No. 11-0396 _______________________________________________________________________ IN THE SUPREME COURT OF TEXAS _______________________________________________________________________ ECF NORTH RIDGE ASSOCIATES, L.P. and TCI 9033 WILSHIRE BOULEVARD, INC., Petitioners, v. ORIX CAPITAL MARKETS, L.L.C., U.S. BANK, N.A. a/k/a U.S. BANCORP, N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-C3, and WELLS FARGO BANK, N.A. a/k/a WELLS FARGO BANK, MINNESOTA, N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 99-C1, Respondents. ______________________________________________________________________ Appealed from the Fifth Court of Appeals District, Dallas County, Texas, No. 05-09-00066-CV ______________________________________________________________________ TCI 9033 WILSHIRE BOULEVARD, INC.'S PETITION FOR REVIEW ______________________________________________________________________ Jonathan Cunningham State Bar No. 00793574 C. Gregory Shamoun State Bar. No. 18089650 SHAMOUN & NORMAN, LLP 1755 Wittington Place, Suite 200, LB 25 Dallas, Texas 75234 214-987-1745 phone 214-521-9033 fax Attorneys for Petitioner FILEDIN THE SUPREME COURTOF TEXAS11 July 15 A11:23 BLAKE. A. HAWTHORNECLERK TCI 9033 Wilshire Boulevard, Inc. i IDENTITY OF PARTIES AND COUNSEL Petitioner TCI 9033 Wilshire Boulevard, Inc. certifies that the following is a complete list of the parties, attorneys, and any other person who has any interest in the outcome of this lawsuit: 1. Petitioner TCI 9033 Wilshire Boulevard, Inc. was a Plaintiff/Counter-Defendant in the trial court, and an Appellant in the Court of Appeals. TCI 9033 Wilshire Boulevard, Inc. is represented by Jonathan J. Cunningham and C. Gregory Shamoun, SHAMOUN & NORMAN, LLP, 1700 Wittington Place, Suite 200, LB 25, Dallas, Texas, 75234. For ease of reference, within this Petitioners Brief, TCI 9033 Wilshire Boulevard, Inc. will be referred to as "Plaintiff" or TCI 9033 Wilshire. 2. Petitioner ECF North Ridge Associates, L.P. was a Plaintiff/Counter-Defendant in the trial court, and an Appellant in the Court of Appeals. ECF North Ridge Associates, L.P. is represented by Ryan K. Lurich and Lawrence J. Friedman, FRIEDMAN & FEIGER, L.L.P., 5301 Spring Valley, Suite 200, Dallas, Texas 75254. For ease of reference, within this Petitioners Brief, ECF North Ridge Associates, L.L.P. will be referred to as Plaintiff or ECF North Ridge. 3. Respondent Orix Capital Markets, L.L.C. was a Defendant/Counter-Plaintiff in the trial court, and an Appellee in the Court of Appeals. Orix Capital Markets, L.L.C. is represented by P. Michael Jung, STRASBURGER & PRICE, LLP, 901 Main Street, Suite 4400, Dallas, Texas, 75202, Talmage Boston, WINSTEAD PC, 1201 Elm Streeet, Suite 5400, Dallas, Texas 75270 and Nicola Hobeiche, ORIX USA Corporation, 1717 Main ii Street, Suite 900, Dallas, Texas, 75201. For ease of reference, within this Petitioners Brief, Orix Capital Markets, L.L.C. will be referred to as Defendant or ORIX. 4. Respondent U.S. Bank N.A. a/k/a U.S. Bancorp, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 1996-C3 was a Defendant/Counter-Plaintiff in the trial court, and an Appellee in the Court of Appeals. U.S. Bank N.A. a/k/a U.S. Bancorp, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 1996-C3 is represented by P. Michael Jung, STRASBURGER & PRICE, LLP, 901 Main Street, Suite 4400, Dallas, Texas, 75202, Talmage Boston, WINSTEAD PC, 1201 Elm Streeet, Suite 5400, Dallas, Texas 75270 and Nicola Hobeiche, ORIX USA Corporation, 1717 Main Street, Suite 900, Dallas, Texas, 75201. For ease of reference, within this Petitioners Brief, U.S. Bank N.A. a/k/a U.S. Bancorp, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 1996-C3 will be referred to as Defendant or U.S. Bank. 5. Respondent Wells Fargo Bank, N.A. a/k/a Wells Fargo Bank, Minnesota, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 99-C1. was a Defendant/Counter-Plaintiff in the trial court, and an Appellee in the Court of Appeals. Wells Fargo Bank, N.A. a/k/a Wells Fargo Bank, Minnesota, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 99-C1 is represented by P. Michael Jung, STRASBURGER & PRICE, LLP, 901 Main Street, Suite 4400, Dallas, Texas, 75202, Talmage Boston, WINSTEAD PC, 1201 Elm Streeet, Suite 5400, Dallas, Texas 75270 and Nicola Hobeiche, ORIX USA Corporation, 1717 Main Street, Suite 900, Dallas, Texas, 75201. For ease of reference, within this Petitioners Brief, Wells Fargo Bank, N.A. a/k/a iii Wells Fargo Bank, Minnesota, N.A., as Trustee For The Mortgage Pass-Through Certificates, Series 99-C1 will be referred to as Defendant or Wells Fargo Bank. iv TABLE OF CONTENTS IDENTIFICATION OF PARTIES AND COUNSEL ...................................................... i INDEX OF AUTHORITIES .............................................................................................. iii STATEMENT OF THE CASE .......................................................................................... vi STATEMENT OF JURISDICTION ................................................................................. vii ISSUES PRESENTED FOR REVIEW ............................................................................. 1 STATEMENT OF FACTS ................................................................................................. 1 SUMMARY OF ARGUMENT .......................................................................................... 1 ARGUMENT ....................................................................................................................... 2 I. THE COURT OF APPEALS ERRONEOUS STANDING HOLDING .................................... 2 (A) The Standing Issue is Paramount Jurisdictional Issue ................................... 2 (B) ORIX Lacks Privity and Therefore Lacks Standing ..................................... 6 (C) The CWCapital Asset Mgmt. Case Is Erroneous In Several Ways ................ 8 II. ISSUES ARISING REGARDING HOLDER STATUS OF WELLS FARGO BANK ................. 10 (A) Questions Are Raised Due to Industry Irregularities ..................................... 10 (B) Wells Fargo Did Not Provide Clear Evidence of Ownership To Establish Standing As Holder of TCI 9033 Wilshires Promissory Note and Deed of Trust .................................................................................. 11 III. TCI 9033 WILSHIRE DEMONSTRATED THAT WELLS FARGO PLEADED NO DAMAGES ............................................................................................................. 10 IV. THE COURT OF APPEALS ERRED IN ITS HOLDING REGARDING THE OTHER INSURANCE PROVISION ............................................................................................. 10 CONCLUSION AND PRAYER ......................................................................................... 15 v INDEX OF AUTHORITIES CASES Alexander v. Houston Oil Field Material Co., 386 S.W.2d 540 (Tex.Civ.App.Tyler 1965, writ refd n.r.e) ) ................................................................. 11 Asshauer v. Wells Fargo Foothill, 263 S.W.3d 468 (Tex.App.Dallas 2008, pet.denied) ...................................................................... 3 Austin Nursing Center, Inc. v. Lavato, 171 S.W.3d 845 (Tex. 2005) ................................ 6 AVCO Corporation v. Interstate Southwest, Ltd., 251 S.W.3d 632 (Tex.App.Houston [14th Dist.] 2007, pet. denied) ............................................. 5,6 Basic Capital Mgmt., Inc. v. American Realty Trust, Inc., __ S.W.3d __, 2011 WL 1206376, 2011 Tex.LEXIS 247 (Tex. April 1, 2011) .............................. 4 BFP 245 Park Co. v. GMAC, 12 A.D. 3d 330, 786 N.Y.S. 2d 425 (2004) ....................... 15 Boy Scouts of America v. Responsive Terminal Sys., Inc., 790 S.W.2d 738 (Tex.App.Dallas 1990, writ denied) ................................................................ 3,12 Cadle Co. v. Lobinger, 50 S.W.3d 662 (Tex. App.Fort Worth 2001, pet. denied) ............................................................. 9 Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880 (Tex. 2001) ............................................................................................................... 6 CWCapital Asset Mgmt., LLC v. Chicago Props. LLC, 610 F.3d 497 (7th Cir. 2010) ..... 5-8 Derbigny v. Bank One, 809 S.W.2d 292 (Tex.App.Houston [14th Dist.] 1991, no writ) .................................................... 11 Deutsche Bank Natl Trust Co. v. Triplett, 2011 Ohio 478, 2011 Ohio App. LEXIS 401 (Ohio Ct. App. 2011) .............................................. 11 Eaves v. Unifund CCR Partners, 301 S.W.3d 402 (Tex.App.El Paso 2009, no pet.) ..... 9 Elizondo v. Texas Nat. Resource Conservation Commn, 974 S.W.2d 928 (Tex.App.Austin 1998, no pet.) ............................................................................ 4 vi Grinnell v. Munson, 137 S.W.3d 706 (Tex.App.San Antonio 2004, no pet.) ............... 10 Jacobsen v. SCI Texas Funeral Serv., Inc., No. 05-00-00686-CV, 2001 Tex.App. LEXIS 1517 (Tex.App.Dallas, Mar. 8, 2001, no pet.) (mem. op.) ................................................................................................................ 2 Nauslar v. Coors Brewing Co., 170 S.W.3d 242 (Tex.App.Dallas 2005, no pet.) ......... 6 OAIC Comml Assets, L.L.C. v. Stonegate Village, L.P., 234 S.W.3d 726 (Tex.App.Dallas 2007, pet. denied). ............................................................... 3,10 ORIX Capital Markets, LLC v. La Vallita Motor Inns, J.V., 329 S.W.3d 30 (Tex.App..San Antonio 2010, pet. granted) ......................................................... 1 R & R White Family Limited Partnership v. Jones, 182 S.W.3d 454 (Tex.App.Texarkana 2006, no pet.) ..................................................................... 4 Rodarte v. Investco Group, L.L.C., 299 S.W.3d 400 (Tex.App.Houston [14th Dist.] 2009, no pet.) ...................................................... 5 Shipley v. Unifund CCR Partners, 331 S.W.3d 27 (Tex.App.Waco 2010, no pet. hist.) ..................................................................... 9 South Texas Water Auth. v. Lomas, 223 S.W.3d 304 (Tex. 2007) ................................... 2,4 Texas Assn of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993) ............................................................................................................. 11 Tinsley v. Dowell, 26 S.W. 946, 948 (Tex. 1894) ............................................................... 6 United States Bank Natl Assn v. Ibanez, 941 N.E.2d 40 (Mass. 2011) ......................... 11 US Bank Natl Assn v. Madero, 913 N.Y.S.2d 612 (N.Y. Ct. App. 2011) ...................... 11 Wells v. Dotson, 261 S.W.3d 275 (Tex.App.Tyler 2008, no pet.) .................................. 3 Wells Fargo Bank, N.A. v. Ford, 15 A.3d 327, 329 (N.J. Ct. App. 2011) ....................... 11 Wells Fargo Bank, N.A. v. Konover, 2009 WL 2710229 (D. Conn. 2009) ......................... 6 vii TREATISES & OTHER AUTHORITIES Congressional Oversight Panel, Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation ............................. 10 viii STATEMENT OF THE CASE Plaintiffs TCI 9033 Wilshire Boulevard, Inc. (TCI 9033 Wilshire) and ECF North Ridge Associates, L.P. (ECF North Ridge) originally filed this lawsuit against Orix Capital Markets, L.L.C. (ORIX) on August 13, 2004, asserting causes of action for breach of contract and seeking a declaratory judgment. [CR 1:17] On September 10, 2004, Defendant ORIX filed a general denial [CR 1:36], and on January 26, 2005, ORIX filed an Original Counterclaim asserting causes of action for breach of contract. [CR 1:38] On July 11, 2005, ORIX filed its First Amended Counterclaim and its Second Amended Counterclaim on April 25, 2006, each alleging a cause of action for breach of contract and seeking declaratory judgment. [CR 1:53, 62] On November 14, 2005, the parties waived a jury trial. [CR 1:60] The parties filed Stipulated Facts with the trial court on August 4, 2006. [CR 1:73] On August 14, 2006, ORIX filed its Third Amended Counterclaim, continuing to assert its counterclaims for breach of contract and seeking declaratory judgment. [CR 1:76] On December 26, 2007, Plaintiffs TCI 9033 Wilshire and ECF North Ridge filed their Second Amended Petition, adding the lenders U.S. Bank and Wells Fargo Bank as parties. [CR 1:81] U.S Bank filed a general denial on February 8, 2008, and Wells Fargo Bank filed its general denial on February 29, 2008. [CR 1:111, 113, see also CR 1:115] On May 16, 2008, both Wells Fargo Bank and U.S. Bank each filed their First Amended Answer and Counterclaim, asserting the same breach of contract and declaratory judgment actions as ORIX. [CR 1:128, 147] The case was tried to the Trial Court beginning November 5, 2008 and ending December 5, 2008. The Trial Court issued a Final Judgment on December 18, ix 2008, finding against Plaintiffs on their causes of action and in favor of ORIX on its counterclaims, and U.S. Bank, and Wells Fargo, purportedly, on their counterclaims. [CR 2:412] Findings of Fact and Conclusions of Law were signed by the Trial Court on February 10, 2009. [CR 2:450] Plaintiffs filed a Joint Motion for New Trial on January 20, 2009 [CR 2:422], which was overruled by the Trial Court in a general order on February 26, 2009. [C. Supp. R. 3:743]. TCI 9033 Wilshire appealed the judgment to the Fifth District Court of Appeals, Dallas, Texas, No. 05-09-00066-CV. The case was submitted before a panel of consisting of Justices Michael O Neill, Douglas Lang, and Mary Murphy. On December 20, 2010, the court of appeals issued an opinion, authored by Justice Murphy; however, on January 19, 2011, the panel withdrew the opinion and vacated the previous judgment and issued a new Opinion. After motions for rehearing, on March 14, 2011, the Court of Appeals again withdrew its opinion and vacated its judgment and issued an Opinion on Rehearing. In its Opinion on Rehearing and Judgment, the court affirmed and modified the judgment of the trial court. Basically, as to that portion of the case concerning TCI 9033 Wilshire, the Court of Appeals affirmed the trial court's judgment. STATEMENT OF JURISDICTION The Texas Supreme Court has jurisdiction over this appeal under Texas Government Code section 22.001(a)(6) because the Court of Appeals has committed an error of law of such importance to the state's jurisprudence that it should be corrected. The Texas Supreme Court has jurisdiction over this appeal under Government Code section 22.001(a)(2) because the Court of Appeals' decision conflicts with this x Court's decision in South Texas Water Auth. v. Lomas, 223 S.W.3d 304, 307 (Tex. 2007) and the Waco Court of Appeals decision in Shipley v. Unifund CCR Partners, 331 S.W.3d 27 (Tex.App.Waco 2010, no pet. hist.). ISSUES PRESENTED FOR REVIEW Standing 1. The Court of Appeals erred in its holding that ORIX had standing to assert a claim for breach of contract and declaratory relief because it is contrary to well-established law and there was no evidence (or, in the alternative, insufficient evidence) to support such a holding. 2. Issues are present regarding the failure of Wells Fargo Bank to produce and offer evidence of the original promissory note and deed of trust to establish its standing and holder status. Contract Issues 3. The Court of Appeals erred in failing to address the issue that Wells Fargo Bank failed to plead an essential element (i.e., damages) and cannot assert damages should be recovered by another party. 4. The Court of Appeals erred in affirming the Trial Courts legal conclusion and finding that TCI 9033 Wilshire breached the Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing because there was no evidence (or, in the alternative, insufficient evidence) to support such a holding.1 STATEMENT OF FACTS With certain additions, in the "Background" section of its Opinion, the Court of Appeals correctly stated the nature of the case.1 Additionally, however, it is important that it is uncontroverted that ORIX was not a party, and never has been a party, and has never been an assignee to any of the loan documents offered and admitted into evidence at trial. [RR 4: pp. 21-25, 94, RR 9: p. 13] Also, it is uncontroverted that, Wells Fargo asserted no claim for damages, instead solely alleging only that ORIX is entitled to damages, if any. [CR 1, pp. 131-132] SUMMARY OF ARGUMENT Ultimately, as this Court is even now considering other cases with similar themes2, this case is about maintaining the consistency of well-established black-letter law and reigning in a trend whereby loan servicers, here a particularly notorious one, attempt to create and manipulate non-monetary defaults in order to profit by charging default interest which they have contractually negotiated with lenders to allow the servicer to receive, and take it upon themselves, without standing, to prosecute lawsuits regardless of the fact that the servicer was, and is, not a party to the underlying contracts. In this case, ORIX attempted to require TCI 9033 Wilshire to obtain terrorism insurance coverage when the specific loan documents did not require it. More importantly, it was error for the Court of Appeals to disregard well-established law and 1 Additionally, however, Petitioner neither indorses nor adopts the Court of Appeals discussion and characterization of CMBS loans in Footnote 1 of the Court of Appeals Opinon. See ECF North Ridge Assoc., L.P. v. Orix Capital Markets, L.L.C., 336 S.W.3d 400, 403 (Tex.App.Dallas 2011, pet. filed). 2 ORIX Capital Markets, LLC v. La Vallita Motor Inns, J.V., 329 S.W.3d 30(Tex.App..San Antonio 2010, pet. granted). 2 hold that ORIX has standing to assert a breach of contract action and seek damages and attorneys fees in ORIXs own name, when it is undisputed in the record that ORIX lacks both privity and third-party beneficiary status. Finally, in addition to the undisputed fact that Wells Fargo, the Trustee regarding CMBS loans related to TCI 9033 Wilshires mortgage, made no claim or pleading for damages, it also failed to prove its standing and status as the actual holder of TCI 9033 Wilshires original promissory note and deed of trust. ARGUMENT I. THE COURT OF APPEALS ERRONEOUS STANDING HOLDING. A. The Standing Issue is a Paramount Jurisdictional Issue. In the present case, Defendant/Counter-Claimant ORIX brought affirmative claims against TCI 9033 Wilshire for breach of contract and for declaratory judgment, wrongfully attempting to bring suit, in its own name and for its own benefit, on a contract to which it admittedly lacks privity and which ORIX is clearly not an intended third-party beneficiary with any legal rights under the contract. [RR 4: pp. 21-25] Standing is a component of subject matter jurisdiction and a constitutional prerequisite to maintaining a suit under Texas law. South Texas Water Auth. v. Lomas, 223 S.W.3d 304, 307 (Tex. 2007). Standing may be raised at any time and may not be waived by the parties. Id. Further, standing is not an affirmative defense. Jacobsen v. SCI Texas Funeral Serv., Inc., No. 05-00-00686-CV, 2001 Tex.App. LEXIS 1517 at *5 (Tex.App.Dallas, Mar. 8, 2001, no pet.) (mem. op.). 3 B. ORIX Lacks Privity and Therefore Lacks Standing. In the context of a breach of contract action, the courts have long recognized that the general rule is that only the parties to a contract have the right to complain of a breach thereof. Wells v. Dotson, 261 S.W.3d 275, 284 (Tex.App.Tyler 2008, no pet.). Further, the courts have long been consistent in applying the general rule that in contract actions, privity of contract is an essential element of recovery. Boy Scouts of America v. Responsive Terminal Sys., Inc., 790 S.W.2d 738, 747 (Tex.App.Dallas 1990, writ denied. For purposes of standing, privity is established by proving that the defendant was a party to an enforceable contract with either the plaintiff or a party who assigned its cause of action to the plaintiff. OAIC Comml Assets, L.L.C. v. Stonegate Village, L.P., 234 S.W.3d 726, 738 (Tex.App.Dallas 2007, pet. denied). In July 2008, the Dallas Court of Appeals itself reaffirmed the principle that without a breach of a legal right belonging to that particular plaintiff, that plaintiff has no standing to litigate. Asshauer v. Wells Fargo Foothill, 263 S.W.3d 468, 471 (Tex.App.Dallas 2008, pet.denied). In the present suit, it was uncontroverted that ORIX lacks contractual privity with TCI 9033 Wilshire. And, ORIX did not allege, prove, or proffer any evidence of any assignment of any rights or causes of action to it regarding the TCI 9033 Wilshire loan documents. The uncontroverted evidence, in fact, establishes the opposite as a matter of law. The very contract upon which ORIXs counterclaim relies expressly excludes ORIX 4 as having standing to assert any legal or equitable right under it.3 Such is the definition of lack of standing. Lacking direct privity, ORIX also did not allege any third-party beneficiary status; and, as the contracts themselves demonstrate, it was the clear express intention of the parties to exclude any potential third-party beneficiaries as having standing to claim any legal or equitable rights. There is a presumption against conferring third party beneficiary status on noncontracting parties. South Texas Water Auth., 223 S.W.3d at 304.4 The express provisions contained in the PSA, which is the sole document upon which ORIX claims to rely to derive its standing to have brought suit in ORIXs own name and seeking damages to be paid to ORIX, actually demonstrate that ORIX is not an assignee,5 agent, attorney-in-fact,6 or otherwise possesses authority or rights to bring suit 3 Section 15.1(6) of the TCI 9033 Wilshire Deed of Trust (Joint Trial Exhibit 4) particularly states -- 4 Very recently, the Texas Supreme Court reiterated that the law governing third-party beneficiaries is relatively settled and that a court will not create a third party beneficiary contract by implication. Basic Capital Mgmt., Inc. v. American Realty Trust, Inc., __ S.W.3d __, 2011 WL 1206376 at *3, 2011 Tex.LEXIS 247 at *11-12 (Tex. April 1, 2011). 5 R & R White Family Limited Partnership v. Jones, 182 S.W.3d 454, 459 (Tex.App.Texarkana 2006, no pet.) (To recover under the theory that a cause of action was assigned to another party, the party claiming the assigned rights must prove that the cause of action was in fact assigned.). 6 Texas courts have expressly recognized that An attorney-in-fact is not a real party in interest. The attorney is merely an agent of the real party in interest and does not possess interests sufficient to qualify for real party in interest status. Thus, the attorney-in fact cannot bring suit in its own name. Elizondo v. Texas Nat. Resource Conservation Commn, 974 S.W.2d 928 (Tex.App.Austin 1998, no pet.). 5 to enforce the rights or remedies under the applicable loan documents in its own name and for its own benefit. D. The CWCapital Asset Mgmt. Case Is Erroneous In Several Ways. The Court of Appeals relied upon one singular case to reach its holding regarding the issue of ORIX having standing to assert a breach of contract action in its own name and for its own benefit. Unfortunately, the holding in CWCapital Asset Mgmt., LLC v. Chicago Properties, LLC, 610 F.3d 497 (7th Cir. 2010), was not only unnecessary dicta7 in the case, but also demonstrably erroneous and contrary to well-established black-letter Texas law. In CWCapital Asset Mgmt., Justice Posner recognized that the servicer was not an assignee who obtained legal rights in the underlying mortgage contracts. Id. at 501.8 7 The CWCapital Asset Mgmt. case was not truly one of the servicer attempting to bring a breach of contract cause of action in its own name and for its own benefit, but instead was a case involving capacity under FED. R. CIV. P. 17. See id at 500-502. The courts erroneous reasoning that the servicer somehow obtained equitable ownership of the claim was clearly rendered dicta since the court resolved the Rule 17 issue on the basis that the trustee had submitted an affidavit ratifying the authority of the servicer to sue on its behalf. CWCapital Asset Mgmt., 610 F.3d at 502. In the present suit, instead, the issue has always been one of standing since ORIX asserted a breach of contract action in its own name, claiming its own legal interest and its own damages. ORIX never pleaded or asserted a representative capacity, which is accentuated by the fact that the Trustee, Wells Fargo was itself also a party to the suit, rendering any representative capacity of ORIX unnecessary. 8 The courts statement that although the plaintiff may not be an assignee, it has a personal stake in the outcome of the lawsuit because it receives a percentage of the proceeds of a defaulted loan that it services, does not operate to grant standing as a third-party beneficiary to the underlying contracts. CWCapital Asset Mgmt, 610 F.3d at 501. Certainly, as here, although the Trustee and the servicer may contract to give a percentage of proceeds to the servicer, such executory contract in no way establishes any legal interest or right of the servicer, either as a party in privity or a third-party beneficiary, in the underlying mortgage contracts between the debtor/mortgagor and the lender/trustee, the owner of the debt. Indeed, the test is not whether someone may just simply have some interest in the outcome of the suit, but whether that plaintiff has a legally cognizable and enforceable interest in the outcome of the case, meaning, regarding a suit on contract, whether the plaintiff owns a legal right in the contract. Rodarte v. Investco Group, L.L.C., 299 S.W.3d 400, 407 (Tex.App.Houston [14th Dist.] 2009, no pet.) (standing concerns the question of whether a party has an enforceable right or interest); AVCO Corporation v. Interstate Southwest, Ltd., 251 S.W.3d 632, 649 (Tex.App.Houston [14th Dist.] 2007, 6 Also, Justice Posner expressly recognized that if the Pooling and Servicing Agreement made the servicer a mere attorney, the servicer would not have standing to bring legal actions in its own name and for its own benefit.9 Id. In the present case, ORIX never presented any evidence of having received any power of attorney on behalf of the Trustee, even to make ORIX an asserted attorney-in-fact to bring suit in a representative capacity.10 Instead, as in CWCapital Asset Mgmt., the Dallas Court of Appeals relied solely upon selective language within the Pooling and Servicing Agreement to wrongfully conclude that ORIX was granted a right and authority11 to bring a breach of contract suit in its own name and for its own benefit. In particular, both Justice Posner and the Court of Appeals erroneously interpreted the following clause in the PSA to permit ORIX to institute lawsuits in its own name and not a representative capacity Notwithstanding anything contained herein to the contrary, neither the Master Servicer nor the Special Servicer shall without the Trustees written consent: (i) except as relating to a Mortgage Loan which the Master Servicer or the Special Servicer, as applicable, is servicing pursuant to their respective duties herein (in which case servicer shall give notice to the Trustee thereof), initiate any action, suit or proceeding solely under the Trustees name without indicating the Master Servicers or Special Servicers, as applicable, representative capacity, or (ii) take any action pet. denied) (a plaintiff with no legally cognizable interest in the outcome of the case lacks standing to sue on its own behalf). 9 Texas law is also well-established and clear on this point. Tinsley v. Dowell, 26 S.W. 946, 948 (Tex. 1894); AVCO Corporation v. Interstate Southwest, Ltd., 251 S.W.3d 632, 652-53 (Tex.App.Houston [14th Dist.] 2007, pet. denied). 10 Compare to Wells Fargo Bank, N.A. v. Konover, 2009 WL 2710229 at *1 (D. Conn. 2009) (slip copy). 11 It is also well-settled law that a plaintiff must have both standing and capacity to bring a lawsuit. Austin Nursing Center, Inc. v. Lavato, 171 S.W.3d 845, 848 (Tex. 2005); Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880, 884 (Tex. 2001); Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 255 (Tex.App.Dallas 2005, no pet.). 7 with the intent to, or which actually does cause, the Trustee to be registered to do business in any state. [RR 21, Exh. 136, p. 54] The Court of Appeals wrongfully conclude[d] under the same reasoning as in CWCapital that this language indicates that the servicer can sue in its own name if the suit relates to a loan that it is servicing, or in the trustees name without indicating that it is doing so in a representative capacityimplying that it is not doing so in a representative capacity if it is suing in regard to a servicing-related loan. CWCapital Asset Mgmt., 610 F.3d at 501 [emphasis in original]. Simply, this conclusion, resting upon perceived indication and implication, is extremely erroneous, and even contrary to a straightforward reading of the provision. The clause does not authorize the servicer to initiate any action in its own name, but instead clearly requires the servicer to always indicate its representative capacity of the Trustee, and only in cases relating to a mortgage being serviced does the servicer need not previously obtain the Trustees written consent to initiate, but must still provide the Trustee notice.12 There simply is no indication or implication of what the servicer can do in its own name and for its own benefit. Accordingly, the Court of Appeals reliance and adoption of Justice Posners erroneous conclusion was, likewise, erroneous under the clear unambiguous language of the Pooling and Servicing Agreement. 12 The seminal requirement addressed by the clause is the necessity of obtaining the Trustees prior written consent, not whether the servicer can initiate actions in its own name and for its own benefit. This is borne out by part (ii) of the provision. So, the clause is merely stipulating when the servicer needs to obtain prior written consent, and has nothing to do with indicating, implying, granting, or even assigning the servicer any authority whatsoever, much less standing, to bring a legal breach of contract action in the servicers own name and for its own benefit. 8 More importantly, despite recognizing that the ORIX, as the servicer, is not an assignee and that the trust still owns and holds any legal rights, title and interest in the mortgage contracts, the Court of Appeals adopted the CWCapital Asset Mgmt. courts wrongful conclusion that the PSA somehow effectively delegates what is effectively equitable ownership of the claim and the trust holds merely the bare legal title; thus, effectively creating some sort of new category of third-party beneficiary, entirely unintended and even expressly denied by the mortgage contract parties, who can assert a legal action for breach of contract.13 The Court of Appeals completely disregarded the well-established law and concluded that such black-letter law does not control the current circumstances of loan servicers of CMBS loans under pooling and servicing agreements. As a result, the Court of Appeals wrongfully carved out some new exception to contract law whereby, without any ownership or title interest in the loan contracts, loan servicers can claim their pooling and servicing agreements convey a post-contract equitable right or third-party beneficiary status giving them an equitable claim and standing to sue for breach of contract in their own names and for their own benefit. Nothing could be further than the established law in Texas. Shortly after oral argument in this case, and before the Dallas Court of Appeals issued its original opinion, the Waco Court of Appeals issued an opinion that, in fact, 13 In fact, in the entire universe of Texas jurisprudence available on either Westlaw or Lexis, the term equitable ownership of the claim appears in one singular opinion the Court of Appeals opinion in the present case, quoting CWCapital Asset Mgmt. Nowhere in Texas jurisprudence has Petitioner found a plaintiff asserting a mere equitable interest in a claim being allowed to bring a legal action for breach of contract, particularly where there is neither privity nor third-party beneficiary status. The Court of Appeals holding in this case would result in a complete watershed change in the well-established Texas law regarding standing in breach of contract actions. 9 directly addresses the exact situation presented. In Shipley v. Unifund CCR Partners, 331 S.W.3d 27 (Tex.App.Waco 2010, no pet. hist.), the assignment, much like the purpose of the Pooling and Servicing Agreement in the present suit, assigned the rights and duties to collect the debt; however, again much like a pooling a servicing agreement, retained title and ownership of the debt in the assignor. Id. at 29. Directly applicable to what the circumstances of a pooling and servicing agreement regarding a servicer of a CMBS loan, the Waco Court of Appeals correctly held that Because standing denotes a partys justiciable interest in a controversy, it is only the party whose primary legal right has been breached that may seek redress for that injury. Eaves v. Unifund CCR Partners, 301 S.W.3d 402, 404 (Tex.App.El Paso 2009, no pet.) Without a breach of a legal right belonging to that party, that party has no standing to litigate. Id. (citing Cadle Co. v. Lobingier, 50 S.W.3d 662, 669-70 (Tex.App.Fort Worth 2001, pet. denied)). Unifund CCR Partnerss [sic] right is solely limited to taking whatever steps are necessary to collect a debt owned entirey by someone else, while holding no title, interest, or rights in anything else. We do not find that this is sufficient to establish that Unifund CCR Partners has standing to pursue this claim in its own name. Shipley, 331 S.W.3d at 29-30. In the present suit, no evidence of any type of ownership of the debt and mortgage contracts by ORIX exists, and the PSA did no more than the assignment in Shipley, assigning ORIX rights and duties of collection, but retaining all title, interest and ownership rights with the Trustee. Accordingly, as in Shipley, ORIX did not have standing to bring a legal action for breach of contract in its own name, for its own benefit, seeking its own damages, and the Court of Appeals erred in not dismissing ORIXs suit for lack of subject matter jurisdiction.14 14 The lack of privity which deprives subject-matter jurisdiction regarding ORIXs breach of contract counterclaim against TCI 9033 Wilshire also requires dismissal of ORIXs claim for declaratory relief 10 II. ISSUES ARISING REGARDING HOLDER STATUS OF WELLS FARGO BANK. A. Questions Are Raised Due to Industry Irregularities. In the fall of 2010, after this case was tried, and even argued to the Court of Appeals, reports of irregularities in the CMBS industry, surfaced as a result of scandals involving robo-signing. Particularly, on November 16, 2010, the Congressional Oversight Panel issued a report Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation.15 [Appendix, Tab 11] Noting that questions of irregularities had arisen in the securitized market, the Report stated that documentation standards in the foreclosure process have helped shine a light on potential questions regarding the ownership of loans sold into securitization without the proper assignment of title to the trust that sponsors the mortgage securities. Id. at p. 64. B. Wells Fargo Did Not Provide Evidence of Clear Ownership to Establish Standing as Holder Regarding TCI 9033 Wilshires Promissory Note and Deed of Trust. Wells Fargo, as Trustee and alleged holder and owner of the TCI 9033 Wilshire note and mortgage, did not provide evidence of possessing the original loan documents as part of the same putative counterclaim. Recently, in OAIC Comml Assets, L.L.C., where similar to the present case the plaintiff asserted breach of contract and declaratory judgment claims, the Dallas Court of Appeals expressly held that because the plaintiff lacked privity there were no rights, status, or other legal relations affected by the agreement in relation to the parties required by the Uniform Declaratory Judgment Act for the court to determine. Id., 234 S.W.3d at 745. Therefore, [a]ccordingly, OAIC has no standing to assert its claims for declaratory relief respecting the agreement. Id. (citing Grinnell v. Munson, 137 S.W.3d 706, 712-14 (Tex.App.San Antonio 2004, no pet.) (plaintiff not in privity to written contract lacked standing to seek declaratory relief respecting contract). Also, importantly, the Dallas Court of Appeals added, Because we concluded above that OAIC lacks standing to bring its claims for breach of contract and declaratory relief, OAIC is not entitled to attorneys fees under either chapter 38 or the Uniform Declaratory Judgments Act. We vacate the trial courts award of attorneys fees to OAIC and dismiss OAICs claim for attorneys fees for lack of jurisdiction. OAIC Comml Assets, L.L.C , 234 S.W.3d at 746. 15Available at http://cybercemetery.unt.edu/archive/cop/20110401223205/http:/www.cop.senate.gov/ 11 and chain of assignments to establish its standing as owner and holder.16 Such evidence was clearly Wells Fargos burden. It has long been settled law in Texas that although a general denial does not put the plaintiff to proof of the execution of the instrument in suit, it requires him to produce the negotiable instrument and introduce it into evidence or show an excuse for not doing so. Alexander v. Houston Oil Field Material Co., 386 S.W.2d 540, 543 (Tex.Civ.App.Tyler 1965, writ refd n.r.e). The claimant has the burden of producing and introducing the original note into evidence. Derbigny v. Bank One, 809 S.W.2d 292, 294 (Tex.App.Houston [14th Dist.] 1991, no writ).17 Accordingly, in the present case, even though the Trustee, Wells Fargo Bank, was a party to the suit, no evidence was presented of the Trustees possession of the original loan documents or the chain of assignments to establish that Wells Fargo was the actual and legal holder of the TCI 9033 Wilshire promissory note and mortgage documents. 16 Although these issues arose and came to light after the trial in this case, it must be remembered that the question of standing is jurisdictional, cannot be waived, and can be raised at any time, even on appeal. Texas Assn of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445-46 (Tex. 1993). 17 With the advent of the issues of irregularities, in recent months, several other states supreme courts and appellate courts have issued decisions emphasizing the requirement that a party seeking to enforce a mortgage note must prove its connection to the note. See United States Bank Natl Assn v. Ibanez, 941 N.E.2d 40, 53 (Mass. 2011) (affirming denial of action to quiet title by securitization trusts that could not prove the assignments of the mortgages); Wells Fargo Bank, N.A. v. Ford, 15 A.3d 327, 329 (N.J. Ct. App. 2011) (foreclosure judgment reversed because plaintiff securitization trustee, Wells Fargo Bank, failed to present any evidence that the note had been assigned to it); Deutsche Bank Natl Trust Co. v. Triplett, 2011 Ohio 478, 2011 Ohio App. LEXIS 401 (Ohio Ct. App. 2011) (foreclosure reversed where bank failed to offer evidence establishing that it owned the note at the time of the filing of the complaint); US Bank Natl Assn v. Madero, 913 N.Y.S.2d 612, 613-14 (N.Y. Ct. App. 2011) (plaintiff failed to demonstrate the prima facie requirement to establish that it had standing as the lawful holder or assignee of the subject note on the date it commenced this action). While the precise legal issues in these cases varied, all of these cases have arisen in a securitization context, they all require actual proof of standing by evidence of the original loan documents and proof of actual assignment, and they demonstrate the very concerns and irregularities mentioned by the Congressional Oversight Panel. 12 III. TCI 9033 WILSHIRE DEMONSTRATED THAT WELLS FARGO PLEADED NO DAMAGES. The Court of Appeals recognized that TCI 9033 Wilshire raised the issue of Wells Fargo failure to plead, and prove, the essential element of damages; however, the court erred in its opinion by failing to address the issue on the asserted basis that TCI 9033 Wilshire had not briefed the issue. To the contrary, TCI 9033 Wilshire expressly directed the Court of Appeals to the fact that Importantly, Wells Fargo asserted no claim for damages, instead solely alleging only that ORIX is entitled to damages, if any, and included appropriate record references.18 Although unsure of how much citation and demonstration the Court of Appeals may consider adequate briefing, TCI 9033 Wilshire certainly did provide the appropriate legal standard with the direct quotation from the Dallas Court of Appeals itself that [O]ne may not maintain an action based upon the harm suffered by another 18 TCI 9033 Wilshire further provided briefing demonstrating That only ORIX is a party asserting a counterclaim is further demonstrated by the live pleading of Defendant Wells Fargo Bank in its First Amended Answer and Counterclaim. [CR 1; p. 128] Although titled as such (although the law instructs that a title is rather meaningless, instead it is the substance of the claims included from which meaning is derived), under the section entitled Counterclaim, each and every paragraph is an exact copy, word for word, merely parroting ORIXs Third Amended Counterclaim. [compare CR 1: pp. 76-80, CR 1:, pp. 130-133] In fact, nowhere in such counterclaim is Wells Fargo Bank even mentioned. And, the prayer of the pleading actually only identifies Wells Fargo Bank as defendant (presumably in relation to the First Amended Answer) and expressly identifies ORIX as the Counter-Plaintiff (necessarily asserting the counterclaim included in the pleading). [CR 1: p. 132] Accordingly, particularly when the repeated stipulations placed into the record by counsel are considered, it becomes clear the live pleadings reveal that only ORIX is asserting claims against TCI alleging breach of contract and for declaratory relief. And TCI 9033 Wilshire briefed the Court of Appeals that, Such is further demonstrated by an examination of the evidence presented, in which absolutely NO evidence was proffered of any damages, an essential element, incurred by Wells Fargo Bank. In fact, even ORIX presented no evidence of any damages alleged to support a putative counterclaim. [RR 4: p. 66]. 13 from Boy Scouts of America v. Responsive Terminal Sys., Inc., 790 S.W.2d 738, 746 (Tex.App.Dallas 1990, writ denied). Whereas TCI 9033 Wilshire not only demonstrated the lack of pleading and evidence, as well as the law that a party cannot assert damages alleged as being suffered by someone else, the Court of Appeals clearly erred in holding that issue was waived as not having been briefed and failing to address the issue. IV. THE COURT OF APPEALS ERRED IN ITS HOLDING REGARDING THE OTHER INSURANCE PROVISION. In its Opinion on Rehearing, the Court of Appeals only addressed the terrorism insurance issue under the other insurance provision of section 2.1(h) of the Deed of Trust, necessarily presuming that the Court of Appeals agreed with TCI 9033 Wilshires briefing that, as a matter of law, terrorism insurance could not have been required under section 2.1(a), the all risk provision, as TCI 9033 Wilshire maintained both at trial and on appeal. By the express language of Section 2.1(h), before ORIX, acting on behalf of the lender/holder Wells Fargo, could require terrorism insurance coverage for the Wilshire Medical Building, ORIX was obligated to determine that terrorism was a hazard or casualty which at that time [May 2004] was commonly insured against by similar properties, similarly situated. Notwithstanding this express obligation, ORIXs that, instead of complying with TCI 9033 Wilshires Deed of Trust, ORIX merely issued a blanket order to require ALL of the borrowers of ALL the loans it serviced to procure terrorism insurance. [RR 13: pp. 44-48, 51-52, 75-77] ORIXs blanket order even 14 contradicted its own Policies and Practices Insurance Administration that directed its insurance department to cause collateral properties to be adequately insured against loss in accordance with generally accepted servicing practices and the constraints of applicable loan documents. [RR 13: pp. 69-71; RR 22; Exh. 154] At trial, ORIX attempted to support its blanket decision by relying (solely) upon a survey that indicated it was common for servicers of commercial mortgage backed securities (CMBS loans) to require terrorism insurance. However, the survey ORIX relied upon at trial to justify its decision was not published, and therefore unknown by ORIX, at the time ORIX made the blanket decision to require all of the borrowers of the loans it serviced to procure terrorism insurance. [RR 19: Exh. 120] And, the survey did not survey loans securing buildings clearly similar to the Wilshire Medical Building, much less similarly situated. [RR 7: p. 92] ORIX relied upon the survey as the sole evidence to justify, years after the fact, the blanket decision to require all the CMBS loans it serviced to obtain terrorism insurance. Nonetheless, the Court of Appeals erroneously held that TCIs Deed of Trust did not require what the Court described as an individualized commonality analysis. Incredibly, rather than holding what the document seems to clearly require, the Court of Appeals concluded that the contract only requires that the required insurance be commonly required and insured against, regardless whether ORIX actually knew at the time it required the insurance. However, the Court of Appeals reasoning ignores, and in fact removes from the contract (and ORIXs own obligations) the requirements that the constraints of the appropriate loan documents be analyzed and considered before 15 requiring such additional insurance coverages. Such conclusion defies the logic that the obligations and requirements in the contract clearly contemplate that the party have a necessary mens rea, so to speak, and know that at the time it is requiring the additional insurance, it is doing so because it meets the constraints of the contract, i.e., it is customarily required and at the time commonly insured against for similarly situated, similar properties. The Court of Appeals erred in reaching its conclusion, particularly when the evidence foreclosed the possibility that the MBA study relied upon by ORIX to justify its blanket decision (and which the Court of Appeals spent much space describing) was not published, could not have been known, and was not known by ORIX at the time it required the additional terrorism insurance.19 CONCLUSION AND PRAYER. WHEREFORE PREMISES CONSIDERED, for the reasons discussed above, TCI 9033 Wilshire respectfully request that this Court grant a petition for review, reverse the trial courts and Dallas Court of Appeals judgments, and render judgment in favor of TCI 9033 Wilshire, or in the alternative remand the case for a new trial. 19 Further, the Court of Appeals citation to BFP 245 Park Co. v. GMAC Commercial Mortg. Corp., 12 A.D.3d 33, 332, 786 N.Y.S.2d 425 (N.Y. App. Div. 2004) on this point is somewhat disingenuous because the requisite conditional language to which the BFP 245 court was referring was language which would have stipulated that any all risk coverage would have to be maintained for all insured risks that, at the time of the contract, were included in an all risk policy. As the Dallas Court of Appeals conclusion in this case would appear to require, every contract would have to expressly include a conditional statement for nearly every sentence of obligation to make clear that the parties must have actual knowledge of the basis for requiring the obligation be performed, in order to prevent a party from merely hoping that its actions can be justified a later time during litigation. 16 Respectfully submitted, /s/ Jonathan J. Cunningham Jonathan J. Cunningham State Bar No. 00793574 C. Gregory Shamoun State Bar No. 18089650 SHAMOUN & NORMAN, LLP 1755 Wittington, Suite 200 Dallas, Texas 75234 214-987-1745 phone 214-521-9033 fax Attorneys for Petitioner TCI 9033 Wilshire Blvd., Inc. 17 CERTIFICATE OF SERVICE This is to certify that a true and correct copy of the above and foregoing has been forwarded to all counsel of record in accordance with the Texas Rules of Appellate Procedure on this 15th day of July, 2011, as follows: P. Michael Jung, Esq. Strasburger & Price, L.L.P. 901 Main Street, Suite 4400 Dallas, Texas 75202 (214) 651-4300 (Telephone) (214) 651-4330 (Telecopier) Talmage Boston, Esq. Winstead P.C. 5400 Renaissance Tower 1201 Elm Street Dallas, Texas 75270 (214) 745-5709 (Telephone) (214) 745-5390 (Telecopier) Ryan K. Lurich, Esq. Friedman & Feiger, L.L.P. 5301 Spring Valley, Suite 200 Dallas, Texas 75254 (972) 788-1400 (Telephone) (972) 788-2667 (Telecopier) /S/ Jonathan J. Cunningham Jonathan J. Cunningham No. 11-0396 _______________________________________________________________________ IN THE SUPREME COURT OF TEXAS _______________________________________________________________________ ECF NORTH RIDGE ASSOCIATES, L.P. and TCI 9033 WILSHIRE BOULEVARD, INC., Petitioners, v. ORIX CAPITAL MARKETS, L.L.C., U.S. BANK, N.A. a/k/a U.S. BANCORP, N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-C3, and WELLS FARGO BANK, N.A. a/k/a WELLS FARGO BANK, MINNESOTA, N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 99-C1, Respondents. ______________________________________________________________________ Appealed from the Fifth Court of Appeals District, Dallas County, Texas, No. 05-09-00066-CV ______________________________________________________________________ APPENDIX TO TCI 9033 WILSHIRE BOULEVARD, INC.'S PETITION FOR REVIEW ______________________________________________________________________ Jonathan Cunningham State Bar No. 00793574 C. Gregory Shamoun State Bar. No. 18089650 SHAMOUN & NORMAN, LLP 1755 Wittington Place, Suite 200, LB 25 Dallas, Texas 75234 214-987-1745 phone 214-521-9033 fax Attorneys for Petitioner TCI 9033 Wilshire Boulevard, Inc. CERTIFICATE OF SERVICE This is to certify that a true and correct copy of the above and foregoing Appendix has been forwarded to all counsel of record in accordance with the Texas Rules of Appellate Procedure on this 15th day of July, 2011, as follows: P. Michael Jung, Esq. Strasburger & Price, L.L.P. 901 Main Street, Suite 4400 Dallas, Texas 75202 (214) 651-4300 (Telephone) (214) 651-4330 (Telecopier) Talmage Boston, Esq. Winstead P.C. 5400 Renaissance Tower 1201 Elm Street Dallas, Texas 75270 (214) 745-5709 (Telephone) (214) 745-5390 (Telecopier) Ryan K. Lurich, Esq. Friedman & Feiger, L.L.P. 5301 Spring Valley, Suite 200 Dallas, Texas 75254 (972) 788-1400 (Telephone) (972) 788-2667 (Telecopier) /S/ Jonathan J. Cunningham Jonathan J. Cunningham APPENDIX TAB "1" -- Trial Court Final Judgment dated December 19, 2008 (CR 2; pp. 412-415). TAB "2" -- Trial Court Findings of Fact and Conclusions of Law, dated February 10, 2009 (CR 2: 450-462). TAB "3" -- Dallas Court of Appeals Opinion dated December 20, 2010. TAB "4" -- Dallas Court of Appeals Opinion dated January 19, 2011. TAB "5" -- Dallas Court of Appeals Opinion on Rehearing dated March 14, 2011. TAB "6" -- Joint Trial Exhibit No. 3, Promissory Note [RR 17, Exh. 3] TAB "7" -- Joint Trial Exhibit No. 4, Deed of Trust [RR 17, Exh. 4] TAB "8" -- Excerpts from Trial Exhibit 136, Pooling and Servicing Agreement [RR 21, Exh. 136] TAB "9" -- CWCapital Asset Mgmt., LLC v. Chicago Props., LLC, 610 F.3d 497 (7th Cir. 2010) TAB "10" -- Shipley v. Unifund CCR Partners, 331, S.W.3d 27 (Tex.App.Waco 2010, no pet. hist.) TAB "11 -- Congressional Oversight Panel issued a report Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation, dated November 16, 2010. No. 11-0396IN THE SUPREME COURT OF TEXASECF NORTH RIDGE ASSOCIATES, L.P. and TCI 9033 WILSHIREBOULEVARD, INC.,Petitioners,v.ORIX CAPITAL MARKETS, L.L.C., U.S. BANK, N.A. a/k/a U.S. BANCORP,N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES,SERIES 1996-C3, and WELLS FARGO BANK, N.A. a/k/a WELLS FARGOBANK, MINNESOTA, N.A., as Trustee FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 99-Cl,Ref.,pondents.Appealed from the Fifth Court of Appeals District, Dallas County, Texas,No.05-09-00066-CVAPPENDIX TO TCI 9033 WILSHIRE BOULEVARD, INC.'SPETITION FOR REVIEWJonathan CunninghamState Bar No. 00793574C. Gregory ShamounState Bar. No. 18089650SHAMOlJN & NORMAN, LLP1755 Wittington Place, Suite 200, LB 25Dallas, Texas 75234214-987-1745 phone214-521-9033 faxAttorneys for PetitionerTel 9033 Wilshire Boulevard, Inc.CERTIFICATE OF SERVICEThis is to certify that a true and correct copy of the above and foregoing Appendixhas been forwarded to all counsel of record in accordance with the Texas Rules ofAppellate Procedure on this 15thday of July, 2011, as follows:P. Michael Jung, Esq.Strasburger & Price, L.L.P.901 Main Street, Suite 4400Dallas, Texas 75202(214) 651-4300 (Telephone)(214) 651-4330 (Telecopier)Talmage Boston, Esq.Winstead P.e.5400 Renaissance Tower1201 Elm StreetDallas, Texas 75270(214) 745-5709 (Telephone)(214) 745-5390 (Telecopier)Ryan K. Lurich, Esq.Friedman & Feiger, L.L.P.5301 Spring Valley, Suite 200Dallas, Texas 75254(972) 788-1400 (Telephone)(972) 788-2667 (Telecopier)lSI Jonathan J. CunninghamJonathan J. CunninghamAPPENDIXTAB "1" -- Trial Court Final Judgment dated December 19,2008 (CR 2; pp. 412-415).TAB "2" -- Trial Court Findings of Fact and Conclusions of Law, dated February 10,2009 (CR 2: 450-462).TAB "3" -- Dallas Court of Appeals Opinion dated December 20,2010.TAB "4" -- Dallas Court of Appeals Opinion dated January 19,2011.TAB "5" -- Dallas Court of Appeals Opinion on Rehearing dated March 14,2011.TAB "6" -- Joint Trial Exhibit No.3, Promissory Note [RR 17, Exh. 3]TAB "7" -- Joint Trial Exhibit No.4, Deed of Trust [RR 17, Exh. 4]TAB "8" -- Excerpts from Trial Exhibit 136, Pooling and Servicing Agreement[RR 21, Exh. 136]TAB "9" -- CWCapital Asset Mgmt.. LLC v. Chicago Props., LLC, 610 F.3d 497(ihCir. 2010)TAB" 10" -- Shipley v. Unifimd CCR Partners, 331, S.W.3d 27(Tex.App.---Waco 2010, no pet. hist.)TAB" 11" -- Congressional Oversight Panel issued a report Examining theConsequences 0/ Mortgage Irregularities for Financial Stability andForeclosure Mitigation, dated November 16, 2010.APPENDIXTAB"I"CAUSE NO. 04-07956-GECF NORTH RIDGE ASSOCIATES, L.P.AND TCI 9033 WILSHIRE BOULEVARD,INC.IN THE DISTRICT COURT OFDALLAS COUNTY, TEXAS134th JUDICIAL DISTRICTPlaintiffs and Counter-Defendants,Defendants and Counter-Plaintiffs.v.ORIX CAPITAL MARKETS, L.L.C., U.S. BANK, N.A., a/k/a U.S. BANCORP, N.A., AS TRUSTEE FOR THE MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-C3 and WELLS FARGO BANK, N.A., a/k/a WELLS FARGO BANK, MINNESOTA N.A., AS TRUSTEE FOR THE MORTGAGE PASS-THROUGH CERTIFICATES SERIES 99-1 FINAL JUDGMENTBeginning November 5thand ending December 5, 2008, this cause was called to trial and carneon to be heard. ECF North Ridge Associates, L.P. ("ECF"), and TCI 9033 Wilshire Boulevard, Inc.("TCI"), Plaintiffs and Counter-Defendants, appeared through their designated representative andattorneys of record, and ORIX Capital Markets, LLC ("ORIX"), U.S. Bank, N.A., a/k/a U.S. Bancorp,N.A., as Trustee for the Mortgage Pass-Through Certificates, Series 1996-C3, and Wells Fargo Bank,N.A., a/k/a Wells Fargo Bank, Minnesota N.A., as Trustee for the Mortgage Pass-Through CertificatesSeries 99-1, Defendants and Counter-Plaintiffs, appeared through their designated representatives andattorneys of record, and all announced ready for trial. The subject contracts between the partiescontained a provision that waived the right to trial by jury, all questions of fact were submitted to theComi, and the case proceeded to trial.The Court, after hearing the evidence and arguments of counsel, is of the opmlOn thatDefendant and Counter-Plaintiff ORIX, acting in its capacity as (i) owner and holder (as of July 25,FINAL JUDGMENT - Page 12006) of the loans formerly held by U.S. Bank, Trustee, on the subject ECF loan, and (ii) SpecialServicer for Wells Fargo Bank, Trustee, on the subject TCI loan, has prevailed on its pleaded causes ofaction in its counterclaim against ECF and TCI for its breach of contract and declaratory relief causesof action, and therefore, is entitled to recover the $217,027.38 in default interest previously paid underprotest by ECF in 2005, which ORIX has been holding in an escrow account since it was paid; andORIX is also entitled to recover the $302,335.53 in default interest previously paid by TCI in 2005,which ORIX has been holding in an escrow account since it was paid. This relief being awarded toORIX in such capacities is consistent with the relief sought by U.S. Bank, Trustee, and Wells FargoBank, Trustee, in their pleaded counterclaims.It is further determined that Plaintiffs ECF and TCI shall take nothing by their claims assertedagainst the Defendants in this case.It is therefore ORDERED, ADJUDGED and DECREED by the Court that ORIX, in suchpreviously designated capacities, shall have and be permitted to retain for its ultimate recovery theamounts it has held in escrow since 2005, as designated above, in the amounts of $217,027.38 againstECF (plus pre-judgment interest at the rate of 5% per annum on the amounts of default interest owingby ECF from May 13, 2004, until such interest was paid under protest by ECF on April 14, 2005, as setforth in Joint Exhibit 79) and $302,335.53 against TCI (plus pre-judgment interest at the rate of 5% perannum on the amounts of default interest owing from March 23, 2004, until such interest was paidunder protest by TCI on May 26,2005, as set forth in Joint Exhibit 85).It is further ORDERED that ORIX, in such previously designated capacities, shall recover fromCounter-Defendant ECF its attorneys fees in the sum of $190,048.91 (being the total amount ofattorneys fees owed through trial by ECF in the amount of $241,380.39 minus the $51,331.48 inORIX's attorneys fees previously paid by ECF) for services rendered through the trial of this case, andFINAL JUDGMENT Page 2shall also recover from TCl attorneys fees the sum of $241,380.39 for services rendered through thetrial of this case; and in the event of an appeal by ECF and TCl to the Court of Appeals, if the appeal isunsuccessful, ORIX, in such previously designated capacities, shall be further entitled to $75,000 asreasonable attorneys fees (to be allocated $37,500.00 against ECF and $37,500.00 against TCl); and inthe event of an appeal by ECF and TCl to the Supreme Court of Texas, in connection with anunsuccessful Petition for Review, then ORlX, in such previously designated capacities, shall beentitled to an additional $15,000 in appellate attorneys fees (to be allocated $7,500.00 against ECF and$7,500.00 against TCl); and if the Petition for Review is granted, and the appeal is unsuccessful, thenORIX in such previously designated capacities, shall be entitled to an additional $20,000 in appellateattorneys fees (to be allocated $10,000.00 against ECF And $10,000.00 against TCl).It is further ORDERED that the total amount of the Judgment here rendered as to (i) pre-judgment interest accrued between May 13, 2004 - April 14, 2005 for ECF, and (ii) as to interestaccrued between March 23, 2004 - May 26, 2005 for TCl, and (iii) as to the award of attorneys feesawarded by this Judgment to ORlX from both ECF and TCl, shall bear interest at the post-judgmentrate of interest of 5% per annum from date ofjudgment until date of payment.All costs of court spent or incurred in this cause are hereby taxed and adjudged againstPlaintiffs and Counter-Defendants, ECF and TCl, for whjch let execution issue.All writs and processes for the enforcement and collection of this Judgment or the costs ofCourt may issue as necessary.All relief requested in this case and not expressly granted is hereby denied. This Judgmentfinally disposes of all parties and claims and is appealable.FINAL JUDGMENT Page 3Signed on this I it- day of _-=(J:=-- -'{..... __, 2008.APPROVED AS TO FORM:Ryan LurichLarry FriedmanFriedman & Feiger, L.L.P.Counsel for ECF North Ridge Associates, L.P.Gregory ShamounDennis HolmgrenShamoun & Nonnan, LLPCounsel for TCI 9033 Wilshire Boulevard, Inc.\!\ Nicola HobeicheORIX Capital MarketsTalmage BostonWinstead PCCounsel for ORIX Capital Markets, L.L.C.,U.S. Bank, N.A., a/k/a U.S. Bancorp, N.A. asTrustee for the Mortgage Pass-Through Certificates,Series 1996-C3 and Wells Fargo Bank, N.A., a/k/aWells Fargo Bank, Minnesota N.A., as Trustee forthe Mortgage Pass-Through Certificates Series 99-1Dallas ] 5308083v2FINAL JUDGMENT - Page 4Judge Presidingl.. .. l:' ;, ::' " " :.' 4 ''':;:;''1' . ::" :.,', . 'f', .,,1.1.1.1 .....: "j .. .. :.. : .... ,.._ .._J6/1012004 28 - $676:38 5.0000% $4,869,943,18 -$18,938.677/12/2004 31 $674.72 5.0000% $4,857,997.83 $20.916.388/10/2004 28 $673.05 5.0000% $4,845,974.09 $18,845.459/9/2004 29 $671.37 5.0000% $4,833,871.44 $19,469.7610/8/2004 28 $669.68 5.0000% $4;821 689.37 $18,751.0111/9/2004 31 $667.98 5.0000% $4 809,427.36 $20,707.2612/9/2004 29 $666.26 5.0000% $4.797,084.88 $19321.591/10/2005 31 $664.54 5.0000% $4,784,661.40 $20,600.632/912005 29 $662.80 5.0000% $4,772156.39 $19,221.193/9/2005 27 $661.05 5.0000% $4,759,569.32 $17,848.384/8/2005 29 $659.29 5.0000% $4,746,899.64 $19,119.464/14/2005 5 $657.52 5.0000% $4,734.146.82 $3,287.60

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APPENDIXTAB"2"CAUSE NO. 04-07956-GECF NORTH RIDGE ASSOCIATES, L.P.,AND TCI 9033 WILSHIRE BOULEVARD,INC.ECF NORTH RIDGE ASSOCIATES, L.P.AND TCI 9033 WILSHIRE BOULEVARD,INC.IN THE DISTRICT COURT OFDALLAS COUNTY, TEXAS134th JUDICIAL DISTRICTPlaintiffs,Counter-Defendantsv.ORIX CAPITAL MARI, pertaining to the environment, natural resources, pollution,health, safcty or clean-up, including, without limitation, each ofthe laws, statutes and ordinances identifiedin the definition of Hazardous Materials hereinafter set forth, as enacted as of the date hereof and as hereafteramended or supplemented, and all regulations promulgated pursoant thereto."Environment!}1 ~ m " shall mean any environmental audit, testing or study of the Property, andof the operation of Borrower delivered by BOlTower to Lender."Equipment" shall have the meaning set forth in1he FOURTH granting clause hereof."Event of Default" shall have the meaning set forth in Section II.I hereof."Govcmmental Authority" shall mean any federal, state, regional, local or other government orpolitical subdivision or agency thereof and any body or authority exercising executive, legislative, judicial,regulatory or administrative functions of or pertaining to government."Hazardous M ~ " shall mean and include (i) those elements, wastes, materials, substaJlces orcompounds identified or regulated as hazardous or toxic pursuant to the CERCLA, the ResourceConservation and Recovery Act ofJ976 (42 U.S.C. 6901 et seq.), the Federal Water Pollution Control Act(33 U.S.C. 1251 et seq.), the H.e:zardous Mate,;als Transportation Act (49 U.S.c. 5101 et seq.), the CleanAir Act (42 U.S.C. 7401 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. 11001 et seq.), theOccupational Safety and Health Act (29 U.S.C. 651 et seq.), the Residential Lead-Based Paint HazardReduction Act (42 U.s,C. 4851 ~ m . ) , any analogous state or local laws, any amendments thereto, andthe regulations promulgated pursusnt to said laws, all as amended from time to time, relating to or affectingthe Property, (ij) any hazardous, toxic or harmful substances, wastes, materials, pollutants or contaminants(including, without limitation, asbestos, polychlorinated biphenyls, petroleum or petroleum by-products orwastes, flammable explosives, radioactive materials, infectious substances, materials containing lead-basedpaint or raw materials which include hazardous constituents) or any other substances or materials which areidentified by or regulated by Environmental Laws, on, in, under or affecting all or any portion oftho Propeltyor finy surrounding areas, and (iii) any substances now or hereafter defined as or included in the definitionsof "hazardous substan.ces", "ha2:ardous Was.te-3", "hazardous materials", "pollutants", "contaminants" or"toxic substt:J. posiage prepaid, or (iii) one Business Day after Ute date of-delivery ofsucU notice to a nationwide,repulable courier sel'viC':;; .Lender: 'MERRrLL LYNCHCREDIT CORPORA.TIONAtiention: Steve GcisScler41102 Deer Lake Drive Ee.1tJacksonville, Florida 32246with a copy by the same means sent situultaJleously to:A.nclrews & Kurth L.L.P.60: S. Figueroa Stm:t, Suite 4200Lo,; CalifclrGm 9Cnt 7Att: rind agreements oftht: (b) In any legal action betweenLender and Borrower seeking enforcement ofanyof the terms and providons oftllls Dee-Ai ofTro3t or any ofthe other Ula:.:l. Docmnents, or the subjectm3tter hereaf onh;crc-G( Cir. ill f.;0tl11ecti on ',v1!h t'1e Property, lf1G prevailing patty shall be awarded,july 1,199\'43-_.. ..._---------.1 . (1261558 .-I 'Iin addition to costs, damages, iqjunctive or other relief, its actual costs and expenses incurred in thataction including, but limited to, its reason.a.bte attorneys' f e e ~ . The teml "prevailing party" meansthe party obtainillg substantially the relief sought, whether by compromise, settlement or judgment.(2:t) QthiOr J''iflg'cillLaneousJ:rovi2kn!i. With respect to the Loan Document: (i) any act whichLender or Trustee, as the case may be, is permirted to perform thereunder may be performed at any time andfrom time to time by Lender or Trustee, as the case may be, or by any Person designated by Lender orTmstee, as thc case may be, and (ii) each appointment of Lender as attorney-in-fact for Bor.rower orIndemnitor under suer. LOan Docwnenl shall be irrevocable and coupled with an interest.Sectton 16.1. l!l veaF' 2U IO&ti IC'" ",,"C'IJA f20of District 01' Columbia General Peter.J. Nickles, S!atcmcn!)I'I'(ntll'l'Force/osurc Su/c Not/u's (Oct. 27, 2(10) (online alFnto/'if'lllc,llt!lIIcntat(,'cllcm/1ll1'cst/!!I,rlill!! /)" f, -, ti,,'p ()f!icc olTonl1ectieul General Richard Blumenthal.Furec!osulc Ducs, Delllilli(!s !lult 'J(I Its C1' Forcclosures1(>1 MIRSC()RP. Inc .. MERS (!cncm/'s Oct. 28, 20!O Statc/IIcnt(Oct. 10) (oillille at The s[alenlenl [hat "Iwle wiIllake sleps 10 proteel Ihe lawful 10 I'oreclose thaI the borrower contractually [0 if the borrower defaults ontheir ll10ltgage loall.' The law firm K&L Gates has also a critical of the attornevactions. K&I, Gales LI.P. DC AU Seck, tu l10me Loan Forcc!osures Bused Oil IIi(OIl.IIJI,c'f('COIlSUlllcr Fillullc/a/ Products Alcrt 1.20 I 0) (online al7)4Sforeclosures fc)!' (lO days to allow time to institute measures to assure the integrity ofJ f-I' 163 , J' 'ID f' J J' 1Me oeument 1 mgs,' 1e, ue leIa epartment re usee t 11S request.5. Other Possible Implications: Potential "Front-End" Fraud and DoclllnentationIrregularitiesUntil the full scope of the problem is determined, it will be difficult to assess whetherbanks, servicers, or borrowers knew of the irregularities in the market. However, there areseveral signs that the problem was at least partially foreseeable, For example, numerous systemshad been developed to circumvent the slow, paper-based property system in the United States.MERS, diseussed in more detail above, represented an attempt to add speed and simplification tothe property registration process, which in turn would allow property to be trans felTed morequickly and easily. MERS arose in reaction to a clash: during the boom, originations andsccuritizations moved extremely quickly. But the property law system that governed theunderlying collateral moves slowly, and is heavily dependent on a variety of steps memorializedon paper and thus inefficient at processing enormous lending volume. While systems like MERSappeared to allow the housing market to accelerate, the legal standards underpinning the marketdid not change substantially. 165 In some respects, the irregularities and the mounting legalproblems in the mortgage system seem to be the consequence of the banks asking the propertylaw system to do something that it may be largely unequipped to do: process millions ofCoreclosures within a relatively short period of time. 166 The Panel emphasizes that m0l1gagelenders and securitization servicers should not undel1ake to foreclose on any homeowner unlessthey are able to clo so illlitil compliance \vith applicable la'v!'s and their contractual agreementswith the homeowner. IC legal uncertainty remains, foreclosure should cease with respect to thathomeowner until all matters are objectively resolved and vetteclthrough competent counsel ineach applicable jurisdiction, SatisCaction of applicable legal standards and legal certainty is inthe best interests oC homeowners as well as creditors and will enable all concerned parties toexercise properly their legal and contractual rights and remedies.This combination of - a demand Cor speed, the use of systems designecltostreamline a legal regime that was viewed as out-of-clate, and a slow, localized legal systemmay havc substantially increased the likelihood that documentation would be insufCicient. As1(,1 Oflicc ofConnccticut i\ttollley Cicncrall{ichanl Bluillenthal,[[OIliC F(!ICC[OII/ICS ()() 8c('(/l/sc f)ms (Oct. I, 20 I0)(;ClIc'lO[ Asks CTC'OWIS 10lclter Irol1lI{ichard Blumcntlwl. altorncyBarbara iVl, Ouinn, chief court administrator. State of Connecticut Judicial Brancll, toState o!Connccticut 14,201, I,'ederal National Assoc.. Nicolle Bradbury. II/pra note I that thethe book and page number of the Illortgage, as well as the street address andstreet address is sufficicut to summary in a foreclosureScetioll III/no, discm;sing strains ollserviecrs,46discLlssed above, somc authorities are taking dircct aim at MERS and the validity of itsC I d '1 I '1I f- 167 I 168processes. /oup e WIt] JUSll1ess pressure exertec onaw Irms anc contractors to processrapidly f()reclosure documents, the system had clear risks of encouraging corner-cutting andcreating substantial legal difficulties. Furthermore, even if these problems were not foreseeablefrorn the vantage point of the housing boom, the downturn in the housing market and theforeclosure crisis made them much more likely. In 2008 and 2009, a vast amount of attentionwas given to the difficulty of determining liability in the securitization market because ofproblems with documentation and transparency. 169 At this time, servicers could have had noticeof the types of documentation problems that could affect the transfer of mortgage ownership. InsonIc cases, even when servicers were explicitly made aware of the shoddy documentation, theydid little to correct the problem. One judge determined that "[r]ather than being an isolated orinadvertent instance of misconduct ... GMAC has persisted in its unlawful document signing'" f" d d . . 170practices even a tel' It was or ere to correct Its practices.Smne observers argue that current irregularities were not only foreseeable, but that theymask a range of potential irregularities at the stage in which the mortgages were originated andpooled. According to that view, current practices sinlply added to and magnified problems withthe prior practices. The legal consequences of foreclosure irregularities will be magnified if theproblems also plagued originations: aner all, foreclosures are still a relatively limited portion ofthe market. If all securitizations or performing whole loans were to be affected, theconsequences could be significantly greater. At this point, answers as to what exactly is thesource of the problems at the front end and how severe the consequences Illay be going flxwarddepend to a large degree on who is evaluating the problem. The Panel describes below theperspectives of varioLls stakeholders in the residential mortgage market.167 Deposition of Tammie Lou Kapusta, JII re: Jllvesl(galioll olLmv Offices olDavid.l. Siern. P.iI. (Sept.22,2010)!6R Federal Nalional Association, Foreclosure nl71e Frames (/ild Feesfbr Breach01 ' at 3 (Aug. 3 I, 20 10) (Announcement SVC-20 I0-12) (online atwww.efanniel1lae.com/s f/gu ides/ssg/annl trs/pd U20 I O/svc I 0 I 2.pd [) (stal ing tha t Fannie !VI ae might pursuecompensatory fces based on "Ihe lenglh orlhe delay. and any additional cosls thai arc directly allributable 10 thedelay.")., Ifern:mdo de Soto, 1ruie Assels Were /liddell Assels, Wall Street Journal UVIal'. 25,atcoll1/artie!c/SBI23793S1139SI ("The real villain is the lack of trust in the paper onand all other assets arc printed. If wc don't restore trust in paper, the next dehwlt -student loans will another col in paper and the world economy to its knees."),Federal National Nicolle iiiI'm note I ("The ('ourt is particularlytroubled the facl thai in tbis case is not Ihe lirst lime Ihat G(\cl I\("s nH"tl-'volull1lecareless to aflldavit has been T'he oflhis case reveals Ibat. theFlorida Court's Older. Gfvll\C's It is well past time for such practices toend. a/su Secllon C .I'll/nil. It is worth thatthc rights ora bona-lide It)r value arc affectcdwhether the had notice ofa competing claim at the tinlc of'purehasc. ()ne source of conflictwill be wlwt, under thesc circumstances, constitules adequate notice. Panel slafTeonversalions with industry sources9,2UIU).47a. Academics and Advocates for HomeownersMany lawyers and stakeholders who have worked with borrowers and servicers on aregular basis ovcr the past few years, primarily in bankruptcy and foreclosure cases, maintainthat documentation problems, including potentially fraudulent practices, have been pervasive andapparent. 171 'rhese actors, including academics who study the topic, argue tbat bankruptcy andf()reclosure procedures have been revealing major deficiencies in mortgage servicing anddocumentation for quite some time, Professor Katherine M. Porter, a professor of law wbotestifled at the Panel's most recent hearing, wrote: "I'he robo-signing scandal should not havebeen a surprise to anyone; thcse problems were being raised in litigation for years now.Similarly, I released a study in 2007 - tbree years ago - that showed that mortgage companieswho filed claims to be paid in bankruptcy cases of homeowners did not attach a copy of the noteto 40% of their claims." 172 According to this view, the servicing process was severely flawed,and "servicers falsify court documents not just to save time and money, but because they simplyhave not kept the accurate records of ownership, payments, and escrow accounts that wouldenable them to proceed !egally.,,173 In 2008-2009 over 1,700 lost note affidavits were filed inBroward County, Florida alone. 174These affidavits claim that the original note has been lost ordestroyed and cannot be produced in court. It is important to recognize, however, that a lostnote affidavit may not actually mean that the note has been lost. In her written testimony to thePanel, Professor Katherine Porter points out that her study of lost notes in bankruptcies "does notprove ... whethcr the mortgage companies have a copy of the note and refused to produce it tostymie the consumers' rights or to cut costs, whether the mortgage companies or theirpredecessors in a securitization lost tbe note, or whether someone other than the mortgagecOlnpany is the holder/bearer of the note.,,1171 For example, in her (estimony submitted to the Congressional Oversight Panel, Julia Gordon of theCenter Ic)r Responsible J,ending writes: "The recent media revelations about "robo-signing" highlight just Olle of themany Ivays in which servicers or their eontraetors elevate profits over eustomer service or duties to their clients, theinvestors. Other abuses include misapplying payments. fc)rce-placing insuranee improperly. disregardingrequirements to evaluate homeowners fi)r nonfc)reelosure options, and documents related to themurtgage's ownership or accuunt status." See Cungressiona I Oversight Panel, Written Testimony of.J ulia Gordon,senIOr counsel, Center for Responsible J.emling, COl' Hearing on TA Rl' Foreclosure Mifigallol1 Programs,at (Oct. 27, 20 I 0) (onl inc at 10271 Ogurdon.pdf) (hereinafter "WrittenTestimony of JuliaWrillen of Katherine Porter. slipro 1I0k 14. at 9 her paper: Katherine M. Porter,Misl)(,{wvior olld Misloke ill {iolll Consumer conversations with Panel s(a 1'1' (Oct. 28, 20] 0).conversations with Panel stalT (Nov. 9, 20] 0).liS Bank 01" Amcrica Q3 20 I 0 [:arnings Call TransClipl, SlIfJl'I1 note 97. al (l.Bank of America 20 I0 Earnings Call TrausClipt, SII/)/'II note a( 6.ISO Jl'ivlori!an Chase 8.: Co., Finane/II/ RcslIlrs II, at 15 (Oct. 13,20]0) (online aililessharelloldercomidownloadsiONlj 105104nn9.x0.x4091 Miennd82-cf74-42ge-81T1-'''".U'UL] 10 natier" Q320IOFin,lIlcial oubelieve f()reclosurc decisions ilied the I"ads andcircumslanccs ou i\ffidavils and Ili/ilil 110lc 23 ("The issues thecOlllpauy has idcnti lied do uot relate ill allY way to the quality of the customer and loan data: nor does the companyhelieve that any oflhcse instances led (0 !(Jreclosures which should not have otherwisc occurred").IXI For the American Sccuritization Forum issucd a statemcnt Ihe ofconcerns rai,;ed ahout sccuritization "In the last Jew days, concerns have heen raised as to whether thestandard methods of trans l'erri ng owncrship of residential mortgage loans to securitization trusts arcsufTicieut and appropriate, Thesc conccrns arc withoul merit and our membership is confident thatthcse methods of49c. Invcsto,'sAs discussed above, securitization investors have been involved in lawsuits regardingunderwriting representations and warranties for sellne time. Investors in MBS or collateralizedelebt obligation (COO) transactions have a variety of options to pursue a claim. Claims allegingviolations of representations and warranties have typically focused on violations of underwritingstandards regarding the underlying loans pooled into the securities. Another option may be topursue similar claims relating to violations of representations and warranties with respect to thetransfer of rnortgage ownership. In the wake of the current documentation controversies, itappears that private investors may become rnore emboldened to pursue put-back requests andpotentially file lawsuits. For example, and as discussed above, a group of investors - includingFIU3NY in its capacity as owner ofRMBS it obtained from American International Group, Inc.(AIO) sent a letter to Bank of America as an initial step to be able to demand access to certainloan files. ls2Direct contact with the bank was initiated because the securitization trustee (Bankof New York) had refused to comply with the initial request in accordance with the PSA.FRBNY, as an investor, is on equal footing with all the other investors, and according toFRBNY's representatives, they view this action and any potential participation in a futurelawsuit as one way to attempt to recover funds for the taxpayers. IS3While there Inay be a growing appetite for pursuing such lawsuits, these lawsuits stillhave to overcome a fair number of obstacles built in to the PSAs, IS4 as well as problems inherent. I I . I ... . 1 18') A I IIII any ega actIon t Jat requIres .JOInt actIOn )y many actors. . 's a genera matter, wJatappears to be a significant problem is that the operating documents for these transactionstransfer are sound and based on a well-established body of law governing a multi-trillion dollar secondary mortgagemarket.' See American Securitization Forum, ASF Savs Mortgage Securitization Le.gal Stl'llcllIres & Loan1,.,""-1';''''- Are Sound (Oct. 15. lO I0) (online at www.americanseeuritizalion.eom!story.aspx'iid=4457) (hereinafier"ASF Statement on Mortgage Securilization Legal Structures and Loan Transfers"). ASF will issue a white paper inthe coming weeks to elaborate fiJrther on this statement.Sec Letler from Gibbs & Bruns LLP to Countrywide, supra note 95. As noted the letterpredominantly problems with loan quality and violation of prudent servicing obligations. .s'ee also Gibbs &Bruns LLI'.Inslitlllionallloitlers HMBS Issue Notiee Non'PCljimllance Idenli/t,ingFailures Master Sen'icer to Perfimn COl'enanlS and in More Th(1/7 $47 Billionou,'urVIV,llle-}s.\Uc)(1 RAlliS 18.20 I0) (online at\vww.gibbsbllll1s.eoll1/files/l Jploads/Documents/Press Release