BY BRIAN KORTE AND SCOTT WORTMAN
Page: 1
IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT
IN AND FOR BROWARD COUNTY, FLORIDA
CASE NO.: CA CE 10021953
U.S. BANK NATIONAL ASSOCIATION, AS
TRUSTEE FOR THE REGISTERED HOLDERS
OF MLCFC COMMERCIAL MORTGAGE TRUST
2006-I, COMMERCIAL MORTGAGE PASSTHROUGH
CERTIFICATES, SERIES 2006-I,
Plaintiff(s),
vs.
TIDEWATER ESTATES CO-OP, INC.,
A FLORIDA NOT-FOR-PROFIT CORPORATION
AND ALL OTHER UNKNOWN PARTIES, INCLUDING
CLAIMANTS, PERSONS OR PARTIES, NATURAL
OR CORPORATE, OR WHOSE LEGAL STATUS IS
UNKNOWN, CLAIMING UNDER ANY OF THE ABOVE
NAMED DEFENDANTS,
Defendant(s).
_________________________________________/
--COURT
PROCEEDINGS HELD BEFORE
THE HONORABLE MICHELE TOWBIN-SINGER
--
Monday, April 25, 2001
10:50 a.m. - 2:25 p.m.
Broward County Courthouse
201 S.E. 6th Street
Room 775
Fort Lauderdale, Florida 33301
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APPEARANCES:
ON BEHALF OF THE PLAINTIFFS:
LORI L. HEYER-BEDNAR, ESQUIRE
ROETZEL & ANDRESS
350 East Las Olas Boulevard
Suite 1150
Fort Lauderdale, Florida 33301
ON BEHALF OF THE DEFENDANTS:
BRIAN KORTE, ESQUIRE
-andSCOTT
J. WORTMAN, ESQUIRE
KORTE & WORTMAN, P.A.
2101 Vista Parkway
West Palm Beach, Florida 33411
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--P
R O C E E D I N G S
THE COURT: I'm sorry I'm late. My motion
calendar took a little longer.
MS. HEYER: We understand. We've been on
the other side of that.
THE COURT: Thanks. Appreciate it. And
for those of you in the audience who aren't
familiar with motion calendar. Every morning I
have what is called motion calendar and I don't
think I have a limit. I could have up to 40
cases starting at 8:45. I hope to finish at
10, but sometimes it takes a little longer. So
I apologize to keep you waiting.
All right. Can the parties announce their
names for the record.
MS. HEYER: Lori Heyer on behalf of
Plaintiff, U.S. Bank as Trustee.
MR. KORTE: Brian Korte on behalf of the
Defendants, Tidewater Estates.
MR. WORTMAN: Scott Wortman on behalf of
Tidewater Estates.
THE COURT: You can proceed.
MS. HEYER: Sure, Your Honor. We'd like
to go ahead and start with Plaintiffs' motion
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for summary judgment.
THE COURT: All right.
MS. HEYER: Your Honor, we forwarded over
to the Court a binder back on April 14th.
Hopefully you've got it with all the other
binders you have.
THE COURT: I do, yes. And I've read
everything in there. All the cases and
everything.
MS. HEYER: Terrific. Thank you, Your
Honor.
I'm here today along with Steve Reynolds,
a representative of U.S. Bank as Trustee. This
case has been pending, Your Honor, for over a
year and it's been in default for over a year.
And at this juncture, Plaintiff thinks that the
case is ripe for summary judgment because
there's no issue of material fact. In fact,
that happens to be admitted by Defendants,
because Defendants are also seeking summary
judgment today as well. So really what we have
here is an issue of law and applying the law to
the facts as they are before the Court. Who
should be victorious in summary judgment?
If you look at the promissory note and
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mortgage, it's undisputed it's executed by
Tidewater Estates. And if you look to the
governing language of the promissory note and
the mortgage, both of them clearly provide that
the note shall be governed, construed, applied
and enforced in accordance with the laws of the
state where the property is located. It's
undisputed the property is located in Deerfield
Beach, Florida in this county.
Why is that important? That's important
because Florida law, the transfer of promissory
notes, the enforcement of mortgages is going to
come down to an interpretation of Florida law.
The loan was transferred after it was
originated into a trust. That's just a matter
of fact. It's not relevant for purposes of
enforcement. It's just a background fact.
U.S. Bank is a trustee for that trust here
enforcing that note. From the time that the
loan got transferred into the trust in March of
2006, payments were paid by Tidewater Estates
to the servicer up until 2009, when they
stopped making payments. That's when they
stopped making principal and interest payments.
They made a few interest payments thereafter,
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but then went into default again and stopped
making any payments whatsoever.
The payment stream is actually attached to
Plaintiffs' affidavit in support of its motion
for summary judgment. No one else has been
collecting rents -- excuse me -- collecting
mortgage payments on this particular loan. Why
is that important? Because obviously on behalf
of the trust, the servicer is acting in
collection of the rents, and then the special
servicer is here to enforce the documents.
There's been no one else who has held the note,
has held the mortgage. From the day it was
originated until today, we can actually track
where that loan has been and why it is actually
here today. In fact, we have possession of the
original. We've had possession of the original
at every hearing before this Court.
Has there been a default? Yes. Is that
disputed? Absolutely not. Has there been a
demand? Absolutely. Is that disputed?
Absolutely not. So really the whole crux of
the case comes down to who is the owner and
holder and how do we enforce the documents?
The owner and holder is U.S. Bank as Trustee.
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Why do we know that? Well, first we have an
endorsement on the allonge in which the loan
was actually transferred to the trust to
LaSalle as Trustee. Is there an endorsement
from LaSalle Bank as Trustee to U.S. Bank as
Trustee? No. Is that necessary? No. Because
the operating fact is that it went into the
trust. After that, LaSalle stepped down as
trustee and U.S. Bank became the successor
trustee. How do we know that? Well, it's in
the pooling and servicing agreement. It's also
in the instruments appointing the trustee. Not
only as LaSalle resignation, but also the
appointment of U.S. Bank as Trustee. Those are
also attached to the affidavit filed in support
of Plaintiffs' motion for summary judgment.
Is that the only thing the Court needs to
look to in this case? No. Because in fact
there's a lot of consistency here. We have a
verified complaint. We have a verified motion
for sequestration of rents. And then we have
the affidavit in support of Plaintiffs' motion
for summary judgment. In addition, we also
have amended answers to interrogatories. And
in the amended answers to interrogatories, it
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restates the exact same facts that I just laid
out; that there was a trust. It was put into
the trust. The loan has been in the trust ever
since 2006. Has there been a change in
trustees? Yes. Is Midland the special
servicer entitled to enforce? Yes. That's
undisputed. Defendants don't dispute that at
all. In fact, under the pooling and servicing
agreement, and the limited power of attorney
attached to the amended answers to
interrogatories, they're here before the Court
with the rights to enforce the loan. Do they
have to necessarily be the owner? No. U.S.
Bank as Trustee is the owner. Midland is here
entitled to enforce the documents on behalf of
U.S. Bank.
Now not only do we have endorsement. We
also have possession. We currently possess and
have to present to the Court the original
promissory note, the original allonge, and the
original mortgage. We also happen to have the
original loan agreement and all the related
documents thereto. But of importance is the
original note. We have a transfer. It got
transferred into the trust. We have the
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allonge that shows that. We also have an
assignment. If you look to the assignments
that were attached to the verified motion -excuse
me -- to the verified complaint, you'll
see where the loan actually got tracked from
its originator to the first trustee. And then
you have an assignment of the note and mortgage
from LaSalle Bank to U.S. Bank. And on top of
all that, we have an affidavit that states that
the owner and holder of the note is U.S. Bank
as Trustee.
Now in my opinion that's overkill under
Florida law. Because Florida law is very
clear. You do not need to have all of those
things to be the owner and holder. Any one of
those items, any evidence of intent to transfer
the loan is sufficient under Florida law. You
can have proof of the purchase, you can have an
assignment of the mortgage, or you can have an
endorsement. In fact, in this case we have
them all.
One of the important cases, Your Honor,
that happens to be one of the most recent cases
we cite to in our papers is Taylor versus
Deutsche Bank, which is tab L in the binder.
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That's a Fifth DCA case. And it interprets the
Uniform Commercial Code. Ironically in that
case the defendants asserted the exact same
defense that they assert here, lack of
standing. Court grants a summary judgment in
favor of the lender. And the court looked to
the code. It looked to 673.3011 of Florida
Statutes, which defines who a holder is. Who
is entitled to come before this Court and
enforce the documents. In that case there
wasn't an endorsement to the note. There
wasn't an allonge. And there wasn't a specific
assignment. But the lender was still entitled
to come forward before the Court and enforce
the documents.
Any evidence of a valid assignment, proof
of purchase or evidence of an effective
transfer is all that's required. Any indicia
of transfer, any indicia of intent is
sufficient. In fact, if you look to 673.3011,
it gives rights to a holder of a note and a
non-holder of a note. With or without
possession, they can come before this Court.
Now one of the defense asserted in the
answers in affirmative defenses by Tidewater is
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that the assignment has got an unusual date.
It's actually dated from LaSalle to U.S. Bank
after the effective date of the transfer.
Well, that's completely unholy irrelevant
because we look to the indicia of transfer. If
the assignment is evidencing a prior transfer,
it's sufficient.
How do we know that? We look to WM
Specialty Mortgage versus Salomon, which is a
4th DCA case, 2004. In that case, the written
assignment was executed after the transfer and
it was found to be sufficient. Because it's
merely evidencing the prior transfer.
Interestingly enough, WM Specialty
Mortgage cites to a Supreme Court of Florida
case, Johns versus Gillian, 1938. Predates all
of us. In that case the court held that a
written assignment of mortgage was absolutely
not required. Intent to pass title, some
evidence of intent is absolutely sufficient
under the law to transfer the note and mortgage
to the holder.
What's interesting in this case is the
Defense cites to York Construction and New York
trust law. They'd like this Court to
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completely ignore the Uniform Commercial Code
and completely ignore Florida law, and go to a
completely different jurisdiction.
Unfortunately, we're here looking to enforce
documents that are controlled by Florida law.
The borrower, Tidewater Estates, was not a
party to the pooling and servicing agreement,
not a party to the trust. The trust documents
are not before this Court for enforcement; the
loan documents are.
This case is not a case of first
impression. Defense would like you to think
that that's the case. However, we have found
supplemental authority that we have filed with
the Court and provided to counsel in U.S. -excuse
me -- in Deutsche Bank versus Castillo,
Case No. 2009-88614-CA-21 down in the 11th
Circuit. If I may approach, Your Honor.
THE COURT: Yes.
MS. HEYER: I hate to burden the Court
with more paper.
THE COURT: Thank you.
MS. HEYER: Why is this case instructive?
In this case, the borrower asserted the exact
same argument that's being asserted here. The
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Defense wanted the Court to look to New York
law. They cited to York construction as a
authority for that proposition. The borrower
also moved for summary judgment the same time
as the plaintiff. Starting to sound familiar.
However, the court in the 11th Circuit, Judge
Thomas, granted summary judgment for the
plaintiff finding Deutsche Bank the holder and
owner of the loan documents, and interpreted
the documents under Florida law and completely
ignored New York law as completely irrelevant.
What I provided to the Court, since the
orders are merely orders granting or denying
the summary judgment, I have provided a copy of
the transcript from that court hearing in which
York Construction was argued strenuously by
defense counsel and New York law as well.
Interestingly enough, defense counsel in
its papers in this action besides trying to
cite New York law, actually try to go into a
little bit of Florida law. And the cases cited
by Tidewater actually support Plaintiffs'
position. In fact, Lizio versus McCullom,
which is a Fourth DCA case, and Judge Eade was
the judge, presiding judge in the lower court
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found that assignee was a holder. Possession
of the originals was sufficient.
Additionally, Tidewater also cites to
Servedio, S-e-r-v-e-d-i-o, versus U.S. Bank.
Another Fourth DCA case. And the court
reaffirmed the requirements to enforce a note
and mortgage. You can have an endorsement or
an assignment or an affidavit of ownership.
And in that case, the plaintiffs submitted
evidence of assignment -- excuse me -- can
submit evidence of an assignment from the payee
to the plaintiff or an affidavit of ownership
to prove its status as holder of the note. And
in fact we have done both of those in this
case.
There is no evidence supplied by any
counter affidavits, any deposition testimony to
show that U.S. Bank is not the owner. There's
no one that's come forward to say it never got
transferred or to say, by the way, I'm holding
the note, not U.S. Bank.
One of the last cases cited by the Defense
that actually addresses Florida law is Riggs
versus Aurora. That supports Plaintiffs'
position. That's also a Fourth DCA case. And
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Judge Lynch was affirmed on appeal. In that
case, possession of the original, albeit the
note was endorsed in blank, established lawful
holder of a note and summary judgment was
affirmed by the Fourth DCA.
One of the last defenses asserted by
Tidewater is that U.S. Bank has to be a holder
in due course. Well, that's really not
relevant. It's legally immaterial in this case
whether U.S. Bank is a holder or a holder in
due course. A holder can enforce just like I
mentioned previously under 673.3011 under the
code. You can be a holder, a non-holder or a
possessor and enforce the note under certain
circumstances. A holder in due course is only
the special term given to a particular holder
to defeat certain personal defenses.
Even if that was the case, and we're not
saying that we're not a holder in due course,
we just don't think that it's relevant because
there's no personal defenses asserted in this
case. The only issue that's been raised is
whether we're a holder. So it doesn't really
make a difference. It doesn't really make a
difference what type of holder that we are,
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just that we're a holder able to come forward
before this Court and enforce the note is
sufficient.
And in fact one of the cases cited by
Defense for the proposition of a holder in due
course, and that we're not a holder in due
course, and therefore cannot enforce actually
goes on to say that a holder of a note is
entitled to summary judgment. You didn't have
to necessarily be a holder in due course.
Now what evidence does the Court have
before it that U.S. Bank is not the holder?
Well, there aren't any deposition transcripts.
There's no factual witness whose come forward
in an affidavit to say, I'm the holder. U.S.
Bank is not the holder. The only thing that
they have filed with the Court is an affidavit
of an expert, which we received with their
cross motion for summary judgment late
Wednesday of last week. Our office and the
courts were closed on Friday. But I have
prepared and filed with the Court this morning
and have provided to opposing counsel
Plaintiffs' motion to exclude the expert report
and his opinions. Not only is it hearsay, the
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bigger issue and the bigger problem in this
case is the report only contains legal
conclusions. If I may approach, Your Honor.
THE COURT: Yes. Thank you.
MS. HEYER: We think that this Court
should not look to the expert report filed by
Tidewater. In fact, the expert is not an
attorney. Yet he's opining on New York law.
And he's also opining that the documents here
violate New York law. Well, that really isn't
an expert's realm of expertise for this case.
The legal conclusions to draw from the
documentation in this case rests with the
Court. And we've cited to two decisions, Your
Honor, two cases that when an expert's
testimony is to determine the terms and meaning
of documentation, that expert testimony is
completely and wholly inappropriate and
reversible error.
It should not be admissible for a person
to come before this Court and opine that a
document is null and void as a matter of law;
that it is in violation and null and void under
New York law. There are five opinions
rendered. Each of them deals with legal
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conclusions and should be inadmissible for
purposes of this proceeding.
That is the only thing that has been filed
in opposition. There have been no other
affidavits or anything like that filed.
Granted we have had deposition transcripts
filed. Which, Your Honor, can see if you look
at the papers filed by Tidewater, nothing in
those papers shows to anyone other than U.S.
Bank as the owner and holder of the documents.
No one has -- we've taken discovery in this
case. There's been no correspondence, no
affidavits, no assertions whatsoever of any
third party who has made claim to these
documents.
So what does the Court have before it? It
has an endorsement. It has an assignment. It
has an affidavit of ownership. And more
importantly and most importantly, we have the
original note and mortgage. And on that basis,
it should be sufficient for this Court for
purposes of the issue, the main issue, which is
who is the owner and holder of the documents.
THE COURT: Thank you.
MR. KORTE: Good morning, Your Honor.
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THE COURT: Good morning.
MR. KORTE: Your Honor, I'm going to start
with the last argument that counsel made and
start with that while it's fresh in our mind.
They have the original note and mortgage.
That's terrific, but the Court doesn't. Under
Booker v. Sarasota, the Court is required to
have possession of that document 20 days in
advance of a motion for summary judgment. It's
a fatal error not to have filed the note and
mortgage. With such, they cannot prove or
prevail on a summary judgment in a foreclosure
action. That's basically the simplest argument
the Court can follow.
Beyond that argument, Your Honor, it's
very straight forward. The note is not made
out to the Plaintiff in this case. We've had
lots of discussions whether or not -- we've got
these transfers back and forth between a trust.
As counsel has pointed out, the trust is not an
issue. It's a sideline. It's not at evidence
today. Then they have no authority to be here,
Your Honor. The note is made out to Merrill
Lynch Mortgage Lending with a very questionable
allonge sending it to LaSalle. They are not
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the proper party. Unless they can prove the
entire chain to get them here, they're not the
proper party to be before the Court.
Now they want to gloss over the pooling
and servicing agreement and the assignments
that are there, and all the misdeeds contained
therein, but they need to get that point.
They're putting the burden on the Defendants by
saying, we have possession of the note and
mortgage. We get to foreclose.
Clearly UCC would be at play if this was a
negotiable instrument. But it has a specific
endorsement. It's no longer a negotiable
instrument and it falls outside of the UCC. If
it's endorsed in blank, negotiable instrument.
Specifically endorsed, not UCC. Riggs. I'll
call it Riggs II, because Riggs I came down and
said the theory was that an endorsement in
blank with nothing more would be insufficient.
The Fourth said, no, no, no. We're going to
allow Riggs II to stand and say endorsements in
blank, possession will get you there. But
that's not the case here. They may or may not
have possession, because they've not filed the
note. But they don't have an endorsement in
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blank. So Riggs fails for them.
But let's go back and start where they
started. They're saying that it was
transferred into a trust. Well, although
that's the claim, Your Honor, we've had some
testimony that it was or was not transferred
into a trust. If they want to now argue that
the document was transferred into a trust, they
need to prove it was done correctly. And they
then take the Court on a wild goose chase in
saying, New York law doesn't apply, because
it's only Florida law under the note and
mortgage. That's true. Under the note and
mortgage Florida law applies. But New York law
applies to the trust itself. And the Court has
to interpret New York law, because the trust is
governed thereafter. And it says, any action
that the trust takes that's in direct conflict
with the trust provisions are void. We laid
that out in our memo very clearly for the
Court. I'm hoping the Court has had an
opportunity to read it. And that is really a
problem for them, because they created this
trust on March, 2006. We had a closing date of
March 30th, 2006. The closing date is
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significant under the trust documents because
if they didn't get the documents in within that
period of time, the trust would fail to be able
to accept those documents.
There is discussion between Mr. Rogers who
created the assignment for Mortgage Lending,
Merrill Lynch Mortgage Lending, and he created
the endorsements in blank on the back of the
allonge and then later had them stamped to
LaSalle, as to what the date was that he
actually signed the documents. Counsel argues
that it's an indicia of intent to transfer
that's required here. Under Taylor v. Deutsche
and WM Specialty, which we rely on heavily,
absolutely it is that intent to transfer that
becomes important. There is no intent to
transfer at the time that the endorsements are
made to the allonge. They don't know who it's
going to, where it's going to, but they know
that it's not going to be endorsed in blank.
He doesn't even have possession of the note in
which to affix the allonge. There can be no
intent to transfer from Merrill Lynch Mortgage
Lending to any party when you don't have
possession of the note in which to do it, and
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you're endorsing allonges to be affixed there
after. At some point in time thereafter.
But it comes up to that same argument,
Judge, and it kind of ties right back into the
March 30th date. On March 30th, if they didn't
have possession of that note and mortgage
endorsed specifically to LaSalle, their trust
will fail. If their trust fails, they are not
permitted to accept it. Which means the
trustee would over step its authority to do so.
These arguments have been made in other courts
and are currently up on appeal throughout the
state, but not like this. In this case we have
a specific endorsement to a specific party who
is not the Plaintiff in this case.
Counsel argued that they can track the
note and mortgage from its inception to today.
That's simply not true. We've asked over and
over in depositions filed with this Court, when
was the note transferred from Merrill Lynch
Mortgage Lending to LaSalle. No one can give a
date. In fact, what they do is they tell you
that the mortgage was transferred pursuant to a
loan purchase agreement between Merrill Lynch
Mortgage Lending and Merrill Lynch Investors
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some time after the making in September of
2005. Well, that's great, but no one can
pinpoint the date when the notes actually
physically transfer or when any monies actually
change hands to pay for them. According to the
trust documents, only the depositor can make
the deposit into the trust. Simply didn't
happen here.
In fact, we've got testimony from all the
parties that there's a direct A to Z transfer.
From Merrill Lynch Mortgage, the first party,
into LaSalle directly avoiding the depositor.
A direct violation of their own pooling and
servicing agreement. It continues, Your Honor.
Did the parties over step their authority
thereafter to get here today? Comes down to
the assignments of mortgages. The assignments
of mortgages become critical to the Court's
consideration as to whether or not they have
the authority to make any type of a mortgage
foreclosure. And I need to stop and discuss
the two different parts. We have the note,
which is the debt itself, and we've got the
mortgage, which is the right to foreclose.
Even if the Court were to find the debt to be
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enforceable, it still also has to find that the
mortgage is in the possession of the Plaintiff,
and that's clearly not the case.
As we pointed out in our brief over and
over again, and the documents clearly lay out,
there is a transfer of the mortgage to LaSalle
at some point in time into the trust. Then
there is a subsequent transfer of the mortgage
to U.S. Bank. The problem is that the
subsequent transfer from LaSalle to U.S. Bank
occurs after LaSalle has been terminated as the
trustee of the trust. Had no authority to make
that assignment. So those subsequent
assignment are ineffectual. They can't send
out more rights than it has, which are zero.
So counsel argued that, well, it's in the
trust and we're going to make hay with the
assignments is true. Whether it made it into
the trust or not, the trustee had no authority
to make the assignment for which they're
traveling under today. In fact, it would be
Wells Fargo who became the interim trustee who
would have had to make that discussion and that
decision to make those transfers. Counsel
didn't even mention the words Wells Fargo
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during her entire argument because she knows
she fails on those points.
And In response to Plaintiffs most
critical point is possession of the note and
assignment are all that's required. Possession
of the note if endorsed in blank may give them
the right to enforce it along with the mortgage
and the assignments thereafter. But, in this
case, especially in this case, the note that
they purport to have has an unaffixed allonge
to it. The document is multi-page for the
actual note and mortgage, and then we've got an
allonge that comes thereafter. Possession of
an allonge that was never affixed to a note and
is simply paper-clipped to it does not create
the intent to transfer they're required to
have. In fact, all it does create is a mess of
paperwork.
Now I don't know if the Court wants us to
take up on a separate matter our motion for
summary judgment or take it up now?
THE COURT: You could do it now, because I
think they're obviously related.
MR. KORTE: Well, then let's go back to
the argument which is raised at page 100 of
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Mr. Reynolds' deposition. He's asked at line
five, page 100, "What information would be
contained in the allonge at the time of your
signature?" And clearly he would have no way
of knowing what was contained in this. All he
can tell you is that the allonge was some time
signed by some lawyer in a different room to
LaSalle. And he would have signed it some time
around September the 9th, 2005.
Well, that's important. Because how could
Mr. Reynolds have had the specific intent to
assign a mortgage or note that he didn't have
in his possession, that he didn't know who it
was going to, and it wasn't dated? He cannot
have that intent. And in fact he is the person
who would have started the ball rolling.
Merrill Lynch Mortgage Investors -- Mortgage
Lenders would have had to be the person who
starts the first assignment. And he's the
person put forward by Merrill Lynch to discuss
this. He's the guy who signed it. He had no
intent to send it to LaSalle or any third
party.
There's a quirk in Florida law that
requires that the person whom is endorsing the
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note whether in blank or in special endorse on
the note if there is physical room and not
attach other pieces of paper. And it's to
avoid this exact situation. We don't want
allonges floating around that are not attached
to the note, because it creates this fraud and
intent problem that we see here today.
On this note, if the Court actually looks
at the copy that's been provided to us, there's
plenty of room to have endorsed. The Florida
law interprets that as being a non-effectual
assignment. So because he didn't have physical
possession of the note, he created his own
problem with the assignment by not endorsing on
the note itself. Because under his testimony,
it was in another state. The note had never
been transferred to Merrill Lynch Mortgage
Lending ever and that he was just merely
executing allonges in mass. Robo signing for
an easier word.
So we have this problem under Florida law.
Is an allonge effective if in fact the allonge
was unnecessary, because there was plenty of
room to have created the assignment on the note
itself. The answer is clearly it's an
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ineffectual assignment. And the fact that it
may cause some distress to Plaintiffs is of
their own making. Had they actually just
delivered the notes to Mr. Rogers to endorse
them and sign them and date them, it would have
been very simple. But in their own expediency,
they never bothered to do it. They just
presented him hundreds of blank sheets of paper
to execute allonges. So even their allonge
fails on its face.
To rehash a little bit, Your Honor. We
have heard about Lizio v. McCullom at 36 So.3d
927, Florida Fourth DCA. In those cases we
discussed whether or not they have the right to
foreclose these properties in the name of U.S.
Bank. And in that vein we talked a little bit
about Ms. Rosenthal's deposition which was
filed with the Court where she really discussed
the authority of the trust. She was produced
as the person with the most knowledge of the
trust. Whether the authority of the trust
would allow for them to actually do that. And
she answers in the negative, that given the
violation of the mortgage problem and
assignment of the mortgage problem, they would
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have no authority to enforce the mortgage.
Moreover, she goes forward and says, under
Section 2.01, that there would be a problem,
and there would have to be an exception report
given their issue of the late dating of the
entry of the mortgage into the pool. And no
such exception was done for this particular
mortgage, Your Honor.
And finally, Your Honor, we have this
discussion whether or not Section 2.01 and 2.02
of the trust allow for Plaintiffs to accept
documents after the cutoff date on the face of
the documents and then subsequently enforce
them. We initially talked about Florida law.
But New York trust law very specifically says
this is not a case of equity. It's a case of
law. They have to specifically perform under
the trust in which to be there.
Well, under 2.01, the cutoff date is a
hard date and there had to have been the
transfer of the documents into the trust on
March the 30th, 2006. By their own testimony
it didn't happen till May. They have no right
to enforce it. They have no right to be here
today. And in fact, Your Honor, they're the
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wrong parties to have brought this action.
THE COURT: Who is the right party?
MR. KORTE: Merrill Lynch Mortgage
Investors would be the proper party or Merrill
Lynch Mortgage Lending, the first party who
made it. One of the two. Because there is a
purchase agreement between Merrill Lynch
Mortgage Lending and Merrill Lynch Mortgage
Investors which appears have been executed and
actually delivered. One of those two parties
would be the proper party to bring the action.
THE COURT: And if Merrill Lynch, both
those entities signed documents stating that
any rights they had to this note and mortgage
are hereby transferred to U.S. Bank, then what?
MR. KORTE: Absolutely. If the Merrill
Lynch Mortgage Investors and Merrill Lynch
Lending had actually executed documents saying
that U.S. Bank has the right to enforce, then
U.S. Bank would have the right to enforce
directly. But it's not U.S. Bank bringing this
action. This is U.S. Bank as a trustee of a
trust. And the trustee of the trust cannot
violate the terms and conditions of the trust.
More importantly, Your Honor, if that had
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actually happened, we'd expect to see the
documentation showing those actual assignments
between the parties and we'd have no problem.
If this is Merrill Lynch Mortgage Lending here
today, this would be a very short hearing. If
this was Merrill Lynch Mortgage Investors, it
probably wouldn't be as bad. But the fact is
this is a third trustee on a fourth transfer of
a document where we're left with back dated,
admittedly back dated documents, admittedly
back dated mortgage assignments, and parties
without authority to make assignments making
them to get U.S. Bank as trustee as the
Plaintiff here today into Court.
THE COURT: Okay.
MR. KORTE: If I may address finally
counsel's argument that we should strike the
affidavit of Lane Houk. Your Honor, there are
some legal conclusions contained in the
affidavit obviously. But the Court is
permitted to carve out those parts that are not
legal conclusions and still maintain the
action. More importantly, Your Honor, even if
the Court were not to consider the affidavit of
Lane Houk in its entirety, that doesn't mean
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they've cured their defects. In fact, they
have not met their burden for purposes of
summary judgment today because there is
questions contained even in the affidavits -the
depositions of their own people as to
whether there was ever an assignment or an
intent to make an assignment. Whether or not
the loan actually made it on time. Clearly a
March 30th cutoff date is in the pooling and
servicing agreement, not before the Court. And
there's testimony that on May the 2nd the
actual transfer occurred. So they've testified
to issues as far as this is concerned. So the
Court doesn't need to even reach Mr. Houk's
deposition transcript or affidavit.
THE COURT: What dispute of facts are
there as opposed to legal conclusions?
MR. KORTE: There are several disputes of
fact, Your Honor.
THE COURT: If there are disputes of fact,
how could I possibly grant your motion for
summary judgment or are you just saying as to
theirs?
MR. KORTE: As to theirs. Our motion for
summary judgment is a cross motion for summary
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judgment that doesn't require the facts to be
proven. We're saying they do not have standing
and have not yet produced a single affidavit
saying that they do have it.
THE COURT: What are the disputes of fact?
MR. KORTE: Very simply, Your Honor. The
first is whether or not Merrill Lynch Mortgage
Investors ever transferred the loans to LaSalle
Bank. Whether the notes physically were ever
transferred, ever been a deliverance of them.
Under Florida law delivery of the documents is
important whether U.S. Bank has authority to be
here today.
THE COURT: Wait a minute. You're saying
there's a requirement that they be
physically -- that the note and mortgage be
physically delivered?
MR. KORTE: There are three ways to be in
Court, Your Honor, on a mortgage foreclosure
action. The first is to be here on an
assignment, which has not been produced today,
Your Honor. There's been no assignment as
between LaSalle Bank and U.S. Bank today. You
need some kind of a documentation before the
Court saying, we hereby assign, and that's not
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here. You need some kind of documentation
saying, we are assigning between Merrill Lynch
Mortgage Investors and Merrill Lynch Mortgage
Lending saying we're going to assign.
THE COURT: This is all legal argument,
right?
MR. KORTE: That's a question of fact.
Whether or not the assignments actually
occurred.
THE COURT: That's a question of law. I'm
asking where are the disputes of fact? For
example, whether or not Merrill Lynch
transferred the loan, that's going to be a
legal -- that's a legal issue. So what are the
disputes of fact?
MR. KORTE: Well, I think perhaps that's
exactly -- and just if the Court would indulge
me for one moment.
THE COURT: Sure.
MR. KORTE: Whether or not Merrill Lynch
Mortgage Lending actually executed and
delivered the notes to Merrill Lynch Mortgage
Investing is a question of fact which despite
the fact we've asked the question in deposition
of Mr. Rogers, we've not received an
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affirmative response. To the contrary, we
received a response that he never had
possession of the original notes to make the
transfer.
Second thing, Your Honor, whether or not
those notes were actually transferred to the
trust.
THE COURT: That's a legal conclusion.
MR. KORTE: Well, physically, Your Honor.
The question is -- a physical delivery is
required if you don't have an assignment of the
mortgage or assignment of the note. Under
Florida law, you can enforce a note either by
possession of it, or if you were the holder of
it and lost it, you could enforce it by
re-establishing a lost note. Only two ways to
do it. So if they have physical possession of
it and they deliver it, that is the intent to
make the delivery that's the question. Whether
I sell to you the notes and never deliver them
to you, never invests in you the right to
enforce the notes. You have the right to sue
me and maybe collect payments. But you don't
have the right to enforce the note because you
don't have it under the UCC as a negotiable
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instrument. If in this case it's an
endorsement specifically made or outside of the
UCC. And we need specific endorsements all the
way down the chain. The question is whether or
not there's any endorsement specifically that
allows U.S. Bank to be here today.
THE COURT: That's a legal issue I think
the way you phrased it just now.
MR. KORTE: Your Honor -
THE COURT: But so far I understand that
you're claiming two areas of factual dispute.
First, whether or not Merrill Lynch executed
the notes to Merrill Lynch Investors. And
whether those notes were physically delivered
to the trust.
As to point number two, the facts or
allegations that U.S. Bank is asserting to show
delivery, are they disputed by you?
MR. KORTE: Yes, Your Honor.
THE COURT: Which ones?
MR. KORTE: The physical delivery portion,
Your Honor. In the deposition of Mr. Rogers,
he never had physical possession of the notes.
He testified that he had never seen the notes.
That's why he had to execute blank allonges in
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mass. The notes were in a different state from
him, and he didn't know who had them or where
they were. So it's okay to assign things, but
you can assign only what you possess.
THE COURT: Are you saying that U.S. Bank
has claimed that the notes were physically
delivered to the trust?
MR. KORTE: Your Honor, we don't know
whether they were or were not physically
delivered to the trust.
THE COURT: U.S. Bank is not relying on
that fact.
MR. KORTE: But they must, Your Honor.
Under the trust agreement, 2.01 and 2.02,
physical delivery is a condition precedent to
accept this. So unless they -- if they don't
claim they had physical possession of the
documents, then they fail under 2.01 and 2.02
of the trust and have no right to enforce.
THE COURT: Well, basically you're arguing
that that's a material fact. And I'll hear
from U.S. Bank as to whether they agree and
what their possession is on whether the notes
were -- first off, whether the notes were
physically delivered to the trust and whether
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that's a material fact. And then, one, whether
or not Merrill Lynch executed the notes to
Merrill Lynch Investors. Again, I'll hear from
U.S. Bank whether they agree that that's
disputed or if it's material. What other? Any
other disputes of fact?
MR. KORTE: Your Honor, whether or not
LaSalle had authority to make an assignment of
a mortgage after it had been removed as the
trustee of the trust. In this case, there's a
back dated assignment.
THE COURT: I think that's a legal
question. Because the documents that U.S. Bank
are relying on to make that argument -actually,
they're arguing that they don't -well,
there is no dispute about the documents
that were signed that would give U.S. Bank the
basis to argue that LaSalle assigned the
mortgage.
MR. KORTE: No, Your Honor. The question
is whether LaSalle had authority to make that
assignment at the time -
THE COURT: I understand. I'm saying that
I don't think that's a dispute of fact.
MR. KORTE: Then no more, Your Honor.
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THE COURT: Okay. Do you want to respond?
MS. HEYER: Of course.
First, Your Honor, with respect to the
very first argument made by Tidewater's counsel
that we had to file the note and mortgage 20
days before the hearing is not what Booker
says. In fact, if you look to Riggs versus
Aurora, which is Judge Lynch's case, so long as
you've got possession at the summary judgment
hearing for purposes of tendering it to the
Court, it's adequate. And we have the
originals here.
With respect to transferring of the
mortgage separate from the note, and ones got
to be transferred one way and ones got to be
transferred another way, that's not what
Florida law says. Florida law says that the
mortgage follows the note. The note is the
obligation and the mortgage is always going to
follow that note wherever that note may be.
Whether it be by assignment, whether it be by
endorsement, whether it be by possession. It
just so happens that I don't think that
argument warrants any merit because we have
possession of both originals today.
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The assignment of trustees -
THE COURT: I'm sorry. The case law that
you cited regarding the argument of possession,
the significance of possession, do those cases
talk about when it's blank? They're arguing
that those cases are distinguishable because
here we've got the note made out to a specific
party.
MS. HEYER: In fact, there is a case where
it wasn't endorsed to the lender who was
enforcing it. And it was found to be
sufficient, Your Honor. It was First Franklin
was the original lender. And the Court found
that even though it was made payable to First
Franklin, it was sufficient for the assignee to
be the holder to enforce it.
THE COURT: What case is that?
MS. HEYER: Lizio. It was one of them,
Your Honor. And that was a Judge Eade case.
And that case, because they possessed the
original note and mortgage, and there was -the
note was payable to an individual who died.
And then there was a subsequent assignment by
the personal representative for the estate.
The Court found that the assignee was a holder
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and granted him standing to seek foreclosure of
the note. There also is another case -
THE COURT: Is that in the binder here?
MS. HEYER: That's in Defendants' binder,
Lizio. There's also -- let's see if I can find
the First Franklin case. The First Franklin
case is in my binder. It's Taylor versus
Deutsche Bank, and that's tab L. It was not
endorsed by the original lender.
THE COURT: Now here of course -- well, in
the Deutsche Bank case -
MS. HEYER: It deals with MERS.
THE COURT: Right. And there was no
question that the note and mortgage had been
assigned to Deutsche Bank. Here the defenses
are that the assignment in this case is also
flawed.
MS. HEYER: I'm going to get to that next,
Your Honor.
THE COURT: Okay.
MS. HEYER: Tidewater's argument is that
Merrill Lynch Mortgage, the original lender,
transferred it to Merrill Lynch Investors, the
depositor, to put into the trust. That's true.
Now was there an assignment from Merrill Lynch
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Mortgage to Merrill Lynch Investors, the
depositor? No. Is one required? No. Why?
Because if you look at the mortgage purchase
disagreement that's been filed in this action,
I believe Defense filed it with their stack
last week, but also it's attached to our
amended answers to interrogatories. And if you
look at the purchase agreement, also if you
look at the pooling and servicing agreement, in
that the depositor buys the loans. Now
purchase under Florida law is enough, too, by
the way to show intent for transfer. The
depositor bought the loans, but it didn't take
possession. It just bought them. Why?
Because it wanted all the original lenders, in
this case Merrill Lynch Mortgage, to transfer
them to the servicer, the trustee, et cetera.
And if you look to page three of the
mortgage purchase agreement under Section II,
conveyance of the mortgage loans, the seller,
that was Merrill Lynch Mortgage, the original
lender, hereby represents and warrants that it
has or will have on behalf of the purchaser,
depositor, delivered to the trustee on or
before the closing dates the documents and
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instruments specified below with respect to
each loan. And what's in there? An original
executed mortgage note, an allonge, an original
or copy of the mortgage, an assignment of
leases, an original executed assignment, and
then another assignment of all unrecorded
documents. So it goes through this whole
litany of documents that have to be
transferred.
In other words, the depositor's focus is
setting up the trust, buying the loans, and
putting the loans into the trust. Does it
physically have to have possession to
effectuate that? Absolutely not. In fact, it
directs the seller on its behalf to transfer it
immediately to LaSalle. And in fact, according
to the answers to interrogatories, the
documents after closing were immediately
transferred to LaSalle. Once the trust got set
up, LaSalle put on its trustee hat and held the
documents thereafter as trustee. LaSalle then
executed an assignment to U.S. Bank as trustee.
It has an effective date in that assignment of
June 30th. That is the effective date. And so
it had the power to go ahead and transfer that
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before it signed. So long as the effective
date evidences the transfer, it's sufficient.
It doesn't matter what date the assignment was
actually signed.
So we think that the documents filed by
the Defense as well as the answers to
interrogatories under the pooling and servicing
agreement and under the mortgage purchase
agreement show how the loans moved from the
original lender to the depositor into the
trust, and have been in the trust and are still
in the trust as we stand here today.
The last argument Tidewater asserts about
possession. The focus of possession under the
code and under Florida law is before the Court
at the time of enforcement. Where it went from
the chain, although we've established the chain
of title, the key focus for the Court is are
you a holder at the time you brought the
lawsuit? Are you a holder at the time you're
moving for summary judgment? Possession is a
focus at that point in time. We have
possession of both the original note, the
allonge, and the mortgage.
With respect to the endorsement issue,
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they raise a small argument with respect to
their having to be an endorsement on the actual
promissory note. I can find no case in Florida
that requires that even though they say that
that's the case. Florida law does not state
that. In fact, Florida law states that if
there is an allonge, it does become part and
parcel of the instrument. It is basically the
endorsement. There's no requirement that you
have to endorse like a check on the back of the
check.
THE COURT: Right.
MS. HEYER: In fact, for a promissory
note, it's standard in the industry, standard
practice and absolutely enforceable under
Florida law to do it via an allonge.
THE COURT: Does not the allonge have to
be affixed to the document?
MS. HEYER: That was going to be my very
last argument, Your Honor. Yes. But what does
affixed mean in the dictionary? Does it mean
that the allonge at the time that it's assigned
has to be attached? No. Can they both be
transferred and then held together by the
trustee, the trust in this case and now here
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today? Yes. They are affixed. They are one
and one the same. They've been held by the
custodian. They've been held in the trust ever
since their origination together. I don't care
if it's a paperclip, a staple. They get
stapled. They get unstapled. They get copied.
I can't tell you how many times it's been.
So the fact that one moment in time it may
have a staple on it or one moment in time it's
got a paperclip, does that mean it's not
negotiable? Does that mean it's not
enforceable? Absolutely not. That would be a
ludicrous result. And I believe as today, I
believe it actually is stapled for purposes of
tendering to the Court.
THE COURT: Have you considered getting
any kind of waivers or any kind of documents
from Merrill Lynch to -- you know, Tidewater is
saying, look, you guys don't have standing. We
believe Merrill Lynch has standing.
MS. HEYER: Merrill Lynch executed the
allonge.
THE COURT: Right.
MS. HEYER: Divesting itself of the
interest based on the mortgage purchase
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agreement giving and selling loans to Merrill
Lynch Investors. David Rogers testified he
signed the allonge. He signed it in blank
because they had to wait for the trust to get
set up. Does that make it unenforceable? No.
In fact, blank endorsements are enforceable,
too. But in this case it got transferred over
to the custodian, LaSalle. LaSalle then became
the trustee, affixed the endorsement on the
allonge, which then got affixed to the note and
has been held in the trust ever since.
Merrill Lynch wouldn't have standing to
come before this Court. Number one, it sold
the loans. Number two, it endorsed the notes.
And, number three, it signed an assignment. It
can't possibly as an assignor come before this
Court and attempt to enforcement the loan
documents.
THE COURT: I wasn't suggesting that they
could. It's because of their argument that
they believe that the proper party is Merrill
Lynch, one of them, either the investors or the
mortgage company. I guess to me Tidewater is
as they've said at the last hearing,
evidentiary hearing, they're not saying that
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they're not in default. They're not saying
that they don't owe the money. They're just
saying not to U.S. Bank. So today I ask well
who does Tidewater think should get the money
or be able to enforce the default? And unless
I misunderstood, they're saying Merrill Lynch
Mortgage and/or Merrill Lynch Investors.
MS. HEYER: Well, what would have to
happen, Your Honor, is Tidewater would have to
come before this Court and show that there was
an exception in the transaction so that this
loan was not put into the trust. But there
wasn't. There's no evidence whatsoever that
this loan did not go into the trust, stay in
the trust, and remain in the trust as of today.
THE COURT: Well, their argument is
because the trust has a deadline for when
things could be transferred in there.
MS. HEYER: Correct. If you look to that
deadline, it says March 30th, 2006. What
evidence does the Court have before it that
that loan actually went into the trust on
March 30th, 2006? Look to the affidavit of
Plaintiff as well as the answers, amended
answers to interrogatories. And if you look at
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the loan history screen, which is a multi-page
document, it shows when the loan got booked as
a brand new loan. Once it hit the trust, the
servicer's roll then became effectuated, and
they had to then start monitoring and servicing
the loan. And on that very last page, and I'll
just show this to the Court instead of having
to flip through the binders to try to find it.
But the very first entry is March 30th, 2006
six, a new loan booked by the servicer. And
from there to today's date, the loan has been
serviced.
MR. KORTE: May I see what document you're
referring to.
MS. HEYER: It's the last page of the
answers to interrogatories. And it's also
attached to the affidavits.
MR. KORTE: Okay.
THE COURT: Thank you.
MS. HEYER: So the loan hasn't been
anywhere else since the master servicer and
special servicer took on their duties with
respect to this particular allonge to Tidewater
on March 30th, 2006. And there's no contrary
evidence from a third party saying it's been
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any place else.
THE COURT: Right. So as to their
alleged, Tidewater's alleged disputes of fact,
whether or not an allonge executed to Merrill
Lynch Investors, you don't find that to be a
material fact; is that correct?
MS. HEYER: Correct. I think the only
issues before this Court are questions of law.
THE COURT: Right.
MS. HEYER: In applying Florida law versus
New York law or even if you apply Florida law,
how do you apply Florida law.
THE COURT: So it appears that there were
no written documents where Merrill Lynch
executed any kind of written documents to
transfer ownership of the notes to Merrill
Lynch Investors, correct?
MS. HEYER: Right, because they were
directed by the depositor under the documents
to immediately assign it to the trustee.
THE COURT: Okay.
MS. HEYER: Which is exactly what they
did.
THE COURT: So there isn't a dispute of
fact here because both sides agree there was no
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written documents between the two of them.
MS. HEYER: Correct.
THE COURT: But also U.S. Bank's position
is that it's not material. It's not even
relevant. And then two, whether those notes
were physically delivered. I'm not sure what
that means even. How could -- because a trust
is not something physical. What's your
response to that, their allegation that the
notes were physically delivered to the trust,
that that's in dispute?
MS. HEYER: We don't think that's a
disputed fact. Because if you look at the PSA
and the mortgage purchase agreement that they
introduced into the Court file, it specifically
directs the depositor -- the depositor
specifically directs the original lender, move
it to the trustee. Immediately sign all the
documentation, I hereby direct you on my behalf
to do so. So there's no issue.
THE COURT: Well, they say that Mr. Rogers
testified he's never seen the note.
MS. HEYER: Yes. Because at the time that
he signed -- when the loan was originated by
the closer, the closer sent the documents to
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LaSalle's custodian. LaSalle held the original
documents while they were doing the
securitization. David Rogers on behalf of
Merrill Lynch signed the allonge along with all
kinds of other allonges for other pools, not
necessarily this particular pool, and that
allonge was immediately sent to LaSalle as
custodian to hold all of the original loan
documents for purposes of setting up the trust
and putting the loans into the trust.
MR. KORTE: Your Honor.
THE COURT: Yes.
MR. KORTE: We have to object to that
entire line. There's no evidence of any of
that in any record or any deposition
transcript, no document or anything that points
to that line of facts that she just gave the
Court.
THE COURT: Let's break it down. What
facts do you want the Court to consider that
you believe are in part of the Court file or
part of your motion?
MS. HEYER: If you look at the amended
answers to interrogatories, Your Honor,
documents were sent to LaSalle after the
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closing. I know they try to point out when the
allonge was signed. The allonge is not dated
by David Rogers. He signed that allonge in
blank. Absolutely nothing wrong with that.
Absolutely proper. The fact that he didn't
have possession of the original doesn't mean
anything, because it immediately went to the
custodian and then went to the trustee.
THE COURT: All right.
MS. HEYER: He didn't have to have
possession to sign the allonge on behalf of
Merrill Lynch. If they are saying he wasn't
authorized on behalf of Merrill Lynch, then we
definitely would have an issue. But that's not
the issue before the Court.
THE COURT: So there is no dispute whether
Mr. Rogers saw the notes. Both sides agree he
never saw the notes?
MS. HEYER: Correct.
THE COURT: You're just saying it doesn't
matter?
MS. HEYER: It doesn't seem like there's
any factual disputes. I think they're all
legal issues.
THE COURT: I'm not going to rule right at
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this second. I'm also going to let Tidewater
know that I did not receive any documents from
you last week. I don't know how. I had my JA
just double-check.
MR. WORTMAN: Judge, we personally hand
delivered a box of our 45 page brief to you.
You never received that?
THE COURT: When was it done?
MR. KORTE: Wednesday.
MR. WORTMAN: That was done Wednesday
evening.
THE COURT: I'll have my JA look on my
couch in my hearing room. Hold on.
MR. WORTMAN: Your Honor, I thought you
had indicated in the opening of today's hearing
that you received the briefing on all this?
THE COURT: No, no, no. I told
Plaintiffs' counsel.
MR. WORTMAN: Your Honor, we hand
delivered -
THE COURT: Hold on. My JA is going to
look on the couch.
MR. WORTMAN: I have a copy of the cover
letter that shows it was delivered.
THE COURT: I'm not disputing that it was.
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I'm just instant messaging my JA to look on my
couch in my hearing room, which is not where I
normally have things delivered.
MR. WORTMAN: We delivered it to the Court
as well as Your Honor's chambers directly due
to the time constraints that were opposed on
the parties.
THE COURT: She's looking on my couch now.
As you know, I have two rooms. I have the
hearing room and then I have my chambers. And
documents for me to read are put in my
chambers, not my hearing room where parties
come in to argue. I don't have things in my
hearing room. So I don't know how it got
there.
MS. HEYER: Your Honor, is the Court going
to rule on the motion to exclude testimony or
are you also deferring on that as well?
THE COURT: Yes, I'll defer on that as
well. I'm obviously going to read -- I'm
waiting to hear back. My judicial assistant is
going to be typing something. Yes. She said
that there is a box on my couch. But I
would -- I don't look on my couch for things.
MR. WORTMAN: Your Honor, we didn't put it
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specifically on the couch. We delivered it to
a representative of Your Honor's chambers.
THE COURT: No, I'm sure. I don't know
how it got there. Because normally it's taken
by my JA and it's put in a special box that I
look to when I go to get materials to be
prepared and there was nothing. The only thing
I did get the Plaintiffs' notebook, but I did
not get yours. And I don't know how it got on
my couch.
MR. WORTMAN: We delivered a 45 page
brief, Your Honor, along with a box of
exhibits.
THE COURT: Right. My JA is just writing,
don't know where that came from and how it got
in there. I'm going to tell her don't bring it
down because there's no way I can read it now.
MR. WORTMAN: Your Honor, I think this
hearing actually would have been probably
shorter, a lot more smooth if Your Honor had
had the opportunity to read our brief in
advance. It lays out -
THE COURT: Yeah. Well, again, I don't
know -- the good news is at least I have it.
But whoever delivered it, talk to them to find
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out, you know, who they delivered it to.
Because obviously I got it. But I didn't know
that I received it. Because, again, I don't
look at my couch.
MR. WORTMAN: I know, Your Honor. But we
handed it to a representative of Your Honor's
office.
THE COURT: Okay. No, I know. I'll go
ahead and read it.
MR. WORTMAN: Please do.
THE COURT: Yes I will.
MR. WORTMAN: We spent a great deal of
time and energy and we laid out the arguments
we think very cogently and in a very organized
fashion. I think it will have a big impression
on Your Honor's decision.
THE COURT: Okay. Anything else?
MS. HEYER: Yeah. The only other motion
we have, Your Honor, I don't know if you were
going to take a lunch recess is the motion for
sequestration.
MR. WORTMAN: Your Honor, if I may address
that. In light of the fact that Your Honor
hasn't had an opportunity to read our brief,
and the really sole issue for purposes of the
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motion for sequestration of rents is whether or
not U.S. Bank as Plaintiff is properly a
mortgagee for purposes of sequestering rents.
All the issues as it relates to what we laid
out in our 45 page brief and what we argued
here this morning are obviously going to
determine Your Honor's ruling as it relates to
sequestration of rents. Thus, we feel it's
totally inappropriate to proceed with the
sequestration of rents and will rely upon our
briefs for that purpose in that the ruling on
the summary judgment motion will dictate Your
Honor's ruling on the motions for sequestration
of rents, except perhaps if it goes against us.
But we think it's quite critical Your Honor
have an opportunity to read our brief.
THE COURT: Well, what response do you
have to that argument about -- yeah, go ahead.
MS. HEYER: Your Honor, Tidewater filed a
response, a memorandum in opposition on
November 22nd of last year to our motion for
sequestration. We don't think that this matter
should be delayed any further. This motion for
sequestration has been pending for over a year.
I'm sorry, six months. And the statute
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requires an expedited hearing. We've planned
to be here. We've given up the two days to
hopefully get this all done in two hours. So
we think that today is a perfect opportunity to
do that.
THE COURT: Well, I could -- I don't know
how long it will take me to read the material,
but I could read it. I don't know how long.
I'm a fast reader.
MR. WORTMAN: It's a 45 page brief with
exhibits about this thick, Judge. You've
gotten the essence of the argument. But
they're laid out in a very particular manner.
And obviously we think it's critically
important that Your Honor rule that in advance
of obviously ruling on the motion for summary
judgment and the sequestration of rents,
because it comes down to whether or not they're
the mortgagee. That's it. And to make a
ruling on a sequestration of rents without
being able to have the benefit of our legal
arguments in written format we think would be
wholly improper.
THE COURT: Do you agree that standing,
it's the same issue?
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MR. WORTMAN: Yes, Your Honor.
THE COURT: No, I know you do. U.S. Bank.
MS. HEYER: I'll concede that they think
that it is. Your Honor, absolutely not. In
fact, Your Honor has requested that we prepare
a memorandum of law with respect to the
standard of care and the burden of proof for
sequestration. There's not a whole lot out
there. We were able to dig up the legislative
history which we have provided to counsel, and
we do have a memorandum of law for Your Honor.
It's fairly simple, fairly straight forward,
because there's not a whole lot out there. But
we don't think standing comes into this at all.
THE COURT: Well, I do think this.
Certainly if I grant -- I don't think there are
any -- there's any factual disputes. I don't.
Which means of course -- and I could change my
mind. But I'm inclined -- you know, I think
whether I allow this expert, and I don't even
know that I need -- that this person is an
expert. But this affidavit submitted by the
Defense, if I allow that in, then there might
be a dispute of fact. But we may -- I don't
know if it's going to get to the point. Bottom
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line is I might be able to rule on both motions
for summary judgment. And if I do, then the
sequestration of rent question is very simple I
think. You don't think so?
MS. HEYER: It is simple. But we don't
think that the motion for summary judgment is
dispositive. We still think the sequestration
of rents needs to be dealt with by the Court.
THE COURT: Well, why don't we take a
lunch break and I'll see how much I can get
through the brief.
MR. WORTMAN: Your Honor, as an aside, on
Thursday we did call Your Honor's chambers and
we had left a message for your JA just
confirming that Your Honor had got the box and
brief.
THE COURT: Really. What did she say?
MR. WORTMAN: We had to leave a message.
THE COURT: I'm sorry. But the bottom
line is I'm certainly not going to rule without
reading it. So I'm going to read it. We could
take a lunch break. If I have 90 minutes, I
could get through a lot of it I'm sure.
MR. WORTMAN: Okay, Judge.
THE COURT: I might even be able to finish
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it. I am a fast reader. So we'll come back
here at 1:30, and I'll let you know if I have
any questions.
(Thereupon, a lunch recess was held off
the record and the proceedings continued as
follows:)
THE COURT: We're back on the record. The
parties are present. I was able to read
through your memorandum. I wasn't able to read
through all the cases, but I did read through
the memo. And as you said, it's pretty much
what you had said earlier. Let me ask U.S.
Bank about how did U.S. Bank get the authority
to be the trustee? My understanding from
reading through the documents was that it was
LaSalle Bank who no longer was trustee that
signed the documents giving authority to U.S.
Bank. So what's your response to that? I know
you said it before, but say it again.
MS. HEYER: No problem.
THE COURT: All right.
MS. HEYER: LaSalle resigned as successor
trustee.
THE COURT: Yes.
MS. HEYER: In it's place, U.S. Bank was
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appointed as trustee.
THE COURT: I thought there was Wells
Fargo in between there.
MS. HEYER: Wells Fargo came in briefly.
But Wells because of a conflict and merger with
Wachovia was unable to perform the duties as a
trustee. So they resigned. LaSalle then
transferred them to U.S. Bank as Trustee. U.S.
Bank became the trustee and did a notice to all
parties of their appointment as trustee.
THE COURT: And there's a document of
record that assigns the powers to U.S. Bank?
MS. HEYER: Correct. The instrument of
successor trustee as well as the notice that
was put out by U.S. Bank once it was appointed
as trustee to all parties of the pooling and
servicing agreement was either attached to an
affidavit, interrogatories. I can't put my
finger on it at this moment. I also think
there was a notice of filing that was done as
well by the Defense, including those
appointments of trustee.
THE COURT: But at the time that this was
executed by LaSalle, was LaSalle a trustee?
MS. HEYER: Yes. Because if you look at
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the effective date of the appointment of
trustee as U.S. Bank, it relates back to
June 30th, 2008. That was the same day that
they resigned. So as of that point in time,
they were able to transfer their power over to
U.S. Bank and resign and be done.
THE COURT: But what was the date of that
agreement, the date that they signed?
MS. HEYER: The effective date of that
was -THE
COURT: Not the effective date. What
was the date that LaSalle signed that
agreement? Does anyone have a copy of the
agreement that I can look at? That way I can
see it myself. Do you have it?
MR. WORTMAN: Yes. Let me just shed some
light on this. There was a notice of
appointment from successor trustee from Wells
Fargo, not LaSalle, that was effective making
U.S. Bank as Trustee January 2nd 2009, not
June 30, 2008. June 30, 2008 is when LaSalle
resigned and then Wells took over. And Wells
allegedly resigned and U.S. Bank became trustee
January 2nd, 2009.
THE COURT: So you're saying there's a
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document dated January 2nd, 2009 where Wells
Fargo -
MR. WORTMAN: Resigned and U.S. Bank
became appointed as trustee at that time.
THE COURT: Okay.
MR. WORTMAN: Which is important for
several reasons. Because U.S. Bank got
allegedly assigned the mortgage in September of
2008 by LaSalle who had already resigned. And
U.S. Bank wasn't even the trustee at that
point. If I could approach, Judge, I'll give
you the notice of appointment.
THE COURT: Yes. Yeah, sure. Okay. The
Court file must have all these documents,
right?
MR. WORTMAN: Yes, Your Honor.
THE COURT: I'm not going to look at it
now.
MS. HEYER: Your Honor, just for
reference, the instrument of appointment of
successor trustee is actually attached to
Plaintiffs' affidavit in support of summary
judgment. And the reference to the June 30th
date, Your Honor, that I was making reference
to, when LaSalle stepped down and U.S. Bank
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became trustee, it then directs your attention
over to the assignment, which is Exhibit "G" to
the verified complaint. And LaSalle assigned
all of its rights and assigned the note, the
mortgage, and related loan documents to U.S.
Bank as Trustee. And that document is actually
signed in September of '08. But it has the
effective date, which is what I was referencing
before of June 30th, 2008. And, again, that's
Exhibit "G" to the verified complaint.
MR. WORTMAN: Your Honor.
THE COURT: Yes.
MR. WORTMAN: Again, the assignment of
mortgage that was executed by LaSalle who had
already resigned, yes, it makes some reference
to an effective date. But you can't have the
retroactive intent to do something three months
earlier when you had already resigned and been
divested of all your authority as trustee.
Moreover, Judge, the assignment of
mortgage in September, 2008 was to U.S. Bank as
Trustee before U.S. Bank was even the trustee.
The trustee assignment or the appointment of
U.S. Bank trustee took place in January of
2009. You can't give something to a trustee
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who has not been named yet as trustee. That's
one of about 10 arguments that we have in our
brief.
MS. HEYER: Your Honor, our brief response
is that it's not relevant because it's already
sitting in the trust. It's been in the trust.
The fact that you have predecessor trustees,
successor trustees is completely irrelevant to
the issue as to whether who was an owner and
holder.
THE COURT: Right. All right. Well, I
want to go through all the documents myself,
the actual agreements and assignments. I'll
hear argument on the motion for sequestration.
MS. HEYER: Your Honor, as I mentioned
before the break, we prepared the memorandum of
law as to the difference in standard between
sequestration of rents and appointment of
receiver. If I may approach.
THE COURT: Okay. Thank you.
MS. HEYER: Now, as the Court is aware
from our last evidentiary hearing on the
appointment of receiver, an evidentiary hearing
is mandated by case law for receiver. No such
mandate is in place for sequestration of rents.
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And the standards are different. There is no
case outlining the procedure. It references
you to the statute. So what I have provided to
the Court is the legislative history as to why
they needed 697.07, as a simplified procedure
to allow for the enforcement of the assignment
of rents before final adjudication of the
issues in a case.
One of the cases that's attached that shed
some light on this very issue is the very last
case in the packet of Ormond Beach Associates
versus Citation Mortgage. And it's a Fifth DCA
case from.
THE COURT: You say it's the last case in
the packet?
MS. HEYER: Last case attached to the
supplemental memorandum.
THE COURT: Right. I have Whetstone
Partnership as the last case.
MS. HEYER: Sorry about that. You're
right. We'll go ahead and deal with Whetstone.
You're right. That is the very last case. I
apologize, Your Honor.
Whetstone is a 1995 case from the Second
District. In that particular case, the trial
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court actually made findings of fact and
conclusions of law as part of the
sequestration, which was held to be error. The
Court really is only to look to the two items
in the statute for purposes of determining an
absolute enforcement of an assignment of rents.
It's not intended as an evidentiary hearing.
It's not intended as a final hearing on the
rights or positions of the parties.
In fact, the court stated that a hearing
at issue is not a trial upon the final
determination of rights, and provided only that
the rental income stream be placed in control
of the court subject of course to final
determination of entitlement at trial.
So in this case, the court, the lower
court was admonished for making findings and
conclusions of law on the mortgagor's defenses
and counter claims. It's U.S. Bank's position
in this case that there really are two issues
only for the Court to determine, and that is
whether there was a default, and whether there
was a demand for rents. Because, again, we're
not going to a final adjudication. We're
merely sequestering the rents, whether it's in
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the registry of the Court or in an escrow
account. There's no prejudice to the parties.
We'll make that determination at the end of the
case once the Court has fully flushed out all
claims, defenses, avoidances, et cetera, et
cetera.
So we think that Whetstone Partnership
versus General Electric is some guidance to
this Court. Also, if you look to the elements
for a receivership, the elements of a
receivership are quite high. You have to show
a likelihood that the Plaintiff will prevail in
the underlying action. That's not required
under 697.07. All you need to merely establish
are the two elements so that the assignment of
rents, which is contained in the mortgage in
this case becomes effective. If you look at
the assignment of rents that's contained in the
mortgage documentation, it clearly states that
it's not security. It is an absolute right
upon default.
So based on the guidance we've gotten from
Whetstone as well as looking to the issues in
this case, it's never been disputed that there
actually was a demand made for the rents to be
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put in the registry of the Court. There's
never been a dispute that there's been a
default. The question at this point is does
the Court need to look to any defenses. Well,
the statute says you're not required to look at
and in fact it's reversible error to look at
any defenses. And Whetstone tells us we cannot
make any conclusions of law or findings of fact
with respect to any defenses. Is standing a
defense? Absolutely. Has standing in holder
status been asserted as a defense? Absolutely.
Based on the construction of the statute and
the case law, we can't look to that issue yet.
The only issue for purposes of whether we need
to put that money in a safe harbor, i.e.,
registry of the Court is whether there's been a
default and whether there's been a demand.
At this point in time the Court has
already heard evidence obviously from the
evidentiary hearing from Mr. Weist (phonetic)
that $77,000 a month is currently being
collected by Tidewater Estates. So there's
rents still being collected as of today on a
monthly basis that's not being accounted for to
the Court; that loan payments are not being
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made. We don't know what is being done with
those rents on a monthly basis.
The demand for rents was made over a year
ago. The motion for sequestration of rents was
made six months ago. The appointment of
receiver for those rents was made a year ago.
And still to this day, here we are a year
later, and we don't know what's going on with
the rents. Certainly sequestration of the
rents doesn't prejudice the parties. Provides
an opportunity for the Court to flush out all
the issues in the case if there are any
remaining now that we've had summary judgment
arguments, and make a final determination.
As further guidance for the Court, we went
ahead and looked at Broward cases pending on
sequestration of rents, and we were able to
actually find, and I'll provide a copy to
counsel, from Bank of America versus McVision.
If I may approach.
THE COURT: Yes.
MS. HEYER: Where Judge Ease on motion
calendar heard a motion for sequestration and
granted a motion for sequestration. No
evidentiary hearing required. We think that
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because the Plaintiff has been waiting a long
time in this case for a year now to get a
disposition as to these rents, the statute
mandates an expedited hearing. It can be done.
It can be done quickly. Because the main
factor in this case is no one is getting
control of the rents. They're not being turned
over to the Plaintiff. They're being placed in
a safe harbor. And there's no prejudice to the
Defense.
THE COURT: Well, I appreciate all the
research you did. As far as Judge Eade's
order, I'm not going to consider it because the
facts of that case may be very different. I
don't know that the defendants even objected to
this.
MR. WORTMAN: Your Honor, we haven't seen
this before.
THE COURT: Right.
MS. HEYER: Your honor, we didn't have any
guidance. And I know Your Honor was
questioning whether it can be heard on motion
or whether it can be done by evidentiary
hearing or not.
THE COURT: Right.
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MS. HEYER: Certainly in this case the
motion was actually attached to the back. It
was not agreed to. Certainly it doesn't
reflect as an agreed order. I'm not clearly
providing it to the Court as dispositive of
anything.
THE COURT: Right. I appreciate it.
Okay. Thank you.
MR. WORTMAN: Your Honor, the
sequestration of rents statute states in
subsection two, if such an assignment is made,
the mortgagee shall hold a lien on rents. Not
to beat a dead horse here, but obviously the
key word is mortgagee. It's our position as
hopefully, Your Honor, had an opportunity to
read our brief and see that U.S. Bank for a
variety of reasons and I think there are 10 in
number is not the mortgagee. The only party
that Tidewater has ever dealt with as far as
being a lender is Merrill Lynch Mortgage
Lending, the original lender.
So if this particular Plaintiff is
incapable as we pause it of proving ownership
of this loan, then they are simply not the
mortgagee. Not only because they don't have
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the note, but also because of all the problems
associated with the mortgages. It's crystal
clear in our opinion that this securitization
process here is laden with defects and
problems. And the documents speak for
themselves in terms of this particular entity
not having any control or ownership or ability
to enforce any of the loan documentation. And
it goes without saying, if that is true, then
they should not have this serious and drastic
remedy of taking the revenue of the community,
either taking it for themselves or depositing
it into the Court's registry.
So for that reason, sequestration of rents
is totally inappropriate. And I'll be happy to
go item by item, issue by issue through our
brief so we could further flush out, you know,
this argument as it relates to the fact that
U.S. Bank is not the mortgagee. And perhaps it
would be a good opportunity. It is a lengthy
brief.
THE COURT: Right. Oh, I've read it. I
think it's very clearly stated. And I've heard
sufficient argument. I don't have any other
questions.
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MR. WORTMAN: Okay. Well, we strenuously
disagree with the interpretation of the statute
that this is just an automatic you don't have
any right to present any defense or argument to
the sequestration of the rents. That would
just create a total absurd result if some third
party, a "stranger" to this loan, which is the
way we're characterizing U.S. Bank, had the
right to do things like this. I mean
theoretically that would enable any company or
entity or person up the street saying, hey, I
believe I'm the mortgagee. So I automatically
get to have the rents sequestered. Then the
Court gets to figure it out later.
THE COURT: Right. Well, what standard do
you believe the Plaintiff needs to meet under
697.07?
MR. WORTMAN: Like my adversary had
represented, there is a dearth of case law on
this statute. We searched high and low for any
type of precent or guidance as to the standard.
There's just no specific case that says whether
it's a preponderance of the evidence or
substantial likelihood of success. I think it
is logical that the Court adopt a high
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standard, either clear or convincing evidence
or substantial likelihood of success on the
merits in order to avoid this type of absurd
result. They have to prove and the Court has
to be fairly well convinced that this is the
right party here to enforce these loan
documents. Whether or not that translates into
a substantial likelihood of success or clear
and convincing, I think that's a very fair
interpretation of what due process requires.
Because this is divesting the community of
basically every penny that comes in.
THE COURT: Well, that's not true.
Because under 697.074, I can allow that money
be taken out of the rents before it's deposited
to pay the reasonable expenses to protect,
preserve, and operate the real property,
including without limitation real estate taxes
and insurance.
So if I were to order sequestration of
rents, it would not -- it most likely would not
be the entire rent.
MR. WORTMAN: I agree with, Your Honor,
obviously. To the extent in the event that
Your Honor either denies both motions for
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summary motion or adjudicate it at some later
point in time, perhaps that would be a fair
interim remedy.
THE COURT: Well, here's what I think. I
think like the Defense said at the first
evidentiary hearing for the Court to assign or
appoint a receiver, there's no question that
Tidewater signed documents that obligated them
to make payments. I mean they took out a loan
of over $6 million. And at some point they
defaulted in that agreement. The only question
that remains is who, who gets that money. But
there's no question in my mind. I put it even
beyond the highest standard possible, which is
proof evident, presumption great, which is even
higher than a jury trial that Tidewater owes
money to an entity, whether it's U.S. Bank or
as Defense counsel says Merrill Lynch.
So I think that I should sequester some of
the money from the rents sufficient to pay
whatever their monthly mortgage payments would
be, and that hopefully would leave them with
money for real estate taxes, insurance, upkeep,
that sort of thing.
MR. WORTMAN: I understand that, Your
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Honor. However, we feel that our cross motion
for summary judgment has substantial merit. We
believe it should be granted for the variety of
reasons that we laid out. I believe there are
10 separate arguments as to why this loan is
not owned and controlled by U.S. Bank.
THE COURT: Yes. They are all very
technical arguments. Because if you look at
what -- if you look at the actions as opposed
to the letters -- the I's being dotted and the
T's being crossed, if you look at what
happened, U.S. Bank has acted as trustee at a
certain point in time. That point in time the
parties dispute. But that's a legal issue I
think. I don't know that it's a factual issue.
I need to mull this over and think whether
there is any dispute of fact or not.
But that being said, then there was quite
some time when Tidewater was paying money and
it was going to U.S. Bank who was acting as
trustee. Merrill Lynch has never demanded.
And the Defense is arguing that it's Merrill
Lynch that would have the right, that would
have standing here. Merrill Lynch has never
asked for any money for this note or mortgage.
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They've never asked for it. And U.S. Bank of
course argues that Merrill Lynch assigned -the
reason they haven't asked for it is because
they don't believe they're entitled to it.
They've assigned their rights to this mortgage
and note eventually over to U.S. Bank.
MR. WORTMAN: Your Honor, can I make an
analogy?
THE COURT: Sure.
MR. WORTMAN: As a board certified real
estate attorney, I've handled thousands and
thousands of real estate transactions. I've
reviewed hundreds of abstracts of title and
prepared and oversaw the execution of warranty
deeds. Like I said, quite a number of real
estate transactions. You could have a well
intended purchaser and seller sitting at a
closing table executing a warranty deed, and
the seller is purporting to transfer title to a
piece of property to a buyer. They shake hands
and they walk out of a room. But there's no
witnesses and no notary. While you have two
parties that clearly thought there was a
transfer of that real estate, because those I's
were not dotted and those T's were not crossed,
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and the technicalities were not followed, there
has been no conveyance of title. That's what
happened here about 10 times over.
THE COURT: Well, that's the question. If
an I wasn't -- there are also times when
technicalities are not followed and it doesn't
have any effect. And the question is: What
effect do these technicalities, these 10
technicalities, if you will, what effect does
it have if any on U.S. Bank's standing? Maybe
it has an effect. Maybe it doesn't.
MR. WORTMAN: Well, Judge, there are
reasons why assignments of mortgage are
supposed to follow a chain. Why allonges are
supposed to be executed in a certain manner.
Why there must be a specific intent to transfer
the loan from Merrill Lynch Mortgage Lending to
LaSalle. But that didn't occur because David
Rogers who executed the allonge just signed it.
It got back dated. Then the actual stamp from
LaSalle came some time thereafter.
There's a panoply of reasons here why the
securitization process that they avail themself
of. We didn't ask to participate in this. We
didn't ask to be a participant in this trust.
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We didn't ask to abide by a pooling and
servicing agreement. This is their
transaction.
THE COURT: Right.
MS. HEYER: These are their rules that
they blatantly violated.
THE COURT: So you're just basically
saying so Tidewater doesn't have to pay back
the $6 million loan?
MR. WORTMAN: As it relates to U.S. Bank
today, Judge, absolutely.
THE COURT: Okay.
MR. WORTMAN: That doesn't mean -
THE COURT: Yeah.
MR. WORTMAN: That doesn't mean that
Merrill Lynch Mortgage Lending, Inc. at some
point -- and what's going on with these
securitizations is there's a massive amount of
re-purchasing that's going on because of
defects like this where the loan is being put
back to the original lender, and the original
lender is coming in and taking over and taking
control.
That's what needs to happen here. U.S.
Bank because of the 10 reasons should not be a
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Plaintiff in this lawsuit. It should be
re-purchased by Merrill Lynch and let them do
what they want as it relates to this loan,
enforcement, default, foreclosure. Fine. But
as it stands right now, this Court is bound to
look at the facts as it relates to U.S. Bank
and whether or not they own and control and
possess this loan properly.
So for that reason as it relates to
summary judgment and sequestration of rents, we
believe they do not have rights as it relates
to any enforcement provision of these loan
documents.
THE COURT: Well, sequestration of rents,
I believe that there should be a sequestration
of rents. And if the parties, they can put it
either in the Court registry or in a trust
account. I'm sure the parties could agree on a
trust account. Because that way they don't
have to pay the court registry fees and maybe
they can earn some interest. I don't know.
But I'm also amenable to instead of ordering
all the rent, to see what the mortgage payments
would have been, and to see if there's enough
money left over to take care of the place. You
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know, taxes and insurance, and that sort of
thing. I don't know.
MS. HEYER: Your Honor, we'd just request
that the order reflect the language in the
statute. The statute does provide for only net
rents. And it defines it by -- it uses
collected rents and then it talks about net
rents allowing for maintenance and necessary
expenses to maintain the property. And
certainly we don't have any objection to
crafting language as to what those approved
expenses are. But I certainly would not want
Tidewater solely on their own making a decision
as to what those necessary expenses are, and
certainly would ask Court guidance with respect
to that.
THE COURT: Right. Well, I think the
first starting point is to see if the parties
can reach an agreement on that. And if not,
then I'll address it. But it does say that the
Court shall require the mortgagor, which would
be Tidewater, to account to the Court and the
mortgagee, which for purposes of this statute
and at this time I'm going to say is U.S. Bank,
for the receipt and use of the collected rents
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and may also impose other conditions, et
cetera.
But I would think that Tidewater would
have a position as to how much money they have
left over after they pay for upkeep, et cetera.
MS. HEYER: Yeah. Well, the statute
actually makes reference to collected rents
going into the registry of the court and then
the mortgagor applying for the payment of those
necessary expenses either with our approval or
Court approval. And certainly I haven't seen
the list of expenses. But certainly I don't
think we're going to have objection if it's for
purposes of maintenance of the property, taxes,
insurance, the like, the necessary expenses.
If there's an issue, then certainly we can
bring it before the Court.
THE COURT: I mean I can do it that way,
or it also authorizes me to do it before it's
deposited if you look at four, subsection four.
MR. WORTMAN: That would be our
preference, Judge, because obviously we have
vendors that need to get paid on a timely
manner. And to have to wait to have a court
order to have monies released from the court's
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registry -
THE COURT: Right. I don't have a problem
with that. But I want to see -- I have no idea
how much money would be left over for the
mortgage payments, do you?
MS. HEYER: Correct, Your Honor. We don't
either.
THE COURT: Right. What do you know?
MR. WORTMAN: Precise amount, not off the
top of my head, Judge. I'd have to sit down
with the property manager and the board. And
I'd be happy to meet with counsel for the
Plaintiff in short order to make a specific
proposal. But we've turned over all the
financial documents to them. So they should
have an idea.
THE COURT: So you should have an idea
also, right?
MR. WORTMAN: Off the top of my head, no,
I don't, Judge. It won't take very long for me
to figure it out and come up with the numbers.
THE COURT: Because I'm hoping, maybe I'm
being too optimistic, that there will be enough
for the mortgage payments to be made out of
that amount. But I don't know. And the other
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issue then is whether Tidewater would want to
agree to a receiver to if there are for example
tenants that aren't paying their maintenance,
their monthly maintenance, and thus imposing an
undo burden on the other tenants who are making
the monthly payments, a receiver helps to get
that taken -
MR. WORTMAN: Your Honor, we have a very
sophisticated property manager that is handling
the affairs of the community in a very well
managed fashion. And the receiver is not
something we're interested in, nor is it before
the Court today.
THE COURT: I know. I know. I'm just
throwing that out there.
MS. HEYER: Your Honor, one last issue on
the rents. The statute references it goes back
to the date of demand for the collected rents.
The demand was back in April of 2010. And I
don't know if you may recall from the
evidentiary hearing, but certainly from
Mr. Weist's deposition, they have been putting
money aside from the net income from the
property, and it's been kind of just sitting in
an account. That money should also then be
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part of whatever, whether it's a trust account,
registry of the court or whatever.
MR. WORTMAN: Your Honor, I don't believe
those funds have been specifically segregated.
There's been a variety of capital improvement
projects and variable expenses that these
monies are used for. So there's not a separate
segregated account for that purpose.
MS. HEYER: Your Honor, as of the
evidentiary hearing, Mr. Weist said there was
about $200,000 set aside in a market, money
market account.
MR. WORTMAN: Nothing is set aside. It's
just that money is in an account. It's not set
aside.
THE COURT: Okay. But it's in an account.
The Court wants to make sure that while it's
important for the trailer park to have its
expenses paid, this mortgage, you need to pay
it. And if it's not to U.S. Bank, it needs to
get paid. It needs to get paid. You don't
just borrow $6 million and then not pay it
back.
MR. WORTMAN: Your Honor, if I could just
comment on that.
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THE COURT: Yes.
MR. WORTMAN: The reason why we're going
through all these arguments today. The
community who I've come to meet and know many
of the residents quite well. They're very
caring, well meaning people. From the onset of
their dealings with U.S. Bank and Midland, the
initial goal was to have a loan modification,
was to try and just simply bring down the
payments not a ton, not in half, a little, with
perhaps an extension of a maturity date. We
got nothing but stonewalled.
So this was thrust upon us to have to then
investigate whether or not this U.S. Bank
ultimately owns and controls this loan. So to
say that we or that Tidewater as a whole, as a
group, you know, is getting away with this or
getting away with that or not doing the right
thing, I just want the Court to know our true
intentions from the onset of our dealings,
which was to get a modification of this loan to
make it a more manageable payment. It just
turned out that when we started to dive into
these documents, we found defect after defect
after defect.
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And while I understand the Court's
concern, again, this is their securitization
debacle that they created, not by us. We would
have been happy to deal with Merrill Lynch
Mortgage Lending. And like my partner
mentioned, this would be a less shorter and
less contentious hearing. But this is their
mess that's now being thrust on us to untangle.
And if they screwed up the transfer of the loan
and to some extent actually benefits Tidewater
on a temporary basis, then so be it. They
should have done things better when they
decided to flip this loan on Wall Street and
Goldman Sachs and the investment banks and
LaSalle Bank and Wells Fargo and ultimately
U.S. Bank.
So we believe the sequestration of rents
should not be granted. The cross motion for
summary judgment should be granted. This case
should be dismissed.
THE COURT: Well, I've already ruled. So
the parties -- I'm going to give the parties
how much time? I would say just I'm thinking
maybe five days to see if they can reach an
agreement whether there's enough money to -
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whether you can agree on something or not. If
not, you come in front of me and we'll have
another hearing on that. And I'll figure out
how much money should go into either the court
registry or a separate trust account.
MR. WORTMAN: Okay.
THE COURT: I'm going to defer ruling on
the motions for summary judgment.
MS. HEYER: Thank you, Your Honor.
MR. WORTMAN: Thank you, Judge.
THE COURT: So five days from today. How
about I give you till the end of the week. Is
that enough time realistically? I think it
should be more than enough time.
MS. HEYER: Yes.
MR. WORTMAN: That's fine.
THE COURT: Okay. And if you need help,
come in on motion calendar maybe if you want.
Thank you everyone. The Court will be
adjourned.
(Thereupon, the proceedings concluded.)
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CERTIFICATE
STATE OF FLORIDA )
COUNTY OF PALM BEACH )
I, TRACY LYN FAZIO, Court Reporter and
Notary Public within and for the State of Florida at
Large, duly commissioned and qualified, do hereby
certify that pursuant to a notice to take said hearing
heretofore filed, the examination was reduced to
writing under my supervision; and that the transcript
is a true record of my stenographic notes.
IN WITNESS WHEREOF, I have hereunto set my
hand and affixed my official seal this 26th day of
April, 2011.
(Signer's identity unknown) Signed by Tracy Fazio <[email protected]> Time:
2011.04.26 13:29:29 -04'00' Reason: I am the author of this document and attest to the integrity of this
document. Location: Boca Raton, FL
(Signer's identity unknown) Signed by Tracy Fazio <[email protected]> Time:
2011.04.26 13:29:23 -04'00' Reason: I am the author of this document and attest to the integrity of this
document. Location: Boca Raton, FL
_______________________
TRACY LYN FAZIO
Court Reporter and
Notary Public, State of
Florida at Large
Florida Court Reporting 561-689-0999