Pamela Owen. Civil Rights. Declaration of Jody m. Mccormick Filed by Defendants. Document No. 41

8/20/2019 Pamela Owen. Civil Rights. Declaration of Jody m. Mccormick Filed by Defendants. Document No. 41

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The Honorable Benjamin H. Settle

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

T

TACOMA

PAMELA

S.

OWEN,

Plaintiff,

vs.

FEDERAL HOUSING FINANCE AGENCY;

FEDERAL HOME LOAN MORTGAGE

CORPORATION; MTC FINANCIAL, INC.,

dba TRUSTEE CORPS; BISHOP,

MARSHALL WEIBEL, P.S.; CHUCK

E.

ATKINS, in his official capacity as Clark

County Sheriff,

Defendants.

Case No. 3:15-cv-05375-BHS

DECLARATION OF JODY M.

MCCORMICK IN SUPPORT OF

FEDERAL HOUSING FINANCE

AGENCY'S ND

FEDERAL HOME

LOAN MORTGAGE CORPORATION'S

JOINT MOTION TO DISMISS

PLAINTIFF'S COMPLAINT

NOTE

ON

MOTION CALENDAR:

November 6 2015

I Jody M. McCormick, make the following declaration:

1.

I am a partner with the law firm Witherspoon Kelley. I

am

counsel of record for

Defendant Federal Housing Finance Agency ( FHF A ) and Defendant Federal Home Loan

Mortgage Corporation ( Freddie Mac ) in the above-captioned case. I submit this Declaration

in support

of

the accompanying Joint Motion to Dismiss Plaintiffs Complaint submitted by

FHF A and Freddie Mac.

DECLARATION OF JODY M. MCCORMICK

IN

SUPPORT

or FEDER.AL HOUSING FINANCE AGENCY'S AND

FEDERAL HOME LOAN MORTGAGE CORPORATION'S

JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT - I

Case No. 3: 15-cv-05375-BHS

Sl2790lODQCX

~ W I T H R S P O O N • K L L

Attorneys Counselors

422 W. Riverside Avenue, Suite l

100

Phone: 509.624.5265

Spokane, Washington 99201-0300

Fax:

509.458.2728

Case 3:15-cv-05375-BHS Document 41 Filed 10/14/15 Page 1 of 63



2 I contacted Plaintiff on two occasions

to

inform Plaintiff that she had not

2

properly effected service upon Freddie Mac and FHFA. On behalf

of

Freddie Mac and FHF A, I

3

represented that both parties would be willing to accept service on the condition that Plaintiff

4

agree to seek a stipulated order that would establish a briefing schedule for Freddie Mac and

5

FHF A to respond to her claims.

6

7

3.

y

letter dated August 4, 2015, and by email dated September 30, 2015, Plaintiff

s rejected the offers described above.

9

4

Attached are true and correct copies of the August 4, 2015 letter (Exhibit A) and

10

September 30, 2015 email (Exhibit B).

I I

5

Attached hereto as Exhibit C

is

a true and correct copy of the Motion and

12

13

Declaration to Vacate Judgment and to Stay Enforcement and Writ of Restitution filed by

14

Plaintiff in

Clark County Superior Court Case No. 15-2-00924-2 (the Unlawful Detainer

15

Action ).

16

6

Attached hereto as Exhibit D is a true and correct copy of Motion to Quash

17

18

Service

of

Summons filed by Plaintiff in the Unlawful Detainer Action.

19

7

Attached hereto as Exhibit E is a true

and

correct copy of the Judgment for Writ

20 of Restitution Only entered

in

the Unlawful Detainer Action.

21

22

23

25

26

27

28

DECLARATION OF JODY M MCCORMICK IN SUPPORT

OF FEDERAL HOUSING FINANCE AGENCY'S AND


JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT- 2

Case

No 3: J5-cv-05375-BHS

1279016

DOCX

l ~ W I T H R S P O O N • K L L

ttorneys Counselors

422 W Riverside Avenue, Suite l 100 Phone: 509.624.5265

Spokane, Washington 99201-0300 Fax: 509.458.2728




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Respectfully submitted this 14'" day

of

October, 2015.

WITHERSPOON • KELLEY

s Jody M McCormick

Jody M. McCormick WSBA # 26351

422 W. Riverside Ave., Suite 1100

Spokane,

W

99201-0300

Phone: 509-624-5265

Fax: 509-458-2728

[email protected]

Attorneys

or

Defendants Federal Home Loan Mortgage

Corporation and Federal Housing Finance Agency

DECLARATION

OF JODY

M

MCCORMICK

IN

SUPPORT

OF FEDERAL HOUSING FINANCE AGENCY'S AND


JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT - 3

Case

No 3: l 5-cv-05375-BHS

·

W I T H R S P O O N • K L L

ttorneys Counselors

422

W

Riverside Avenue, Suite 1100 Phone: S09.624.S265

Spokane, Washington 99201-0300

Fax:

509.458.2728

Sr/.790 6DOCX




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CERTIFICATE

OF

SERVICE

I hereby certify that on the 14

1

day of October, 2015,

1. I caused to be electronically filed the foregoing DECLARATION OF JODY M.

MCCORMICK IN SUPPORT OF FEDERAL HOUSING FINANCE

AGENCY S

AND

FEDERAL HOME LOAN MORTGAGE CORPORATION'S JOINT MOTION TO DISMISS

PLAINTIFF'S COMPLAINT with the Clerk

of

the Court using the CM/ECF System which will

send notification

of

such filing to the following:

Michael Steven DeLeo [email protected], [email protected]

Barbara L Bollero [email protected], [email protected]

William P. Richardson [email protected],

[email protected], [email protected]

Pamela S. Owen [email protected], [email protected],

parnela. [email protected]

David A Weibel [email protected]

2. I hereby certify that I have mailed

by

United States Postal Service the foregoing

document to the following non-CM/ECF participants at the address listed below:

None

3. I hereby certify that I have mailed by United States Postal Service the foregoing

document to the following CM/ECF participants at the address listed below: None

4.

I hereby certify that I have hand-delivered the foregoing document to the

following participants at the addresses listed below: None

s Jody M McCormick

Jody M. McCormick WSBA

#

26351

WITHERSPOON • KELLEY

422 W. Riverside Ave., Suite 1100

Spokane,

WA

99201-0300

Phone:509-624-5265

Fax: 509-458-2728

[email protected]

DECLARATION OF JODY M.

MCCORMICK

JN SUPPORT

OF

FEDERAL

HOUSING FINANCE AGENCY'S AND

FEDERAL HOME

LOAN MORTGAGE CORPORATION'S

JOINT MOTION TO

DISMISS

PLAINTIFF'S COMPLAINT· 4

Case No. 3:15 cv 05375 BHS

~ W I T H R S P O O N · K L L

Attorneys Counselors

422

W_

Riverside Avenue, Suite 1100 Phone: 509.624.5'265'

Sl27QIJJ6DOCX

Spokane, Washington 9920\-0300 Fax: 509.458.2728




EXHIBIT




Pamela S. Owen

3912 NE 57th A venue

Vancouver, WA 98661

Tel: (360) 991-4758

[email protected]

August 4, 2015

Jody M. McCormick

Witherspoon Kelley

422 W Riverside A venue, Suite 1100

Spokane, WA 99201

Tel: (509) 624-5265; Fax: (509) 458-2728

[email protected]

Cause:

Owen

v

Atkins et al. 15-cv-053 75-BHS; United States District Court for the

Western District of Washington (Tacoma)

Subj: Plaintiffs Rejection of Joint Offer to Stipulate

to

Order Setting Briefing Schedule

Dear Counsel:

l decline to accept your offer received on the above date for the following reasons, among

others not listed:

1.

The above-titled action was removed on June 4, 2015, and not June 5, 2015 as

stated in the Stipulation.

2.

The Stipulation erroneously claims that ''Plaintiff did not properly serve your

clients. Plaintiff has never attempted to serve your clients with sun1mons and complaint is a more

accurate statement

of

the fact.

3.

On June 7 2015, your clients were asked to waive service of summons. Your

clients have one choice at this late stage: Waive service or pay the costs of service. Rule 4(d)(2)

makes mandatory that:

lf

defendant located within the United States fails, without good cause, to sign

and return a waiver requested by a plaintiff located within the United States, the

ourt must impose on the defendant

(A) the expenses later incurred in making service; and

(8) the reasonable expenses, including attorney's fees,

of

any motion required to

collect those service expenses.

4. You were provided with a copy

ofmy

motion to stay proceedings pending the

outcome of the unlawful detainer appeal. Your clients may use this opportunity to oppose this

1




motion and argue against delay. Should your clients prevail on appeal, the District Court would

be left with only one choice to dismiss the action.

5. Defendant Sheriff Atkins informed the District Court that your clients agreed to

have this action ren1oved to Federal Court while being aware

of

the unlawful detainer appeal:

6 Pursuant to J8 lT.S.C . 1446(b)t2)(AJ, consent to this re1110Yal has be

obtained

fro111 all

r

defendants

that

h•1Ye filed

a

Notice

of

Appearance. or notified Defendant Atkins

of

their intent to

e

tile

a Kotice of

Appearance.

(Atkins Notice

of

Removal, Dkt. No. 1at2, filed 06/05/15.(

6. Your clients may, without my stipulation, file a 1notion seeking an Order setting a

briefing schedule consistent with your current Stipulation. I will oppose your clients' motion for

the reason herein stated and for the reasons stated in my motion to stay pending outcome

of

the

unlawful detainer appeal.

7.

Your client, Freddie Mac, has a

brief

on appeal due on August 19 2015. You are

required to remind your client of Rev. Code Wash. (ARCW) § 40.16.030 (2015) (Offering false

instrument for filing or record); Exhibits 5 and 6 attached to the complaint; the Trustees Deed

Upon Sale; and the Declarations made under penalty

of

perjury to cause the Superior Court and

Sheriff Atkins to allegedly violate my State and Federal constitutional and statutory rights.

On

a

side note,

you mentioned

that

should my settlement

offer

is 7 figures, you

would not take this

amount

to your clients. Washington State Court Rules

of

Professional

Conduct (RPC) 1.2 and 1.4 mandates that a lawyer n1ust communicate with her or his clients all

settlement offers. ''A lawyer shall abide by a client's decision whether to settle a matter. A

lawyer for a government agency, such as yourself, may have authority on

behalf

of

the

government to decide upon settlement or whether to appeal from an adverse judgment. Such

authority must be consistent with the Government's it1-house lawyers. Thus, any failure to

comply with an obligation or prohibition imposed by a RPC would be a basis for invoking the

disciplinary process. While the RPC may not serve as a cause of action against you and your

other lawyers, the Rules do establish standards

of conduct by lawyers and

•·a

lawyer's violation

of

a Rule may be evidence

of

breach

of

the applicable standard

of

conduct.

Yours truly,

,/)

. ,I_ • 1

/-f ·

I

.:· 1 .

·

._-_ c c · L · f l c . 1 1 ~ ' ~ _ , , ~ · ' : ~ · c . · : : , , _ ~ ' ~ · ~ · - · - ' ' - ' £ - ; ' - ' I - ; : ~ . : _ - ~ ; , _ ,

Pamela S. Owen

Plain1ifr

Tel: (360) 991-4758

pan1ela. owcn 9 a ~ g m ai I con1

2




EXHI IT




Jody M. McCormick

From

Sent

To

Subject

Dear Counsel:

Pamela

Owen

<[email protected]>

Wednesday,

September

30, 2015

5:36 AM

[email protected]; Alicia Asptint;

Steven

J

Dixson;

[email protected];

[email protected]; Erin Hill; [email protected];

[email protected]; [email protected];

Emanuel McCray;

[email protected]; [email protected]; [email protected]; Jody

M.

McCormick

Re: Owen v

Atkins

As a courtesy, the following is provided per

your

email dated 9/29/2015:

1 Regarding service of summons and complaint on your clients, your attention is directed

to

Dkt.

#s

35

and 36.

2

Pursuant to

R W §§

238.18.040 and .050. service was complete and ' had by serving the

secretary

of

state

of

the state

of

Washington

[23B.18.040];

and: ''No proceedings shall be had against the

nonadmitted organization nor shall it be required to appear, plead, or answer until the expiration

of

forty days

after the date

of

service upon the secretary of state. ' [238.18.050], which was September 1. 2015.

3

Under Local Civ.R. 55(a): ''A motion for entry of default need not be served on the defaulting

party. However, in the case

of

a defaulting party who has entered an appearance, the moving party must give the

defaulting party written notice

of

the requesting party's intention to move for the entry

of

default at least

fourteen days prior to filing its motion and must provide evidence that such notice has been given in the motion

for entry

of

default.

4

Because your clients have been duly served under Chapter

23B.18

RCW, your request to

stipulate is moot.

I hope the above infonnation is useful to you. Please also confinn the interest of your clients in reaching

a settlement within the next week or two. This will save them the time and costs from sub1nitting an Answer

and Reply.

ls/Pamela Owen

Plaintiff

On Tue, Sep 29, 2015

at 11

:20 AM, Jody M. McCormick <[email protected]> wrote:

Ms. Owen:

I

am

writing on behalf

of the

Federal Housing Finance Agency and Freddie Mac about

Owen

v

tkins t

al

Case

No.

3:15-cv-05375 in the Western District of Washington.

Freddie Mac and FHFA have still not been served

with

a summons and complaint in accordance

with

court

rules. However, both Freddie Mac and FHFA are willing

to

waive their objections to the sufficiency of service in order

to

establish a plan to proceed with the case. We therefore wish to enter into a stipulation th t would waive objections to

1




service

and

set

dates for Freddie Mac and

FHFA to

respond

to the complaint by a

dispositive

motion for you to oppose

that motion and for

Freddie

Mac and FHFA to

reply

to

your opposition.

If

you

agree I will

send you

proposed

dates for a briefing schedule and we can

discuss

further how we can document

the

agreement

in

the

form

of a stipulation.

Jody

Jody

M.

Mc ormick

Principal

IWitherspoon • Kelley

[email protected] I Attorney Profile I

vCard

Cont1denr1al1/y Notice The J11forma/1on

r::onlaJ11ed

in th•s email

and

any accompanymg attac/Jment(s) s intended

only

for the use of the intended rec fJ e

nd

may be

conf1denlial and/or privileged If any reader

of

Ill

s

comm11mcat1 111s 1101 he111te11ded rec1p1en/ unauthonied

se

disclosure or copying is stnctly prohibited

and

may be

un ai;.1ul If you have recei ved this com1mm1ca1mn in error, please 1mmed1a/e/y notify h ' sender

by

return email

and

delete tl1e origma/ message and

ll

copies from your

system Thank you




EXHI IT C




T0:12066220354

FROM:3802187896

Page:

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Plaintiff s),

Defendant s .

FILED

?Dl5APRl1

lt\11•19

scan

GWEB R.

CLEM

Cl

ARI\

COUNTY

r ~

No /

5),ocffl -/-8.

Motion

and Declaration to

Vacate Judgment and to Stay

Enforcement

o

Judgm1nt and

Wiii

of RHIHutlon

1. Relief reg,uested. The

defendant s} move s)

the

court

for an order vacating the

14 judgment

entered

in this action and

staying enforcement

of the judgment and the

writ of

15

restitution

until the

motion

can be heard.

16

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otion

and Declaration

to Vacate

Judg. and Stay

_

~ · · · ~

. .......

_.,

-

.




TO:l2066220354 FROM:3602167696

Page

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3

4

3

Evidence

relied up on This motion

is

based on the

attached declaration

of

9 i c

UJ\ tt<_ ;; 6u X r

6

4 Authority and argument This motion is made pursuant to

CR

and

CR

60 nd

1 other) Rc0 .5q, 1 il,303

8 Dated

v:

/ 3;CJ,CJ2

9

10

11

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13

Teleph<lne Number

14

DECLARATION

15

1

/:fr,171tda 5. Ot et

.

declare

as follows:

16

L am the

defendant

in this unlawful

detainer action

17

2 request

that

the judgment

entered

in this

action

be

vacated

and

that

enforcement

of

18

the

judgment

nd the

wr t

o restitution be stayed until the

motion

to

vacale judgment

can be

19 heard for the following reasons: - : : - - - , = : : - ' 1 ~ ± ~ 4 - ~ / t ~ J ~ _ ( / _ b ~ D & ' - ; - ~ { ~ · i . . , . l ( j ~ / ~ J e ~

1 1 - ' r > . . . L . ] ~ ~ ' . 2 , £ - L ' . l . L . . £ : : . . + - ~ : J : : d . ~ f , J . t i . ~ : 1 ' . 2 . : c . J 4 z : : t : ' . ' . . . ~ - , - - , - . ~

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Motion

and O ClaretJon

to

Vacate

Judg

and

Stay

•

i• --

. ' ... -




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T0:1Z066ZZ0354 FROM:360Z167696

Page

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statement

is true

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signed

in

arieou

ve

City)

Washingtonon

°-e ZA-//3,0la;;J.

Date)

Motion ttnd l Hdaration to

Vacate

Jud /. and st y

•··· ...... .




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4113/2015

• Find Your

Legislator

Visiting

the Legtslature

* Agendas, Schedules and

Calendars

t

Biii information

• Laws

and

A(Jency

Rules

•

Legislative

Committee

Legislative Agencies

•

Legislative

Information

Center

• E-mail Notifications

Civic Education

i;

Historyofthe State

Legislature

•· Congress

-

the Other

Washington

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« Washington

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Rew a11a.m unawu delalner adloo Dltib essed

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p-evt1J.Slr.

RCWs >

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59.1 >Section 59.18.363

59.18.360

<<

59. 18.363

>>

59 18.365

RCW

59.18.363

Unlawful

detainer

action - Distressed

home previously.

In

an

unlawful

detainer action Involving

property that

was

a

distressed

home:

1) The plaintiff shall disdose to

the court

whether the defendant previously

held title

to

the

property that

was

a distressed home, and explain how

the plaintiff

came to acquire litle;

2)

A

defendant

who previously

held title to the property

that was a

distressed

home shall not be required

to escrow ny

money pending tr1al when

amaterial

question

of

fact exists as to whether the plaintiff acquired title from the defendant

directly or indirectly through

a distressed

home conveyance;

3)

There must be both an

automatic

stay

of the

action and

a

consolidation

of

the

action with

a

pending

or

subsequent quiet title

action

when

a defendant

claims

that the

plaintiff acquired tltle to the property through

a

distressed home

conveyance.

2ooa

c 2 a

§

13 J




EXHI IT D




I

2

3

4

COPY

ORIG\NA.l, fll,ED

APR

23 26 5

ScottG

Weber

Cieri< Clatk

co

IN THE SUPERIOR COURT OF THE STATE OF WASlllNGTON

IN

AND

FOR THE COUNTY OF CLARK

FEDERAL HOME LOAN MORTGAGE NO. 15-2-00924-2

CORPORATION

6

7

8

10

11

12

13

14

5

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiff,

vs.

MOTION

T

QUASH

PAMELA S. OWEN, et al.

SERVICE OF SUMMONS

Defendants.

Hearing Date: May

l

2015

Time:

9:00a.m.

Judge: Honorable Judge Robert

Lewis

Court:

Department

9

COMES NOW Defendant, Pamela S. Owen, fur her motion captioned above, and states:

TABLE OF CONTENTS

Table

of

uthorities ...2

Questions resented •

3

I

II

A.

1.

2.

3.

4.

Whether

the

trial court lacks subject matter unlawful detainer

0

urisdicti

• 3

on

Whether

the trial court erred in directing issuance

of

default

judgment against Defendant by order

entered

on April

3,

201

S

•.•

3

Whether the trial court erred

in

directing issuance ofwrit

of

restitution against Defendant by order entered on

April 3, 2015,

at

Sub. 12 ...................................................3

Whether Defendant is entitled

to

have

the

writ of restitution

quashed,

and

the action dismissed with prejudice .. .. .. .. .. .. .. .. .. .. ..3

Summary

ofLegal Argument

.....................................................

3

Plaintiff's Reliefls Barred By Doctrine of Unclean Hands .................3

BriefHistory and

Overview

ofSecuritizationand Mortgage-Backed

Securities

MBS) and the

Active Role ofPlaintiff Federal Home Loan

Mortgage Corporation (FHLMC) or ( Freddie Mac ) Leading

To

DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS

1




I

Recent

Mortgage Crisis

................................................................

4

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

B

c.

III.

B.

IV

Federal

Takeover

ofPlaintiff Freddie

Mac ..........................................

7

Plaintiff

Freddie

Mac s

Role In

the

Creation

of

he Mortgage

Electronic

Registration

Systems MERS) To

Circumvent the

State Land Registry.........

9

PlaintiffDoes Not State In Its Complaint A Claim and Can Never State

A Claim

Cogniz.able

Under Chapter 59.12 RCW ..................................15

Tue Court Lacks Subject Matter Jurisdiction Because

ofPlaintiff s

Unclean Hands

and

Plaintiff s Failure to Strictly Comply

With

Chapter 59 12 RCW 15

Defendant

Was

Never

In Demult As

A Matter ofState

and

Federal

Law

......

18

CONCLUSION

20

AVIHORJIIES

Fedm Q se

Arbaugh

v.

Y

HCorp .

546

U.S. 500, 510-516 (2006)

....................................23

State Cases

In

re Agard, 444 B.R. 231, 247 (Bankr.E.D.N.Y.2011)

.................................

9, 17

Asuncion

v.

Superior Court

o

San Diego County,

108

Cal. App.

3d 141,

146-147, 166

Cal. Rptr.

306

(Cal. App.

4th

Dist.

1980)

...............................

23

Bain v. Metropolitan

Mortgage

Group, Inc.,

175

Wn.2d 83, 285 P.3d 34 2012)

..........................................................

9, 14

Hangman Ridge Training Stables,

Inc.

v. Safeco Title

Ins. Co

.

105 Wasb.2d 778, 780, 719P.2d 531 1986)

..................................................

15

Housing

Au horll)i ofCil)Io Everett v. Terry, 114 Wn.2d 558 (1990) ... ... ... ...23, 24, 25

Landmark

Nat /

Bankv.

Kesler,

216 P.3d

158,

166-67

(Kan.

2010)

.......................

12

Little

v. Catania, 48 Wn.2d 890,

297

P.2d255 (1956)..........................19, 23,

24,

24

Sowers

v.

Lewis, 49

Wn.2d 891, 894, 307P.2d 1064 (1957) ... ... ... ... .. ... .. 19, 23, 24,

25

Wilson

v.

Daniels,

31Wn.2d633, 643, 198 P.2d 496 (1948)

.......................

20, 23, 25

DEFENDANT S MOTION

TO

QUASH

SERVICE

OF SUMMONS

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Statutes

Washington Revised Code

§7 28 19

§ 9A 52 ········· ············· ···············

21

§ 59.12.030 19, 21

§ 59.12.032

19

§ 59.12.040 20, 21

§ 59.12.050 19

§ 59.12.070 20, 21,

22

§ 59.12.080 20, 21, 22

§ 59.12.090 24

§ 59.12.120 ······· 22

§ 59.12.121 •

·······•··

······•····· 23

§ 61.24 et

seq

........................................................................... 13

§ 61.24.040 14,18, 20

§ 61.24.040, subd 9) 20

§

61 24 060

19, 20

OUESJIONS

PRESENTED

Defendant is alleging

that

Plaintiffbas entered this Temple ofJustice with unclean bands

and bas completely failed

to

follow the procedures

mandated

by the Legislature under Chapter

59.12 RCW.

The

issues thus

presented are:

1

Wbether the trial court

lacks

subject

matter

unlawful

detainer jurisdiction.

2

Wbether

the

trial court erred in directing issuance

of

default judgment

against Defendant by order entered

on

April 3, 2015.

3 Whether the trial court ~

in

directing Issuance ofWritofRestitution

against Defendant

by

order entered on April 3, 2015, at Sub. 12.

DEFENDANT S MOTION TO QUASH SERVICE

OF

SUMMONS

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4.

Whether Defendant is entided

to

have the writ of restitution quashed, and

the action dismissed with prejudice.

J. SUMMARY OF LEGAL ARGUMENT

1.1

The

question at

the

heart of his motion is the Court's subject matter unlawful detainer

jurisdiction and the procedure the Court must

follow

when a Plaintiff intentionally fails to strictly

follow the

statutory provisions governing the Plaintiff's rights and remedies and the Court's

jurisdiction lintited

by

the unlawful detainer statutes, Chapter 59.12 RCW.

1.2 As

more fully

set

forth and supported

herein,

Plaintiff failed

to

follow any of

he

procedure

prescn bed by the unlawful detainer statute. Tho Superior Court cannot assert subject

matter

jurisdiction due to the Plaintiff's failure to follow procedure.

1.3

Plaintiff;

a

Federal government corporation,

is

attempting

to

use

this

Honorable Temple

of

Justice to circumvent the unlawful detainer laws of this State

to

summarily evict Defendant, who

is

the

lawful owner ofher primary residence in violation of the Federal and State constitutions and

laws

and due process of law.

1.4 The law in this State mandates that the proper action

by

the court in this proceeding is to

dismiss Plaintiff's action with prejudice.

D PLAINTIFF'S RELIEF IS BARRED

BY

DOCTRINE OF UNCLEAN HANDS.

A. Brief History and Overview of

Securitizatlon

and Mortaap-Baeked

Seeuritieo

(MBS)

and

lbe Active Role of Plalntttf Federal Home Loan Mortgage Corporation (FHLMC)

or

( Freddie

Mnc ) Leading To

Reeent Mortgage Crisis.

2.1

Securitization is the creation and issuance ofdebt securities, or bonds whose payments of

principal and interest derive from cash flows generated

by

separate pools of assets. It

had

grown

from a non-existent industry

n

1970 to $6.6 trillion

as

of he second quarter of2003, before the

start

of

he recent financial crisis

in 2008.

22 2.2 Financial institutions

and

businesses

of all

kinds

use

securitizatlon to immediately realize

23

24

25

26

27

28

the value ofa cash-producing asset These are typically financial assets such as loans, but can also

be

trade

receivables or leases.

lo

most cases, the

originator

of

the

asset

aotlcipates a regular stream

of

payments. By pooling

the

assets together, the payment

streams

can be used to support interest

and principal payments on debt securities.

2.3

When assets

are securitized,

the originator receives the payment stream as a

lump

sum

rather than spread out over time. Securitiz.ed mortgages are known as mortgage-backed securities


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MBS), while securitized assets-non-mortgage loans or assets with expected payment streams-

are known as asset-backed securities ABS).

2.4

To

initiate a

securiti7;ation,

a company must

first createwhat

is called a special purpose

vehicle SPV) in the parlance

o

securiti7;ation.

The

SPV

is legally

separate

from the company, or

the bolder of

he

assets. Typically a company sells its assets

to the SPV.

2.5

The payment streams generated

by

the assets can then be repackaged kl back an issue of

bonds, or the SPV can transfer the assets to a trust, which becomes the nominal issuer. In both

cases, the bonds are exchanged

with

an

underwriter

for cssh The

underwriter

then sells

the

securities

to

investors. Unlike other bonds, securities backed by mortgages

usually

pay both

interest and a portion of

the

investor's principal on a monthly basis, in addition

to

including

insurance for

the

financial

product.

2.6

The first mortgage-backed securities arose from the secondary mortgage market in

1970.

Investors had traded whole loans, or unsecuritized mortgages, for some time before the

Government National Mortgage Asaociation GNMA), also called Ginoie Mae, guaranteed the

first

mortgage pass-through securities

that

pass

the

principal and

interest

payments

on

mortgages

through

to

investors.

2.7 Ginnie Mae

was

soon followed

by

Plaintiff Freddie Mac as

part

of a federsl scheme

to

promote homeownership

by

fostering a secondary marl<et in home mortgages.

2.8 Pass-throughs were a dramatic innovation in the secondary mortgage market, where the

whole-loan market, the buying

and

sellingofmortgages,

was

relatively illiquid. This presented a

risk to mortgage lenders who could

find

themselves unable to find buyers if

hey

wanted to sell

their Joan portfolios both quickly and at an acceptsble price.

2.9 Holding the loans also meant exposure to the risk that rising interest rates could drive a

lender's interest cost higher

than

its interest

income. But

trading whole loans

meant

a

raft

of

details

and

paperwodc:

that

made the business relatively costly.

2.10 Mortgage-backed securities changed all that by combining similar loans into pools, which

allowed the government agencies

to

pass the mortgage payments through

to

the certificate holders

or investors. This change made the secondary mortgage market more attractive

to

investors

and

lenders alike. Investors

now

had a liquid instrument

and

lenders had

the

option

to

move any

interest

rate

risk associated with mortgages offof their bolance sheet.

DEFENDANT'S MOT ON TO QUASH SERVICE O SUMMONS




1 2.11

Growth

in the pass-through market inevitably led to innovations especially

as

originators

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8

9

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12

13

sought a broader MBS investor base. In response, Fannie Mae issued the first

collaterali7.ed

mortgage

obligations (CMO) in 1983. Amore complicated twist on pass-tbroughs, CMOs redirect

the

cash

flows

of

rusts

to create securities

with

several different payment features.

2.12

The

central goal

with CMOs

was to address prepayment

risk the main

obstacle to

expanding the demand for pass-throughs. Prepayment risk for MBS investors is the unexpected

return of principal stemming from

consumers who

refinance the mortgages that bsck the

securities

2.13

It was calculated

that homeowners would

be more likely to refinance mortgages

when

inlerest

rates

are fillling. As this traoslates into prepayment ofMBS principal, investors were often

forced

to reinvest the retnmed principal at a lower

return.

2.14 Thus,

CM

Os

were

created to accommodate the preference

of

investors to lower

prepayment

risk with classes ofsecurities that offer principal repayment at varying speeds. The

different bond classes associated with CMOs are also called tranches (a French

word

meaning

slice).

14

2.15

Some CMOs can include

50

or more tranches

and

can also be subordinate

to

other

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tranches. In the event loans in the underlying securitization pool defaul4 investors in the

subordinate tranche would have to absorb the loss first.

2.16 As

part

of he Tax Reform Act of 1986, Congress created the Real Estate Mortgage

Investment

Conduit REMIC) to facilitate

the

issuance of M

Os.

Almost

all CM

Os are cumntly

issued in the form ofREMICs. In addition to varying maturities, REM Cs can be

issned

with

different risk characteristics.

2.17

REMIC

investors, in exchange for a higher coupon paymen4 can choose to take on greater

credit risk. Along with a simplif\ed

tax

treatmen4

these

changes made the REMIC strueture

an

indispensable

feature of

ho MBS market. Plaintiff Freddie Mac, and his sister, Fannie Mae

are

the

largest issuers

of

this typo

of

security.

B

Federal Takeover

of

Plaintiff Freddie Mac.

2.18 On September 6, 2008, the director

of

he Federal Housing Finance Agency

(FHFA)

placed two

of

he

United

States' Goveromont-Spousored Enterprises (OSEs), PlaintiffFederal

Home Loan

Mortgage Corporation ( Freddie Mac ),

and

Federal National Mortgage Association

(''Fannie

Mae ),

into a conservatorship run by

the

FHFA as a result

of

heir active participation

in

DEFENDANT'S MOTION TO QUASH SERVICE

OF

SUMMONS

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the "subprime mortgage crisis" involving

Bank of America Countrywide

Bank

and

other national

banks.

2.19

At a September

8, 2008 press

conference,

former United

States Treasury Secretary

Henry

Paulson

stated

''that

conservatorship

was

the

only

form

in

which

I would commit taxpayer money

to

the

GSEs.

He

further said that "I attribute the need

for

today's aetion primarily

to

the

inherent

conflict

and

lawed

business

model embedded in the

GSE structwe,

and

to

the ongoing housing

correction."

2.20

At

a subsequent

news

conference,

Ben

Bernanke,

former

Federal Reserve Bank

Chainnan

stated:

"I strongly endorse both the decision

by FHF

A Director

Loclthort to

place Fannie Mae

and

Freddie Mac

into

conservatorshjp

and

the actions

taken

by Treasury Secretary Paulson to ensure

the financial soundness

o

hose

two companies.

2.21 The

combined losses Plaintiff Freddie

Mac

and

Fannie

Mae

ofUS$14.9 billion

and market

concerns

about

their

ability

to

raise capital

and

debt,

threatened to

disrupt the

U.S.

housing

financial market.

2.22 n an effort

t

bsil out Plaintiff Freddie

Mac

and Fannie Mae, the

U.S.

Treasury

Department committed to invest as much as US$200 bi111on in preferred stock and

extend

credit

through 2009 to keep

Plaintiff Freddie

Mac

and

Fannie Mae

solvent

and

operating.

2.23

Reportedly, Plaintiff FreddieMac and Fannie Mae have outstanding

more than US$5

trillion inmortgage-backed securities (MBS)

and

debt-where the debt portion alone is US$1.6

trillion.

2.24

The conservatorsbip action has been

described

as

one

of he most sweeping

government

interventions

in private

financial markets in decades,"

and one that

"could

turn

into

the

biggest

nd

costliest government bailout ever

o

private companies.

2.25 On July

30, 2008, President George W. Bush

signed into law

the Housing

and Economic

Recovery Act

(HERA) of2008,

Pub.L.

110-289, 122 Stat 2654,

which

enabled expanded

regulatory authority over Plaintiff Freddie Mac and

Fannie

Mae by the newly established FHFA.

6

This new law also

gave

the

U.S.

Treasury

the

authority

to

advance funds

for

the

purpose of

stabilizing Plaintiff Freddie

Mac and Fannie Mae,

limited only

by the

amount

of

debt that

the

entire federal govemment is permitted

by

law to commit to.

2.27

The

HERA

was designed primarily

to

address the

subprime

mortgage crisis. To ensure

Plaintiff Freddie

Mac and

Fannie Mae obtain the desired solvency, the

law

further

raised the U.S.


OF

SUMMONS

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Treasury's debt ceiling

by

US 800

billion,

to

a total ofUS$10.7 trillion, in anticipation

of the

potential

need for the

Treasury

to

have the flexibility to support Plaintiff Freddie

Mac and

Fannie

Mae, or the

Federal

Home Loan Banks.

8

Many

commercial

banks

own

preferred

shares

issued

by

Plaintiff Freddie

Mac

and Fannie

Mae. These shares

have

bad

their dividends

suspended,

end

are

junior

to the senior

preferred

stock

issued to the Treasury in the

restructuring of

Plaintiff Freddie

Mac and

Fannie

Mae. The market

value of he

preferred

shares

plunged after

the restructuring

announcement and suspension

of

dividends.

Banks

were

required

to

write

down the

value

of

Plaintiff Freddie Mac and Fannie Mae

prefened stock held in their portfolios, thus compounding capitalttation concerns for certain

U.S.

banks. Gateway Bank, e.g., agreed to be bought out

by

Hampton Roads Banksbares, Inc. to make

up

for

a

writedown

ofUS 40 million on

its stock

in Plaintiff FreddieMac

and

FannieMae which

put

it below regulatory requirements

to

be

considered adequately capitalized.

2.29

ecause

of

he

change

in

management control of

PlaintiffFreddie

Mae

and Fannie

Mae,

the

parties in the credit default swap (CDS) market contracts have defined the action of placing

Plaintiff Freddie Mac end Fannie Mae

into

conservatorship to be equivalent to bankruptcy.

2.30 In CDS parlance,

this is termed a "credit evenf' that triggers

the

settling

of

outstanding

contracts

for the

derivatives,

which are used to

hedge or speculate

on

the potential risk that

a

company will default on its

bonds.

This "credit event" also means that some owners ofCDSs

that

were

hedging against

the

risk ofa bond default may be worse off, since the value of he bonds

may

be

higher than when they

purchased the

swap.

2.31 On August I0, 2011, the

Federal

Housing

Finance

Agency asked

investors for ideas on

renting

homes

owned

by

Plaintiff Freddie

Mac and

Fannie Mae and the Federal Housing

Administration as an alternative

to

evicting the occupants,

among

other

things.

1

C.

Plalnllff

Freddie

Mae'1

Role n the

Creation of

the Mortgage Eleetronle

Registration

Syltem1 (MERS)

To Cirenmvent the State Land Registry.

2.32

As mortgage-backed securities

grew in record

volume during the 1980s, itbecame self

evident

to the MBS

market participants

that

a similar mechanism or

SPV

was

needed

for the

mortgages placed into

these

securities.

26

1

U.S. Government May

Renl

FOTflC/osedHomu

To

Ease HowIng Slump, by.

News

Hub.

htto:tlwww.ponscreen.com y/6 l 4mP/US-0Pvemment-May-Rent-Foreclosed-Homes-To-Ease:Housjng-Slumo-News.

27 HY b_...

PopScreen"

is the

world's

first

Video

Prediction

Engine (VPE), http://www.popscreen.com/abmrt. See

aho:

GtwemmenJ may rent out foreclosedproperties, "The Sun News, published on

August

8, 2011.

28 DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS

8




I 2.33

In October 1993, Plaintiff Freddie Mac co-founded en electronic mortgage registration

2

3

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system that became known

as

MERS and a corporation that became

known

as Mortgage

Electrnnic Registration Systems,

Inc.,

or

MERS, Inc.

in October

1995.

Electronic Data System

(EDS)

was

awarded a contract

to

develop and service the

MERS

technology systems, and

M RS

was

officially launched in April 1997. See

Bain

v.

Metropolitan

Mortgage Gr P,

Inc., 175

Wn.2d 83, 285 P.3d 34 (2012), citing In re Agard 444 B.R. 231, 247 (Bankr.E.D.N.Y.2011); In

re

MERSCORP,

lnc. v. Romaine, 8 N.Y.3d 90, 96 n. 2, 861N.E.2d81, 828 N.Y.S.2d 266 (2006);

Phyllis

K.

Slesinger Daniel McLaughlin,

Mortgage Electronic Registration System,

31 Idaho

L.Rev. 805, 807 (1995); Christopher L. Peterson, Foreclosure,

Subprime Mortgage

Lending, and

the Mortgage Electronic Registration

System,

78 U.

Cin.

L.Rev.

1359,

1361 (2010),

and

Defendant's Exhibit 1 attached hereto.

2.34

The

underlying problem Plaintiff Freddie Mac and its co-founders sought to curb or

circumveot

was

the fact that

a

mortgage loen transferred

into

en MBS had to

become

bankruptcy

remote

from

the originating lender in

the

event the originating lender collapsed, such

as

happened

to

Countrywide

ank

in 2007 and many others during the financial crisis of2008.

2.35 Thus, MBS investors demanded some

kind

o protection to ensure that the lender's

own

creditors could not avoid or ''rollback the transfer of the loans

into

the

MBS

as fraudulent

conveyances and suck them

back

into

the

lender's bankruptcy

estate.

2.36 The easiest

way

to create

such protection was

to

simply convey the loan for consideration

through three or four entities before it

roached

the

MBS. However,

each of these conveyances

had

to be recorded with tho relevant recorder or land registry.

2.37 With each loan requiring three or four assignments, end hundreds

of

mortgage loans going

into each

MBS,

the result

was that

recorders were flooded with assignments, and investment

banks

found

themselves choking on paperwork and recorders' fees.

2.38 Plaintiff Freddie Mac

and

its co-founders used MERS in an endesvor to ix

this

problem

by requiring

all members ofMERS to change their standard loan documents to name M RS as

the

nominal

beneficiary or mortgagee

of

record. This enabled loaders

and

investors

to

transfer

mortgages without recording assignments in local recorders' offices and in

turn

avoid having to

pay recording fees.

2.39 Plaintiff Freddie Mac's MERS became immediately problematic for State land registries,

since all intermediate transfers between

points

are

tracked

only on the

MERS system, and

tho

DEFENDANT'S MOTION

TO

QUASH SERVICE

OF

SUMMONS

9




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entity

who

holds

the loan at

the end

merely records the reconveyance

as

an agent for

MERSCORP

Holdings,

Inc.

2.40 Plaintiff Freddie Mac's MERS presented an additional problem forthe States' Uniform

Commercial

Code

UCC) because neither the owner

of

he original Note or the original Note

was

tracked

by

MERS.

2.41 f

a

borrower defaults, and in an effort

to

citcumvent the

UCC

problem, Plaintiff Freddie

Mac

and its co-founders

authoriz.ed MERS,

through the use of individuals known as robo-

signers,

to

record an assignment ofthe Note on

behalf

of Mortgage Electronic Registration

Systems, Inc. to the

real

party in interest, i.e., an investmentbank such as ReconTrust Company,

NA

in its

capacity as

Trustee for a

bank

or

MBS,

in order

to

initiate

a

nonjudicial

foreclosure.

242

The

problems associated

with

Plaintiff Freddie Mac's nonjudicial foreclosure of

Defendant's mortgage

is

highlighted by the February

10,

2011 Decision of he

U.S. Bllllkruptcy

Court

in In re Agard Case No. 8-10-77338-reg, (Eastem District of

New

York), reported in In re

Agard

B.R.

231, 247 Bankr.E.D.N.

Y.2011

); the Complsint filed by the Stste of Washington

against ReconTrust

Company,

N.A.

in August

2011

and

the

Consent Decree

and

Injunction filed

against ReconTruston August 20,

2012.

A complete and correctcopy of each document is

attached hereto

as

Exhibits 1, 2 and 3, respectively.

2.43

On

Februacy

10, 2011, the U.S. Bankruptcy Court for the Eastern District of

New

Yotk

considered a motion

for

relief

from

the bllllkruptcy

stay

brought

by U.S. Bank as

the

trustee

ofa

securiti7.ation trust.

2.44 U.S. Bank claimed the right to foreclose on the debtor's mortgage in part because of

purported assignmaot of the mortgage

from

MERS.

The

court

found

itself constrained by the

Rooker-Feldman

doctrine

to give

effect

to

a prior state-court judgment of foreclosure, but

went

on

to

consider several

arguments MERS

advanced about

its legal statos

aud authority,

noting

that it

had

held

off on deciding

dozens

of additional cases until those matters

were

clarified.

2.45 The

court

found

that

MERS

bad no power aa

an

agent

to

assign

the

mortgage under its

rules,

its

membership

agreement,

or the

tellllS

of

the mortgage itself. The court

also found

that

MERS bad no power as the mortgagee ofrecord to assign the mortgage: MERS's position that it

can be

both the mortgagee and

an

agent of the mortgagee is absurd,

at

best.

2.46 The court observed further that MERS audits partners/members, which include Plaintiff

Freddie Mac, made the decision

to

create and operate under a business model that

waa

designed in

DEFENDANT S

MOTION

TO QUASH

SERVICE

OF SUMMONS

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large part

to

avoid

the

requirements of he traditional mortgage recording process, and the

fact

that

because MERS may

be involved with

50

of

all

residential

mortgagea in

the country,

was

insufficient reason for the Court

to tum

a blind

eye to the fact that

the

MERS process

does not

comply with

law.

The

Court

further stared that:

The Court finds that the record of his case

is

insufficient to prove that an agency

relationship exists under the laws of the state ofNew York between

MERS

and its

members. According to

MERS, the principaUagent

relatiowihip among itself and its

members

is

created by the MERS rules ofmembership

and

tenns

and

conditions,

as well as

the Mortgage itself.

However,

none of he

documents

expressly creates

an agency

relatiowihip

or even mentions the word agency. MERS would have

this

Court cobble together

the

documents

and draw

inferences from the

words

contained in those documents. For example,

MERS

argues that its agent status can

be found in the Mortgage which states

that MERS

is a nominee

and

a

mortgagee o record.

However,

the

fa.ct

fuat MERS s named nominee n the

Mortgage

is not dispositive

of

he

existence

of

an agency relatiowihip

and

does

not,

in and of itself, give

MERS

any authority to act.

•••

MERS

also

relies

on

its

rules

ofmembership

as evidence

of the agency

relationshlp.

However,

the rules lack

any

specific mention of an agency

relationship, and do not bestow upon MERS any authority to

ct

Rather, the rules

are ambiguous as to MERS's authority to take offirmative actions with respect to

mortgages registered on its system.

n

addition to casting itself

as

nominee/agent, MERS seems to

argne

that its role

as

mortgagee ofrecord gives it the rights of a mortgagee in its own right ...• The

provisions ofSection 1921 relate solely to

the

discharge ofmortgages and the

Court

will

not apply

that

definition beyond

the

provisions of hat section

in

order to

find

that MERS

is a

mortgagee

with

full

authority

to

perform the duties of

mortgagee

in

its

own

right Aside

from the

inappropriate reliance upon the

statutory definition of mortgagee, MERS's position

that

it can be

both

the

mortgagee and an ageot of the mortgagee is absurd, at best

Adding to this absurdiry, it is notsble in this case that the AssignmentofMortgage

was

by

MERS,

as

nominee for

First Franklin, the origioal lender. By the Movant's

and MERS's own admission at the time

the

assignment

was

effectuated, First

Franklin no longer held any interest in the Note. Both

the

Movant and

MERS

have

represented to the Court that subsequent to the origioation of he loan, the Note

was

assigned, through

the MERS

tracking

system,

from

First Franklin

to

Aurora,

and

then from Aurora to

U.S. Bank.

Accordingly, at the time that

MERS, as nominee

of

First Franklin,

assigned the

interest in the Mortgage

to U.S.

Baok,

U.S.

Bank

allegediy already held the Note and it

was atU.S.

Bank's

direction,

not First

Franklin's, that the Mortgage was assigned to U.S.

Bank.

Said anolher wsy, when

MERS

assigned the Mortgage

to

U.S.

Bank on

First Franklin's behall; it took its

direction

from U.S.

Bank, not First Franklin, to provide documentation of an


11




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assignment from an entity that no longer bad any rights to the Note or the

Mortgage. The

documentation

provided to

the Court in this

case (and

the Court

has

no

reason to believe that

any

further documentation

exists),

is stunningly

inconsistent

with

what

the

parties

define as the

fucts of

his

case.

However, even

ifMERS

bad assigned

the

Mortgage acting on behalf

of

he entity

which held the Note at

the

time

of he

assignment, this Court finds that MERS did

not have authority,

as 'nominee or

agent,

to

assign

the

Mortgage

absent

showing

that it

was

given specific written

directions

by its principal.

This Court finds that MERS's theory

that

it can set

as

a common agent for

undisclosed principals

is not support

by

the

law The relationship between

MERS

and

its lenders and its distortion of its alleged nominee

status

was appropriately

described by

the

Supreme Court of

Kansas as follows: ''The

parties

appear

to

have

defined

the

word

[nominee)

in much the same wsy

that

the blind men

of

Indian

legend described an elephant-their description depended on which part they

were

touching

at

any given time.

Landmark

Nat / Bankv.

Kesler,

216 P.3d 158, 166-67

(Kan. 2010).

2.48

In addition

to

Plaintiff Freddie

Mac, the

following organizations are current

MERSCORP

Holdings shareholders: I) American Land Title Association; (2) Bank ofAmerica National

Association; (3) CCO Mortgage Corporation;

(4)

CitiMortgage,

Inc.;

(S) CoreLogic, Inc.;

(6)

CRE

Finance o u n c i ~ (7) EverBank; (8) Fannie

Mae;

(9) First American Title

Insurance

Corporation;

(10)

Guaranty Bank;

(11)

Housing Residential, Ltd.;

(12)

HSBC Finance Corporation; (13)

MGIC

Investor Services Corporation;

(14)

Morserv, Inc.; (15) Mortgage Bankers Association;

(16)

PM

Mortgage Insurance Company; (17) Residential Funding Company, LLC; ( 8) Stewsrt Title

Guaranty Company; (19) SunTrust Mortgage, Inc.; (20) Wells Fargo Bank, N.A.; and (21) WMC

Mortgage Corporation. https:l/www.mersinc.org/about-us/shareholders. [Last visited on April 19,

2015.)

2.49 In August 2011,

the

State

of

Washington suedReconTrustCompany, N.A.

in

State of

Washington

King

County Superior

Court.

The case is

State o Washington v. Recon .lrust Co.

N.A.

case number 11-2-26867-5, filed on August

S,

2011.

2.50 In

the

lawsuit, Washington State Attorney General Rob McKenna accused ReconTrust

Co.,

a subsidiary

of

BankofAmerica N

A.,

and

which also sets as

a foreclosure

trustee,

of

conducting illegal nonjudicial foreclosures on thousands

of

homeowners

and

putting up

roadblocks to saving residents' homes and violating its obligation to be a neutral

third

party acting

in the best

interest oflenders

and

borrowers.

DEFENDANT'S MOTION

TO

QUASH SERVICE

OF

SUMMONS

12




I 2.51

Rather than act in

good faith

to borrowers, ReconTrust would only halt a

home

sale

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beneficiary approved it, failed to

identify

the ownera

ofloans and conducted

foreclosure

sales in

private locations instead of public spaces, the suit alleged.

2.52 McKenna

also

accused

ReconTrust

of

providing confusing information about how

borrowers defaulted and

how to

rectify default, and using documents that were rife with errors or

improperly notariz ed

2.53 R.econTrust's illegal practices

make

it difficult, i not impossible, for borrowers

who

might

have

a shot

at

saving their homes

to

stop those foreclosures, McKenna said in a

statemenL

ReconTrost's claim that

the company

doesn't have

to

follow Washingtoo

law and

procedures

because it

is

a national

bank

is

wrong,''

said

McKenna.

2.54 The former Attorney General further accused ReconTrust, which

haa

issued nearly I 0,000

foreclosures notices since 2008, of stonewalling his office's investigation into its foreclosure

practices and ignoring

warnings

that it

was

in violation

of

Washington's Deed

of

Trust Act

(DTA), RCW 61.24 et

seq.

2.55 According to the State's complaint, because courts in Washington cannot get involved in

noajudicial foreclosure proceedings, the

OTA

and a neutral Trustee are the

only

protectiona

for

homeowners n foreclosures.

Homeowners

facing foreclosure

are captive

t

ReconTrust'

s trustee

services, the complaint

said.

2.56 The complaint further alleged that ReconTrust failed

to

comply with one essential

requirement

of

he

deed

of trust

statute

reqniring a

trustee to

keep a physical

office

in

Washington

State so

that residents

at risk

oflosing their homes can

make

a

last-mim1te

payment, seek

information or request that a foreclosure sale be postponed.

2.57

On September 2,

2011,

ReconTrust removed the Complaint to the U.S. District Court,

Western

District

of

Washington.

On

August 20, 2012, the

U.S.

District

Court

entered

an

Injunction and

Conaent Decree against

ReconTrost

and

ordering this benking entity

to pay to

the

State

$1,090,000 for costs and attorney fees and for possible enforcement

of he

Consent Decree.

2.58

Defendant's legal title

to

ownership

and

continued

unfettered

possession

of

the real

property located

at

3912 NE

57 '

Avenue,

Vancouver, Washington

98661,

is inextricably

intertwined

in

the business

model

Plaintiff Freddie

Mac

and its coconspirators intentionally

created and operates

as part

of

a

scheme

that

was

designed from the outset

to

intentionally

avoid


O

SUMMONS

13




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the

requirements

of

he traditional

mortgage

recording process,

the UCC

regarding negotiable

instruments,

this

State's Deed of Trust

Act,

and the

unlawful

detainer statutes, RCW

59.12

et

seq.

2.59

n Bain

v.

Metropolitan

Mortgage Group

Inc.

175

Wn.2d 83, 285

P.3d

34

(2012),

the

Court unanimously

held

that

under

the Washington Deeds

of

Trust

ct

WDTA),

chapter

61.24

RCW, the

beneficiary

in

a nonjudicial foreclosure

action

must

be

the

actual

bolder of the

promissory note.

2.60 With

regards

to MERS, the

Court rejected

the

claim

made by MERS

that it could

be

a

beneficiary of a Note in a Deed of Trust i f t

never

held

the

Note:

''The plaintiffs

argue

that our interpretation of he

deed

of

rust

act should be

guided by

these

UCC

definitions,

and thus

a beneficiary

must

either actually

possess the

promissory note

or

be

the payee.

E.g., Selkowitz

Opening

Br. at 14. We

agree.

This

aecords

with

the

way

the

term holder

is used

across

the

deed of trust

act and

the

Washington

UCC.

By

contrast,

MERS's approach would require

us

to

give

bolder a different

meaning

in differeot related statutes

and

construe the deed

of trust act to mean

that

a

deed

of trust

may

secure itselfor

that

the note follows the

security inatnnnent. Washington's deed of rust act contemplates that

the

security

inatnnnent

will follow

the

note, not the other way around MERS isnot a holder''

under

the plain language of the

statute.

2.61

The

Supreme

Court

in Bain

also rejected MERS's

agency

claims:

But oss

also

observed

that

[w]e have repeatedly held that a prerequisite of an

agency

is control of

the

agent

by the

principal.

Id. at 402, 463

P.2d

159

(emphasis

added) (citing McCarty

v

King

County

Med. Serv.

Corp.

26 Wash.2d 660, 175

P.2d

653

(1946)).

While

we

have

no

reason

to

doubt

that

the

lenders

and

their

assigns

control

MERS,

agency requires a specific principal that is accountable for

the

acts of its

agent.

But

MERS

offers

no

authority

for

the implicit proposition

that

the lender's

nomination o M RS as noll inee

rises to

an gency relationship with

successor

notebolders. (Footnote

omitted.)

MERS fails

to

identify the entities that control and

are

aecountable for its actions. It has not established that it

is

an agent for a lawful

prineipal.

We will not allow waiver of statutory protections lightly. MERS did not become a

beneficiary by conttact or under agency principals .

•••

We

answer the first certified question No, based

on

the plain language of

the

statute. MERS is an ineligible 'beneficiary' within

the

terms of

he

Washington

Deed ofTrust Act, if it never

held

the promissory

note

or other debt inatnnnent

secured

by

the

deed

of trust.

27 2.62

The

Supreme

Court

further

held

that

a

homeowner could

state a cause of action

under

28 DEFENDANT'S MOTION T QUASH SERVICE OF SUMMONS

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Washington's Consumer Protection

Act

against

Mortgage

Electronic Registration Systems,

Inc., i

MERS acts as an unlawful beneficiary under

the

terms of Washington's Deed of Trust Act:

Bain contends

that

MERS violated

the

CPA when it acted as a beneficiary ... .

To

prevail

on a CPA action,

the plaintiff

must

show

"( ) unfair or deceptive act or

practice;

(2)

occurring in

trade or

commerce;

(3)

public interest impact; (

4)

injury

to

plaintiff in

his or ber

business

or

property;

(5)

causation."

Hangmao Ridge

Training Stables. Inc. v. Safeco Title Ins. Co.,

105

Wasb.2d

778, 780,

719 P.2d 531

1986).

MERS

does not dispute all the elements.

•••

The attorney

general of his

state

maintains

a

consumer

protection division

and bas

considerable experience and expertise in

consumer

protection matters. As an lcus,

the

attorney general

contends that MERS

is

claiming to

be

the

beneficiary

when

it

knows or should know that under

Washington

law

it

must

bold

the note

to be

the

beneficiary"

and seems to suggest we bold that

claim is

per ee

deceptive and/or

unfair.

AG Br.

at

14. This

contention

finds

support inimloor

Billboard/Wash.

Inc.

v

Integra

Telecom

ofWash.

Inc. 162

Wash.2d

59,

170

P.3d

10

2007),

where

we

found

a telephone

company

had

committed

a deceptive

act

as a matter oflaw

by

listing a sun:harge "on a portion of he invoice that included state and federal tax

charges." d at

76, J70

P.3d

10.

•••

Our attorney general

also

notes

that the

assignment

of the deed o trust that

MERS

uses purports

to

transfer its beneficial interest

on

behalf

of ts own

successors

and

assigns, not

on behalf

ofany

principal .... This undermines MERS's contention that

it acts only as an agent for a lender/principal and its successors and it "conceals the

identity ofwhichever loan holder

MERS

purports

to be

acting for

when

assigning

the deed of

trust." AG Br.

at

14. The

attorney

general

identifies

other

places where

MERS

purports

to be acting

as

the agent

for its

own

successors, not for

some

principal.

Id.

at

15

(citing

Doc.

l,

Ex. B). Many

other courts

have

found

it

deceptive

to

claim authority

when

no authority existed and to

conceal

the true

party

in a transaction.

•••

While we are

1Jllwilling

to

ssy it is

per se deceptive, we agree that

characterizing

MERS as the beneficiary

has

the cspacity

to

deceive and

thus,

for the purposes of

answering

the

certified question, presumptively the first element is met.

•••

MERS

contends that plaintiffs csnnot

show

a public

interest

impact becsuse, it

contends,

each

plaintiff is challenging "MERS's

role aa

the beneficiary under

Plaintifl's Deed of Trust in the context of the foreclosure proceedings on Plaintiff's

property."

Resp.

Br.

ofMERS

at

40

Solkowitz) emphasis

omitted).

But

there

is

considerable evidence that MERS is involved with an enormous number of

mortgages

in the

cowttry and our state), perhaps as

many

as half nationwide.

John

R.

Hooge &

Laurie Williams,

Mortgage

Electronic Registration Systems, Inc.: A

Survey

of

Cases

Discussing MERS'

Authority

to NORTON BANKR.L.

ADVISORY

NO. 8, at

21(Aug.2010).

lfin fact

the language

is unfair or

deceptive,

it would have a

broad impact.

This

element

is

also

presumptively

met.


15




1

2

3

4

6

7

8

9

10

•••

As

amicus notes, '

1

MERS' concealment of

loan transfers also could

also

deprive

homeowners of other

rights,

such as the ability to take advantage

of

the

protections of he Truth in Lending Act and other actions that require the

homeowner to sue or negotiate with the actual holder

of

he promissory note. AG

Br.

at 11 (citing

15

U.S.C. §

1635 1); Miguel v Country Funding

Corp • 309 F.3d

1161, 1162-65 (9th Cir.2002)) ...

If the first

word in the third

question was

"may"

instead

of

"does,"

our

answer

would be yes. Instead, we answer the question with a qualified yes, depending

on whether

the

homeowner can produce evidence on each element required to

prove a CPA claim. The fact that MERS claims to be a beneficiary, when under a

plain reading of he

statute

it

was

not, presumptively meets

the

deception

element

ofa CPA action •.. We answer the third question with a qualified yes; a CPA

action may be maintainable .... A true and correct

copy of

he Attorney

General

Ainicns Brief

is attached

hereto

as

Defendant's Exhibit

S

I l 2.63 The following is a screenshot ofClari< County Auditor's documents tracking the

12

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15

16

17

18

19

20

21

22

transactions associated with Defendant's property:

Auditor Document Search Results

Search Criteria:

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23

2.64 On October

17,

2011, one yeerbefore

the

Supreme Court decided

Bain

MERS

and

one of

24

25

26

27

28

its members, CoreLogic, Inc., see paragraph 2.48

supra

recorded an Assignment

of

Deed of

Trust, Auditor Document No.

479971,

wherein

MERS,

acting

as

beneficiary, purported assign

both

the

Mortgage and the Note to another member ofMERS, Bank

of

America, National

Association," to wit:

DEFENDANT'S

MOTION

TO QUASH SERVICE

OF

SUMMONS

16




1

2

3

4

SSIGNMENTOF DEED

OF

TRUST

J'os Value RceAvcd,.

1M Wldcnipod

boldor ofa

Deod ofTnill (herein

..

Assipor ') whoa: t.ddrea ls»OO

S. W. 34TH AVENUE. SUIT& JOI

OCALA,n. 34414

doef pat.sell,

a11ip.

b'lll .trer

• d

cmYOj

GDIO

BAro. X OF AMERICA, N.A., SUCCESSOR BY MERG8R TO BAC HOME LOANS

SERVJCINC,

lJ

PXA COUNTRYWIDE HOME LO.U.'S

SU.VICING, LP wlHM 9ddm& ii

400

lll'ATJONAL WAY, SIMJ

VALLEY

1

CA9 H 5

all

banoftcill

lalml5l lmda°VLI\ ca-t111D

Deed of I r8 t

described

btkiw

1oplblr

whh the

note{•)

Jmd

obllpiiont

thmin

1nd

die

moaf)'

du•

and

to

become due

'8\neou

WM Interest utcl

all ripl.I .ccrurcl

or 10 ICr.nMI imder s id Deed otTnJst.

5

2.65

A

true

and com:ct copy

of

this public record is attached hereto

as

Defendant's Exhibit 5.

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Both

the Supreme Court and the Attorney General

found

the language

used

in

the

aforementioned

Assignment

to

constitute a violation

of

he

CPA. he

Assignment also discloses the

filct

that

MERS

is

claiming to be the bolder

of

he

Note,

the mortgagee and the agent for the mortgagee.

Bain

citing In

re

Agard

444 B.R.

231,

247

Bankr.E.D.N.Y.2011

),

held that

an interpre1Blion of

the term beneficiary that has the deed

of

rust securing itself is untenable. MERS s position

that it

can

be both

the

mortgagee and an agent

of

the mortgagee is

absurd,

at best.

In re

Agard

444 B.R. 231, 247

E.D.N.Y.2011).

2.66

Bain

also

rejected the notion that a lender's nomination

of

MERS as a nominee rises to an

agency

relationsbip with successor noteholders. MERS intentionally avoids the agency question in

the above Assignment by presenting a history

of

the

''Original

Lender, to wit:

OriP•I

Lender.

LANDMARK MORTGAGE COMPANY

"'4NcBy: . PAMELA S.OWllN AMA.u1EDWOMANASllERIBPAR.\TB

UTA

TE

Origiul

Trunco: l"IDEUTY NATIONAL

TITLE INSURANCE

Dat.e of Deed ofTrusc:

1V412DOS

Orii: ui Lo.ri

Amour.I: S2Dl.UD.OD

~ o r e

ir.i

Clsrk

Cou•f7.Wlt. on:

Jlll IHOJ.

book

NIA,

P9JO

NIA and

binrwn•l

mn «

4Gl2)1t

2.67

Plaintiff Freddie

Mac, who

is a co-founder of

MERS

and also a

member

of

MERS, is

actively perpetrating a fraud upon this Honorable Court. To establish it is the new legal owner

of

Defendant's property, Plaintiff does pot attach to its complaint a copy of he Trustee's Deed

Upon Sale issued

on

January 22,

2015, nor does

Plaintiff Freddie Mac claim in its Complaint that

it was an innocent purchaser

of

Defendant's

real

property.

As the

co-founder and co-creator

of

MERS and Its electronic registration system, Plaintiff's innocent

purchaser

claim would be

untenable, simply because Plaintiffnot

only

ratified the fraud

of

MERS and Bank

of

America,

as

part

ofMERS' membersbip agreement which Plaintiff helped

create,

Plaintiff

demanded

that

this fraud be undertaken by

all

ofMERS's members, including itself and its agents, Trustees,

successors

and assignees. A true and correct

copy of

he Trustee's Deed

on file

with the

County

Auditor is attached

hereto as

Defendant's Exhibit

6.

DEFENDANT'S MOTION

TO

QUASH SERVICE

OF

SUMMONS

17




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2.68 A legally,

cogniz.able

Trustee's

Deed

requires

that

the Trustee must have complied with

the Deed

of Trust

Act,

Chapter

61.24 RCW.

The

Bain

Court reiterated the law of

this

State

requiring Trustees

to be

obligated

to all of he

parties :

Critically

under our statutory

system, trustee is not

merely

an

agent

for

th

leoder or the lender's successors. Trustees have obligations to

all of

the parties to

the deed, including the homeowner. RCW 61.24.010(4) .... Amoog other

things,

the

trustee sh ll

have proof

that

the beneficiary is the

owner of aoy

promissory

note or other obligation secured by the deed

of

rust...

before

foreclosing on an

owner-occupied home. RCW 61.24.030(7)(a), (8)0).

Finally, throughout this process, courts must be

mindful of

the

f ct that

Washington's deed of rust

act

should be consttued to further three basic

objectives ....

''First,

the nonjudicial foreclosure process should remain efficient

aod inexpensive.

Second,

the process should provide ao adequate opportunity for

interested parties to prevent wrongful

foreclosure. Third,

the process should

promote

the

stability

of

land titles. '

Bain

v Metropolitan

Mortgage Group

Inc.

175 Wn.2d 83,

285

P.3d 34,

39

(2012).

2.68 The

Trustee's Deed denies that

MERS

w s ever the beneficiary in any ofDefendant's

transactions.

See

paragraph

2.

This Deed lso does not explain bow MTC Financial,

Inc.

obtained

powers to

become

Trustee

for Bank ofAmerica,

N

A.,

aoother member of MERS,

when MERS

was never

a beneficiary aod never held power to

make

any assignment to Bank

of

America.

2.69 On March 26, 2014, Document Processing Solution caused to be recorded the

County

Auditor Appointment of Successor Trustee, Document No. 5059964,

on

behalfofBank of

America,

N.A., wherein it w s claimed thatMERS

Inc.

w s the original beneficiary .... A true

and

correct

copy of

this public record is attached

as

Defendant's Exhibit

9.

2.70 Thus, Auditor Document Nos. 5139307 (Trustee's

Deed); 5080743

(Notice ofTrustee

Sale); 4799971

(Assignment

of

Deed

of

Trust and Note(s) and

5059964

Appointment of

Successor Trustee) would appear to be the fruits of r ud aimed at destabilizing land titles in

Ibis

State

as

st ted

by the

Court in

Bain v.

Metropolitan

Mortgage Group

Inc.

115 Wn.2d 83, 285

P.3d 34,

39

2012), and

which

Ibis

Court

bas no

jurisdiction

to aid

or

abet.

2.71 During

Defendant's bankruptcy proceeding, Bank of America, N.A., in support

of

its

Motion

for

ReliefFrom Stay, attached a copy

of

the original Note, which was materially

different from the

copy

of he original Note given to Defendant

nine

yesrs previously.

Defendant's copy contains both

a MERS

Number and a loao number. The copy presented by

Bank

of

America to prove it was the owner or holder

of

the original Note

lacked

a MERS number


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and a loan number. True and correct copies of these conflicting Notes are attached hereto as

Defendant's Exhibits 7 and 8, respectively.

2.72 Additionally, BankofAmerica produced an allonge containing indorsements which

attempt

to

convert the fraudulent copy

of

he original Note

into

a

besrer Note or

a

Note indorsed

in

blank.

See

Page

2

of Exhibit

8. This

allonge also does

not

identify the

Joan

nwnber.

2.73

The

Court's exercise of subject

matter

unlawful detainer jurisdiction would violate both

the three basic objectives

of he

DTA and the unlawful detainer ststutes.

2. 74 Washington's

CPA

RCW 19.86.095, also directs that Defeudant serve the Attorney

General with a copy ofher initial pleading alleging

a

violation of he CPA by PlaintiffFreddie

Mac and its co-conspirators:

In

any proceeding in which there is a request for injuoctive relief under RCW

19.86.090

the

attorney geoeral

shall

be served with a copy

of

the

initial pleading

alieging a

violation ofthis chapter. In any appellate

proceeding in

which an issue is

presented concerning a provisionof

his

chapter,

the

attorney general

shall,

within

the time provided for filing the brief with

the

appellate court

be

served with a copy

of the briefof he

party

preseoting such issue.

i l l

PLAINTIFF DOES NOT STATE IN ITS COMPLAINT A CLAIM AND CAN

NEVER STATE A CLAIM COGNIZABLE UNDER CHAPTER 59.12 RCW.

A.

The Court Lacks Subject Matter Jurisdiction Because

of

Plaintiff's Unclean

Hands

d Plaintiff's Failure to Slrictly Comply With hapter 59.12 RCW.

3.1 In addition

to

haviog unclean hands, Plaintiff

does

not

state

and cannot state a claim

cogni7Bble

under Chapter

59.12 RCW

which narrowly limits a Superior Court's exercise of

subject matter jurisdiction.

3.2 Section 59 .12.050, RCW is a grant of limited jurisdiction,

rather

than a geoeral grant of

jurisdiction

3.3 The

Clarl< County Superior Court lacks jurisdiction

to

hear

this

case because the

jurisdictional condition precedent has not

beeo

satisfied and cannot be

satisfied

by

Plaintiff

Federal Home Loan Mortgage Corporation ( Freddie

Mac'').

3.4 Washington law provides

two

methods of removing an occupant

in

possession of

real

estate: an action in ejectment under RCW 7.28; or an action for unlawful detainer

under

RCW

59.12.

DEFENDANT'S MOTION TO

QUASH

SERVICE OF SUMMONS

19




I 3.5 Where a special st tute provides a method of process, compliance with that method is

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jurisdictional. i.e., the jurisdictional condition precedeol Sowers v. Lewis

49

Wn.2d 891,

894,

307 P.2d

1064

(1957); Little v Catania

48

Wn.2d 890, 297 P.2d 255 (1956).

3.6 In this case, Plaintiff Freddie Mac elected to bring an action for nnlawful detainer under

Chapter 59.12

RCW,

but failed to comply with this special law.

3.

7

The

Legislature provided

in RCW

§ 59.12.032 that an nnlawful detainer action,

commenced

as

a result

of

a trustee's sale

under

chapter 61.24

RCW,

l Yl1. first comply with the

requirements ofRCW §§ 61.24.040 (Foreclosure Notice of Sale) and 61.24.060 (Rights and

remedies of rustee's sale purch ser and written notice to occnpants or tenants), in order for the

purchaser to exercise

its statutory right to the summary proceedings to obtain possession

of real

property provided

in

chapter

59.12 RCW, the

unlawful detainer statute.

3.8

Indeed, Plaintiff Freddie

Mac

evidences the fact that its unlawful detainer Complaint

is

subject to Chapter 59.12 RCW in paragraph l, where it is claimed this Court's subject m tter

jurisdiction is provided pursuant to RCW § 59.12.050.

3.9 Moreover, RCW § 61.24.040, subd. 9)

directed

that a trustee's election of a nonjudicial

foreclosure shall entitle

the

purchaser to utilize

the

summary proceedings

under

ch pter 59.12

R W t evict

occupants who

are not

tenants.

3.10 RCW § 61.24.040, subd. (9) further provides that for tenant-occupied property, the

purchaser shall provide a tenant with written notice in accordance with RCW 61.24.060 .. ..

3.11 Because the unlawful detainer statute is in derogation of

he

common law,

and

must

be

strictly construed in

favor of

he tenant, Wilson v.

Daniels

31Wn.2d633,

643, 198

P.2d 4

(1948), in order to take advantage of its favorable provisions,

a

landlord must strictly comply with

the

requirements

of

Chapter 59.12 RCW. Sowers v. Lewis

49

Wn.2d 891, 894, 307 P.2d

1064

1957).

3.12 Further, compliance with

the

requirements

for

the complaint, summons

and

notice

mandated by the Legislature n RCW §§ 59.12.030, 59.12.070 and 59.12.080, constitutes

the

· ~ u r i s d i c t i o n l

condition precedenf' to bringing a cause

of

action

in

unlawful detainer, which

have

not beeo met

and carmot be

met

by

Plaintiff Freddie Mac.

3.13 The Legislature defined

the

term unlawful detainer in RCW §§ 59.12.030 as (a] tenant

of real property for a term less

th n

life is guilty ofunlawful detainer either:

DEFENDANT'S MOTION TO QUASH SERVICEOF SUMMONS

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1)

When he

or

she

holds over or continues in

possession,

in penon

or

by

subtenant,

of

he property

or any

part thereofafter the expiration

of

he term

for

which it is let to him or her. When real property is lessed for a specified term or

period by express

or

implied contract, whether written or oral, the tenancy shall be

terminated

without notice at

the expiration

of he

specified term

or period;

2)

When

he or she, having leased property for an

indefinite

time

with

monthly or

other periodic rent reserved, continues in possession thereof; in person

or

by

subtenant, after the end

of

any such month

or

period,

when

the landlord, more then

twenty days

prior

to

the

end of such month

or period,

has

served

notice

in

manner

in

RCW 59.12.040 provided)

requiring

him

or

her to

quit

the

premises at

the

expiration

o such month or period;

(3) When he

or

she continues

in

possession

in person or by subtenant after a

default

in the

payment

of

rent

and after

notice

in writing requiring

in

the

alternative

the

payment of

he rent

or

the surrender

of

he detained premises, served in

manner

in

RCW

59.12.040provided)

in

behalf

of

he person entitled

to

the rent upon

the

person

owing it, bas remained uncomplicd with for the period

of hree days

after

service thereof. The notice may be served at any time after the

rent

becomes

due;

(4) Wben

he or

she continues

in

poasession in person or by subtenant

after

a

neglect

or failure to keep

or

perform

any

other condition or covenant of the lesse or

agreement

under

which the

property

is held,

including

any

covenant

not to assign

or sublet, then one for the payment

of

rent, and after notice inwriting requiring in

the alternative the performance

of

such condition or covenant

or

the surrender

of

the property, served in manner in RCW 59.12.040 provided) uponhim or her,

and

i h r is subtenant in actual

possession

o h

premises also

upon such

subtenant, shall

remain

uncomplied

with

for ten

days

after service

thereof. Within

ten

days

after the service

of

such

notice the tenact, or any subtenant in

actual

occupation

of

he premises, or any mortgagee

of

he term, or other person

interested

in its continuance, may perform such

condition or covenant

and thereby

save the

lease from such forfeiture;

(S) When he

or

she commits or permits waste upon the demised premises, or when

he or she sets up or carries on thereon

any

unlawful business, or

when

he

or

she

erects, suffers, permits, or maintains on

or

about

the

premises any nuisance, and

remains

in possession

after the

service in manner

in

RCW 59.12.040

provided)

upon him

or her

of hree

days

notice to quit;

(6)

A person who, without the permission of

the

owner

and

without having color

of

title thereto enters

upon

land

o

another and

who

fails or refuses

to remove

therefrom after

three

days

notice, in writing and served upon him

or her

in the

manner provided in RCW 59.12.040. Such person may also

be subject t

the

criminal

provisions

of

chapter

9A.52

RCW; or

DEFENDANT S MOTION TO QUASH SERVICE O SUMMONS

21




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(7) When

he

or she commits or permits any gang-related activity

at

the premises as

prohibited by RCW

59.18.130.

3.14 Plaintiff Freddie Mac points to nothing in RCW §§ 59.12.030 to support its complaint

for

unlawful

detainer.

The Complaint further does not allege facts regarding the notice Plaintiff

was

required

to

provide to Defendant before commencing its action for unlawful detainer.

3.15 The minimum mandatory contents of a complaint for unlawful detainer and the issuance

of

its associated summons are governed

by

RCW § 59.12.070, which provides:

The plaintiff in his or her complain' which shall be inwriting, must

set

forth the

facts on which he or

she

seeks to recover, and describe the premises with

reasonable

certainty,

and

may set

forth therein any circumstances of

raud

force or

violence, which

may

have accompanied the forcible entty or forcible or unlawful

detainer, end claim

damages

therefor, or compensation for the occupation of the

premises, or both; in case the unlawful detainer charged be after default

in

the

payment of

ren the complaint must state the

amount of

such

rent.

A

summons

must be issued as in other cases, returnable at a day designated therein, which shall

not be

loss

than seven nor more than

thirty

days from the date of service, except in

cases where the publicationo summons is necessary, in which case the comt

or

judge thereof may order that tho summons be

made

returnable at such time as may

be deemed proper,

and

the summons shall specify the return day so fixed.

3.16 The Legislature provided in

RCW

§ 59.12.080 that tho unlawful detainer summons must,

at a minimum ''notify the defendant to appear and answer, among other things, to wit:

The summons must

state

the names of the parties

to

tho proceeding, the court in

which

the

seme is

brough

the

nature of

he

action,

in

concise

terms,

and the relief

s • and

also

the return

day;

and must notify the defendant

to

appear end answer

within the time designated

or that the

relief sought will be taken against him or

her.

The summons must be directed

to the

defenden' end in case of summons

by

publication, be served at least five days before the return day designated therein.

The summons must be served

and

returned in

the same manner as

summons

in

other actions s served nd returned.

3.17 Nowhere under

RCW

Chapters 59.12 or 61.24 does

the

Legislature provide Plaintiff a

right or remedy

to

create its

own

summons providing for Defendant's default before

tho

action

is

filed with end the summons is issued

by

the Superior Court

3.18 Moreover, RCW

§

59.12.070 expressly mandates

that

[a) summons must be issued as in

other cases

.... Likewise, RCW § 59.12.080 directs, among other things, that:

The summons

must

state ..

he court in which the same is brought ...

DEFENDANT'S

MOTION

TO QUASH SERVICE OF SUMMONS

22




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3.19 The summons used by Plaintiff did not state the name

of

the Court in which the summons

was

..brought

or

issued. Rather,

the

summons stated

th

name o court in which th summons

would be brought and issued from

at

some unspecified time in the future.

3.20 Under RCW

§

59.12.180, the Legislature made the

rules

of

practice for civil actions in

this State applicable to

unlawful

detainer actions:

Except as otherwise provided in this cbapter, the provisions of the laws of this

state with refereoce to practice in civil actions are applicable to, and constitute the

rules of

practice in the proceedingsmentioned in this chapter; and the provisions

of

such laws relative to new trials and appeals, exoept so

fur

as they are inconsistent

with

the

provisions of this chapter, shall be held to apply to the proceedings

mentioned in

this chapter.

B.

Defendant Was Never

In

Default

Al

A

Matter of

State

and

Federal Low.

3.21 The

Court's jurisdiction to

render

ajudgment by

default

is specified in RCW

§

59.12.120

and

is

further predicated upon a valid snmmons having

been

issued by the court pW'SU31lt to RCW

§§ 59.12.070 and 59.12.080:

If

on the date appointed in the summons the defendant does not appear or answer,

the court shall render judgment in favor

of

the plaintiffas prayed for in the

complaint. RCW

§

59.12.120.

3.22 Additionally, because the summons created and utilized by Plaintiffwas null, void and

unconstitutional, the condition giving rise to

the

pleading by Defendant specified in RCW

§

59.12.121 never became

due:

On or before the day fixed for bis or her appearance the defendant may appear and

answer or

demur.

RCW

§

59.12.121.

3.23

An

unlawful detainer action is a special proceeding which relates only to real estate. There

must be a substantial compliance with the requisites

of

such a statute. Because the summons was

not issued by the court and was not filed with the court before it

was

served, Plaintiff did not

comply with Chapter 59.12. The Courts in Wilson

v. Daniels

31Wn.2d633, 643, 198 P.2d4

(1948); Little v. Catania 48 Wn.2d 890, 297 P.2d 255 (1956); Sowers v. Lewis 49 Wn.2d 891,

894, 307 P 2d 1064 (1957); and

Housing Authority

o

Cily

o

Everett

v.

Terry 114 Wn.2d

558

789 P 2d 745 (1990) directs that the trial eourt must dismiss Plaintiff's Complaint.

3.24 The State's

law

dismissing a complaint for lack ofsubject-matter jurisdiction is consistent

with Federal law. Justice Ginsburg, writing for the Court inArbaugh

v.

Y HCorp. 546

U.S.

500, 506, 5I0-516 (2006), explained that subject-matter jurisdiction .. nvolves a court's power

DEFENDANT'S MOTION

TO

QUASH SERVICE

OF

SUMMONS

3




1 the

parties to

th

enforcement of such

rights

as they may have in some

more appropriate

ed

. ..

2 proce

ings

...

3

4

Respectfully

submitted,

5 Dated: April

19

2015

: ) ~ ? J ~ u v ~

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elaS Owen

3912 NE 57 • Avenue

Vancouver WA 98661

(360) 991-4758

DEFENDANT S MOTION TO QUASH SERVICE O SUMMONS

26




Case 8-10-77338-reg

Doc

41-1 Filed 02110/11 Entered 02/10/1114:13:10

UNITED

STATES BANKRUPTCY

COURT

EASTERN DISTRICT f NEW YORK

x

ln

re:

FERREL

L.

AGARD,

Debtor.

---------------------------------------------------x

Case

N-0.

810-77338-reg

Chapter 7

MEMORANDUM DECISION

Before

the

Court

is

a

motion

(the Motion'') seeking relief

from

the auto1natic stay

pursuant to 11 U.S.C. § 362(d)(1) and 2), to foreclose on a secured interest in the Debtor's real

property located in Westbury, New York (the Property ). The movant is Select Portfolio

Servicing, Inc. ( Select Portfolio or Movant ), as servicer for U.S. Bank National Association,

as

Tn1stee

for First Franklin Mortgage

Loan

Trust 2006-FF

12,

Mortgage Pass-Through

Certificates, Series 2006-FF 12 ( .

U.S.

Bank ).

The

Debtor filed limited opposition

to

the

Motion

contesting

the

Movant's standing

to

seek relief

from

stay. The Debtor argues that the only

interest U.S. Bank holds in the underlying mortgage 'vas received by

way

of an assignment

from

the Mortgage Electronic Registration System a/k/a MERS, as a nominee for the original

lender. The Debtor's argument raises a fundamental question as to whether

MERS

had the legal

authority

to

assign

a

valid and enforceable interest

in

the subject mortgage. Because

U.S.

Bank's

rights

can be

no greater than the rights as transferred

by

its assignor-

MERS

- the Debtor argues

that the Movant, acting on behalf of

U.S.

Bank, has failed to establish that it holds an

enforceable

EXHIBIT

P GE OF 3




Case 8-10-77338-reg

Doc

41-1 Filed 02110/11 Entered 02110/1114:13:10

right

against the Property.

The Movant's initial response to the Debtor's opposition \ as that

MERS's authority to assign the mortgage to U.S. Bank

is

derived

from

the mortgage itself which

allegedly grants to MERS its status as both ''nominee oftlie mortgagee and mortgagee of

record. The Movant later supplemented its papers taking the position that U S

Bank is

a

creditor

with

standing to seek relief from stay

by

virtue of a judgment of foreclosure

and

sale

entered

in

its

favor

y the state court prior

to

the filing of

he

bankruptcy. The

Movant

argues

that the judgment

of

foreclosure is a final adjudication as to U S Bank's status as a secured

creditor and therefore the

Rooker-Feldman

doctrine prohibits this Court from looking behind the

judgment and questioning whether U S Bank has proper standing before this Court

by

virtue ofa

valid assignment of he 1nortgagc from MERS.

The Court received extensive briefing and oral argument

fron1

MERS, as an intervenor in

these proceedings which go beyond the arguments presented y

the

Movant. In addition to the

rights

created by the mortgage documents themselves,

MERS

argues that the terms of its

membership agreement with the original lender and its successors

in

interest, as well as New

York state

agency

laws, give

MERS

the authority

to

assign

the

mortgage. MERS argues

that

it

holds legal title to mortgages for

its

member/lenders as

both

''nominee and 1nortgagee of

The

Debtor also questions whether Select Portfolio has

the

authority and

the

standing to

seek relief from the automatic stay. The Movant argues that Select Portfolio has standing

to bring the Motion based upon its status

as

servicer'' of the Mortgage, and attaches an

affidavit of a vice president ofSelect Portfolio attesting to that servic ing relationship.

aselaw has established that a mortgage servicer has standing to seek

relief

from the

automatic

stay

as a party in interest. See, e.g., Greer v O Dell, 305 F.3d 1297

(11th

Cir

2002);

In re Woodber1y,

383 B.R. 373 (Bankr. D.S.C. 2008).

This

presumes,

however, that the lender for \Vhom the servicer acts validly holds the subject note and

mortgage. Thus, this Decision will focus on whether U.S. Bank validly holds the subject

note

and

1nortgage.

Page 2 of 37

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Case

8 10 77338 reg Doc 41 1 Filed

02110111

Entered 02110/1114:13:10

record.

As such, it

argues that

any me1nber/lender vhich

holds

a note secured by real property,

that assigns that note to another member

by

way of entry into the MERS database, need not also

assign the mortgage because legal title to the mortgage remains in the name ofMERS, as agent

for any member/lender which holds the corresponding note. MERS s position is that if a MERS

member

directs it

to

provide

a written

assignment

of he

mortgage,

MERS has the legal

authority,

as

an

agent

for each of

its

members,

to

assign

mortgages

to

the member/lender

currently holding the note as reflected in the MERS database.

For the reasons that follow, the Debtor s objection to the Motion is overruled

and

the

Motion is

granted.

The

Debtor s objection

is

overruled

by

application of either the

Rooker

Feld1nan doctrine, or resjudicata. Under those doctrines, this Court

1nust

accept the state court

judgment of foreclosure as evidence of

U.S.

Bank s status as a creditor secured by the Property.

Such

status

is

sufficient to establish the Movant s standing

to

seek relieffro1n the automatic

stay.

The Motion is

granted

on

the merits because the Movant

has

shown,

and

the Debtor has not

disputed, sufficient basis to lift the stay under Section 362{d).

Although the Court is constrained in this

case to

give

full

force and effect

to

the state

o u r t j u d ~ m e n t of foreclosure, there are numerous other cases before this Court which present

identical issues

with

respect

to MERS and in which

there have

been no

prior dispositive state

court decisions. This Court

has

deferred rulings

on

dozens of other motions for relief from stay

pending

the

resolution of

the

issue of whether an entity which acquires its interests in a mortgage

by way

ofassign1nent

from MERS, as

nominee,

is

a valid secured creditor with standing

to

seek

relief

from

the

auto1natic

stay.

It is for

this reason

that the

Court s decision

in

this matter will

address the issue of whether the Movant

has

established standing in this case notwithstanding the

Page

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Case 8-10-77338-reg Doc 41-1 Filed 02/10/11 Entered 02110/1114:13:10

existence

of

he foreclosure judgment. The Court believes this analysis

is

necessary for the

precedential effect it will have on other cases pending before this Court.

The Court recognizes that an adverse ruling regarding MERS's authority to assign

mortgages or

act

on behalf

of

its 1nember/lenders could have a significant impact on

MERS and

upon the lenders which do business with

MERS

throughout

the

United States. However,

the

Court must resolve the instant matter y applying the laws as they exist today.

It

is

up

to the

legislative branch,

if

it chooses, to amend

the

current statutes to confer upon MERS the requisite

authority

to

assign mortgages

under its

current business practices.

MERS

and its partners

n1ade

the decision to create and operate under a business inodel that was designed in large part to avoid

the

requirements

of

the traditional mortgage recording process. ·rhis Court does not accept the

argument that because MERS 1nay e involved with 50o/o of all residential mortgages in the

country, that is reason enough for this Court to

turn

a blind eye to the fact that this process does

not comply with the law.

acts

Procedural Background

On September 20, 2010, the Debtor filed for relief under Chapter 7 of the Bankruptcy

Code.

In Schedule to the petition, the Debtor lists a joint ownership interest in the Property

described as follows:

[s]ingle family home owned with son, deed

in

son's name since

2007;

used as

primary residence

. . . .

Debtor

\Vas

on original deed

and is

liable on the mortgage,

therefore

has

equitable title, Debtor

is in

default of

the

mortgage with a

princi1 a]

balance of over $450,000.00. The house is worth approximately $350,000. A

Page 4

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Case 8-10-77338-reg

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foreclosure sale was scheduled 9121/\0.

According to Schedule

D

the Property

is

valued at $350,000

and

is

encumbered

by

a mortgage

in the amount of$536,920.67 held

by SPS

Select Portfolio Servicing.

On October

14

2010, the Movant

filed

the Motion seeking relief from the automatic stay

pursuant to

11

U.S.C. §362(d) to foreclose on the Property.

The

Motion does not state that a

foreclosure proceeding had been commenced

or

that a judgment

of

foreclosure was granted prior

to

the filing of the bankruptcy petition. Nor does it 1nention that the Debtor holds only equitable

title

and

does not hold legal title

to

the

Property. Instead, Movant alleges that

U.S.

Bank

is

the

holder

of

he Mortgage; that the last mortgage payment

it

received

from

the Debtor

was

applied

to

the July,

2008

payment; and that the Debtor

has

failed

to 1nake

any post·petition

payments to the Movant. Movant also asserts that

as of

September

24, 2010,

the total

indebtedness on

the

Note and Mortgage

was

$542,902.33

and

the

Debtor lists

the

value

of

the

Property at

$350,000 in

its schedules. On that basis, Movant seeks entry

of an

order vacating the

st y

pursuant

to

l t U.S.C.

§

362 d) t)

nd

d) 2).

Annexed to the Motion are copies

of

the following documents:

• Adjustable Rate Note, dated June 9, 2006, executed

by

the Debtor

as

borrower and listing

First Franklin a Division

of Na.

City Bank

of In.

( First Franklin ) as

the

lender

(''Note );

Balloon Note Addendum

to

the Note, dated June

9,

2006;

• Mortgage, dated June 9 2006 executed by the Debtor and listing First Franklin as lender,

and MERS

as

nominee for First Franklin and First Franklin's successors nd assigns

( Mortgage );

• Adjustable Rate and Balloon Rider, dated June

9

2006;

• Addendum to Promissory Note and Security Agreement executed by

the

Debtor; and

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37

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Case 8-10-77338-reg Doc41-1 Filed 02/10/11 Entered 02/10/1114:13:10

• Assignment of Mortgage

dated

February I, 2008 listing

MERS as

nominee for

First

Franklin as assignor, and the Movant, U.S. Bank National Association, as Trustee for

First Franklin Mortgage Loan Trust

2 6 ~

FF

12

Mortgage Pass-through Certificates,

Series 2006-Ff

12

as assignee( Assignment o Mortgage ).

The

rguments

o

he

arties

On October 27 2010 the Debtor filed limited opposition to

the

Motion alleging that

the

Movant

lacks standing

to

seek

the

relief requested because

MERS

the purported assignor to

the Movant, did not have authority to assign the Mortgage and therefore the Movant cannot

establish that it

is

a bona fide holder

o

a valid secured interest

in

the Property.

The Movant responded to the Debtor's li111ited opposition regarding MERS's authority to

assign

by

referring to the provisions o the Mortgage ' 'hich purport to create a nominee

relationship between MERS

and First

Franklin. In conclusory fashion, the Movant states that

it

therefore follows that MERS's standing to assign is based upon its no1ninee status.

On

November

15

2010, a hearing

was

held and the Court gave both the Debtor and

Movant the opportunity

to

file supplemental briefs on the issues raised by the Debtor's lin1ited

opposition.

On December 8 2010, the Movant filed a n1e1norandum o law

in

support o the Motion

arguing that this Court Jacks jurisdiction to adjudicate the issue

o \Vhether

MERS had authority

to assign the Mortgage, and even assuming the Court did have jurisdiction

to

decide this issue,

under New York law the MERS assignment was valid.

Jn

support o its jurisdictional argument,

the Movant advises the Court (for the first time) that a Judge1nent o Foreclosure and Sale

( Judgment o Foreclosure ) was entered

by

the state court

in

favor o the Movant on Nove1nber

24, 2008, and any judicial review o the Judgment o Foreclosure is barred

by

the doctrines o

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Case 8-10-77338-reg Doc 41-1 Filed 02/10111 Entered 02110/1114:13:10

resjudicata, Rooker·Feldn1an, and judicial estoppeL

2

The Movant argl1es that the Debtor had a

full

and fair opportunity to litigate these issues in state court, but chose to default, and cannot

now challenge the state court's adjudication as to the Movant's status as a secured creditor or

holder of he Note and Mortgage, or its standing to seek relief from the automatic stay

in

this

Court. The Movant also notes that the Debtor admits in her petition and schedules that she is

liable

on

the Mortgage, that

it

was in default and the subject

of

a foreclosure sale, and thus

judicial estoppel bars her arguments to the contrary.

In addition to its preclusion argu1nents,

on

the underlying merits

of

its position the

Movant cites to case law holding that MERS assignments similar to the assignment in this case,

are valid and enforceable. See U.S. Bank, N.A.

v.

Flynn, 897 N.Y .S. 2d 855, 858 (N.Y, Sup. Ct.

2010); Kiah

v

Aurora Loan Sen>ices

LLC

2010

U.S. Dist. LEXIS

121252, at I

(D.

Mass. Nov.

6,

201

O ; Perry v. Nat l Default Servicing Corp., 2010

U.S.

Dist. LEXIS 92907, at I (Dist.

N.D. Cal. Aug. 20, 2010). It

is

the Movant's position that the provisions of the Mortgage grant

to

MERS

the right to assign the Mortgage as nominee, or agent,

on

behalf of the lender, First

Franklin. Specifically, Movant relies on the recitations

of

the Mortgage pursuant

to

which the

Borrower acknowledges that

MERS

holds bare legal title to the Mortgage. but has the right

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

'

The Judgment of Foreclosure

names the Debtor and an

individual, Shelly English,

as

defendants.

Shelly

English

is

the Debtor's

daughter-in-la\v.

At a hearing held on

December

13, 20 I0, the Debtor's counsel stated that he believed the

Debtor

transferred

title

to

the Property

to

her son, Leroy English, in 2007. This

is

consistent \Vith

infonnation provided

by

the

Debtor

in

her petition

and

schedules.

Leroy

English,

however,

was not

named

in the

foreclosure

action. No

one

in this case has

addressed

the

issue of whether the proper parties were named

iri

the foreclosure action. However,

absent

an

argument

to the

contrary, this

Court

can

only

presume that

the

Judgment

of

Foreclosure

is a

binding

final judgment

by

a court of competent jurisdiction.

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Case 8-10-77338-reg

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sell the Property; and (B) to take any action required ofLender including, but not lilnited to,

releasing

and

canceling [the Mortgage].

In

addition, the Movant argues that MERS's status

as

a

mortgagee•• and

thus its

authority to

assign the Mortgage is supported by the

New

York

Real

Property

Actions

and Proceedings Law ( RPAPL )

and

New York Real Property Law (

.

RPL ).

Movant

cites

to RPAPL

§ 1921-a which allows a mortgagee to.execute and deliver partial

releases of lien, and argues that

MERS

falls within the definition of mortgagee which includes

the current holder

of

the mortgage

of

record

or. , . their.,.

agents, successors or assigns.

N.Y. Real Prop. Acts.

aw§

1921(9)(•) (McKinney 2011). Although the definition of

mortgagee cited to by the Movant only applies to RPAPL

§

1921, Movant argues that

it

is a

mortgagee vested with the

authority

to

execute

and

deliver

a

loan payoff statement; execute

and deliver a discharge

of

mortgage and assign a mortgage pursuant to RPL §§ 274 and 275.

In

addition to its status as mortgagee, Movant also argues that the assignment is

valid

because MERS

is

an agent of each of

its

member banks under the general laws of agency in

New York.

see N.Y. Gen. Oblig. Law § 5-1501 (I) (McKinney 2011

),

3

and public policy requires

the liberal interpretation and judicial recognition of the principal-agent relationship. See

rens

v.

Shainsw1lt

37 A.D.2d 274 (N.Y. App. Div. 1971 ), affd

29

N.Y.2d 663 (1971 ).

In

the instant

case, Movant argues, the Mortgage appoints MERS

as

nominee,

read

agent, for the original

'

Movant cites to New York General Obligations Law for the proposition that an agency

agreement may take any form 'desired by the parties concerned.' The direct quote

desired by the parties concerned seems to be attributed to the General Obligations Law

citation, however, the Court could find no such language in the current version of§

150 l (1 ). Tha t provision, rather, defines an agent as

a

person granted authority to act as

attorney-in-fact for the principal

under a power ofattorney

and includes the original

agent and any co-agent or successor agent. Unless the context indicates otherwise, an

'agent'

designated in a power of attorney shall mean 'attorney-in-fact' for the purposes of

this title. An agent acting under a power

of

attorney has a fiduciary relationship with the

principal. N.Y. Gen. Oblig.

Law§

5-1501(1) (McKinney 2011) (emphasis added).

Page 8 of 37

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Case 8-10-77338-reg Doc 41-1 Filed 02110/11 Entered 02/10/1114:13:10

lender and the original lender's successors and assigns.

As

nominee/agent

for

the lender,

and

as

mortgagee of record, Movant argues MERS had the authority to assign the Mortgage to the

Movant,

U.S.

Bank,

"in

accordance with the principal's instruction to its nominee MERS, to

assign the mortgage

lien

to U.S. Bank ,

Finally, Movant argues that even absent a legally enforceable assignment of the

Mortgage, it is entitled to enforce

the

lien because U.S. Bank holds the Note. The Movant

argues that if it can establish that U.S. Bank is the legal holder the Note, the Mo11gage

by

operation

of

law

passes

to the

Movant because the Note

and

the Mortgage

are

deemed

to be

inseparable. See In re Conde-Dedonato

391

B.R. 247 (Bankr. E.D.N.Y. 2008). The Movant

represents, but has not proven, that U.S. Bank is the rightful holder

of

the Note, and further

argues that the assignment

of

the Note has to this point

not

been contested in this proceeding.

MERS nioved

to

intervene in this matter pursuant

to

Fed.

R.

Bankr. P. 7024 because:

12.

The Court's detennination of the

MERS

Issue directly affects the

business model ofMERS. Additionally, approximately 50o/o of

all

consumer

mortgages in the United States are held in the name ofMERS,

as

the mortgagee

of record.

13.

The

Court's determination of the MERS Issue will have

a

significant impact

on

MERS

as well

as the mortgage industry

in

New York and

the United States.

14.

MERS has a direct financial stake

in

the outcome

of

this contested

matter, and any detennination of he MERS Issue h.as a direct hnpact on MERS.

(Motion

to

Intervene,

, ~ 1 2 - 1 4 .

Pennission

to

intervene was granted

at

a hearing

held

on December 13, 2010.

In addition

to

adopting the arguments asserted by the Movant, M RS strenuously

defends its

authority to act as mortgagee pursuant to the procedures for processing this

and

other

mortgage. '. under the

MERS

system. First, MERS points out that

the

Mortgage itself

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Case 8-10-77338-reg Doc41-1 Filed 02110111 Entered 02/10/1114:13:10

designates MERS as the nominee for the original lender, First Franklin, and its successors and

assigns.

In

addition, the lender designates, and the Debtor agrees

to

recognize, MERS as the

inortgagee of record and as no1ninee for

Lender

and Lender's successors and

assigns '

and

as

such the Debtor ''expressly agreed without qualification that MERS

had

the right to foreclose

upon

the premises as well

as

exercise any and all rights as nominee for the Lender. (MERS

Memorandum

of

Law at 7 . These designations

as

nominee, and mortgagee

of

record, and

the Debtor's recognition thereof, it argues, leads

to

the conclusion that MERS was authorized as

a matter of law to assign the Mortgage to U.S. Bank.

Although

MERS

believes that the mortgage documents alone provide it with authority to

effectuate the assign1nent at issue, they also urge the Court to broaden its analysis and

read

the

documents in the context

of

the overall MERS System. According to MERS, each

participating bank/lender agrees

to

be bound by the terms ofa membership agreement pursuant

to

which

the

1nember

appoints MERS to act as its authorized agent with authority to, among

other things, hold legal title

to

mortgages and as a result, MERS

is

empowered

to

execute

assignments of mortgage on behalfof all its member banks. In this particular case, MERS

maintains that as a member

of

MERS and pursuant

to

the MERS 1nembership agreement,

the

Joan originator in this case, First Franklin, appointed MERS ''to act

as

its agent to hold the

Mortgage as no1ninee on First Franklin's behalf, and on behalfof First Franklin's successors and

assigns.

MERS

explains that subsequent

to

the mortgage's inception, First Franklin assigned

the Note to Aurora Bank FSB f/k/a Lehman Brothers Bank ( Aurora ), another MERS member.

According to MERS,

note

assignments among MERS me1nbers

are

tracked via self-effectuated

and self-monitored computer entries into

the MERS

database.

As

a MERS member, y

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operation of he MERS membership rules, Aurora is deemed to have appointed MERS to act as

its agent to hold the Mortgage as nominee. Aurora subsequently assigned the

Note

to U.S. Bank,

also

a

MERS member. By

operation

of he MERS membership

agreement,

U.S.

Bank

is deemed

to have appointed MERS to act as its agent to hold the Mortgage as nominee. Then, according to

MERS, U.S.

Bank,

as the holder

of he note, under the MERS Me1nbership Rules,

chose

to

instruct MERS

to assign the Mortgage to

U.S. Bank

prior to commencing the foreclosure

proceedings

by

U.S. Bank. (Affirmation

of

William

C.

Hultman,

,12).

MERS

argues

that the

express tenns

of

the

1nortgage

coupled with the provisions

of

he

MERS membership agreement:. is more than sufficient to create

an

agency relationship between

MERS

and lender and the lender's successors

in

interest under New York

law

and

as

a result

establish

tv1ERS s

authority to assign the Mortgage. (MERS

Me1norandu1n of

Law at 7).

On

December

20,

2010, the Debtor filed supplemental opposition to the Motion. The

Debtor argues that lheRooker-Feldn1an doctrine should not preclude judicial review

in

this case

because

the

Debtor's objection to the Motion raises issues that could not have been raised

in

the

state court foreclosure action, namely the validity

of

the assignment and standing to lift the stay.

The Debtor also argues that the

Rooke1·-Feld111an

doctrine does not apply because the Judgment

of

Foreclosure was entered

by

default. Finally, she also argues that the bankruptcy court can

review matters which are void or fraudulent

on its

face.

ee In re Ward

423 B.R. 22 (Bankr.

E.D.N.Y. 2010).

The Debtor says that

she

is

alleging questionable, even possibly fraudulenl

conduct

by

MERS

in

regards to transferring notes and lifting the stay. (Debtor's Supplemental

Oppositio:n at

3).

The Movant filed supplemental papers

on

December 23, 20 I

0

arguing that the Motion is

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Case 8-10-77338-reg Doc 41-1 Filed 02/10/11 Entered 02110/1114:13:10

moot

because the Property is no longer an asset of the estate as a result of the Chapter 7

Trustee's report of no distribution, and as such, the Section 362(a) automatic stay was

dissolved upon the entry ofa discharge

on

December 14,

2010. See Brooks

v

Bank ofNe11

York

Mellon No. DKC 09-1408, 2009 WL 3379928, at

2

(D. Md. Oct.

16,

2009); Riggs Nat I Bank

o/Woshington D.C.

v Peny

129 F.2d

982, 986 (4th Cir.

1984).

The Movant also maintains that Rooker·Feld111an does apply to default judgments

because that doctrine

does not

require that the prior judgment be a judgment on the merits.

Charchenko

v

City o/Stilhvater 47 F.3d 981, 983 n.l (8th Cir. 1995); see al so Kafele v. Lerner

Sampson Rothfass L.P.A. No. 04-3659, 2005 WL 3528921, at 2-3 (6th Cir. Doc. 22, 2005);

In re Dahlgren No. 09-18982, 2010 WL 5287400, a t I (D.N.J. Dec. 17, 2010). The

Movant

points out that the Debtor seems

to be

confusing the

Rooker-Feldman

doctrine with issue and

claim preclusion and that the Debtor has misapplied Chief Judge Craig's ruling

in In

·e J{ ard.

Discussion

As

a threshold matter, this Court will address the Movant's argument that this Motion has

been mooted by the entry of he discharge order.

Effect of

ire

Chapter 7 discharge

11

Ille automatic stay

Section 362(c) provides that:

Except

as

provided

in

subsections (d), (c),

(f),

and (h)

of

this section--

(1)

the slay of

an

act

against property o he estate

under subsection (a) of

this

section continues until such property is no

longer

property of the estate;

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case 8 10 77338 reg Doc 41 1 Filed

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2) the stay of

any other act

under subsection (a)

of

this section continues until the

earliest of-

(A)

the time

the case is closed;

B) the time the case is dismissed;

or

C) i f he case is a case under chapter 7 of this title concerning an individual or a case

under chapter 9, 11, 12, or 13

of

this title,

the

ti e a discharge is granted or denied;

U.S.C.

§

J62(c) (emphasis added).

Pursuant to Section 362(c)(1), the auto1natic stay

\Vhich

protects property of the estate,

as opposed to property

of

the debtor, continues until the property

is

no longer property

of

the

estate regnrdless of the entry of the discharge. The provision of the statute relied upon by the

Movant for the proposition that the auto1natic stay tenninates upon the entry of a discharge,

relates only

to

the stay of any other act under subsection(a), ,

i.e.

an act against property that is

not

property of the estate, i.e.

is

property of the debtor. The relationship between property of

the estate and property

of

the debtor is succinctly stated as follows:

Property

of

the estate consists

of

all property

of

the debtor

as

of

he date

of

the

filing

of

the petition. 11 U.S.C.

§

541. It remains property

of

the estate until it has

been exempted

by

the debtor under§ 522, abandoned

by

the trustee under§

554(a), or sold

by the

trustee under§ 363. lfproperty

of

the estate is not claimed

exempt, sold, or abandoned by the trustee,

it is

abandoned to the debtor at the

time the case is closed i f he property was scheduled under§ 521(1).

f

he

property is

not

scheduled

by

the debtor and is

not

otherwise administered,

it

remains property of the estate even after the case has

been

closed.

f he property

in

question

is

property of the estate, it ren1ains subject to the

automatic

stay

until it becomes property

of

the debtor

and until

the earlier

of

the

time

the case was closed, the

case

is dismissed,

or

a discharge is

granted or

denied

in a chapter 7 case.

Jn re

Pulln1an

319

B.R.

443, 445 (Bankr. E.D.

Va.

2004).

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Movant's position seems to be that the Chapter 7 Trustee 's filing

of

a report

of

no

distribution," otherwise known as a "no asset report," effectuated an abandonment

of he

real

property at issue in this case,

and

therefore the

Property

has reverted

back

to

the

Debtor.

However, Movant fails to cite the relevant statute. Section 554(c) provides that "[u)nless the

court orders othetwise, any property scheduled under section 521

(I)

of this title not otherwise

administered

at the

time of

he closing

ofa case is abandoned to the debtor and administered

for

purposes

of

section 350 of this title."

11

U.S.C. § 554(c) (emphasis added); Fed.

R.

Bankr. P.

6007. Cases interpreting Section 554(c) hold that the filing of a report of no distribution

does

not effectuate an abandonment of estate property. See,

e.g.,

In

re

Israel, 112 B.R. 481, 482 n.3

Bankr. D. Conn. 1990) ("The filing of a no-asset report does not close a case and therefore does

not

constitute an abandonment of

property

of the estate.") (citing e.g., Zlogar v. Internal Revenue

Serv.

Jn

re Zlogar), 101 B.R.

1,

3 n.3

(Bankr.

N.D. Ill. 1989);

Scln1,aber v.

Reed In

re

Reed), 89

B.R.

JOO,

104 (Bankr. C.D. CaL 1988);

11U.S.C.§554(c)).

Btcause the real property

at

issue in this case

has

not

been

abandoned it remains property

of the estate subject to Section 362(a) unless and until relief

is

granted under Section 362(d).

Rooker-Feldman and

resjudicata

The Movant argues that U.S. Bank's status as a secured creditor, which is the basis for its

standing in this case, already has been detennined

by

the state court and that determination

cannot be revisited here The Movant relies

on

both the

Rooker-Feldn1an

doctrine and

res

•

Because the Debtor's objection is ovenuled under

Rooker-Feld111an

and resjudicata, the

Court will

not

address the merits ofthe Movant'sjudic ial estoppe arguments.

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judicata principles to support this position.

The Rooker-Feldman doctrine is derived from two Supreme Court cases,

Rooker

v.

Fidelity Trust Co.

263 U.S. 413

(1923),

and D.C.

Court ofAppeals v. Feldnian 460

U.S.

462

(1983), which together stand

for the proposition that lower federal courts lack subject

1natter

jurisdiction to sit in direct appellate review of state courtjudg1nents. The Rooker-Feldn1an

doctrine is a narrow jurisdictional doctrine which is distinct

from

federal preclusion doctrines.

See McKithen v. Brown 481 F

3d

89, 96-97 2d Cir. 2007) (citing Exxon Mobil Corp. v. Saudi

Basic Indus. Corp. 544 U.S. 280, 284 (2005), and Hob/ock

v.

lbany CountyBoard

o

Elections

422 F.3d 77, 85 (2d Cir. 2005)). In essence, the doctrine bars cases brought by state-court

losers complaining of injuries caused by state-court judgments rendered before the district court

proceedings commenced

and

inviting district court review

and

rejection

of

those judgments.

Rooker-Fe/dn1an

does not otherwise override or supplant preclusion doctrine or augment the

circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to

state-court actions. Exxon Mobil 544

U.S.

at

283.

The Second Circuit has delineated four elements that must be satisfied in order for

Rooker-Feldman to apply:

First, the federal-court plaintiff must have lost

in

state court. Second, the plaintiff

must complain ]of injuries caused by [a] state-court judgment[.] Third, the

plaintiff must invit[e] district court review and rejection of [that] judginent [ ].

Fourth, the state-court judg1nent 1nust have been rendered before the district

court proceedings commenced -i.e.,

Rooker-Feldman

has no application to

federal-court suits proceeding in parallel

with

ongoing state-court litigation. The

first and fourth

of

these requirements

may

be loosely ter111ed procedural; the

second and third

may

be termed substantive.

McKithen 481 F.3d at 97 (internal citation omitted and alteration in original) (quoting Hoblock

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422 F.3d at 85).

In a case with facts similar to the instant case, Chief Judge Craig applied the Rooker

Feldman

doctrine to overrule a debtor's objection to a motion for relief from the automatic stay.

See

In

re

Ward 423 B.R. 22 (Bankr. E.D.N.Y. 2010).

In

In

re Ward

a foreclosure sale was

conducted prior to the filing of the bankruptcy petition. When the successful purchaser sought

relief from stay in the bankruptcy case to proceed

to

evict the debtor, the debtor opposed the

motion. The debtor argued that the foreclosure judgment was flawed because

no

original note

was

produced , the mortgage

was

rescinded , the plaintiff

in

the action doesn't exist

or

was

not

a proper

party to the

foreclosure action'',

and that ~ e v e r y t h i n g was

done irregularly

and

underneath [the] table. In

re Ward

423 B.R. at 27. Chief Judge Craig overruled the debtor's

opposition and

found

that each

of

he elements ofthe Rooker-Feld111an doctrine were satisfied:

The Rooker-Feldn1an

doctrine applies

in

this case because the Debtor lost

in

the

st&te court foreclosure action, the Foreclosure Judgn1ent was rendered before the

Debtor commenced this

case,

and the Debtor seeks this Court's review

of

the

J-'oreclosure Judgment

in

the context

of

her opposition to the Purchaser's motion

for

relief

from the

automatic

stay. The injury

complained

of,

i.e. the foreclosure

sale to the Purchaser, was caused

by

the Foreclosure Judgment because the

foreclosure [sale] would not have occurred but-for'' the Foreclosure Judgment.

Accordingly, the Rooker-J:<e/dman doctrine does not pennit this Court to

disregard the Foreclosure Judgment.

Jn re Ward

423 B.R.

at

28 (citations omitted and alteration

in

original).

In the

instant case,

the

Debtor argues

that the

Rooker Feldtnan doctrine does not

apply

because the Judgment of Foreclosure was entered on default,

not

on the merits. She also argues

that

Rooker-FeJdn1an

should not

apply

because she is alleging that the Judgment of foreclosure

was

procured

by

fraud

in

that the

MERS

syste1n

of

mortgage assignments

was

fraudulent

in

nature or

void. However, this Court

is

not aware

of any

exception

to the

Rooker Feldman

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doctrine

for default

judg1nents,

or

judg1nents

procured by fraud and

the

Court

will

not read those

exceptions into the rule. See

Salen1

v Paroli 260 B.R.

246,

254 (S.D.N.Y. 2001) (applying

Rooker-Feldn1an

to preclude review of state court default judgment); see

also

Lo111bard

v.

Lombard No. OO-CIV-6703 (SAS), 2001 WL 548725, at 3-4 (S.D.N.Y. May 23, 2001)

applying Rooker-FeldJnan to preclude review of stipulation of settlement executed in

connection with state court proceeding

even

though applicant argued that the stipulation should

e declared null and void because he was under duress at the time it was executed).

The Debtor also argues that Rooker-Feldn1m1 does not

apply

in this case because

she is

not

asking this Court to set aside the Judgment of Foreclosure,

but

rather is asking this Court to

make a determination as to the Movant's standing to seek relief from stay. The Debtor argues

that notwithstanding the Rooker-Feldman doctrine, the bankruptcy court musl have the ability to

determine the standing of he parties before it.

Although the Debtor says she is not seeking affirmative relief from this Court, the net

effect of upholding the Debtor's jurisdictional objection

in

this case would

be to

deny U.S. Bank

rights that were awfully granted

to

U.S.

Bank by

the state court. This would be tantamount to a

reversal which is prohibited by Rooker-Feldn1an.

Even ifRooker-Feldn1an were found

not

to apply to this detennination, the Court still

would find that the Debtor

is

precluded from questioning

U.S.

Bank's standing as a secured

creditor under the doctrine

of

resjudicata. The state court already

has

determined that U.S.

Bank is a secured creditor with standing to foreclose and this Court cannot alter that

detennination in order

to

deny U.S. Bank standing to seek relief from the automatic stay.

The doctrine of

resjudicata

is grounded in the Full Faith

and

Credit Clause of he United

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States Constitution. U.S. Const.

art.

IV.

§

I. It prevents a party from re-litigating any issue

or

defense that

was

decided by a court of co1npetent jurisdiction and which could have been raised

or decided in the prior action.

See Burgos v.

Hopkins 14 F.3d 787, 789 (2d Cir. 1994) (applying

New York preclusion rules); Swiatkowski v. Citibank No. 10-CV-1 4, 2010 WL 3951212, at

*14

(E.O.N.Y. Oct. 7, 2010)(citing

Waldman v. Vill. of

Kiryas Joel 39 F.Supp.2d 370, 377

(S.D.N.Y. 1999)).

Res

judicala applies to judgments that were obtained

by

default, see

Kelleran

v. Andrijevic

825

F.2d 692, 694-95 2d

Cir.

1987), but it

1nay

not apply if the judgment was

obtained

by

extrinsic

fraud

or collusion. "Extrinsic

fraud

involves the patties' 'opportunity

to

have

a

full

and fair hearing,' while intrinsic fraud, on the other hand, involves the 'underlying

issue in the original lawsuit."' In re Ward 423

B.R.

at

29.

The Debtor's assertions that the

MERS

sy.;tem o

assignments may have been fraudulent

is

more appropriately

deen1ed an

intrinsic fraud argu1nent. The Debtor has not alleged any extrinsic fraud in the procurement o

the Judgment

o

Foreclosure which prevented a full and fair hearing before the state court.

As a result. the Court finds that the Judgment o Foreclosure alone is sufficient evidence

o he

Movant's status as a secured creditor and therefore its standing

to

seek relieffroni the

automatic stay.

On

that basis, and because the Movant has established grounds for relief

from

stay

under Section 362(d), the Motion will be granted.

M RS

Because

o

the broad applicability

o

the issues raised in this case the Court believes that

it

s appropriate

to

set forth

its

analysis

on

the issue

o

whether the Movant, absent the Judgment

o Foreclosure, would have standing to bring the instant 1notion. Specifically MERS's role in

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the ownership and transfer of real property

notes

and 1nortgages is at issue in dozens of cases

before this Court. As a result, the Court has deferred ruling

on

1notions for relief

from

stay

where the movants' standing may

be

affected by MERS's participation in the transfer of the real

property notes and mortgages. ln the instant case, the issues were resolved under the

Rooker

Fekhnan doctrine and the application ofresjudicata. Most, i not

all,

of the remainder of the

MERS cases before the Court cannot be resolved on the same basis. For that reason, and

because MERS has intervened in this proceeding arguing that the validity ofM RS assignments

directly affects its business model and will have a significant impact on the national nlortgage

industry, this Court will give a reasoned opinion as to

the

Movant's standing to seek relief

from

the stay and how that standing is affected by the fact that U.S. Bank acquired its rights in the

Mortgage by way of assignment

from

MERS.

Standing to seek relief

roni

tile

auton1atic

stay

The Debtor has challenged the Movant's standing to seek relief from the automatic stay.

Standing is a threshold issue for a court

to

resolve. Section 362(d) states that relieffro1n stay

may be granted (o]n request of a party in interest and after notice and a hearing. 11

U.S.C.

§

362(d). The

term

party

in

interest is not defined

in

the Bankruptcy Code, however the Court

of Appeals

for

the Second Circuit has stated that (g)enerally

the

'real party

in

interest' is the

one

who, under the applicable substantive law, has the legal right which is sought to be enforced

or is the party entitled to bring suit.

See Roslyn Savings Bank v.

Con1coach Jn re Co111coach),

698 F.2d

571,

573

(2d Cir.

1983).

l'he legislative history

of

Section

362

'suggests that,

notwithstanding the use of the term 'party

in

interest'. it is only creditors who 1nay obtain relief

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from the automatic stay.

id. at 573-

74. (citing H.R.

Rep.

No. 95-595, 95th Cong., Ist Sess.

175.

reprinted in 1978 U.S.Code Cong. Ad. News 5787, 6 J 36); see also Greg Restaurant

E quip.

nd

Supplies v. Toar Train P ship (In re Toar Train P ship),

15

B.R. 401 402 (Bankr. D.

Vt.1981) (finding that a judgment creditor

of

the debtor was not a

party

in interest'' because

the

judgment creditor was not itself a direct creditor

of

the bankrupt).

Using the standard established by the Second Circuit, this Court must determine whether

the

Movant

is

the one who under applicable substantive

law

has the legal right'' to enforce the

subject Note and Mortgage, and is therefore a creditor

of

this Debtor.

See

In re Toar, 15 B.R.

at

402;

see also

in re Mims, 438 B.R. 52, 55 (Bankr. S.D.N.Y. 2010). The Bankruptcy Code

defines a ''creditor

as an

entity

that

has a claim against the debtor that arose

at

the tiine <lf or

before the order for relief U S C § I01(10). Claim is defined as the right to

payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed

contingent, tnatured, unmatured, disputed, undisputed, legal. equitable, secured or unsecured

, 11 U.S.C. § 101(5)(A).

In

the context of

a

lift

stay

motion where the movant is seeking

to

commence or continue

with

an

action

to

foreclose

a

n1ortgage against real property, the

n1ovant

must

show that it

is

a ''party in interest by showing that it

is

a creditor with a security interest in

the

subject

real

property. See

Miins,

438

B.R.

at 57 (finding that

as

movant failed to prove

it

owns the Note, it

has

failed to establish

that

it

has standing

to

pursue its state

law

remedies with

regard to the Mortgage

and

Property ).

Cf

Bro1vn

Bctrk I

L.P.

v. Ebersole

(Jn

re Ebersole), 440

B.R.

690, 694 (Bankr. W.D. Va. 2010) (finding that movant seeking relief fron1 stay must prove

that

it

is the holder of he subject

note

in

order

to

establish a

'colorable claim'

which

would

establish standing to

seek relief from stay).

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Note/1older

status

In

the Motion, the Movant asserts

U.S.

Bank's status as the holder

of

he Mortgage.

However in

order

to have

standing

to

seek relieffron1 stay,

Movant.

which acts

as

the

representative of U.S. Bank, must show that

U.S.

Bank holds both the Mortgage

and

the Note.

Mims, 438 B.R. at 56. Although the Motion does not explicitly state

that

U.S. Bank

is

the holder

of he Note, it

is

implicit in the Motion

and

the arguments presented by the Movant at the

bearing. However, the record de1nonstrates that the Movant has produced no evidence,

documentary or otherwise, that U.S. Bank

is

the rightful holder

of

he Note. Movant's reliance

on the fact that U.S. Bank's noteholder status has not been challenged thus far does not alter or

diminish the Movant's burden to show that it is the holder of the-Note as well as the Mortgage.

Under New York law Movant can prove that U.S. Bank is the holder of the Note by

providing the Court with proof

of

a written assign1nent

of

the Note,

or by

deinonstrating that

U.S.

Bank

has

physical possession of the Note endorsed over

to it.

See

eg.

LaSalle Bank

N.A. v.

Lamy

824 N.Y.S.2d

769

2006 WL2251721, at \ (N.Y.

Sup.

Ct.

Aug. 7

2006). The

only

written

assign1nent

presented

to

the Court

is

not

an

assignment of the Note but rather

an

Assignment of Mortgage which contains a vague reference

to

the Note. Tagged

to

the end of

the provisions which purport to assign the Mortgage, there

is

language in the Assignment stating

To Have and to Hold the said Mortgage nd Note, and also the said property until the said

Assignee forever, subject

to

the tenns contained

in

said Mortgage and Note. (Assignment of

Mortgage (emphasis added)). Not only

is

the language vague

and

insufficient

to

prove

an

intent

to

assign the Note, but MERS is not a party to the Note

and

the record is barren of any

representation that

MERS

the

purported assignee had any authority to

take

any action

with

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respect to the Note. Therefore, the Court finds that the Assignment of Mortgage is not sufficient

to establish an effective assignment of the Note.

By MERS s

own account,

it

took no part

in

the assignment

of

he

Note in

this case, but

merely provided a database which allowed its 1ne1nbers to electronically self-report transfers of

the Note. MERS does not confinn that the Note was properly transferred or in fact whether

anyone including agents ofMERS had or have physical possession of the Note. What remains

undisputed is that MERS did not have any rights with respect to the Note and other than

as

described above, MERS played no role

in

the transfer of the Note.

Absent a showing

of

a valid assignment of the Note, Movant can demonstrate that U.S.

Bank is the holder of he Note if it can

show

that U.S.

Bank

has physical possession of the Note

endorsed to its name. See In re Mirn.s 423 B.R. at 56-57. According to the evidence presented

in this matter

the manner

in

which the MERS system is structured provides that, [w]hen the

beneficial interest in a

loan

is sold, the

pro1nissory note

is[] transferred by

an

endorsement and

delivery

from

the buyer to

the

seller [sic], but

MERS

Members are obligated to update the

MERS® System to reflect the change in ownership of the promissory note (MERS

Supplemental Memorandum of

Law

at 6 . However, there is nothing in the record to prove that

the Note in this case was transferred according to the processes described above other than

MERS's representation that its computer database reflects that the Note was transferred to U.S.

Bank. The Court has no evidentiary basis to find that the Note was endorsed to U.S. Bank or

that U.S. Bank has physical possession

of

the Note. Therefore, the Court finds that Movant has

not

satisfied its burden

of

showing that

U.S. Bank,

the

party

on

whose behalf Movant seeks relief


Documents

Pamela Owen. Civil Rights. Declaration of Jody m. Mccormick Filed by Defendants. Document No. 41