1 TOWER BRAND AND

ASSOCIATES, PLLC
2 7047 E. Greenway Parkway, Ste 250
Scottsdale, Arizona 85254
3 VOICE: 602-363-0732
FACSIMILE: 480-383-6050
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Gervais R. Brand, Esq. (#002280)
5 g.r.brand@att.net
Attorney for Debtors/Movants
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UNITED STATES BANKRUPTCY COURT
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DISTRICT OF ARIZONA
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IN RE
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No. 2:09-bk-18255
10 Stephen Lynn Wortman and Kathy Lynn
Wortman
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Chapter 13
12 Debtors,
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14 Stephen Lynn Wortman and Kathy Lynn ADVERSARIAL PROCEEDING

Wortman
15 No. 2:09-ap-00942
16 Movants, MOTION FOR SUMMARY
JUDGMENT OR, IN THE
17 vs. ALTERNATIVE, PRE-TRIAL
MEMORANDUM OF FACTS AND
18 U.S. Bank National Association, Trustee, One LAW
19 Home Compas, Mac ID#X2302-04C; John
Does I-III and Black Corporations I-III and
20 XYZ Partnerships,

21 Respondents.

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23 Movant/Debtors request this Court to grant them summary judgment for the reason that

24 based upon the documentary evidence before the Court by Pre-Trial Statement and otherwise

25 there are no material contested issues of fact and Debtors are entitle to Judgment as a matter of

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 law that Repondent U.S. Bank , N.A., Trustee, One Home Compas, MAC ID#X2302-04C is
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not the real party in interest with standing, and therefore Respondents are not entitled to make
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the secured claim submitted in this cause nor are they entitled to relief l ifting the bankruptcy
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automatic stay. Furthermore, Respondents have had due process notice and the secured claim
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5 that Respondents assert should be denied for the 3 rd time in this matter and Debtors are entitled

6 to an order pursuant to Section 506(d) of the Bankruptcy Code declaring void the lien upon

7 Debtors‟ property.

8 History of this Proceeding. Debtors filed their Bankruptcy Petition on August 2, 2009.

9 On August 17, 2009, Debtors filed their adversarial proceeding later amended on February 10,

10 2010. U.S. Bank, N.A. Trustee, filed its first secured claim of and concerning the lien now
11 before this Court. It amended that claim before any action was taken by Debtors. Debtors
12 objected to that Amended Claim by Objections dated October 10. 2009, and amended their
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Objections on that same date. On November 2, 2009 the Debtors Amended Objections were
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sustained by order of this Court.
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On November 18, 2009, U.S. Bank, N.A., Trustee, filed a new but identical claim
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without taking any action regarding the order sustaining the original objections. Debtors then
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objected to this second Claim on December 16, 2009, and those objections were similarly
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sustained by order of this Court on February 18, 2010. In the meantime Claimant U.S. Bank,
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N.A., Trustee, filed a Motion for Relief From Stay on December 2, 2009. Debtors objected to
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the Motion for Relief on December 8, 2009, and then amended their Adversarial Complaint
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22 previously filed on February 10, 2009. And in the Amended Complaint Debtors alleged that

23 the Trustee/Claimant was not the real party in interest with standing to make the claim

24 described in their Motion. Claimant filed its Answer to the Complaint and the issues were

25 joined.

26 For over one year the parties have been engaged in attempts to reach a mutually

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 acceptable resolution of the Claimant‟s Motion and Debtors‟ Adversary Complaint. Initially
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the Trustee submitted documents necessary for a modification much like what the Debtors had
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submitted long before they even filed bankruptcy. Still the Debtors cooperate an d completed
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the documents and were denied the modification. Discovery in preparation for a trial date set
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5 in the Fall of 2010 was submitted by Debtors to U.S. Bank, N.A., Trustee and only partially

6 returned but the documents returned included the Pooling Service Agreement (PSA) attached

7 hereto as Exhibit A. It is that PSA which is effectively a New York Trust Agreement to which

8 Debtors will refer for the balance of this Motion. Exhibits B and C are copies of the

9 promissory note and deed of trust which were originally signed by the Debtors and were

10 attached to the Claims of U.S. Bank, N.A., Trustee, in 2009.

11 Again it appeared that the parties may have had a legitimate potential of settlement in
12 October 2010 but there was a question of value of the real property so a new appraisal was
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ordered and then reordered by a new appraiser. It was returned with a value of $180,000. And
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Debtors made an offer at that price in a good faith attempt to resolve the conflict. After two
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months of waiting for a response from Claimant in April 2011 Claimant neither accepted nor
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rejected the offer of settlement but instead presented yet another set of documents to determine
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if Debtors were qualified for a government sponsored modification. Debtors have repeatedly
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informed Claimant that they do not seek a modification as would borrowers recently
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beginning this process but rather they wanted a response to their legitimate offer of settlement.
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Claimants have refused to say anything and this is where we are today
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22 Debtors submit that the PSA provided by U.S. Bank, N.A., Trustee, and the note

23 (Exhibit B) and deed of trust (Exhibit C) demonstrate that there is no need for any presentation

24 of further evidence and Debtors are entitled to Judgment as a matter of law. The note and deed

25 of trust were never transferred and/or funded as a part of the ONE HOME COMPAS, MAC

26 ID#X 2302-04C Trust and therefore U.S. Bank, N.A., trustee never became the real party in

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 interest and never had standing to make claim herein or seek relief from a stay.
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Standing of a Trustee in a Secured Trust. The preliminary statement of the Pooling
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Agreement dated February 1, 2006, states at the outset that the Residential Assets Securities
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Corporation, is the Depositor under the Agreement, which has special significance in the
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5 application of the law to the facts as will be explained herein. This Depositor is the seller that

6 intends to sell mortgaged backed certificates to investors according to the statement.

7 In the fall of 2010 Congress became concerned with multiplying irregularities in the

8 real estate lending industry with serious implications to the U.S. economy. These irregularities

9 were not limited to the “robo signers” and fraudulent irregularities so often exposed in the

10 press, but also included documentation irregularities from title defects to serious consequencial
11 errors causing mortgages to be unenforceable. Hearings were conducted and evidence
12 presented resulting in a published definitive report entitled Congressional Oversight Panel
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November Oversight Report dated November 16, 2010. A copy thereof is attached to this
14
Motion as Exhibit D. This Report as well as the written testimony of Professor Adam J.
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Levitan, Associate Professor of Law, Georgetown University Law Center, Washington D.C.,
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given on November 18, 2010, before the House Financial Services Committee Subcommittee
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on Housing and Community Opportunity, a copy of which is also attached hereto as Exhibit E,
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describe the “securitization” process which is described in the Pooling Agreement attached as
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Exhibit A.
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At page 4 of his testimony Professor Levitan described “Securitization” as a financing
21

22 method involving the issuance of securities against a dedicated cashflow such as mortgage

23 payments. Securitization thus links the consume borrower with capital market financing. This

24 is precisely what the Pooling Agreement (Exhibit A) describes as the process undertaken by

25 Residential Assets Securities Corporation. Specifically he states,

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 “First, a financial institution (the „sponsor‟ or „seller‟) assembles a pool of mortgage
1 loans. The loans were either made („originated‟) by an affiliate of a financial institution or
purchased from unaffiliated third-party originators. Second, the pool of loans is sold by the
2 sponsor to a special purpose subsidiary (the „Depositor‟) that has no other assets or liabilities.
This is done to segregate the loans from the sponsor‟s assets and liabilities. Third, the
3 Depositor sells the loans to a passive, specially created, single-purpose vehicle (SPV),
typically a Trust in the case of residential mortgages. The SPV issues certificated securities to
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raise the funds to pay the Depositor for the loans.”
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Again, this is precisely what has occurred in the instant case including use of the
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“Depositor” to describe Residential Assets Securities Corporation, and although Residential
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Funding Corporation is described as the “Master Servicer”, the definitions describe it as the
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seller of the mortgage loans to the “Depositor”. This is what the “Sponsor” in Professor
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Levitan‟s description does. It would thus appear that Residential Funding Corporation
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occupies a dual role as “servicer” and “sponsor” in this case. These similarities are no
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surprise because most of the many Pooling Agreements are similar or even identical , all
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established as is this one in the State of New York.
13

14 We therefore have in this case the stereotypical securitization process described

15 before Congress and otherwise.

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Given that there was this securitization process in this case, it is not only expected that
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the Trustee of the trust agreement (the PSA) is the party coming before this Court as has U.S.
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Bank, N.A., Trustee, but even more important for our inquiry, the Trustee is the real party in
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interest, the party with standing, and therefore the party required to make claim with this Court.
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See LaSalle Bank, N.A., as Trustee for Certificate Holders of Asset Securitization Corporate
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22 Commercial Mortgage Pass-Through Certificates, Series 1997-D5 v. Nomura Asset Capital

23 0 F.Supp.2d 465 (S.D.New York (2001); LaSalle Bank, N.A., v. LEHMAN BROTHERS

24 HOLDINGS, INC 237 F.Supp.2d 618 (D Maryland 2002); In Re Hwang, 396 B.R. 757(Cal. 2008);

25 In Re Hwang, 438 B.R.661(CD Cal 2010); In Re Robin Hayes, 393 B.R.. 259 (Mass. 2008).

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 1 As stated above, most if not all, of the Pooling Service Agreements (PSA)

2 originate and are to be construed according to the laws of the State of New York.
This is important because in the State of New York a transfer of assets into a trust
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requires actual delivery of the transferred assets in a manner such that no one else
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could possibly claim ownership. In Vincent v. Putnam, 248 N.Y. 76, 83(N.Y. 1928)
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it was said that to vest the donee with the control and dominion over the property
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and to divest the donor of his dominion and control, and the delivery must be made
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with the intent to vest the title of the property with the donee. This avoids fraudulent
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transfer issues. Mere words cannot accomplish a delivery and equity can never be
9 used to help out and accomplish an incomplete delivery. The delivery must be
10 accomplished in the most perfect manner possible. In Re Van Alstyne, 207 N.Y.
11 298, 309 (N.Y. 1913). Professor Levitan questions whether under New York Law a
12 blank endorsement of a note can accomplish such a transfer to a trust because a

13 blank endorsement turns a note into bearer paper to which others can lay claim.

14 Turning to the specific terms of the PSA in this case regarding how assets can
be transferred into the Trust (it should be noted that assets are by the terms all
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mortgage loans), Paragraph 2.01 (b)(i) provides that the original mortgage note
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should be endorsed without recourse to the order of the Trustee and showing an
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unbroken chain of endorsements from the originator to the person endorsing it to the
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Trustee. That person according to the terms of 2.01(a) is the Depositor. Most
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importantly paragraph 11.04 provides that the Agreement and the certificates issued
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shall be construed according to the laws of the State of New York.
21 Under New York law, a trustee's powers are defined in the trust instrument,
22 Colorado & Southern Ry. Co. v. Blair, 214 N.Y. 497, 511-12, 108 N.E. 840 (1915).
23 New York trust law requires strict compliance with the trust documents; any
24 transaction by the trust that is in contravention of the trust documents is void,

25 meaning that the transfer cannot actually take place as a matter of law. Therefore, if

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 1 the transfer of the notes and mortgages did not comply with the PSA, the transfer

2 would be void, and the assets would not have been transferred to the trust.
Furthermore, it is not arbitrary that the “Depositor” would be the person
3
designated by the Trust, particularly where REMIC Trusts which have strict rules to
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avoid double taxation are involved, to accomplish the transfer to the Trust. The
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“Depositor” is required to be the person who transfers the note to the Trustee
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because the “Depositor” is a wholly owned subsidiary of the “Sponsor” (which may
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explain the similarities in name often encountered) with only the assets in it that are
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of and concerning the securitization process. Thus it is not burdened with any of the
9 risks or causes of action of generally doing business that could be present if the
10 “Sponsor” were the ultimate transferring party to the Trust. It would not present the
11 risks to the investors of the problem of “putback” where transfers have failed which
12 is fraught with danger because of the timeline which probably has been violated and

13 endangers the tax aspects of the REMIC Trust so important to the securitization

14 process itself.
Professor Levitan explains at page 19 of his testimony that the chain of
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transfer of often the note and the mortgage is not just an attempt by Wall Street to
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confuse and overly complicate matters. The chain of transfer from the “Sponsor”, to
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the “Depositor”, to the “Trustee” is a necessary transition to ensure that the loan is
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“bankruptcy remote” once placed in the Trust meaning that if any upstream
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transferors were to file bankruptcy the bankruptcy estate could not lay claim to the
20
loan by claiming that the transfer was not a true sale but rather a secured loan. This
21 bankruptcy remoteness is an essential element of the process because the investors
22 do not want to assume the risk of the credit of the originators and the sponsoring
23 entities but only the mortgages themselves. Absent the remoteness the economics of
24 the securitization do not work.

25 This then leads us to the actual transfer in question. Here the endorsement as

26 it appears on the copy of the promissory note is from Residential Funding

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 1 Corporation not the Residential Asset Securities Corporation. Therefore the

2 transfer was from the “Sponsor” not from the “Depositor” and the chain of transfer
so important to the process was broken destroying the bankruptcy remoteness. More
3
importantly for our discussion, the transfer is void because it is contrary to the
4
express terms of the PSA, the trust agreement applicable and essential to the
5
transaction before the Court. If the transaction transfer is void then the Trust did not
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ever take title to the loan note asset and it has not standing necessary for success of
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the Motion to Lift the Stay nor is it a party in interest at all.
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The Court should note that in the case of In Re Robin Hayes, supra, there
9 was a similar confusion of names and the wrong person attempted conveyance to the
10 Trustee. It was found that there was not the standing as would otherwise be
11 necessary to avoid error.
12 In addition the Claimant has not established that it submitted an unbroken

13 chain of endorsements from the originator to the Trust as required pursuant to that

14 same paragraph 2.01(a)(i).

Debtors submit that in the matter before the Court there is no testimony which
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can remedy this infirmity to give the claimant standing and its Motion to Lift the
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Stay fails as a matter of law. Debtors have challenged the claim three times and in
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this case by adversarial proceeding which gave the claimant and all of those
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affiliated in its claim of title due process notice. Debtors are therefore entitled to
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their remedy pursuant to Section 506(d) of the Bankruptcy Code and the lien which
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has been the subject of all of the proceedings should be declared void and those in
21 the chain of transfer ordered to join in the execution of a Release of Lien to assure
22 proper title for Debtors and all of those taking subject to Debtors.
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24 RESPECTFULLY SUBMITTED this 4th day of May, 2011.

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 TOWER BRAND AND ASSOCIATES,
1 PLLC
2
/s/ Gervais R. Brand
3 Gervais R. Brand, Esq.
4
Copy of the foregoing emailed 4th day
5 Of May, 2011 to:
6 Tiffany & Bosco, P.A.
Leonard J. McDonald
7 hsnelson@tblaw.com
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By /s/ Gervais R. Brand
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