
Absent release of the lien, the buyer takes the property subject to the
mortgage lien, even though the associated debt remains owed by the
seller: liens follow property, while debts remain with obligors.
Therefore if the seller defaults on the debt, the mortgagee may
foreclose on the mortgage and force the sale of the property now
owned by the buyer. The question about who has the lien on
Blackacre can morph into the question of who owns Blackacre.
Absent clarity about who is the mortgagee, title to Blackacre is not
marketable. Moreover, unless title to land is clear, it can affect other
30
property interests, such as leaseholds, easements, and boundaries.
Therefore, problems in determining who is a mortgagee can affect
title on far more than foreclosure properties. Confusion over
mortgage transfer methods and thus over rights in mortgages has
potentially far-reaching consequences.
This Article examines the legal and market developments that
have befouled the law of mortgage title. It argues that the current
confusion in the law is, at its core, the result of competing mortgage
title systems. This is a novel conceptualization of the problem driving
foreclosure-standing litigation, but, once the problem is understood in
this manner, a solution—reconciliation of title systems—is readily
apparent.
Both land title systems and promissory note title systems purport
to cover mortgage title. Article 3 of the UCC provides a little-
31
remarked title system for promissory notes. Local land records
provide a title system for land and encumbrances upon it, such as
mortgages. Yet because of the common-law doctrine that “the
mortgage follows the note,” the UCC Article 3 system has also had

apply if the seller had no right to conduct a sale, as opposed to challenges relating to sale
procedures.
30. See David E. Woolley & Lisa D. Herzog, MERS: The Unreported Effects of Lost Chain
of Title on Real Property Owners, 8 HASTINGS BUS. L.J. 365, 366–68 (2012) (discussing the
impact of unclear title on boundary disputes).
31. For a discussion of the Article 3 provisions that establish this title system for
promissory notes, see infra Part I.A.3.
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the potential to serve as a mortgage title system when a note is
secured by a mortgage.
There was always a latent tension between these public-law
mortgage title systems, but it was of little consequence until the late
twentieth century because mortgages were rarely transferred, and
mortgages were seldom separated from notes. The formalities of both
systems were clear and followed, and as a result, there was seldom a
discrepancy between them. And even if discrepancies existed
between the title systems, they were rarely of consequence. Title was
seldom challenged because foreclosures were rare, and default
judgments and isolated problems usually could be settled quietly.
The long-dormant tension between these systems became a
problem as the mortgage finance market developed from balance-
sheet lending to securitization. Securitization transactions require
multiple bulk transfers of mortgages in order to achieve various credit
ratings, bankruptcy, tax, accounting, and bank-regulatory-capital
benefits. Absent clear documentation of these transfers, the various
transactional benefits are in doubt, which would undermine the
economic viability of securitization. Title-and-transfer system clarity
is essential for securitization.
Both UCC Article 3 and land records provide a high degree of
title clarity. Despite the potential tension between them, these
systems have fundamental similarities. Both are property rights
verification systems that operate through “public demonstration.”
Both systems require compliance with demonstrative legal formalities
to achieve property rights. Compliance provides the evidentiary
certainty of the property rights. Both systems are examples of the
“paperization principle,” a legal evolution aimed at reducing fraud,
32
uncertainty, and adjudication costs. Thus, obtaining property rights
under these public demonstration regimes has up-front costs due to
formalities, but compliance with the formalities ensures a high degree
of security in the property rights, both vis-à-vis other competing
claimants to the property rights and as to the ability to enforce the
mortgage property rights. These benefits accrue, however, only to
securitization investors; they have no intrinsic value to the sell-side of
the securitization industry, which see them as transaction costs to be
eliminated.

32. See Robert Charles Clark, Abstract Rights Versus Paper Rights Under Article 9 of the
Uniform Commercial Code, 84 YALE L.J. 445, 476–77 (1975).
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Accordingly, the sell-side developed alternative mortgage title-
and-transfer systems that dispensed with demonstrative public
formalities in favor of private, bilateral contracting. Thus, a private
electronic mortgage registry—the Mortgage Electronic Registration
Systems, Inc. (MERS)—was created, and UCC Article 9 was revised
to operate as a system for the sale of notes and mortgages. Bilateral
“contracting” regimes reduced the transaction costs in mortgage
transfers and hence in mortgage securitizations by dispensing with
demonstrative legal formalities. These up-front costs savings,
however, came at the expense of certainty in property rights vis-à-vis
other competing claimants and a reduced ability to enforce the
property rights. In other words, the mortgage transfer regime change
shifted costs from deal formation to deal enforcement. Costs were
thus shifted from the financial institutions that created securitizations
to securitization investors, because the investors could not observe
and price this risk shift because deal documents remained unchanged.
The cost shift only became apparent with the rise of foreclosures and
foreclosure litigation in 2007.
Even now, securitization investors cannot gauge the impact of
the risk shift in terms of their loss-given-default on a mortgage, which
33
is a factor preventing the resurrection of the securitization market.
Continued legal confusion about mortgage transfers frustrates deal
formation in the housing-finance market, which weighs down the
economy overall. Thus, resolving the legal questions about mortgage
transfer is critical for restarting the housing-finance market.
It is important to emphasize that the question of which system
governs mortgage transfers and title is distinct from compliance.
Confusion over which system governs can frustrate compliance, but
compliance problems can exist even with legal clarity, and it is the
specter of widespread compliance problems that directly pose the
too-big-to-fail concern. Although this Article focuses on the systems
question, in many reported cases it appears as if there has been

33. There have been only a handful of private-label residential-mortgage securitization
deals since 2008. See Al Yoon, Deal May Signal Thaw in Mortgage Securities, WALL ST. J. (Mar.
20, 2013, 6:47 P.M.), http://online.wsj.com/article/SB10001424127887324373204578372833475791
270.html. In contrast, the private-label commercial-mortgage securitization market has made a
much more vigorous rebound. Adam J. Levitin & Susan M. Wachter, The Commercial Real
Estate Bubble, 3 HARV. BUS. L. REV. 83, 112–13 (2013).
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compliance with, at best, one, and often none, of the competing title-
34
and-transfer systems.
It is also important to emphasize what is and what is not at issue
in challenges to foreclosure standing. Foreclosure standing litigation
does not directly relate to the issue of whether the homeowner is in
35
default on the mortgage or even indebted and to what amount. The
mortgage-title-system issue does not generally go to the question of
the validity of the mortgage loan or its generic enforceability.
Problems with mortgage title do not mean that a loan is not
outstanding or that it is not in default. Instead, the mortgage title
issue is about the specific question of who has the right to enforce the
mortgage and the consequences of improper foreclosures.
Insisting that foreclosures be carried out only by parties with
standing may appear to be a procedural nicety that has little to do
36
with moral rights or economic reality. Such a view fundamentally
misunderstands the mortgage contract. The mortgage contract is not
simply an agreement that the home may be sold upon a default on the
loan. Instead, it is an agreement that if the homeowner defaults on
the loan, the mortgagee may sell the property pursuant to the requisite
legal procedure. A mortgage loan involves a bundle of rights,
including procedural rights. These procedural rights are not merely
notional; they are explicitly priced by the market. Mortgage finance
availability and pricing is statistically correlated with variations in
37
procedural protections for borrowers. Retroactively liberalizing the

34. See, e.g., In re Maisel, 378 B.R. 19, 22 (Bankr. D. Mass. 2007) (finding no evidence of a
proper assignment of the mortgage nor the note to the foreclosing party prior to foreclosure);
Wells Fargo Bank, N.A. v. Marchione, 887 N.Y.S.2d 615, 620 (App. Div. 2009) (finding no
evidence of a proper assignment of the mortgage to the foreclosing party prior to foreclosure);
HSBC Bank U.S.A. Nat’l Ass’n v. Miller, 889 N.Y.S.2d 430, 433 (Sup. Ct. 2009) (holding that a
mortgagee’s assignee lacked standing to foreclose because the mortgagee did not hold the
promissory note at the time the complaint was filed).
35. See, e.g., U.S. Bank, Nat’l Ass’n v. Moore, 278 P.3d 596, 602 (Okla. 2012) (“[F]or the
homeowners, absent adjudication on the underlying indebtedness, today’s decision to reverse
the dismissal of the petition and motion to vacate cannot cancel their obligation arising from an
authenticated Note, or insulate them from foreclosure proceedings based on proven
delinquency. This Court’s decision [that the plaintiff lacks standing to foreclose] in no way
releases or exonerates the debt owed by the defendants on this home.”).
36. Tamara Keith & Renee Montaigne, Sorting out the Banks’ Foreclosure Mess, NPR
(Oct. 15, 2010, 4:00 AM), http://www.npr.org/templates/story/story.php?storyId=130582451
(quoting JPMorgan Chase CEO Jamie Dimon as saying that “for the most part by the time you
get to the end of the process, you know, we’re not evicting people who deserve to stay in the
house”).
37. See Lee J. Alston, Farm Foreclosure Moratorium Legislation: A Lesson from the Past,
74 AM. ECON. REV. 445, 456 (1984) (pointing out the consequences of laws preventing the
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2013] THE PAPER CHASE 651

rules for mortgage enforcement creates an unearned windfall for
mortgagees. Moreover, enforcement of bargained-for procedural
requirements such as standing gives homeowners leverage to achieve
negotiated solutions to loan defaults, such as a loan modification.
Alternatively, enforcement of the bargained-for procedural leverage
can buy the homeowner time to relocate, enabling a softer landing
with fewer social dislocations and externalities.
At the same time, however, we should recognize the economic
costs from lack of clarity in mortgage title. When it is not clear who
can foreclose, the result is a defaulted loan sitting in limbo. Someone
is still owed money on the loan and is not being paid. If the
homeowner has abandoned the property, the result is deadweight
loss. If the homeowner remains in residence, the result is a substantial
transfer of wealth from the real lender to the homeowner. The
homeowner has functionally secured a rent-free dwelling, but it is
with uncertain tenure and little alienability, as the house is still
encumbered. This situation is bad for both the ultimate economic
lender on the loan and for the economy as a whole, as part of the
housing market is unable to clear. Thus, although the rule of law is
part of the microeconomic bargain, insistence upon it may be less
than optimal from a macroeconomic standpoint.
This Article proceeds as follows. Part I reviews the traditional
mortgage title-and-transfer systems: UCC Article 3 and land records.
It emphasizes how these systems required demonstrative formalities
of transfer but created high degrees of certainty in the property rights
transferred. Part II explains how the change in mortgage financing
from balance-sheet lending to securitization affected the demands
made on mortgage title-and-transfer systems. Part III examines the

foreclosure of farms); Quinn Curtis, State Foreclosure Laws and Mortgage Origination in the
Subprime, J. REAL EST. FIN. & ECON. 19 (2013), http://link.springer.com/article/10.1007/s11146-
013-9437-9 (“The provisions that make foreclosure easier—nonjudicial process and readily
available deficiency judgments—lead to increased applications and accepted applications in the
subprime market . . . .”); Lawrence D. Jones, Deficiency Judgments and the Exercise of the
Default Option in Home Mortgage Loans, 36 J.L. & ECON. 115, 126–27 (1993) (noting the lender
response to default rates); Mark Meador, The Effects of Mortgage Laws on Home Mortgage
Rates, 34 J. ECON. & BUS. 143, 146 (1982) (estimating a 13.87 basis-point increase in interest
rates on new homes as a result of antideficiency laws); Karen M. Pence, Foreclosing on
Opportunity: State Laws and Mortgage Credit, 88 REV. ECON. & STAT. 177, 180 (2006) (noting
that the availability—and hence, the cost—of mortgages in states with judicial foreclosure
proceedings is greater than in states with nonjudicial foreclosures); Michael H. Schill, An
Economic Analysis of Mortgagor Protection Laws, 77 VA. L. REV. 489, 491 (1991) (arguing that
“the relatively modest costs associated with state mortgagor protection laws do suggest that
mortgagor protections may indeed promote economic efficiency”).
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652 DUKE LAW JOURNAL [Vol. 63:637

additional mortgage transfer methods created to facilitate
securitization: MERS and revised UCC Article 9. It suggests that the
securitization sell-side and the securitization buy-side may have had
different understandings of how transfers were to occur in
securitizations, which the sell-side exploited to capture the cost
savings from regime change and increase the volume of its fee-based
business and hence its profits.
Part IV reviews existing reform proposals and considers how
mortgage title systems could be reconciled. It proposes the creation of
a registration system for mortgage notes that would be linked via
unique identifiers to mortgages recorded in the land records.
Registration would create a rebuttable presumption of ownership,
and matching mortgage recordation and note registration would be a
precondition of foreclosure. Linked note-and-mortgage title systems
would preserve borrowers’ interest in keeping the terms of notes
private, resolve questions about foreclosure standing, remove the
potential cloud to real-estate title, and facilitate mortgage financing
transactions generally by clarifying property rights.
The Article concludes with some observations about the lessons
that the mortgage-title-system confusion holds out for commercial
law more generally and the problem of too-big-to-fail in the courts.
The title-system problem stands as a reminder of the problems that
can arise when certainty of property rights is eroded to reduce
transaction costs and of the toll that too-big-to-fail problems take on
the judicial system.

I. TRADITIONAL MORTGAGE TITLE SYSTEMS
The obligation colloquially referred to as a “mortgage” is usually
embodied in two separate instruments: a promissory note and a
38
security instrument. The promissory note is what creates the debt
obligation, whereas the security instrument is what makes real
property the collateral securing performance on the note. The
security instrument is what enables the remedy of foreclosure—the
forced sale of the collateral property—upon default on the note. The
note is enforceable without the security instrument, as an unsecured

38. The name and operation of the security instrument vary by state, but the differences
are not essential for our purposes. Sometimes the security instrument is called a “mortgage”;
other times, a “deed of trust” or “trust deed.” In some states the mortgage transaction is a two-
party transaction, whereas in other states a three-party escrow arrangement is used.
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259
free of the Article 9 purchaser’s claim. The Article 9 purchaser
would have no rights in the note; at most, the purchaser would have a
litigation claim against the seller. Thus, the only way the MBS
investors could be completely sure that the securitization trust has no
competing claimants would have been to insist on Article 3 transfer.
Fourth, even if Article 3 sales do not trump Article 9 sales, there
would still be a logic for requiring Article 3 negotiation, namely, that
the Article 9 transfer method is too easy to consummate and hence
does not lend itself to easy proof, unlike Article 3. Under the basic
commercial-law rule of nemo dat, a transferor cannot transfer rights it
does not have; I cannot sell you the Brooklyn Bridge. For Article 3,
this is not a problem. Because of reification, the seller only has
something to transfer if the seller can deliver the physical note, and
260
the chain of title is built into the note itself through indorsements. If
there is no delivery, there is no transfer, so it is easy to verify if rights
have been transferred.
Article 9 codifies the nemo dat rule by requiring the seller to
261
have rights in the property sold for the transfer to be effective.
Unlike Article 3, however, determining if a seller has rights to
transfer is difficult. It ultimately requires proving up a chain of title
from the originator to the seller to the depositor or ABC. If this
chain cannot be proven, then the transfer from the depositor to the
trust (CD) is a manqué transaction.
The lack of solid evidence of transfers is particularly important
given the occurrence of “warehouse fraud,” wherein the same
mortgage might be sold multiple times to different buyers by the
262
same seller. If the originator A already sold the mortgage, then the
hapless subsequent buyer B has no rights in the mortgage to pass
along, making the BCD transfers meaningless; B, and therefore
C, have nothing to transfer.

259. See U.C.C. § 9-331 cmt. 2 (2011) (explaining that “priority” contextually means taking
“free” of the Article 9 security interest).
260. The 2002 revision to UCC section 3-309’s lost-note provision undermines reification by
enabling enforcement of notes that were lost in a mediate, rather immediate, transfer. As of
2012, only ten states have adopted this revised provision. See supra note 84.
261. U.C.C. § 9-203(b)(2) (requiring the seller to have rights in the collateral or the power to
transfer rights in the collateral).
262. See e.g., Provident Bank v. Cmty. Home Mortg. Corp., 498 F. Supp. 2d 558, 562
(E.D.N.Y. 2007); Charles L. Armstrong, Thomas H. McNeill & James E. Reynolds, Warehouse
Lending Losses Under the Financial Institution Bond, 12 FIDELITY L.J. 1, 2 (2006); Brian F.
Corbett, Beware of Warehouse Lending Fraud, POYNER SPRUILL (Nov. 19, 2008),
http://www.poynerspruill.com/publications/Pages/BewareofWarehouseLendingFraud.aspx.
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One of the unfortunate byproducts of the sub-prime mortgage crisis has been an increase in fraudulent
conduct among originators of residential mortgage loans who fund such loans using warehouse lines of
credit provided by banks and other financial institutions. The premise of warehouse lending is as
follows: Lender A obtains a line of credit from Bank B wherein Bank B funds loans made by Lender A to
consumers secured by residential real estate. Bank B secures its line of credit to Lender A by taking an
assignment of the notes and mortgages given by the consumers to Lender A. The notes and mortgages
are held by Bank B until Lender A packages and sells the loans on the secondary market, at which time
the advances under the line of credit made by Bank B to Lender A are repaid.

Mortgage lenders typically obtain warehouse lines of credit from more than one bank or financial
institution so that they can maximize the loan dollars that they offer to consumers without having to
raise significant equity. A few different schemes have surfaced in which these mortgage lenders “double
fund” the residential real estate loans being made by having two or more of the lenders providing
warehouse lines of credit unknowingly fund the same mortgage loan. The mortgage lender uses the
proceeds from one of the lines to fund the residential real estate loan while keeping the proceeds from
the other loan or loans for itself.

In one of the schemes, upon making a loan to a consumer, Lender A delivers the original promissory
note to Bank B in exchange for the money to fund the loan. Lender A also obtains funding from Bank C
for the same loan by assigning the mortgage instrument to Bank C and recording a copy of this
assignment. In another scheme, Lender A delivers the original promissory note to Bank B and delivers a
copy of the same promissory note to Bank C.

In both instances and regardless of the timeframe in which Bank B and C fund the loans or obtain their
respective “collateral”, the result is the same – Bank B prevails. The Uniform Commercial Code (the
“UCC”) makes it clear that UCC rules govern the perfection or non-perfection of the security interests of
the warehouse lenders in the above scenario. See N.C.G.S. § 25-9-109. The UCC prescribes that the
mortgage follows the note and, therefore, one cannot perfect a security interest in the mortgage
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instrument without also perfecting a security interest in the underlying obligation (i.e., the note). See
N.C.G.S. § 25-9-109, Comment 7. To perfect a security interest in a promissory note, a lender must
either: (a) file a financing statement, or (b) take possession of the promissory note. See N.C.G.S. §§ 25-9-
312(a) and 25-9-313(a). Although the UCC now allows a lender to obtain a perfected security interest in
promissory notes by filing a UCC Financing Statement, the best practice is to always take possession of
original promissory notes so as to cut off any priority rights that certain competing purchasers and
lenders with possession of the promissory notes may be entitled to. See N.C.G.S. §§ 25-9-330(d) and 25-
9-331.

It is clear from the above examples that obtaining possession of original promissory notes is, in most
instances, sufficient to protect a lender providing warehouse lines of credit. What happens, however,
when Lender A obtains duplicate originals of the promissory note from the unsuspecting borrowing
consumer and delivers “original” notes to both Bank B and Bank C? In this situation, obtaining
possession of the original promissory note is not enough. The determination depends simply upon
which bank obtained possession of the “original” promissory note first. The first to obtain possession
would prevail. See N.C.G.S. § 25-9-322(a); See also Provident Bank v. Cmty. Home Mortg. Corp., 498 F.
Supp. 2d 558 (E.D.N.Y. 2007).

The above scenarios and the law applicable thereto illustrate that a lender providing warehouse lines of
credit would be well advised to, in addition to taking possession of original promissory notes, closely
monitor the lending activities of its borrowers, including the funding and borrowing from warehouse
lines of credit provided by other lenders.

Physical Address: 301 Fayetteville Street, Suite 1900, Raleigh, NC
27601http://www.poynerspruill.com/publications/Pages/BewareofWarehouseLendingFraud.aspx
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________

No 02-CV-5219 (JFB) (AKT)
_____________________

THE PROVIDENT BANK,

Plaintiff,

FIRST SAVINGS BANK, FSB,

Intervenor Plaintiff,

WAREHOUSEONE ACCEPTANCE COMPANY IV, LLC,

Intervenor Plaintiff, and

NETBANK,

Intervenor Plaintiff,

VERSUS

COMMUNITY HOME MORTGAGE CORP.,
COMMUNITY HOME FUNDING GROUP, LTD., AND
IRA SILVERMAN,

Defendants.

___________________

MEMORANDUM AND ORDER
May 7, 2007
___________________

JOSEPH F. BIANCO, District Judge: of guaranty, and requesting an accounting and
appointment of a receiver, against defendants
Plaintiff Provident Bank (“Provident”) Community Home Mortgage Corp. and
brings the instant action alleging breach of Community Home Funding Group, Ltd.
contract, fraudulent representation and breach (collectively, “Community”) and Ira
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Silverman (“Silverman”) (collectively, banking operations in New York, as well as
“defendants”). Intervenor-plaintiffs other states. (Southwest’s 56.1, ¶ 5.)
Southwest Securities Bank, formerly known Community originated residential mortgage
as First Savings Bank, FSB (“Southwest”), loans. (Id.) Southwest and RBMG, Inc.
Warehouseone Acceptance Company IV, LLC (“RBMG”) did business with Community –
(“Warehouseone”) and NetBank (“NetBank”) Southwest, as a “warehouse lender,”2 and
intervened in the action to assert claims RBMG as a “correspondent lender.”
against Community and each other. (Southwest’s 56.1, ¶¶ 2-3.) Intervenor-
plaintiff NetBank is a successor in interest to
NetBank asserts a cross-claim against RBMG, Inc. (Stagg Aff., ¶ 1.)
Southwest for a declaratory judgment in
Netbank’s favor; in addition, Southwest In order to obtain the money to fund the
asserts counter-claims against NetBank for mortgages it originated, Community entered
constructive trust, unjust enrichment, into agreements with banks such as Southwest
conversion, and for a declaratory judgment in and RBMG to fund a portion of the purchase
Southwest’s favor. price associated with the loans. (Southwest’s
56.1, ¶ 6; Ex. A.) In a Mortgage Purchase
Southwest now moves, under Federal Rule Agreement (“MPA”) between Community
of Civil Procedure 56, for summary judgment and Southwest, the parties provided that
as to NetBank’s cross-claim and its own Community would sell a loan it had originated
counter-claim for a declaratory judgment, or, to Southwest, and that the purchase price paid
in the alternative, for relief pursuant to the by Southwest would be used by Community
Court’s equity powers. NetBank cross-moves to fund the closing of the loan.3 (Southwest’s
for summary judgment, seeking a declaratory
judgment in its favor as to its cross-claim and
Southwest’s counter-claim. For the reasons 2
“Warehouse lending” is a practice by which
that follow, Southwest’s motion for summary
judgment is denied. NetBank’s motion for Mortgage bankers use their revolving
summary judgment is granted. lines of credit with commercial banks to
close and record mortgage loans in their
I. BACKGROUND own names, pledging the secured
mortgage notes as collateral with the
A. The Facts banks. Thereafter, the banks hold onto or
“warehouse” the mortgage loans until
they are reassigned and sold to a
The following facts are taken from the
permanent lender.
parties’ depositions, declarations, exhibits and
respective Local 56.1 statements of facts.1 Madison, Dwyer, and Bender, 2 Law of Real
Estate Financing § 11:7 (Database updated
Defendant Community was a mortgage November 2006).
banker authorized to conduct mortgage
3
NetBank contends that Southwest did not
actually purchase mortgage loans from
1
Where one party’s 56.1 statement is cited, the Community. According to NetBank, the MPA
fact is not contested by the other party, unless created a loan or line of credit in favor of
otherwise indicated. Community, pursuant to which Community could

2
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56.1, ¶ 7, Ex. A.) Community would then be 14.) Community thereby obtained duplicate
obligated to sell the loan within 60 days in funding for one loan from two different
order to repay Southwest, plus interest and warehouse lenders, and retained the entire
fees. (Southwest’s 56.1, ¶ 8, Ex. A.) value of the loan for its own purposes.
Similarly, under RBMG’s Correspondent (NetBank’s Intervenor Compl., ¶ 48.) After
Mortgage Purchase Agreement (“CMPA”) the loan was sold to a permanent investor,
with Community, RBMG agreed to purchase only one of the warehouse lenders would be
mortgage loans from Community. paid in full. (NetBank’s Intervenor Compl., ¶
(NetBank’s 56.1, ¶ 2; Southwest’s 56.1, Ex. 49.) As a result, the investor and the unpaid
W.) warehouse lender would have conflicting
recorded mortgages and assignments.
Community allegedly engaged in a (NetBank’s Intervenor Compl., ¶ 49.) In the
scheme known as “double-booking.”4 case of nine loans, one original note and
(Southwest’s 56.1, ¶ 13.) Pursuant to this assignment was sold to Southwest, and
scheme, each mortgage borrower executed duplicate original documents were sold to
duplicate original promissory notes and RBMG.6 (Southwest’s 56.1, ¶ 14.) As a
mortgage assignments.5 (Southwest’s 56.1, ¶ result of Community’s fraud, there are a total
of nine loans which were sold to both
Southwest and RBMG and for which each
maintain an outstanding balance of up to ten now claims a priority interest:
million dollars in loans that Southwest had funded,
but which were not yet repaid to Southwest. (1) The Brockman loan, in the amount
(NetBank’s Response to Southwest’s 56.1, ¶ 7.) of $246,050;
In distinguishing Southwest and NetBank’s (2) The Duhigg loan, in the amount of
relationships with Community, NetBank asserts:
$238,000;
“Southwest extended a line of credit to
Community in exchange for a secured interest in
(3) The Kassorla loan, in the amount
the notes associated with the mortgage loans of $300,000;
Community originated. NetBank purchased loans (4) The Martinez loan, in the amount
from Community without extending any line of of $236,000;
credit to Community.” (NetBank’s Response to (5) The Matterson loan, in the amount
Southwest’s 56.1, ¶ 12.) As discussed infra, this of $284,500;
issue need not be resolved for purposes of these (6) The McDuffie loan, in the amount
motions. of $177,050;
4
Both intervenor-plaintiffs agree that Community
engaged in fraud by “double-booking” loans.
(Southwest’s 56.1, ¶ 13; NetBank’s Am.
Intervenor Compl., ¶¶ 47-53 (Stagg Aff., Ex. 16).) this dispute is immaterial to the issues pertinent to
Therefore, for purposes of deciding this motion, the pending motion.
the Court shall assume that Community, in fact,
6
did engage in a fraudulent double-booking NetBank disputes that Southwest received the
scheme. original note for the Nienstedt loan, which is one
of the disputed loans. (NetBank’s Response to
5
NetBank disputes that Community, or any other Southwest’s 56.1, ¶ 14; Stagg Aff., Ex. 1.) This
entity, defrauded the mortgagors. (NetBank’s dispute is immaterial because Southwest does not
Response to Southwest’s 56.1, ¶ 14.) However, assert a priority interest in this loan.

3
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I used to have a deputy who said that the FHA mortgage insurance funds were where mortgages went to die. That was, however,
before the creation of MERS, derivatives and the explosion of mortgage fraud during the 1990's which in combination with the
“strong dollar policy” engineered what I have referred to as a financial coup d’etat.
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The challenge for Ben Bernanke and the Fed governors since the 2008 bailouts has been how to deal with the backlog of fraud – not
just fraudulent mortgages and fraudulent mortgage securities but the derivatives piled on top and the politics of who owns them, such
as sovereign nations with nuclear arsenals, and how they feel about taking massive losses on AAA paper purchased in good faith.

On one hand, you could let them all default. The problem is the criminal liabilities would drive the global and national leadership into
factionalism that could turn violent, not to mention what such defaults would do to liquidity in the financial system. Then there is the
fact that a great deal of the fraudulent paper has been purchased by pension funds. So the mark down would hit the retirement savings
of the people who have now also lost their homes or equity in their homes. The politics of this in an election year are terrifying for the
Administration to contemplate.

Various court squabbles over the MERS system for registering mortgages are also nipping at the Fed and Treasury heels. It is hard to
win a presidential election in 3100 counties when multiple federal agencies are in the local courts trying to foreclose on half the
county while supporting arguments that a national registration system is free to violate local property laws with impunity.

Why should the sheriff respect your rights if you take the position that the county has no rights and local property laws are
meaningless? In fact, the Sheriff does not have sufficient staff time to process foreclosures and protect the local citizenry from the
growing crime that results from hard times. The Sheriff is also running for election and the people who vote for him or her comprise a
much larger group than the handful of local professionals on the big banks payroll, including those processing foreclosures for FHA,
VA, Farmers Home and Fannie and Freddie.

So, it looks like the Fed decision last week to buy $40 billion a month in mortgage paper is the ultimate plan to clear the market once
and for all of fraudulent mortgages, mortgage backed securities and related derivatives. This means Fannie and Freddie will be bailed
out and winding down through the back door. This means the big banks may be paid in full for your mortgage. It also means your
pension fund assets will not be marked to market – at the price of debasing the purchasing power of your assets and benefits.

The Fed is now where mortgages go to die. Thousands of mortgages on homes that do not exist or on homes that have more than one
“first” mortgage are now going to the Fed to disappear. Thousands of multifamily and commercial mortgages will be bought up as
well. As this happens, trillions of dollars that have been amassed offshore will be free to come back into the US to buy up and
reposition land, farmland, residential and commercial real estate and other tangibles.

With documents shredded, criminal liabilities extinguished and financial institutions made whole, funds can return without fear of
seizure.
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QE3 proves beyond any shadow of a doubt that the extent of the fraud was as bad as I said it was. You can count up the bailouts and
QE1, QE2, QE3 the numbers speak for themselves. The fraud was indeed in the many trillions of dollars. It was intentional. It was a
plan.

Now, the $64,000 question for those whose house is underwater or whose mortgage is in default is whether or not you still owe on
your mortgage. Certainly, you still do as a legal matter. If the bank has been paid off, arguably in some cases several times, why not
you? Let’s see if Fannie, Freddie and the big banks are under orders to quietly pass through a portion of their largesse to troubled
homeowners in amounts sufficient to unfreeze the market. If you are in a workout situation, you need to take notice. If enough
mortgage write-offs flow through, the Democrats will quickly amass a lock on the elections in November.

If you are in the market to buy a home or other real estate, you also need to pay attention – a major turn is now underway. Watch to
see how much the banks pass through to homeowners and property owners to see how fast and big the turn may be. Watch to see the
inflow of funds from offshore. This is not only funds returning but investors around the world looking to exchange their dollars for
tangible assets to protect themselves from debasement of the dollar denominated deposits and securities they hold. Watch to see what
the renegotiation of federal tax policy and the reengineering of the federal budget in response to the “fiscal cliff” do to reposition
housing and real estate prices and cost of financing for an inflow looking for large accumulations.

Finally, the way the Fed has engineered the Slow Burn to date is to continually offset monetary inflation with labor deflation. It is
worth contemplating how much labor deflation will be required to offset QE3 and how sufficient additional labor deflation might be
engineered. Ben Bernanke was quite clever to tie QE3 to unemployment. The problem has become the solution, which is the basis for
QE-Infinity.
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Professional

Solari, Inc.
President, 1998 to date, publisher of The Solari Report.

Solari Investment Advisory Services, LLC.
Managing Member, 2006 to date, of this investment advisory firm.

The Hamilton Securities Group, Inc., Washington, DC, San Francisco, CA, and New York,
NY
President, 1991-1998. Responsible for founding and building this broker-dealer/investment bank
with special emphasis on financial software technology and advanced decision science.
Transactions for government and private clients totaled $12 billion of auctions and private
placements. Portfolio strategy for the Federal Housing Administration related to $400 billion of
mortgage insurance and related securities and real estate assets and liabilities. Transactions and
portfolio strategy relied heavily on pricing infrastructure of software, databases and pricing tools
used to identify and price existing and pro forma geographic flows of private and public income
and investment on an integrated basis.

U.S. Department of Housing and Urban Development, Washington, DC
Assistant Secretary for Housing-Federal Housing Commissioner, 1989-1990. Responsible for the
operations of the Federal Housing Administration, including: annual originations of $50-100
billion of mortgage insurance; servicing of $320 billion of mortgage insurance, mortgages and
properties, portfolio analysis and pricing for 63,000 communities; production and management
of assisted private housing; reengineering of organization of 7,000 employees in 80 offices
nationwide; migration of systems to network systems and tools; and advisor to the Secretary on
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capital markets regulatory responsibilities, including the RTC Oversight Board, Federal Housing
Finance Board and Home Loan Bank Board System, Fannie Mae and Freddie Mac. Focus
included changes in law, regulations and administration to institute financial and appropriation
controls and financial, actuarial and place based disclosure for FHA, federal credit programs and
agencies government wide.

Dillon, Read & Co. Inc., New York, NY
Managing Director and Member, Board of Directors, 1986-1989; Senior Vice President, 1984-
1986; Vice President, 1982-1984; Associate, 1978-1982. Served in the Corporate Finance,
Energy Finance, Mergers and Acquisitions and Public Finance Departments.

Academic

• The Wharton School, University of Pennsylvania, M.B.A., 1978 (Finance)
• The University of Pennsylvania, B.A., 1974 (History)
• Yale-in-China Language Institute, Hong Kong (Mandarin)
• Bennett College, A.A., 1970 (English)
• Summer Schools, Harvard 1969, Stanford 1970
• Sabbatical, MIT, Fall 1995

Publications

• Blog: solari.com/blog
• Column: The Real Deal, Scoop Media
• Lectures/Interviews: Regular Speaker & Radio Talk Show Guest

Memberships

Academic

• Member, Board of Trustees, The Friends Select School, 9/99-5/02
• Member, Graduate Executive Board, Wharton School, University of Pennsylvania, 4/86-
10/94
• Member, Board of Overseers, University of Pennsylvania School of Arts and Sciences,
2/87-3/89
• Member, Board of Directors, Wharton Business School Club of New York, Inc., 12/88-
3/89
• Member, Advisory Board, The Wharton School Club of Washington, DC, 9/91-12/95
• Member, Board of Trustees, Bank Street College, 11/88-3/89
• Member, Capital Task Force Financial Advisory Group, New York City Board of
Education, 7/87-3/89

Arts & Community

• Member, Board of Directors, New York City Food Bank, 3/87-3/89
• Member, Council for Excellence in Government, 7/91-12/97
Case 1:13-ap-01070-MB Doc 107 Filed 08/11/15 Entered 08/11/15 22:45:28 Desc
Main Document Page 65 of 66

• Member, The Urban Land Institute, 5/90-12/97
• Member, Board of Directors and Executive Committee, National Multi Housing Council,
4/92-12/95
• Member, Board of Directors, The Housing Roundtable, Inc., 1/91-12/93

Business & Capital Markets

• Member, Board of Directors, Gold Anti-Trust Action Committee (GATA), 7/04 - 10/10
• Member, Rotary Club of Bolivar, TN, 3/04-5/06
• Member, Advisory Board, Sanders Research Associates, 6/01-8/04
• Member, The Economic Club of New York, 1/88-12/01
• Member, Board of Directors, Student Loan Marketing Association, Sallie Mae, 11/91-
3/94
• Member, Board of Directors, Dillon, Read & Co. Inc., 1/86-3/89
• Member, Board of Directors, Carteret Savings Bank, F.A., Morristown, NJ, 6/91-12/92
• Member, Board of Directors, First American Corp. and First American Bankshares, Inc.,
3/94-10/96
• Member, Advisory Council, Federal National Mortgage Association, Fannie Mae, 2/92-
12/93
• Member, Emerging Markets Advisory Committee, Securities & Exchange Commission,
4/90-10/93
• Member, The Bond Club of New York, Inc., 2/88-3/89

Church

• Member, Christ Our Hope Reformed Episcopal Church - 1/11 to date
• Member, Hickory Valley Baptist Church, 11/99 - 1/11
• Member, Greater Mount Calvary Holy Church, 11/97 - 8/00
• Attendance, Race Street Friends Meeting, 9/58-5/68

Information Technology

• Member, Advisory Board, HTML.com, 11/02-12/06

Other

Internships

• Goldman Sachs, 1977
• Sante Fe National Bank, 1976
CaseA.1:13-ap-01070-MB
In re Allana Baroni, Doc 107 Filed 08/11/15
Chapter 11Entered 08/11/15 22:45:28 Desc
Main Document Page 66 of 66
Bankr. Case No. 1:12-bk-10986-MB
Debtor(s)

PROOF OF SERVICE OF DOCUMENT
I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is:

Law Offices of Louis J. Esbin
25129 The Old Road, Suite 114, Stevenson Ranch, California 91381

A true and correct copy of the foregoing docum ent Described PLAINTIFF'S NOTICE OF M OTION AND M OTION FO R
SUM M ARY ADJUDICATION OR, IN THE ALTERNATIVE, PARTIAL SUM M ARY ADJUDICATION; M EM ORANDUM OF
POINTS AND AUTHORITIES; DECLARATIONS IN SUPPORT THEREOF will be served or was served (a) on the judge in
cham bers in the form and m anner required by LBR 5005-2(d); and (b) in the m anner indicated below:

1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING ("NEF") - Pursuant to controlling General
Order(s) and Local Bankruptcy Rule(s) ("LBR"), the foregoing docum ent will be served by the court via NEF and hyperlink to
the docum ent. On August 11, 2015, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and
determ ined that the following person(s) are on the Electronic Mail Notice List to receive NEF transm ission at the em ail
address(es) indicated below:
Louis J. Esbin (esbinlaw@sbcglobal.net) United States Trustee (ustpregion16.wh.ecf@usdoj.gov)
Michael Riley (mriley8@aol.com) S Margaux Ross (margaux.ross@usdoj.gov)
Bernard J. Kornberg (bjk@severson.com) q Service inform ation continued on attached page
2. SERVED BY U.S. M AIL OR OVERNIGHT M AIL (indicate m ethod for each person or entity served):
On August 11, 2015, I served the following person(s) and/or entity(ies) at the last known address(es) in this bankruptcy case
or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States Mail, first class,
postage prepaid, and/or with an overnight m ail service addressed as follows. Listing the judge here constitutes a declaration
that m ailing to the judge will be com pleted no later than 24 hours after the docum ent is filed.
Hon. Martin R. Barash Debtor
Courtroom 302 Allana Baroni
21041 Burbank Blvd. 3339 Via Verde Ct.
W oodland Hills, CA 91367 Calabasas, CA 91302

q Service inform ation continued on attached page
3. SERVED BY PERSONAL DELIVERY, FACSIM ILE TRANSM ISSION OR EM AIL (indicate m ethod for each person or entity
served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on August 11, 2015, I served the following person(s) and/or entity(ies)
by personal delivery, or (for those who consented in writing to such service m ethod), by facsim ile transm ission and/or em ail
as follows. Listing the judge here constitutes a declaration that personal delivery on the judge will be com pleted no later than
24 hours after the docum ent is filed.

q Service inform ation continued on attached page
I declare under penalty of perjury under the laws of the United States of Am erica that the foregoing is true and correct.
August 11, 2015 Sandy Fairbrother /s/ Sandy Fairbrother

Date Type Nam e Signature

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.
January 2009
F 9013-3.1