ANOTHER FLORIDA REVERSAL 2nd DCA: DAVID B. HOWELL and DAVE B. HOWELL, LLC, Appellants, v. ED BEBB, INC., Appellee. 2nd District. Case No. 2D09-3664. Opinion filed May 28, 2010 REVERSED & REMANDED

HOWELL v. ED BEBB, INC.

DAVID B. HOWELL and DAVE B. HOWELL, LLC, Appellants,

v.

ED BEBB, INC., Appellee.

Case No. 2D09-3664.

District Court of Appeal of Florida, Second District.

Opinion filed May 28, 2010.

Matthew J. Conigliaro, Annette Marie Lang, and Stephanie C. Zimmerman of Carlton Fields, P.A., St. Petersburg, for Appellants.

Thomas C. Saunders of Saunders Law Group, Bartow, for Appellee.

WHATLEY, Judge.

David B. Howell and Dave B. Howell, LLC (collectively referred to as Howell) filed this direct appeal of a final summary judgment to quiet title and for ejectment entered in favor of Ed Bebb, Inc. We conclude that Bebb did not establish that it was entitled to summary judgment at this stage in the pleadings and reverse.

Bebb filed an amended complaint against Howell asserting counts to quiet title, take possession of real property, require specific performance, foreclose on a mortgage, and for ejectment. Howell filed a motion to dismiss, and while the motion was pending, Bebb filed a motion for summary judgment. After a hearing on Bebb’s motion, the circuit court entered final summary judgment in favor of Bebb.

Generally, “[a] movant is entitled to summary judgment `if the pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials as would be admissible in evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'” Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006) (quoting Fla. R. Civ. P. 1.510(c)). But if “a plaintiff moves for summary judgment before the defendant has filed an answer, `the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.'” BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 937-38 (Fla. 2d DCA 2010) (quoting Settecasi v. Bd. of Pub. Instruction of Pinellas County, 156 So. 2d 652, 654 (Fla. 2d DCA 1963)). Thus, the standard to establish entitlement to summary judgment requires the plaintiff to establish that “the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint.” Id. at 938.

The trial court in the present case appears to have used the wrong standard in ruling on Bebb’s motion for summary judgment, as it asked Howell if he had filed any affidavits or anything that would create a material issue of fact. At the hearing on the motion for summary judgment, Howell noted issues of material fact that could be raised in an answer to the complaint. However, Bebb based its argument for summary judgment on the failure of Howell to file affidavits establishing genuine issues of material fact. On appeal, Bebb does not contend that it established to a certainty at the hearing that no answer which Howell might properly serve could present a genuine issue of fact.

Accordingly, it was improper to enter summary judgment in favor of Bebb at this stage in the pleadings, and we reverse the judgment and remand for further proceedings.

Reversed and remanded.

NORTHCUTT and LaROSE, JJ., Concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED.

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Kline v. Mortgage Electronic Registration Systems, Inc., Dist. Court, SD Ohio, Western Div. 2010

Pointers for FDCPA, TILA, MERS, OCSPA

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

Case No. 3:08cv408.

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

March 29, 2010.

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

 

WALTER HERBERT RICE, District Judge.

In this putative class action, the Plaintiffs have set forth claims under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692a et seq.; the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq.; and the Ohio Consumer Sales Practices Act (“OCSPA”), Ohio Revised Code § 1345.01 et seq,; as well as for breach of contract and unjust enrichment under the common law of Ohio. See Doc. #1 at ¶ 2. In their Complaint, the Plaintiffs have named eleven Defendants, including Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”). MERS has filed a motion, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, requesting that this Court dismiss Plaintiff’s Complaint for failure to state a claim upon which relief can be granted. See Doc. #31. This Court referred that motion to United States Magistrate Judge Sharon Ovington for a Report and Recommendations. Judge Ovington has submitted such a judicial filing, recommending that this Court sustain in part and overrule in part MERS’ motion. See Doc. #133. The Plaintiffs have submitted Objections (Doc. #143) thereto, upon which the Court now rules. The Court begins by setting forth the standard by which it reviews Judge Ovington’s Report and Recommendations (Doc. #133), as well as a brief summary of the procedural standards which must be applied whenever a court rules on a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure, seeking dismissal for failure to state a claim upon which relief can be granted.

Under 28 U.S.C. § 636(b)(1)(A), a District Court may refer to a Magistrate Judge “any pretrial matter pending before the court,” with certain listed exceptions. Motions to dismiss are among the listed exceptions. Section 636(b)(1)(B) authorizes District Courts to refer “any motion excepted from subparagraph (A)” to a Magistrate Judge for “proposed findings of fact and recommendations.” When a District Court refers a matter to a Magistrate Judge under § 636(b)(1)(B), it must conduct a de novo review of that judicial officer’s recommendations. See United States v. Raddatz, 447 U.S. 667, 673-74 (1980); United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001).

In Prater v. City of Burnside, Ky., 289 F.3d 417 (6th Cir. 2002), the Sixth Circuit reiterated the fundamental principles which govern the ruling on a motion to dismiss under Rule 12(b)(6):

The district court’s dismissal of a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is also reviewed de novo. Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999), overruled on other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002). When deciding whether to dismiss a claim under Rule 12(b)(6), “[t]he court must construe the complaint in a light most favorable to the plaintiff, and accept all of [the] factual allegations as true.” Id. (citation omitted).

Id. at 424. In Swierkiewicz v. Sorema N.A., 532 U.S. 506 (2002), the Supreme Court noted that Rule 8(a)(2) of the Federal Rules of Civil Procedure merely requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Id. at 212. Therein, the Court explained further:

Such a statement must simply “give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims. See id., at 47-48; Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168-169 (1993). “The provisions for discovery are so flexible and the provisions for pretrial procedure and summary judgment so effective, that attempted surprise in federal practice is aborted very easily, synthetic issues detected, and the gravamen of the dispute brought frankly into the open for the inspection of the court.” 5 C. Wright & A. Miller, Federal Practice and Procedure § 1202, p. 76 (2d ed. 1990).

Id. at 512-13. In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court rejected the standard established in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that a claim should not be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 550 U.S. at 562-63. The Supreme Court recently expounded upon Twombly in Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937 (2009), writing:

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in Twombly, 550 U.S. 544, the pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S., at 555. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line between possibility and plausibility of `entitlement to relief.'” Id., at 557 (brackets omitted).

Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id., at 555 (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d, at 157-158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not “show[n]”—”that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2).

Id. at 1949-50.

In their Complaint, four Plaintiffs have set forth claims against MERS, to wit: Eugene Kline (“Kline”), Diana Hughes (“Hughes”) and George and Carol Ross (collectively the “Rosses”). In that pleading, Kline alleges that he entered into a loan transaction with WMC Mortgage (“WMC”) and that the mortgage securing that loan was held by MERS, as nominee for WMC. Doc. #1 at ¶ 64. During the course of the foreclosure proceeding on that property, Kline’s foreclosure counsel communicated to the attorney representing MERS, requesting that the latter give him a figure at which Kline could pay off that loan. MERS’ counsel indicated that Kline’s payoff figure included, inter alia, $350, for attorney’s fees, and $225, for previous service costs. Id. at ¶¶ 65-69. According to Kline, MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. In addition, Kline alleges that MERS violated the TILA, 15 U.S.C. § 1666d, by demanding these sums. Id. at ¶¶ 133-136.

Hughes alleges that, in or about July, 2005, she entered into a mortgage agreement with Heartland Home Finance (“Heartland”), covering her home at 437 Donnington Drive, Dayton, Ohio. Doc. #1 at ¶ 107. That mortgage was subsequently assigned to MERS, as nominee for Heartland. Id. at ¶ 108. Subsequently, Hughes initiated proceedings under Chapter 13 of the Bankruptcy Code, during which MERS filed a proof of claim, with which it sought to recover, inter alia, $675 for post-petition attorney’s fees. Id. at ¶ 109 and ¶ 111. According to Hughes, the recovery of such fees, even pursuant to a fee-shifting provision in a mortgage, violates Ohio law. Id. at ¶ 113. Hughes alleges that MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. Hughes has not set forth a claim under the TILA against MERS.

The Rosses allege that, in or about December, 2002, they took out a mortgage loan from Preferred Mortgage Consultants, with MERS acting as the mortgagee. Doc. #1 at ¶ 114. In December, 2006, the Rosses fell behind in their payments, which resulted in their mortgage being accelerated. Id. at ¶¶ 116-117. In April, 2007, the Rosses initiated proceedings under Chapter 13 of the Bankruptcy Code, during which MERS filed a proof of claim seeking to recover, inter alia, $475, for pre-petition bankruptcy fees, and $495.22, for accrued late charges. Id. at ¶¶ 119-120. The Rosses allege that MERS’ actions in that regard violated provisions of the FDCPA, constituted deceptive and misleading practices in violation of the OCSPA, unjustly enriched MERS, and breached a contract between the parties. The Rosses have not set forth a claim under the TILA against MERS.

In her Report and Recommendations (Doc. #133), Judge Ovington has recommended that this Court dismiss the claims of Kline, Hughes and the Rosses against MERS under the FDCPA, because that Defendant was not a “debt collector,” as that term is defined by the federal statute. See Doc. #133 at 9-15. That judicial officer has also recommended that the Court dismiss, with prejudice, those Plaintiffs’ state law claims for breach of contract and unjust enrichment against MERS. Id. at 21-24. As to those Plaintiffs’ claims under the OCSPA, the Magistrate Judge has recommended that the Court dismiss their class action claims with prejudice, and that it decline to continue to exercise supplemental jurisdiction over the individual claims of Hughes and the Rosses, while continuing to exercise such jurisdiction over Kline’s individual claim under the state statute. Id. at 25-26. Finally, Judge Ovington has recommended that the Court decline to dismiss Kline’s claim under the TILA against MERS. Id. at 19-21.

Kline, Hughes and the Rosses do not challenge Judge Ovington’s recommendation that this Court dismiss their claims under the FDCPA against MERS, because the latter is not a debt collector within the meaning of that statute. This Court, having conducted a de novo review of the recommendation, concurs with same. Accordingly, the Court sustains MERS’ Motion to Dismiss (Doc. #31), as it relates the claims of Kline, Hughes and the Rosses under the FDCPA.

MERS supported its Motion to Dismiss (Doc. #31), by appending seven documents to its memorandum in support thereof (Doc. #33). In particular, MERS has provided the mortgages of Kline, Hughes and the Rosses pertaining to it, the proof of claim filed on behalf of MERS in Hughes’ bankruptcy proceedings, the amended and second amended proofs of claim filed on behalf of MERS in the Rosses’ bankruptcy and a decision of Judge Thomas Rose issued in Kline v. Home Eq Servicing Corp., Case No. 3:07cv084 (S.D.Ohio). The Plaintiffs initially object to the Report and Recommendations of the Magistrate Judge, because she did not exclude those documents from consideration, since they are matters outside the pleadings. For reasons which follow, this Court cannot agree.

Rule 12(d) of the Federal Rules of Civil Procedure provides:

(d) Result of Presenting Matters Outside the Pleadings. If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.

In Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), the Supreme Court cited with approval 5B Wright & Miller, Federal Practice and Procedure § 1357, as setting forth types of such materials which can be considered when ruling on a motion to dismiss. Id. at 322. That section of the treatise provides, in pertinent part:

In determining whether to grant a Federal Rule 12(b)(6) motion, district courts primarily consider the allegations in the complaint. The court is not limited to the four corners of the complaint, however. Numerous cases, as the note below reflects, have allowed consideration of matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned; these items may be considered by the district judge without converting the motion into one for summary judgment.

5B Wright & Miller, Federal Practice and Procedure § 1357 at 375-76 (footnote omitted). The Sixth Circuit has approved of the use of each of those types of materials, when ruling on a motion to dismiss, without converting same to a motion for summary judgment. See e.g., Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999) (District Court may consider documents referred to in plaintiff’s complaint and central to his claim, public records, matters of which a court may take judicial notice and decisions of governmental agencies). See also Wyser-Pratte Management Corp. Inc. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir. 2005); Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997) (quoting Wright & Miller, supra, with approval). Of course, where the submitted materials “capture[] only part of the incident and would provide a distorted view of the events at issue, . . . we do not require a court to consider that evidence on a 12(b)(6) motion.” Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008) (internal quotation marks omitted).

Herein, Kline, Hughes and the Rosses have referred in their Complaint to the mortgages and the proofs of claim supplied by MERS, documents central to their claims against it. As to Judge Rose’s decision, as well as the proofs of claim, courts are authorized to take judicial notice of other court proceedings, without converting a motion under rule 12(b)(6) into one for summary judgment. Buck v. Thomas Cooley Law School, ___ F.3d ___, 2010 WL 935364 (6th Cir. 2010) at *3 (noting that, “[a]lthough typically courts are limited to the pleadings when faced with a motion under Rule 12(b)(6), a court may take judicial notice of other court proceedings without converting the motion into one for summary judgment” and citing Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 576 (6th Cir. 2008)). Accordingly, the Court overrules the Plaintiffs’ Objections (Doc. #143), as they relate to the question of whether the Magistrate Judge erred by failing to exclude the documents MERS attached to its memorandum.

Hughes and the Rosses argue that Judge Ovington erred in recommending that this Court decline to continue to exercise supplemental jurisdiction, because not all claims over which this Court can exercise original jurisdiction have been dismissed. The supplemental jurisdiction statute provides, in relevant part:

(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.

* * * (c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—* * *

(3) the district court has dismissed all claims over which it has original jurisdiction . . . .

28 U.S.C. § 1367. Whether a court may exercise supplemental jurisdiction over a state law claim, in accordance with § 1367(a), is to be determined under the standards established by the Supreme Court in United Mine Workers of Am. v. Gibbs, 383 U.S. 715 (1966), wherein the Court wrote that to exercise pendent (nka supplemental) jurisdiction, “[t]he state and federal claims must derive from a common nucleus of operative fact.” Id. at 725.[1] When a court dismisses a plaintiff’s only claim over which it has original jurisdiction (i.e., a federal claim), for failure to state a claim upon which relief can be granted, it should decline to continue to exercise supplemental jurisdiction over the plaintiff’s state law claims. See e.g., Musson Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1255-56 (6th Cir. 1996) (noting that there is a strong presumption that District Court declines to continue to exercise supplemental jurisdiction over state law claims after it has dismissed federal claims pursuant to a 12(b)(6) motion).

Herein, this Court can exercise original jurisdiction over Plaintiffs’ claims under the FDCPA and the TILA. Accordingly, it must exercise supplemental jurisdiction over all other claims set forth by Plaintiffs. Whether it will continue to do so, from this point forward, is the issue. The only federal claims set forth by Hughes are claims under the FDCPA against MERS and the law firm of Lerner, Sampson and Rothfuss (“LS&R”). In this Decision, the Court has dismissed Hughes’ claim under the FDCPA against MERS, and it previously dismissed her claim under that statute against LS&R. See Doc. #116. Accordingly, it is inappropriate for the Court to continue to exercise supplemental jurisdiction over any of Hughes’ state law claims, i.e., her claim under the OCSPA, regardless of whether such claim is for class action relief, and her claims for breach of contract and for unjust enrichment. Those state law claims are ordered dismissed without prejudice to refiling in a state court of competent jurisdiction.[2]

Similarly, the Rosses only federal claims are under the FDCPA against MERS and LS&R. Although this Court has determined herein that the Rosses’ claim under the FDCPA against MERS must be dismissed, it has previously concluded that their claim under that statute survived LS&R’s Motion to Dismiss (Doc. #17). See Doc. #116. Since that claim arises out of the same nucleus of fact as those Plaintiffs’ state law claims against MERS, it is permissible to continue to exercise supplemental jurisdiction over those state law claims.

Accordingly, the Court sustains the Plaintiffs’ Objections (Doc. #143), to the extent that they are based on the assertion that the Magistrate Judge erred in recommending that the Court decline to continue to exercise supplemental jurisdiction over the Rosses’ individual claims under the OCSPA. The Court overrules those Objections, to the extent that they are based on the assertion that the Magistrate Judge erred in recommending that the Court decline to continue to exercise supplemental jurisdiction over Hughes’ individual claim under the OCSPA.[3]

In addition, Kline, Hughes and the Rosses object to the recommendation of Judge Ovington that the Court dismiss their claims for breach of contract, unjust enrichment and for a class action under the OCSPA. As an initial matter, this Court has declined to continue to exercise supplemental jurisdiction over Hughes’ state law claims; therefore, it need not address these objections as they relate to that Plaintiff. Rather, the Court orders that all of Hughes’ state law claims be dismissed, without prejudice to refiling in a state court of competent jurisdiction.

The Court now turns to Kline’s and the Rosses’ claims for breach of contract, for unjust enrichment and for a class action under the OCSPA. Judge Ovington recommended that the Court dismiss, with prejudice, the breach of contract claims of Kline and the Rosses, because those Plaintiffs had failed to allege any of elements of a breach of contract claim against MERS. See Doc. #133 at 21-23. This Court agrees with Judge Ovington that Kline and the Rosses have failed to state claims for breach of contract against MERS in their Complaint. However, since those Plaintiffs have identified potentially plausible claims for breach of contract in their Objections (see Doc. #143 at 6-9), this Court will order that those claims be dismissed, without prejudice to being re-plead in an amended complaint, which sets forth the theories of Kline and the Rosses as to how charging the fees, of which those Plaintiffs complain, breached their contracts with MERS, i.e., the mortgages to which they were parties with MERS.

Similarly, Judge Ovington recommended that this Court dismiss the claims of Kline and the Rosses against MERS, because they failed to allege that they had conferred a benefit upon MERS. See Doc. #133 at 23-24. Those Plaintiffs have objected to that particular recommendation. See Doc. #143 at 10-12. Once again, although this Court agrees with Judge Ovington that Kline and the Rosses have failed to identify the benefit which they conferred on MERS,[4] it will, however, afford those Plaintiffs the opportunity of amending their Complaint to allege how they conferred such a benefit.

Judge Ovington recommended that this Court dismiss, with prejudice, the class action aspect of the claims of Kline and the Rosses under the OCSPA. That recommendation is based upon § 1345.09(B) of the Ohio Revised Code. Under that statutory provision, a consumer may not maintain a class action for a violation of the OCSPA, unless “the violation was an act or practice declared to be deceptive or unconscionable by rule adopted under division (B)(2) of section 1345.05 of the Revised Code before the consumer transaction on which the action is based, or an act or practice determined by a court of this state to violate section 1345.02, 1345.03, or 1345.031 of the Revised Code and committed after the decision containing the determination has been made available for public inspection under division (A)(3) of section 1345.05 of the Revised Code.” (Emphasis added). Herein, since Kline and the Rosses have not alleged that any of the asserted violations of the Ohio statute by MERS also violated such a rule or court decision, Judge Ovington recommended that the Court dismiss that aspect of Kline’s and the Rosses’ claims under the OCSPA, with prejudice. Although this Court agrees with Judge Ovington that the Plaintiffs’ Complaint is devoid of such allegations, it will afford them the opportunity of amending to cure that pleading deficiency.[5]

Based upon the foregoing, the Court sustains in part and overrules in part the Plaintiffs’ Objections (Doc. #143) to Judge Ovington’s Report and Recommendations (Doc. #133). The Court overrules those Objections as they relate to the utilization of the documents supplied by MERS and the recommendation that the Court dismiss certain of the state law claims of Kline, Hughes and the Rosses, while rejecting the recommendation that said dismissal be with prejudice. The Court also sustains those Objections (Doc. #143), as they relate to the recommendation that the Court decline to continue to exercise supplemental jurisdiction over the Rosses’ individual claims under the OCSPA. Accordingly, the Court adopts in part and rejects in part the Magistrate Judge’s Report and Recommendations (Doc. #133). In addition, the Court sustains MERS’ Motion to Dismiss (Doc. #31), as it relates to the claims of Kline, Hughes and the Rosses under the FDCPA and overrules that motion as it relates to Kline’s claim under the TILA. Kline and the Rosses are given leave to file an amended complaint, properly pleading their state law claims of breach of contract, unjust enrichment and for class action status under the OCSPA, subject to the strictures of Fed. R. Civ. P. 11, within 14 days from date. Hughes’ state law claims are ordered dismissed, without prejudice to refiling in a state court of competent jurisdiction, as the Court declines to continue to exercise supplemental jurisdiction over same.

[1] See e.g., De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 308 (3d Cir.2003) (noting that “a district court may exercise supplemental jurisdiction where state-law claims share a `common nucleus of operative fact’ with the claims that supported the district court’s original jurisdiction”) (quoting Gibbs, 383 U.S. at 725).

[2] To the extent that Hughes’ position is that as long as any federal claim remains pending in this litigation, it is permissible to exercise supplemental jurisdiction over all state law claims set forth by every Plaintiff herein, this Court cannot agree. This Court can exercise supplemental jurisdiction over only those state law claims that arise out of the same nucleus of fact as a federal law claim. Therefore, the pendency of Kline’s claim under the TILA does not authorize this Court to exercise supplemental jurisdiction over Hughes’ state law claims, given that those claims do not arise out of the same nucleus of operative facts.

Moreover, this Court rejects Hughes’ assertion that it can exercise subject matter jurisdiction over Hughes’ state law claims in accordance with the Class Action Fairness Act, 28 U.S.C. § 1332(d). This Court’s original jurisdiction over claims under that statute is predicated upon the amount in controversy for a class action exceeding $5,000,000. See 28 U.S.C. § 1332(d)(2). Herein, the Plaintiffs have failed to allege that the amount in controversy in a class action based upon Hughes’ state law claims would exceed that sum.

[3] Given that Judge Ovington did not recommend that this Court decline to continue to exercise supplemental jurisdiction over any of Kline’s state law claims, Kline did not object to the aspect of Judge Ovington’s Report and Recommendations, addressing the continuing exercise of supplemental jurisdiction.

[4] The Court rejects the Plaintiffs’ assertion that one can infer that they conferred a benefit on MERS, merely because they allege that it demanded the payment of certain fees during foreclosure or bankruptcy proceedings.

[5] The portion of § 1345.09(B), which this Court has emphasized above refers to “a court of this state.” Kline and the Rosses have cited decisions by federal courts sitting in Ohio to support their assertion that their class claims under the OCSPA should not be dismissed. Whether a federal court sitting in Ohio is “a court of this state” is an issue which this Court does not address herein.

WEISBAND Case No. 4:09-bk-05175-EWH. BKR Tucson Judge HOLLOWELL Denies MLS for Lack of Standing

Via: Livinglies

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

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

IN RE WEISBAND

In re: BARRY WEISBAND, Chapter 13, Debtor.

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

United States Bankruptcy Court, D. Arizona.

March 29, 2010.

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

MEMORANDUM DECISION

EILEEN W. HOLLOWELL, Bankruptcy Judge

I. INTRODUCTION

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

II. FACTUAL AND PROCEDURAL HISTORY

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

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

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

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

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

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

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

B. Bankruptcy Events

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

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

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

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

III. ISSUE

Does GMAC have standing to bring the Motion?

IV. JURISDICTIONAL STATEMENT

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

V. DISCUSSION

A. Introduction

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

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

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

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

B. GMAC’s Standing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

C. Debtor’s Other Arguments

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

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

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

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

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

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

3. The Movant Has Not Violated Rule 9011

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

VI. CONCLUSION

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

Accordingly, its motion is DENIED without prejudice.

First American sues 8 rivals over AVMs: LENDER PROCESSING SERVICES (LPS)

Things that make you go Hmmm…

Patent infringement lawsuit seeks damages from Zillow, LPS, others

BY MATT CARTER, TUESDAY, MAY 4, 2010.

Inman News

First American CoreLogic Inc. has filed a lawsuit against eight companies, including Zillow Inc. and Lender Processing Services Inc., claiming the companies’ automated property valuation services infringe on a 1994 patent.

In its complaint, CoreLogic seeks an injunction against the companies to prohibit them from using or selling any products that fall within the scope of the patent, and for triple damages to “compensate CoreLogic for its profits lost.”

None of the companies named in the April 16 lawsuit have filed formal a response to the complaint, and none would comment to Inman News.

The companies named in the lawsuit provide automated valuation model (AVM) services to businesses or consumers — computer-generated property value estimates that typically rely on a property’s unique characteristics, public property records and other market statistics.

A spokeswoman for Zillow — a site that became one of the Internet’s most popular real estate portals by offering instant, free property “Zestimates” to consumers — said the company was aware of the lawsuit, and “has no plans to change any aspect of our business as a result of this complaint.”

LPS — a technology and data provider for the National Association of Realtors’ Realtor Property Resource database — said the company does not comment on pending litigation, but “does intend to continue providing AVM services.”

NAR’s RPR LLC subsidiary intends to generate revenue by incorporating active and sold listings data into automated property valuations that the company hopes will become a standard for the lending industry, government agencies and others (see story).

Other companies named in the lawsuit include: Fiserv Inc., Intellireal LLC, Interthinx Inc., Precision Appraisal Services Inc., Real Data Inc. and RealEC Technologies Inc.

Patent lawsuits can sometimes take years to resolve, as defendants may be able to demonstrate that a patent was issued for an idea that was not new, or that a patent claim was overly broad or vauge.

In its lawsuit, CoreLogic claims the rights to U.S. Patent 5,361,201, issued Nov. 1, 1994, for an “automated real estate appraisal system” and assigned by its inventors to HNC Inc

Summarizing the system in their patent application, inventors Allen Jost, Jennifer Nelson, Krishna Gopinathan and Craig Smith described how predictive models could generate estimated property values based on individual property characteristics and neighborhood or area characteristics.

Through a trial and error process, they said, the models could be fed “training data” in order to “learn” the relationships between individual property characteristics and area characteristics.

In the learning stage, the model’s predicted property values are compared to actual sales, and the weights assigned to different variables repeatedly adjusted to achieve the greatest degree of accuracy.

Although the process was similar in concept to established regression analysis techniques, the inventors said the application would also employ “neural networks” to automatically detect relationships between variables that would otherwise need to be detected and inputted manually by programmers.

Neural networks, they said, would allow rapid development of models and automated data analysis — a vital capability if the goal is to value properties in thousands of neighborhoods or areas, each requiring its own model.

Once the models had been developed, the inventors said, they could also be programmed to monitor their own performance and adjust their assumptions when performance dropped below a predetermined level.

In addition to an estimated property value, the models would be able to compute the predicted margin of error, allowing for a value range to be generated for each property — a common feature of AVMs offered to consumers.

The patent application described the algorithms and dozens of variables that could be used to generate valuations, and included source code written in ANSI C and Microsoft Excel macro.

The patent was assigned to Transamerica Intellitech Inc. in August 2000, and then to First American Real Estate Solutions, now part of CoreLogic.

First American is spinning off its information solutions group into a separate, publicly traded company, to be known as “CoreLogic.”

***

Maine State Retirement System, et al. v. Countrywide Financial, et al.

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

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

Plaintiffs,

vs.

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

Defendants

This Complaint is brought pursuant to the Securities Act of 1933 (the “Securities Act”) by plaintiff Maine Public Employees State Retirement System, individually, and as a class action on behalf of all persons or entities (“plaintiffs” or the “Class”) who purchased or otherwise acquired (1) Alternative Loan Trust Certificates issued by, inter alia, Defendant CWALT, Inc. (“CWALT”); (2) CWABS Asset-Backed Trust Certificates issued by, inter alia, Defendant CWABS, Inc. (“CWABS”); (3) CHL Mortgage Pass-Through Trust Certificates issued by, inter alia, Defendant CWMBS, Inc. (“CWMBS”); and (4) CWHEQ Revolving Home Equity Loan Trusts and Home Equity Loan Trusts issued by, inter alia, Defendant CWHEQ, Inc. (“CWHEQ”) (collectively referred to as the “Certificates”).

Continue below: Be patient this is a big file

TOPAKO LOVE; LAURA HESCOTT; CHRISTINA ALLEN; ERIC TATE …Officers of way, way too many banks Part Deux “The Twilight Zone”

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

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