Case 2:09-cv-00669-LDG-PAL LENARD E.

SCHWARTZER Suite1 Boulevard, Jones 2850South Nevada89146 LasVegas, (702)228-7590 Telephone: Facsimile:(702) 892-0122 E-Mail: trustee@s-mlaw.com Chapter7 Trustee

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ESQ. LENARDE. SCHWARTZER, Bar Nevada No. 0399 LAW FIRM & SCHWARTZER MCPHERSON Suite1 Boulevard, Jones 2850South Nevada89146 LasVegas, (702)228-7590 Telephone: (702) 892-0122 Facsimile: E-Mail: usdcfilings@s-mlaw.com Attorneys William& Dawn Zeigler for
T]NITED STATESDISTRICT COURT DISTRICT OF NEVADA

In re: LISA MARIE CHONG. Debtor. MORTGAGEELECTRONIC INC., SYSTEMS, REGISTRATION Appellant, LISA MARIE CHONG,
llee.

BankruptcyCaseNo. BK-S-07-16645-LBR Ref. No.: 09-00010 Appellate

1 Case 2:09-cv-066 -KJD-LRL No.

In re: MITCHELL and JOSHUASCOTT JIDITHMITCHELL AlWA STEPHANIE ruDITH CABRAL, STEPHANIE Debtors. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
v. JOSHUA SCOTT MITCHELL and STEPHANIE JIDITH MITCHELL AlKlA STEPHANIE JUDITH CABRAL,

1 No. BK-S-07- 6226-LBR Case Bankruptcy Ref. Appellate No.: 09-00018

CaseNo. 2:09-Iv-0668-JCM-RJJ

APPELLEE WILLIAM &DAWN ZEIGLER AND CHAPTERT TRUSTEE'S OPENING BRIEF

Case 2:09-cv-00669-LDG-PAL

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In re: LARALEE BARRY ALLEN TRAYNOR ANd M. TRAYNOR, Debtors. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
V.

885 No. Case BK-S-07-1 1-LBR Bankruptcy 09-00016 Ref. Appellate No.: No. Case 2:09-:v-0669-LDG-PAL

BARRY ALLEN TRAYNOR ANdLARALEE M. TRAYNOR,

ln re: SHEILA MEDINA a/k/aSHEILA GOGGIN, Debtor. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION
V.

1 AM No. BK-S-08- 2206-B Case Bankruptcy Ref. Appellate No.: 09-00017 -0670-KJD-GWF No. Case 2:09-cv

SHEILA MEDINA a/k/aSHEILA GOGGIN.

Aooellee

In re: ROBERT THOMASATKERSONand DAWN NICOLEATKERSON, Debtor. MORTGAGE ELECTRONIC INC.. REGI STRATIONSYSTEMS.
V.

BankruptcyCaseNo. BK-S-08-11608-BAM AppellateRef. No.: 09-00011

CaseNo. 2:09-Iv-0673-RCJ-GWF

ROBERTTHOMAS ATKERSONand DAWN NICOLEATKERSON. In re: WILLIAM JAY ZEIGLERandDAWN M. ZEIGLER, Debtor. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
V.

No. 1 Bankruptcy Case BK-S-08- 07I 8-MKN Ref. Appellate No.: 09-00012

No. Case 2:09-Iv-0676-RLH-PAL

WILLIAM JAY ZEIGLERandDAWN M. ZEIGLER.

Case 2:09-cv-00669-LDG-PAL In re: PETERC. ALTMANN, JR., Debtor. MORTGAGE ELECTRONIC REGISTRATION INC., SYSTEMS, Appellant,
v.

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BankruptcyCaseNo. BK-S-08-10108-LBR AppellateRef. No.: 09-00013

CaseNo. 2:09-cv-0677-JCM-LRL

PETERC. ALTMANN, JR.,

Aooellee.

In re: SURJITSAMRA, Debtor. Debtor. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Appellant,
V.

Bankruptcy Case BK-S-08-1 No. 7506-MKN Appellate No.: 09-00019 Ref. Case 2:09-Iv-0683-RLH-RIJ No.

SURJIT SAMRA,

In re: JOSEANG AND DIVINA ANG. Debtor. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS. INC.. Appellant,
V.

Bankruptcy Case BK-S-08-1860-LBR No. 1 Appellate Ref.No.: 09-00021 Case 2:09-cv-0684-LDG-GWF No.

JOSEANG AND DIVINA ANG, Appellee.

In re: GUILLERMINA CORTES. Debtor. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS. INC.. Appellani,
V.

BankruptcyCaseNo. BK-S-08-I 7344-MKN Appellate Ref. No.: 09-00022

CaseNo. 2:09-cv-0685-KJD-RJJ

GUILLERMINA CORTES.

Case 2:09-cv-00669-LDG-PAL In re: DUFAUCHARD, JOSEPH ELDRIDGE Debtor. ELECTRONIC MORTGAGE [NIC., SYSTEMS, REGISTRATION Appellant,
V.

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1 No. Case BK-S-07- 6519-MKN Bankruptcy Ref.No.: 09-00007 Appellate I -JCM-LRL No. Case 2:09-cv'069

DUFAUCHARD, JOSEPH ELDRIDGE

Anpellee.

ln re: MICHELEDART, Debtor. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant, v. MICHELEDART,

1 No. Case BK-S-08-1007-LBR Bankruptcy Ref.No.: 09-0006 Appellate

No. Case 2:09-cv-00873-KJD-GWF

In re: ADAM J. BREEDEN, Debtor. MORTGAGEELECTRONIC INC., SYSTEMS, REGISTRATION Appellant,

1 No. Case BK-S-07- I 577-LBR Bankruptcy Ref.No.: 09-0008 Appellate

Case 2:09-cv-00874-LDG-LRL No.

ADAM J. BREEDEN,
BankruptcyCaseNo. BK-S-07-17182-MKN AppellateRef. No.: 09-00023

In re: JEFFREYPILATICH, Debtor. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Appellant,

V.

No. 2:09-cv-00888-KJD-GWF Case

JEFFREYPILATICH, Appellee.

Case 2:09-cv-00669-LDG-PAL ln re: KATHLEENO'DELL, Debtor. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
V.

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1 No. Case BK-S-08- 6913-MKN Bankruptcy Ref.No.: 09-0020 Appellate

No. Case 2:09-cv-00889-KJD-PAL

KATHLEENO'DELL, In re: N. ROBERTA. BEALERandCASSANDRA BEALER, Debtor. ELECTRONIC MORTGAGE TNIC., SYSTEMS, REGISTRATION Appellant,
v.

I No. Case BK-S-08- 0052-MKN Bankruptcy Ref. Appellate No.: 09-00015

No. Case 2:09-cv-0890-PMP-PAL

N. A. ROBERT BEALERandCASSANDRA BEALER,

Appellee.

In re: DEAN MAURER Debtor. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
v.

-B 1 No. Bankruptcy Case BK-S-06- 2287 AM Ref.No.: 09-00014 Appellate I -JCM-GWF No. Case 2:09-cv-0089

DEAN MAURER, In re: LONNIE EARL HAWKINS AND LISA WILLETT HAWKINS, Debtors. ELECTRONIC MORTGAGE INC., SYSTEMS, REGISTRATION Appellant,
V.

CaseNo. BK-S-07-13593-LBR Bankruptcy AppellateRef. No.: 09-0009

No. 2 :09-cv-00892-KJD-GWF Case

LONNIE EARL HAWKINS AND LISA WILLETT HAWKINS.

Appellees.

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TABLE OF CONTENTS

L II.

TABLE OF CONTENTS

TABLE OF AUTHORITIES PRESENTED STATEMENT OF THE /,S,SUE,S SUMMARY OF ARGAMENT FACTUAL BACKGROAND ARGUMENT

u I 2
J

In.
IV.

V. W.

13

A. BANKRUPTCY RULES REQUIRE A MOTION FOR RELIEF FROM STAY TO BE FILED BY A *REAL PARTY IN INTEREST''B. MERS LACKED CONSTITUTIONAL AND PRUDENTIAL STANDING TO BRING MOTIONS FOR RELIEF FROM STAY
C. WHY THIS CASE IS IMPORTANT. VII. CONCLUSION

13

t7 29 32

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TABLE OF AUTHORITIES Casns

Intern.,lnc.,2F.3d347,352 (1OthCir. Bayless Christie,Manson& Woods v.

28
Ernestbergv. Mortgage InvestorsGroup,2009 WL 160241,at *5 (D.Nev. January

22,2009)

-_----_-_---25

FederalDepositIns. Corp. v. Gliclcrnan, F .2d 416,418 (9th Cir. l97l) ------ 28 450 Gallingerv. VaalerIns.,Inc., 12F.3d 127,I29 (8th Cir. 1993) ----------28 ---27 ---ZB

Hammv. ArrowcreekHomeowners' Ass'n,124Nev. 28, 183P.3d 895,902 (Nev. 2008)---In re CMGT,lnc.,4028.R.262,276 (Bankr.N.D.Ill.2009) In re Comcoach Corp.,698 F.2d 571(2ndCir.1983) In re Englewood Community Hosp. Corp.,1l7 B.R. 352, 360 (Bankr.N.D.Ill.

In re Fitch, 2009WL 1514501 (Bankr.N.D.Ohio May 29, 2009) In re Foreclosure Cases 2007wL 323243 (N.D.OhioOct.3 2007) 0 I, , In re Hill,2009 WL 1956174 (Bankr.D .Ariz.July6, 2009)---In re Hwang,396 B.R.757(BanIs.C.D.Cal. 2008)
In re Jacobson,402 B.R. 359 (Bankr.D.Ore. 2009)

-----___3 3, 2s

In re Golden Planof Califurnia, Inc.,25B.R. 183,185(Bankr.E.D.Cal. I98z)--16 --- 3, 15,20 ----- 3, 15,16 3,15,16 -------19 3, rs, 19
3, l5 3, 15, l8

In re Jacobson,402 359(Bankr.W.D.Wash. B.R. 2009) In re Sheridan, 2009wL 6313 5 (Bankr.D.Idaho 5 March 12,2009)
In re Vargas,396 B.R. 511 (Bankr.C.D.Cal. 2008)----In re Wilhelm,2009 (Bankr.D.Idaho WL 1988812 July 7,2009)

IntegratedConsultingServices, Inc. v. LDDS Communications, lnc.,996 F.Supp.

470(D.Md. 1ee8)

------28

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F '2d Itel contatnersInternational corp. v. Atlanttrafik Expressservice Ltd',909

695(zdCir.1990)
---27 (5th Cir.1994) & Karl Rove Co. v. Thornburgh,3gF.3d 1273,1296 Drake Ins. Ltd. v. Am. Gen.Life Ins. Co.,376F.3d 664,672(7thCit.2004) Sphere

. Trump v. Eighth Judicial Dist. Court of Stateof Nevada, 109Nev. 687 857P.2d (Nev.1993) 740,745 -----27

Srarurns NRS104.3301 ----------25

Rur,ns
BankruptcyLocal Rule a001(a)(3)--------------BankruptcyRule 4001

-- 3,27,3r
13 T4 t4 t4
,---15

Rule 7017 Bankruptcy Rule 9014 Bankruptcy Rule 17 -------' F.R.Civ.P.

Rule 17 -------' Fed.R.Civ.P.

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ilI.

STATEMENT OF THE ISSVES PRESENTED The issuepresentedis whether the Bankruptcy Court erred when it held that a

upon must be broughtby to motion for relief from stay to allow a residence be foreclosed the party that has a financial interest in the note securedby the deed of trust, or an agent for such aparty. Did MERS, by refusingto identiff the partieswhich actually ownedthe notes fail to prove its standing?

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IV.SUMMARY OF ARGUMENT MERS takesthe position that it has standingto prosecutemotions for relief from when (a) MERS hasno the automaticstay seekingpermissionto forecloseon residences beneficial interestin the note and deed of trust (that is, it is not the party which is to be (b) paid and it is not the party which will actually forecloseon the residences), when MERS refusesto discloseto the Bankruptcy Court the identity of the beneficial owner of the note and deedof trust and (c) after an objectionhasbeenraisedto MERS's motion that it is not the "real pafty in interest",MERS fails or refusesto join or obtain ratification from the beneficial owner of the note and deed of trust to the motion. The Bankruptcy Court found that MERS lacked prudential and Constitutional standingand all judges deniedMERS' variousmotions. threebankruptcy Motions for relief from the automatic stay are to be brought by a "parfy in interest."BankruptcyCode $362(d).While the BankruptcyCode doesnot definethat term it is generallymeantto mean aparty with a pecuniaryinterestin the outcomeof the dispute. MERS did not show it had a pecuniaryinterestin the notesand deedsof trust and showedno pecuniaryinterestin the outcomeof the motion. Standingis a requirementgroundedin Article III of the U.S. Constitutionand a defectin standingcannotbe waived by the parties.A movant must have both Constitutionalstanding and prudential standingfor a federal court to havejurisdiction to hear the case.Constitutional standingrequiresthe moving party must have suffered some actual or threatenedinjury as a result of the defendant'sconduct, that the injury be traced to the challenged action,and that it is likely to be redressed a favorabledecisionon the by motion. Prudentialstandingis a set of principlesthat placeslimits on the classof person who may invoke a federal court's powers. To comply with the requirement of prudential standing, movant must assertits own legal rights and interests. the Generally, aparty without legal rights to enforcean obligationunder applicablesubstantive law lacks prudentialstanding.MERS did not show it was being harmedby the existence the of

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automaticstay and, except for the casesof Dart andZeigler, did not even attempt to show it was protectingits own legal rights. In only two of the cases(Dart andZeigler) did MERS attempt to show that it was of of the actualholder of the notesinvolved. In the cases the cases Dart andZeigler, it MERS to attempted show legal title but not a beneficialinterest.In all other cases, or offeredno suchproof of its currentpossession ownershipof the notes,the identity of the currentholder or owner of the note or its authority to act on behalf of the current holder or owner of the notes. involving this issueis that a motion to lift The currenttrend amongreportedcases must be broughtby by stay seekingpermissionto forecloseon a note secured a residence the real party in interest who has Constitutional and prudential standing. SeeIn re (Bankr.D.Idaho July 7,2009); In re Hill, 2009 WL 1956174 WL 1988812 Wilhelm,2009 (Bankr.N.D.Ohio May 28, (Bankr.D.Ariz. Jlly 6,2009); In re Fitch,2009 WL 1514501 March 12,2009); In re 2009);In re Sheridan,2009WL 631355(Bankr.D.Idaho 2009); In re Hwang, 396 B.R. 757 B.R. 359 (Bankr.D.Ore. Jacobson,4O2 2008); andIn re (Bankr.C.D.Cal. 2008);In re Vargas, 396 B.R. 511 (Bankr.C.D.Cal. ForeclosureCases, 2007 WL 3232430(N.D.Ohio Oct.3l,2007). But this is not a new Corp.,,698 F.2d 57I (2nd Cir. 1983). See requirement. In re Comcoach In three of the caseson appeal,Hawkins, Zeigler andDart, the motions were moot before the Bankruptcy Court issuedits order (by reasonof the fact that the automatic stay unrelatedto MERS' motions)and the appealsshouldbe had terminatedfor reasons dismissed. However,Trusteedoesnot want this casedecidedsolely on the technicalmerits that MERS technicallylacks standing. There are importantpolicy decisionswhich shouldbe considered.MERS not only lacks standingbut it alsoputs a barrier between the Debtors and the actual lenderswhich prevontsany meaningful negotiations. BankruptcyLocal Rule 4001(a)(3)requiresthe movant "to communicatein good faith

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resolutionof the motion before filing a motion for relief from stay." MERS has regarding not shown it has any authority to negotiatewith Debtors. Without that authority, MERS for can't comply with the Local Rule and meetthis prerequisite filing a motion for relief explosion. While from stay.This is a pervasiveproblem in the currentforeclosure that they will negotiatewith borrowers, promiseCongress mortgagecompanyexecutives which have with the borrowersto servicecompanies they leaveall communications loans. MERS is one financialincentives(large fees)to forecloseratherthan renegotiate step further down the chain and has not shown it even has authority to comply with the Local Rule 4001(aX3).In order for the real partiesin interestto negotiateand attemptto resolvethe matter, the real parties in interestmust be before the Bankruptcy Court. Allowing MERS to file motions for relief from stayeliminatesany real negotiations.

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V. FACTUAL BACKGROUND relief from MERS, through various attorneys,has filed hundredsof motions for of automaticstay to allow foreclosureson residences.Lenard E. Schwartzer,one

the

filed objectionsto severalmotions for relief from stay eight Chapter7 panel Trustees, parties when it was apparentfrom the pleadingsthat the motions were being brought by of who were not the payeesof the notesand by partieswhich held no assignments the the notes. In all cases, issuewas raisedwhetherMERS was the "real party in interest" and whether MERS had standing.The threejudges of the Bankruptcy Court orderedthat be the variousmotions in27 different cases heardat one time in arren banchearing.The identicalfor eachof thesecases. fact patternsare similar but not necessarily A. The common fact patternsare found in the following cases:

1.

Case BK-S-07-16645-LBR, No. 2:09-cvLISA MARIE CHONG, 0661.KJD.LRL

3.

No. Case 2:09-cv-0669-LDG' 1 1-LBR, TRAYNORBK-S-07-885 PAL

4.

Case MEDINA,BK-S-08-12206-BAM, No. 2:09-cv-0670-KJDGWF

5.

2:09-cv-0673-RCJCaseNo. BK-S-08-11608-BAM, ATKERSON, GWF

7.

2:09-cv-0677-JCMCaseNo. ALTMANN, BK-S-08-10108-LBR, LRL

9. 11.

No. Case 2:09-cv-0684-LDG-GWF 1860-LBR, ANG, BK-S-08-1 Case BK-S-07-16519-MKN, No. 2:09-cv-0691DUFAUCHARD. JCM-LRL -17577-LBR, No. 2:09-cv-00874-LDGCase BK-S-07 BREEDEN, LRL

13.

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16.

CaseNo. 2:09-cv-0890-PMPBEALER. BK-S-08-10052-MKN, PAL

' .

Debtor's Petition was filed MERS' Motion filed as "Nominee for the original lender,its successors and/orassignees"

that the Trustee'sOppositionfiled basedon the "lack of documentation loan owed by the Debtors is owned by the movant."

'

MERS files a Declarationby a "bankruptcyprocessor"for a In somecases, servicingcompanywhich containsno allegationsconcerningthe identity of the currentowner or holder of the note.

'

In thosecases, Trusteefiled a Reply statingthat "MERS is not the real party in interest in that it has no interestin the note and deed of trust except that as nomineeof the true, unidentified,owner."

'

MERS filed a Notice of Withdrawal of Motion which was not stipulated to by the Trustee

' ' '

Hearingswere held. The Mitchell andDart Memorandum Opinions were entered An Order denyingMotion basedupon the Mitchel/ Opinion was entered

B.

In severalcases, fact patternis the sameas aboveexceptno Notice of the

Withdrawalof Motion was filed bv MERS. Thesecases are:

8.

SAMBRA

BK-S-08-17506-MKN, No. 2:09-cv-0683-RLHCase

zuJ
10. CORTES BK-S-08-17344-MKN. CaseNo. 2:09-cv-0685-KJD-

zuJ
14. PILATICH BK-S-07-17182-MKN, No. 2:09-cv-00888-KJDCase GWF

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15.

O'DELL PAL

BK-S-08-16913-MKN, CaseNo. 2:09-cv-00889-KJD-

r7. MAURER BK-S-06-12287-BA]|/., No. 2:09-cv-00891-JCMCase

GWF

C.

The fact pattern in the Mitchell caseis similar to the others in that there is

no additionalevidenceconcerningMERS holding possession the original note and of deedof trust. However,pursuantto the Order to SetHearing (Docket #44), all joint pleadings were filed in the Mitchell case.

2. '

JOSHUASCOTTMITCHELL andSTEPHANIE JUDITH MITCHELL BK-S-0 - | 6226, ase 7 C No. 2:09 cv-0668-JCM-RIJ

Thejoint pleadings filed in Mitchellpursuant the Bankruptcy to Court's Orderfor JointHearingentered April 29,2009.

' '

September 28,2007 Januarv 15.2008

Debtor'sPetition was filed (Docket #l) MERS Motion filed as'Nominee forPlaza

HomeMortgage, Inc.,its successors andlor assigns,'(Docket #30) ' January 2008 16, Trustee's oppositionfiled based the "lack of on documentation the loanowedby the Debtorsis ownedby the movant." that (Docket #34) ' February 28,2008
MERS files a Declaration by a "bankruptcy

processorfor GMAC Mortgage, LLC" which containsno allegations concerningthe identity of the current owner or holder of the loan. (Docket #38) ' March 11, 2008 TrusteeReply filed statingthat "MERS is not

the real party in interest in that it has no interest in the note and deed of trust exceptthat as nomineeof the true, unidentified,owner." (Docket #40)

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April 29,2008 (Docket#44) May 12,2008 '

Orderfor joint hearings on27 MERSmotions

MERSfilesBrief in Response MatterCourt to

Identified and attemptsto withdraw its motions on all but four cases.

May 22,2009

Trustee filesResponse MERSBrief pointing to

out the evidentiary insufficiencies theAffidavitsfiled by MERS in

regarding Ziegler ' June2,2008 Notice of Errata (attaching documents

previously missingor mislabeled) (Docket #56) ' June 2,2008 MERSReplyBrief in whichMERScontinues

to assertit doesnot have to identiS' the current owner of the note and deed

of trust(Docket#57) ' August 5,2008

MERS Supplemental Brief and Affidavits still

failing to identify the current owner of the note and deed of trust and asserting that it has standingto act on behalf of this unidentifiedparty. The brief statesthat its motion for relief "contains an implied certification that MERS is able to discharge responsibilities a movant.', the of

'

August 5,2008

Declarationof William C. Hultman states that

MERS could not veriSr that it possessed notesin most cases(that is, in the all cases exceptDart, Ziegler,Hawkins and Furiati) (Docket #74)

August 5,2008 August 19,2008

Trustee'sSupplemental Brief (Docket #78) Hearing.Transcriptfiled as Docket #83.

Importantly,MERS counselagreed that if the beneficialowner of the note is not a memberof MERS then MERS would not have standingto proceed. (Docket#83, Pages12-14)

January 2r,2009

's Trustee supplemental opposition citingthe

recentdecisionsin In re Hwang andIn re Vargas(Docket #91)

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18,2009 February March3t,2009 March31,2009

(Docket#97) MERS' Response OrderDenyingMotion (Docket#98) (Docket#99) Decision Memorandum

D.

beforethe Court ruled on In one case,the BankruptcyCasewas dismissed

the MERS Motion. There no longer was an automatic stay in place and the Bankruptcy Court lackedjurisdiction. The motion was moot beforeit was decided.Appelleehasno objectionto reversalof the bankruptcyCourt's decisionon this ground.The caseis:

18.

2:09-cv-00892-KJDCaseNo. HAWKINS BK-S-07-13593-LBR,

GWF

E.

In two cases,Ziegler andDart, MERS filed additional Affidavits regarding

by but the possession, not ownership,of the notessecured deedsof trusts.Thesecases had evidentiary issuesbut thesetwo caseswere moot when the Bankruptcy Court's orderswere enteredand the appealsshould be remandedwith instructions to deny the motionsas being moot.

6. '

Case ZEIGLERBK-S-08-10718-MKN. No. 2:09-cv-0676-RLHPAL

12.2008 Februarv

Motion for Relief From Stay on behalf of

MERS re 2317 Martinique Avenue filed by Eddie R. Jimenez(Docket#2l)

'

12.2008 Februarv

AmendedMotion for Relief From Stav on

behalf of MERS solely as nomineefor Meridias Capital,Inc. rc2317 Martinique Avenue filed by Eddie R. Jimenez(Docket #24) fhereafter,the "Amended Motion"] ' March 3, 2008 filed on behalf of Debtorsby Lenard Response

(Docket #35) Appellee's Appendix # A E. Schwartzer

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March12,2008 (Docket #43) April 2,2008 (Docket #49) April 17,2008

to Motion continued April 2,2008 Amended

to Motion continued June9, 2008 Amended

Motion for Relief from Stay on behalf of

MeridiasCapitalre 2317MartiniqueAvenuefiled by Kristin Schuler-Hintz Motion"] Appellee's (Docket the #51) fhereafter, "schuler-Hintz Appendix# B April 29,2008 on the setting hearing the order to set Hearing

#54) Motion for June9, 2008(Docket Amended }day 14,2008 (Docket #59) 2008. 4, June 2008 Appendix# C Appellee's June 9,2008 (Docket #67) June 1,2008 1 #66) 2008(Docket July18,2008 '
Order Terminatins Automatic Stay enteredon AmendedMotion continuedto August 19, 2008

to Motion continued June11, Schuler-Hintz

Debtor(Docket#63) OrderDischarging

to Motion continued June25, Schuler-Hintz

Schuler-HintzMotion (Docket #69) Appellee's Appendix # D

April 7,2009

Order After Joint Hearing denying the Amended

Motion (Docket #83)

that Amended Motion was moot before the Bankruptcy Court made its It appears a decisionbecause motion seekingrelief from the automaticstaywas filed on behalf of by MeridiasCapital,the payeeand holder of the note secured a deedof trust on23l7 Martinique Avenue by Kristin Schuler-Hintz andthat motion was granted. MERS, as

10

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nomineefor Meridias Capital, has no interest in the outcome of the Amended Motion and neitherdoesMeridias Capital.Meridias Capital alreadyhasthe stay lifted to allow foreclosure.

12.

DART GWF

CaseNo.2:09-cv-00873-KJD8BK-S-08-11007-LBR,

February20,2008 Motion for Relief from Automatic Stay on behalf of MERS, Inc as nomineefor CountrywideHome Loans,Inc. re 5812 Lady Carolina Street(Docket #19). Filed by JeremyBergstrom. Declarationof SusanWeale (Docket February20,2008 Supplemental

#20)
March 11, 2008 MERS Motion for Relief from Automatic Stay on MortgageCorporationre 58l2Lady Carolina Street behalf of Centralbanc (Docket #25). Filed by Eddie R. Jimenez.

21,2008 March #32) July9, 2009

August 5, 2008

Motion (Docket Trustee'sOppositionto Centralbanc

Declarationof MERS (Docket #47) Affidavit of Cynthia A. Mech (Docket #62)

December3, 2008 Final Decree,Dischargeof Trusteeand Closing of 7 Chapter Case(Docket#63) Appellee'sAppendix # E March 31,2009 MemorandumOpinion (Docket #64)

(a) because a Final Decree Basedupon the docket,this appealshouldbe dismissed closingthe casewas enteredbeforethe BankruptcyCourt madeits decision(oncethe creditor is allowed to foreclose caseis closed,there is no automaticstay,the secured without permission from the Bankruptcy Court and the Trusteehas no interest in the property which was the subject of the motion), and (b) no final order denying the MERS

t1,

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the Motion was entered-only MemorandumOpinion. The Trusteehas no objectionto reversalof the Bankruptcy Court's decisionon the first groundor dismissalof this appeal on the secondground.

OTHER IMPORTANT FACTS MERS' position beforethe BankruptcyCourt was that the beneficialowner of eachnote has "to have some connectionwith MERS in order for MERS to have standing Transcript,page13, line 25 to page 14' line l3' to bring a relief from stay action.'o 662-3. Appendix4, pages MERS' position before the Bankruptcy Court was that MERS was the agentfor the actual owner of the note not really the beneficial owner of the note. The Transcript, page18,lines8-11,Appendix4,page667,shows: that they JudgeMarkell:...So they're not a beneficiaryin the sense arethe one with an economicinterest,but they're a beneficiarybecause who does. fully someone they represent That's exactlyit... Mr. Cardozo: as The BankruptcyCourt rejectedMERS''argumentthat its mere presence the on nominee-beneficiary the deedof trust was suffrcientto confer standingin the eventof the an objection because current (but unidentified) owner of the note might not be a relationshipwith MERS. memberof or have a contractual MERS specificallyrefusedto identiff the currentownersof the notesin the 40 it cases beforethe Bankruptcy Court because wantedthis to be a "test case"of its argumentthat MERS mere identification as the nominee-beneficiaryon the deed of trust was sufficientto give it standing.SeeTranscriptpage68, lines l2-I3, Appendix 4, page 717,whereMERS counselstated; The reasonwhv MERS hasnot identifiedthe beneficialowner, this is a test case.

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VI. ARGUMENT MERS statesthat it is only appealingtwo findings by the Bankruptcy Court. First, it appeals BankruptcyCourt's finding that MERS was not the beneficiaryof the deeds the of trust at issuein eachof the cases. Second, appeals Bankruptcy Court's finding it the that MERS' evidencewas insufficient in the Dart andZeigler casesin which the Court found that MERS had not shown it was the holder of the notesin thosetwo cases. MERS is attemptingto evadethe BankruptcyCourt's basicruling that MERS was not the real party in interest and MERS lacked Constitutional and prudential standing to bring the motions for relief from the automatic stay becauseit had no financial interestin the notes,it failed and refused to identiff the actualbeneficial owner of the notes and it failed to join the beneficialowner of the notesand failed to show the beneficialowners ratification of MERS' motion. MERS is asking this Court to ignore the standing requirements litigation which apply to motions filed in the Bankruptcy Court. of A. BANKRUPTCY RULES REQUIRE A MOTION FOR RELIEF

FROM STAY TO BE FILED BY A "REAL PARTY IN INTEREST'' BankruptcyRule 4001 provides: Rule 4001. Relief from Automatic Stay;Prohibiting or Conditioningthe Use, Sale,or Leaseof Property;Use of CashCollateral;Obtaining Credit; Agreements (a) Relief from stay;prohibiting or conditioningthe use,sale,or leaseof property. (1) Motion. A motion for relief from an automatic stay provided by the Code or a motion to prohibit or conditionthe use,sale,or leaseof property pursuant to $ 363(e)shall be made in accordance with Rule 9014

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Matters,provides: BankruptcyRule g0 | 4, regardingContested (c) Application of Part VII Rules. Except as provided in this rule, and unlessthe court directs the otherwise, following rules shall apply: 7 009, 7 017, 7 021, 7 025, 7 026, 037,7 04!, 7 042,70 52,7054-7056, 7 064,7 069, 707I . The following 7 028-7 by of subdivisions Fed. R. Civ. P.26. as incorporated Rule 7026, shall not matterunlessthe court directsotherwise:26(a)(1) apply in a contested re (mandatorydisclosure),26(a)(2) (disclosures gardingexperttestimony) 26(a)(3) (additional pre-trial disclosure), and 26(t) (mandatory meeting and to plan). An entity that desires beforeschedulingconference/discovery manner as provided in Rule perpetuate testimony may proceedin the same proceeding.The 7027 for the taking of a depositionbeforean adversary court may at any stagein a particular matter direct that one or more of the otherrules in Part VII shall apply. The court shall give the partiesnotice of any order issuedunder this paragraphto afford them a reasonable prescribed the order. by opportunityto comply with the procedures Rule 17 provides: F.R.Civ.P. Rule 17.F.R.Civ.P. Rule 7017 adopts Bankruptcy (a) REAL PARTY IN INTEREST. (l) Designationin General.An action must be prosecuted in the name of the real party in interest. The following may suein their own nameswithout joining the personfor whosebenefit the action is brought: (A) an executor; (B) an administrator; (C) a guardian; (D) a bailee; (E) a trustee of an expresstrust; (F) a party with whom or in whose name a contract has been made for another'sbenefit; and (G) a party authorizedby statute. (2) Action in the Name of the UnitedStates Another's Useor for Benefit. When a federal statuteso provides, an action for another's use or benefit must be brought in the name of the United States. (3) Joinder of the Real Party in Interest.The court may not dismiss an action for failure to prosecutein the name of the real party in interest time hasbeenallowed for the real until, after an objection,a reasonable party in interestto ratify, join, or be substitutedinto the action. After

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as the ratification,joinder, or substitution, actionproceeds if it had been originally commencedby the real party in interest. There is no dispute that theseBankruptcy Rules require a motion for relief from by stayto be prosecuted the "real party in interest." SeeIn re Wilhelm,2009 WL (Bankr.D.Ariz. (Bankr.D.Idaho July 7, 2009);In re Hill,2009 WL 1956174 1988812 July 6, 2009); In re Sheridan,2009WL 631355(Bankr.D.IdahoMarch 12,2009);In re 2009); In re Hwang, 396 B.R' 757 B.R. 359 (Bankr.D.Ore' Jacobson,402 2008).Unless (Bankr.C.D.Cal. 396 B.R. 511 (Bankr.C.D.Cal. 2008);In re Vargas, statedin Fed.R.Civ.P.Rule 17, it MERS fits into that categoryor one of the categories cannotprosecutea contestedmotion for relief from the automatic stay without bringing forward aratification, joinder, or substitutionby the rcalparty in interest. Therewas no evidencethat MERS is a real party in interestwith a beneficial interestin notesand deedsof trust which were the subjectof the Motions. There are financial institutions which own the beneficial interestin the notes and deedsof trust which are not known to the Debtors, the Trustee,and maybe even to MERS. But those financial institutions were not and, presently, are not parties to the motions or to this someevidencethat a servicingcompanyhad MERS presented In appeal. two cases, were moot beforethe Bankruptcycourt possession the notesin question.Thosecases of madeits decision. The Commentsto 1966Amendmentto Fed.R.Civ.P.l7 statethe purposeof the real parly in interest rule is "to protect the defendantagainsta subsequent action by the party actually entitled to recover, and to insure generally that the judgmentwill have its proper effect as resjudicata." If the Bankruptcy Court found the deedof trust to be adequatelyprotectedor invalid there would be a unknown beneficiaryof question whethersuch a decisionwould bind an unnamed, the deedof trust.

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The real parly in interest requirementis an expressionof the for and controversies jurisdiction in requirementof cases constitutional FederalCourt. This is to insurethat the party bringing the action has a sufficient interest in the proceeding to diligently advance the case.With narrow exceptions,there must be a personalinterest,financial or otherwise, or stakein the plaintiff for the action to proceed. 1982)(emphasis In re GoldenPlan of Catifurnia,Inc., 25 B.R. 183,185(Bankr.E.D.Cal. added). The rule was appliedto a motion for relief from stay in In re Hwang,396 B.R. 2008),which held: 757,767(Bankr.C.D.Cal. [t]he right to enforcea note on behalf of a noteholderdoesnot convertthe agentinto a realparty in interest."As a generalrule, a person noteholder's who is an attorney-in-fact or an agent solely for the purpose of bringing suit is viewed as a nominal rather than a real party in interest and will be requiredto litigate in the nameof his principal ratherthan in his own name. In re Hwang,was followed by the BankruptcyCourt in In re Jacobson,402B.R. 2009),which held: 359,366(Bankr.W.D.Wash. The real party in interest in relief from stay is whoever is entitled to Even if a serviceror agenthas enforcethe obligation soughtto be enforced. authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer,which must be the movingparty, and so identified in the papersand in the electronicdocketingdoneby the moving party'scounsel. It follows that ordersgrantingrelief from stay must do so to the the holder of the obligation to be enforced--not serviceror others,or the collective"Movant," as in the proposedorder UBS AG submitted.Of course,setting forth that the holder may act through agents,or may later assignor transferthe interest,a.8., "ACT Properties ,LLC, and its agents, is and successors, assigns," appropriate. This is not a merely theoreticalconcern. In the Zeigler case,Eddie Jimenez brought a motion for relief from stay on behalf of MERS as nominee for Meridias Capital which was pending when Kristin Schuler-Hintzbrought a motion for relief from stay on behalf of Meridias Capital which was granted.Implicit in this seriesof eventsis that MeridiasCapitaldidn't evenknow MERS was filing a motion on its behalf.
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other interest MERS has produced no evidencethat it had a personal,financial, or nomineeof in the outcomeof the motions. The reality is that MERS is merely an alleged say it is in the real pa.;ry interestbut not the real party in interest.MERS couldn't even (1) it the nomineeof the currentbeneficialownersof the notesand deedsof trust because didn't presentany evidenceof the identity of the currentbeneficial owners and(2) it didn,t presentany evidenceof its contractwith the currentbeneficial owners. The Bankruptcy Court and this Court is left with no evidencethat MERS has any connection with the current beneficial owner of the notes and deedsof trust. MERS' evidencethat it relationshipwith the original lenderis not evidenceof a relationship had a contractual with the current (unidentified) lender. MERS had multiple opportunitiesto bring (a) join the current owners of the notes as a movantor (b) to show ratification of the motionsby the ownersof the notes. It made decisionnot to do so. SeeTranscriptpage68, lines 12'13, Appendix 4, page a strategic 717,whereMERS counselstated; The reasonwhv MERS hasnot identifiedthe beneficialowner, this is a test case. Applying the principles set forth in the rules,MERS failed to show that it is a "real party in interest" and, therefore,MERS was not entitled to relief sought in its motion. More importantly, MERS was not the real party in interestbut, at bestoan agent for the unidentified real party in interest.

B.

MERS LACKED CONSTITUTIONALAND PRUDENTIAL

The Bankruptcy Court for the District of Idaho statedthe law regarding standing. It stated:

are but requirement related, and Standing the real-party-in-interest and both encompasses constitutional Standing concepts. not identical,

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see, e.g., warth v. seldin, 422u.s. 490, 498-99,95 prudentialelements. *9 s.ct. 2197,45 L.Ed.2d 343 (1975); In re Simplot,2007wL 2479664,at To (Bankr.D.Idaho.Aug.28,2007). have constitutionalstanding,the litigant must allege an "injury that is concrete,particularized, and actual or behavior;and challenged to imminent; fairly traceable the defendant's by likely to be redressed a favorableruling." Davis v. Fed. Election --Cornm'n, U. S. ----, 128S.Ct.27 59,2768, 17| L.Ed.2d737 (2008). Prudential standing includes the idea that the injured party must assertits ,See, e.g., Warth,422 U.S. at 499. Thus, own claims,ratherthan another's. the real-party-in-interestdoctrine generally falls within the prudential SeeHwang,396 B.R. at769. That is, as "a prudential doctrine. standing matter,a plaintiff must assert'hisown legal interestsasthe real party in F.3d 1107,IlI2 (gth Cir.2004),as Dunmorev. UnitedStates,358 interest, at*2. foundin Fed.R.civ.P.17[.]' " Mitchell,2009wL 1044368, the (Bankr.D.Idaho July 7,2009). Previously, same WL 1988812 In re Wilhem,2009 the Court discussed doctrineof standingand its basisin the 9th Circuit: Hasso v. Mozsgai ( In re La Sierra Fin. Servs.) 290 B.R. 7 18 (9th , standingencompasses Cir.BAP2002),explainedthat the doctrineof both constitutionallimitations on federalcourt jurisdiction (i.e., the of caseor controversyrequirements Article III), and prudential of limitations on the court'sexercise thatjurisdiction. Constitutional injury in fact, viz. an invasion of a judicially standingrequires an cognizableinterest.290 B.R. at726-27. Prudentialstandingrequires that the party's assertionsfall within the zone of interestsprotected by the statuteand, further, requiresthat the litigant assertonly its own rights and not thoseof anotherparty. Id. at727 (citing Bennett S.Ct.1154,137 U v. S p e a r,5 2 0 .S . 154,162,167- 68,117 standingexistshasthe L.Ed.2d28I (1997).The party asserting articulatedin burdenof proving it.Id. At726. Though sometimes to the casesas principles applicable standingon appeal,the same propositions apply to a party at the bankruptcy court level. August 28,2007)l Id.lln re simplot,2007 wL2479664 (Bankr.D.Idaho (footnote citations omitted). ln Simplot, the Court concludedthat "parties may not assert... objectionsthat relatesolely to others,or that go to issues that do not directly and adverselyaffect them pecuniarily."Id. at * 10 (footnote citations omitted). Thesesamestandingrequirementswere recently highlighted in a stay relief context by the court in In re Jacobson,-- B.R. ----,2009WL 567188 *5-6 (Bankr.W.D.Wash. Mar.6,2009). at

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March 12,2009). WL 631355at *3 (Bkrtcy.D.Idaho In re Sheridan,2009 B.R. 359 Court in In re Jacobson,4O2 Bankruptcy As mentionin Sheridan,the as (Bankr.w.D.wash. 2009),statedthe samerequirements follows: 1. Law: For a federalcourt to havejurisdiction, the litigant must have constitutional standing,which requiresan injury fairly traceableto the by allegedlyunlawful conductand likely to be redressed the defendant's relief. UnitedFood & CommercialWorkersUnion Local 75I v. requested Brown Group,Inc., 517U.S. 544,551,116S.Ct.1529,134L.8d.2d758

(tee6).
[T]he questionof standingis whetherthe litigant is entitledto have the court decidethe merits of the disputeor of particularissues. judicially self-imposed limits on several Standingdoctrineembraces jurisdiction, suchas the generalprohibition on the exerciseof federal legal rights.... a litigant'sraising anotherperson's Typically ... the standinginquiry requirescarefuljudicial to whetherthe examinationof a complaint'sallegations ascertain particular plaintiff is entitled to an adjudication of the particular claims asserted. Allen v. Wright,468 U.S. 737, 750-52,104 S.Ct.3315, 82 L.Ed.2d 556 predicatedon the "case (1984) (citationsomitted). Constitutionalstanding, or controversy"requirementof Article III of the Constitution,is a threshold jurisdictionalrequirement,and cannotbe waived.PershingPark Villas Homeowners Ass'n v. UnitedPacific Ins. Co., 219 F .3d 895, 899-900(9th Cir.2000). A litigant must also have "prudentialstanding,"which stemsfrom rules of practicelimiting the exercise federaljurisdiction to further of considerations such as orderly management the judicial system.Pershing of In Park, 219 F.3d at 899-900; re Godon,275B.R. 555, 564-565 (Bankr.E.D.Cal.2002) (citing Benderv. WilliamsportArea Sch. Dist., 475 S 5 u . s . 5 3 4 ,5 4 t - 4 2 , 1 0 6 . C t .t 3 2 6 , 8 9L . E d . 2 d 0 1( 1 9 8 6 ) ) . Generally,aparty without the legal right under applicable law substantive to enforcethe obligationat issue,or pursuingan interest outsidethose protected by the law invoked or abstractquestionsmore legislatively,lacksprudentialstanding.Doran v. 7addressed appropriately F.3d 1034,1044(9th Cir.2008). Eleven, Inc., 524 Under the Bankruptcy Code, a party seeking relief from stay must establish entitlement to that relief. $ 362(d); seefn re Hayes,393 Foreclosureagentsand B.R. 259, 266-267(Bankr.D.Mass.2008). servicersdo not automatically have standing, In re Scott,376 B.R. 285,

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290 (Bankr.D.Idaho 2007);Hwang,396 B.R. at767, and must show authority to act for the party which does. added). 402 B.R. at366-7 (emphasis at in The sameruleswere stated In re Hill.2009 WL 1956174 *4 (Bankr.D.Ariz. July 6, 2009),as follows: In addition to the procedural "real party in interest" requirementsof Rule 17, a litigant must also have standingto bring a motion. Warth v. Seldin,422U.5. 490,498,95 S.Ct.2197,45L.8d.2d343 (1975).Having standingto bring a motion is different than being a "real party in interest" underRule 17.Davis v. YageoCorp.,481F.3d 661,678(9th Cir.2007). Standingis a requirementgroundedin Article III of the U.S. Constitution and a defect in standing cannotbe waived by the parties.In re Kang Jin A Hwang,396 B.R. 757,768 (Bankr.C.D.Cal.2008). litigant must have both constitutional standing and prudential standingfor a federal court to havejurisdiction to hearthe case. Elk Grove Unified Sch.Dist. v. Newdow, (2004). 542U.S. 1, 11, 124 S.Ct.2301,159L.8d.2d98 Constitutional standingrequiresan injury be fairly traceable the defendant's to allegedly unlawful conductand likely to be redressed the requested by relief. 75I v. Brown Group,Inc., 517U.S. 544,551,116S.Ct.1529,134L.8d.2d758 (1996).Prudential standing is a set of principles that placeslimits on the classof person who may invoke a federal court's powers. Newdow, 542 U.S. at ll. To comply with the requirement of prudential standing, the litigant must assert its own legal rights and interests. Oregon v.

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0 WL 48127 (D'Nev' Docket#21; andElias v. HomEq Servicing,No.08-1836,2009 February25,2009).In addition,there are other cases.SeeOrzoffv. MERS,No. 08-1512, March 26,2009 as Docket #32; Beltran v. MERS,No. 08-l 101,Order Order entered January5,2009 as Docket #18; Dunlap v MER.I, No. 08-918,Order entered entered CaseNo. 08-1800, v. 6,2009 as Docket#44; Vasquez Aurora Loan Services, January without oppositionApril 21,2009 asDocket #15; Vera-Jaramillov. Order entered MERS,CaseNo. 08-1734,Order enteredwithout oppositionMarch 9,2009 as Docket #23. The conclusionmadeby the District Court in Ramosv. MERS, No. 08-1089, March 5,2009 as Docket #21, atpage7, was "Thus, under the deedof Orderentered trust, MERS was empoweredto forecloseon the property and to appoint Cal-Westernas substitutetrusteefor purpose of conducting the foreclosure.Plaintiffs' atgumentsto the contrary are rejected." The conclusionmadeby the District Court in Elias v. HomeEq Servicing,No. 08February25,2009, atpage2,2009WL 481270,at*2, (D.Nev' 1836,Orderentered o'The and recordeddeedsof trust, noticesof foreclosure, February25,2009),holds: trustee'sdeedupon sale confirms the standingof HomeEq, Sutton and MERS to upon Elias' default.SeeDoc. #6, Exhibits 3-6." foreclose Neither of these casesnor any of the other District Court decisionsconcern MERS' standing to seek affirmative relief in a court. It is the Appellee's positionthat evenif MERS has the ability to foreclose,it lacks standingto file a motion for relief from stay. The difference is that there was no "real party in interest" rule and no "standing" to requirement conducta non-judicial foreclosure.There are"teal party in interest"rules and "standing" requirementsto file a motion for relief from stay in a Bankruptcy Court. Therefore,in the past, it may not have beenwrongful for MERS to conduct a non-judicial of without presentingevidenceof its possession the promissorynote or foreclosure

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presentingevidenceof its authority to conduct the foreclosurefrom the party in possession the promissory of note.l The distinctionbetweencases which hold that a party must have possession the of noteto seekaffirmative relief in court while not requiringpossession the note to of conducta non-judicial foreclosureis exactlythe distinctionmadeby the District Court in

Thit changed when the Nevadalegislaturepassed, AB 149,which becamelaw in July 1, 2009. This statuteallows a homeowner to require mediation. The mediation rules adoptedby the Nevada SupremeCourt require, at Part II, Rule 5: 6. All beneficiaries of a deed of trust sought to be foreclosed againstan eligible beneficiary participant who has timely delivered an Election of Mediation shall participate in the ForeclosureMediation Program, be representedat all times during a mediation by a person or personswho have the authority to modifu the loan securedby the deed oftrust sought to be foreclosed,and bring to the mediation the original or a certified copy of the deed of trust, the mortgage note, and each assignmentof the deedof trust and mortgage note. (a) The eligible participant and lender representatives with authority to modify the underlying loan shall be physically presentor, if approved by the mediator for good causeshown, may participate in the mediation by phone. (c) For purposesof this rule, a certified copy of the original mortgage note, deed of trust and each assignmentof the deed of trust and mortgage note is only satisfied when the mediator receivesa statementunder oath signed before a notary public that must include; (l) The narne,address,capacity and authority of the person making the certification: (2) The person making the certification is in actual possessionof the original mortgage note, deedof trust , and each assignmentof the mortgage note and deed of trust; and (3) The attachedcopy of the mortgagenote, deed of trust, and each assignmentof the mortgage note and deedof trust are a true and correct copy of the original moftgage note, deedof trust, and assignmentof the deed of trust and mortgage note in the possession the person making the of certification. (d) In the event of the loss or destructionof the original mortgage note, deedof trust, or assignmentof the mortgagenote or deed of trust, the mediator shall recognizea judicial order enteredpursuantto NRS L04.3309providing for the enforcementof a lost, destroyed,or stolen instrument. Appellee'sAppendix # F. 24

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22, v. Ernestberg Mortgage InvestorsGroup,,2009WL 160241,at *5 (D.Nev. January 2009),which stated: In support of Plaintiffs argumentthat Defendantslacked standing to proceedwith the nonjudicial foreclosure the SubjectPropertybecause of they failed to provide the original Note, Plaintiff citesto a nonbinding opinion from an Ohio federal court, In re Foreclosure Cases(Deutsche No. l:07CY2282(N.D.Ohio Oct.31, BankNat'l Trust Co. v. Moore), Case 2007).However, the referencedcaseis distinguishableas it dealt with judicial foreclosure proceedings broughtby lenders,in contrastto the presentsituation.The presentlawsuit involvesa nonjudical foreclosure, as allowed underNevadalaw. expressly

MERS arguedto this District Court in Ernestberg that the rule in In re Foreclosure Cases (Deutsche Bank Nat'l Trust Co. v. Moore) did not apply to non-judicial foreclosure MERS should not be allowed to MERS was not bringing ajudicial proceeding. because arguethat the rule in In re Foreclosure Cases(DeutscheBank lt{ot'l Trust Co. v. Moore) doesnot apply when MERS is instituting a Bankruptcy Court proceeding. Even in Nevada, MERS could not go into statecourt to enforce a promissory note basedon its "beneficiary" status.In Nevada,the personsidentified as being entitledto which states: enforcea promissorynote are listed in NRS 104.3301 NRS 104.3301 Person entitled to enforce instrument. entitledto enforce"an instrumentmeans: 1. o'Person (a) The holder of the instrument; (b) A nonholderin possession the instrumentwho has the rights of a of or holder; (c) A person not in possession the instrument who is entitled to of enforcethe instrumentpursuantto NRS 104.3309[ost, destroyedor stolen notel or subsection 4 of NRS 104.3418 fpayment or acceptanceby mistakel. 2. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession the instrument. of

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MERS failed to show with admissible that it fit into anyoneof those evidence categories.Except for the casesof Zeigler andDart, MERS did not presentevidencethat MERS it was the holder of the notessecured the deedof trust. In the other cases, by contendedthat being named as the beneficiary on the original deed of trust was proof that it was authorizedto act on behalf of the unidentified current holder of the note. The BankruptcyCourt went into colloquy with MERS counselon this point. The Transcript the contains followine: JUDGE MARKELL: Well, what we would say is, if in fact-again, articulatingon the fly is neverparticularlyprecise. But if I articulatea rule it would be if MERS is listed asthe beneficiaryand it is acting for a personwho is not namedin the original deedof trust as the lender,then it hasto show, eitherby provision of assigned-by showingthat the currentbeneficialholder is a MERS memberor by showing that it's the holder,that it has standing. Those are the casesin which I have a concern.I understandthat you enter into it and somebodysat down and really thought out a system in terms of that, but again,we deal with-the casesthat concernus, at leastthe casesthat concem me,

I arenot the onesthat work the way the systemwas designedbecause think you're bringing me aroundto the conclusionthat that design,at leaston paper,works. That is all about paper. What I'm concernedabout is insuring that if in fact there has been a change in the beneficialholder of the note,that the I's have beendotted and T's havebeen to to to crossed make sureMERS continues havethe statusand capacitynecessary althoughit is not I prosecute relief from stay. Because think you conceded, the earlier in the argumentthat if the systembreaksdown and if much of a concession, with MERS you don't have the new beneficialholder of the note is not connected standing. MR. CARDOZO: Yes.

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687-8. page36,line12topage37,line 12,Appendix4,pages Transcript The importanceof this requirementthat the party filing the motion for relief from stay have standingis basednot only on the legal requirementbut also on the procedural requirementthat the party bringing the motion for relief from stay must, before filing the motion,pursuantto BankruptcyLocal Rule 4001(a)(3), "communicatein good faith regardingresolutionof the motion beforefiling a motion for relief from stay." MERS' it positionis, apparently, can comply with this rule by communicating"no negotiations" it because is not a party with a financial interest in the note securedby the deed of trust. The BankruptcyCourt's MemorandumOpinion, at page7, lines 18-19,reached the correctlegal conclusionwhen it stated: But more importantly, even if MERS is the nominee of the beneficiary,or the motion was broughtby the beneficiary,that mere allegation is not sufficient to confer standing. it When MERS standingis challenged, cannotrely on its unsworn allegations.It must presentevidencethat it is the holder of the note or it has authority to act from the currentholder of the note. It can't show the latter without identiffing the current holder of the note. by Agency is a legal relationshipcreated an expressor implied agreementor by operation of law whereby the agent is authorizedto act for the principal, subjectto the principal'scontrol.As in the formation of any to contract,the consentof both partiesis necessary establishan agency it Agency is neverto be presumed; must be shown relationship. party who asserts existenceof agencyrelationship the affirmatively. The hasthe burden of proving it. & Karl Rove Co. v. Thornburgh,39 F.3d 1273,1296(5th Cir. 1994).SeealsoHamm v. 124 Homeowners'Ass'n, Nev. 28, 183P.3d 895,902 (Nev. 2008)("The Arrowcreek parly assertingthe agencyrelationship has the burden of proving the relationship by a ."); Trump v. Eighth Judicial Dist. Court of Stateof preponderance the evidence of Nev. 687,857P.2d740,745 (Nev. 1993)(footnote3) ("The burdenof Nevada,109

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proving an agencyrelationshiprestson the party asserting that such a relationship exists.");Gallinger v. VaalerIns., Inc.,12F.3d 127, 129(8th Cir. t993) ("The burdenof proof is upon the one asserting existence the agency.")(applying the of North Dakota law); Bayless Christie,Manson& Woods v. Intern.,Inc.,2F.3d 347,352 (10th Cir. 1993) ("As indicated,aparty asserting agencyhasthe burdenof proof to show the "existence, natureand extentof the agencyrelationship."")(applying Oklahomalaw). MERS can't prove its agency for the unidentified current owner of the note by perception its authority,that is, because of peoplethink it is an agent. Seeltel Containers InternationalCorp. v. Atlanttrafik ExpressServiceLtd., 909 F .2d 698 (2nd Cir.1990),in which the SecondCircuit held that whetheran agencyrelationshipexists "depends on the actual interaction betweenthe putative principal and agent,not on any perceptiona third party may have of the relationship;'Id. at702. MERS can't prove its agencyfor an unidentifiedcurrentowner of the note by its own testimony. re CMGT,Inc., 402F.R.262,276 (Banl<r.N.D.I11. In 2009)("The "words and conduct"of the principal establish agencyrelationship;the allegedagent's the words and conductare not sufficient.SphereDrake Ins. Ltd. v. Am. Gen.Life Ins. Co., 376 F .3d 664,672 (7th Cir.2004)."); IntegratedConsultingServices, Inc. v. LDDS Inc.r 996 F.Supp.470 (D.Md. 1998)("To prove an agencyrelationship Communications, by implication, there must be factual evidencein the record supporting the implication that the putative agent acted as such.A mere proclamation of agency is insufficient'); In re Englewood Hosp. Corp., 117 B.R. 352,360 (Bankr.N.D.Ill.1990)("The Community authority of an agent must find its ultimate sourcein some act or word of the principal, indicativeof his intention either express implied."); Federal Deposit Ins. Corp. v. or F.2d 416,418(9th Cir. l97l) ('NumerousCaliforniacases Glickman,450 hold that a declaration an allegedagentis not admissible establish agencyunlessmadein of to the the presence or authorizedin someway by the would-beprincipal."). of

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One might say that MERS failed its test casebecauseit was caught in a Catch-22 situation. It didn't want to identify its principal (the current owner of the note) but it could not prove its authority to act without evidenceof authorization from its principal. C. WHY THIS CASE IS IMPORTANT

This caseinvolves an important economic issueconfronting this country. There is a tsunami of foreclosuresoverwhelming the Las Vegas real estatemarket. The effect goesbeyondthe debtorswho are losing their homesbut affectstheir neighborswho own where home valuesdecline;and their their neighborhoods houses, to adjacent abandoned cities and county who face decliningpropertytaxes. SeeThe Housing Crisis and Bankruptcy Reform: The PrepackagedChapter 13 Approach by Eric A. Posnerand Luigi Zingales(February23,2009),2a copyof which is attachedin Appellee's Appendix. of that the problem requiresadjustment.Presidents largebanks Lendershave recognized with borrowers."However,in effect,that is not happening. One havepromisedto oowork reasonis that servicing agentshave no incentive to work with borrowers. It takes more The servicingfeesfor foreclosure time to negotiatea loan modificationthan to foreclose. arehigherthan thosefor loan modification. And the borrower never getsto talk to the lender. SeeSecuritization and DistressedLoan Renegotiation: Evidence From the Subprime Mortgage Crisis by TomaszPiskorskiy,Amit Seruzand Vikrant Vigx the are The servicingcompanies in the way and, in most cases, (December, 2008).3 borrower has no way to even identify its lender.
"Th. housing crisis threatensto destroy hundredsof billions of dollars of value by causing homeownerswith negative equity to walk away from their houses.A house in foreclosureis worth 30 to 50 percent less than a housethat a homeownereither retains or sells on the market, neighboringpropertyvaluesas well." A completecopy of this housedamages and a foreclosed Appendix # G. paperis includedin Appellee's We show that delinquent loans are serviceddifferently dependingon their securitization status. Conditional on a loan becoming seriously delinquent,we found a significantly lower foreclosure with loansheld by the bank ('pofifolio' loans)when comparedto similar loans rate associated that are securitized;the likelihood of a portfolio loan default is lower in relative terms by about 29 3 2

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As statedin the written testimony of Diane Thompson, counsel for the National Consumer Law Center,beforethe United StatesSenate Committeeon Banking, Housing, & Urban Affairs on Julv 16.20094: In attemptingto make senseof this pluzzle, should rememberthat we servicers not investors.Investorshold the note, or a beneficial interest are in it, and are, in general,entitledto repaymentof the interestand principal. Servicers collect the paymentsfrom the homeowners behalf of the on investors. The bulk of their income comesfrom a percentage paymenton principal balancein the pool; the bulk of their net worth is the outstanding tied to the value of the mortgageservicingrights they purchased. servicer A may or may not lose money-or lose it in the sameamountsor on the same scale-when an investorlosesmoney.And it is servicers, investors, not who are making the day-to-day, on the ground, decisionsas to whether or not to modiff any given loan. Servicers continueto receivemost of their income from acting as largely automatedpass-throughaccountingentities,whose mechanicalactions are performedoffshoreor by personifiedcomputersystems. Their entire predicatedon making money by skimming profits from model is business what they are collecting:through a fixed percentage the total loan pool, of fees chargedhomeownersfor default, interest income on the payments during the time the servicer holds them before they are turned over to the owners,and affiliated business affangements. Servicers make their money purchases the largelythrough lucky or strategicinvestmentdecisions: of right pool of mortgageservicingrights and the correctinteresthedging decisions. Performinglarge numbersof loan modificationswould cost servicersupfront money in fixed overheadcosts,including staffing and physical infrastructure. Testimony,pages12-13. Forcing MERS to identifu the current actual owner of the note (the investor) and forcing the actual current lender (the investor) to comply with Bankruptcy Local Rule
20-30% for all the loans and about 30-50% for loans of better credit quality. A complete copy of this paperis includedin Appellee's Appendix # H. o A.opy of the completetestimony is includedin Appellee's Appendix # I. 30

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in a001(a)(3) which requiresthe movant o'tocommunicate good faith regardingresolution of the motion before filing a motion for relief from stay" will be a way of combatingthe tsunami.It will force the parties with the actual economic interest in the note and to to residence identi$r themselves each.Importantly,it is way to combatthis problem within the existins rules.

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VII.

CONCLUSION

The Appellee Trusteerequests judges of the District Court to affirm the the decisionsof the Bankruptcy Court except for the casesof Hawkins, Dart and Zeigler which shouldbe remanded with instructionsto vacatethe decisionsbecause decisions the in thesecases were moot when they were made.The Appellee Trusteeseeksaffirmation of the ruling that MERS, at leastwhen its motion to lift stay is contested, doesnot have standing bring the motion unlessit can show (a) MERS is the currentholder to of the note (that is, MERS is in actualphysicalpossession the note which has been of endorsed to it or endorsedin blank) or (b) MERS has authority to act from the current holder of the note. Either approach must be supported admissibleevidenceapplying normal by evidentiaryrules.The Appellee Trusteeseeksaffirmation that MERS, identification on the original note as beneficiarybut not lenderis not, in itself, sufficient to prove MERS' standing when its standingis contested.

DATED: Augustr(

,2009 LENARD E. SCHWARTZER LasVegas, Nevada 89146 Telephone (702) 228-7590 : Chapter7 Trustee
2850 SouthJonesBoulevard,Suite 1

LENARD E. SCHWARTZER.
NevadaBar No. 0399 SCHWARTZER MCPHERSON & LAW FIRM 2850 SouthJonesBoulevard,Suite I Las Vegas,Nevada 89146 Telephone: (702) 228-7590 Attorneysfor William & Dawn Zeigler

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