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RICHARD A. HALL (SBN 135483) BOTTOMLINE LAWYERS 985 Lincoln Way, Suite 206 Auburn, California 95603 Telephone: 530.888.7100
Facsimile: 866.305.1238

Attorneys for Defendants Carmichael Brentwood, LLC, a California limited liability company; Hood Properties, LLC, a California limited liability company; and Dave C. Hood

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO - UNLIMITED JURISDICTION

JPMorgan Chase Bank, National Association, as purchaser of Loan No. 625968631, and certain other assets of Washington Mutual Bank, formerly known as Washington Mutual Bank, F.A. from the Federal Deposit Insurance Corporation, acting as receiver,

) ) ) ) ) ) ) ) Plaintiff, ) ) v. ) ) Carmichael Brentwood, LLC, a ) California limited liability company, ) Hood Properties, LLC, a California ) limited liability company; Dave C. ) Hood; and Does 1 through 20, inclusive, ) ) Defendants. ) ________________________________ )

Case No. 34-2010-00083604 Defendants Memorandum in Support of Ex Parte Application for Temporary Restraining Order and Request for Preliminary Injunction Date: November 5, 2010 Time: 1:45 p.m. Dept: 54

Introduction This action was filed in or about July 28, 2010. Defendant Carmichael Brentwood filed for bankruptcy protection on or about July 30. In September 2010, the plaintiff filed for relief from the automatic stay. It was granted. Now, the defendants are seeking injunctive relief in this court. Relief is necessary right now to stop the appointment of a receiver and application of funds, by JPMorgan, as purchaser of loan no. 625968631. This move by JPMorgan is imminent, because the lift stay order was only days ago, on October 13, 2010. The lift stay motion was

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brought by JPMorgan Chase as purchaser of loan no. 625968631. The order specifically authorized JPMorgan to proceed with the appointment of a receiver and application of funds. But the documents supporting that motion,1 and this ex parte application, show that JPMorgan is not and was not the purchaser of loan no. 625968631 (Carmichael Brentwood loan), the capacity under which JPMorgan is prosecuting this lawsuit. Facts Relevant to Requested Relief In or about January 2007, Carmichael Brentwood got a loan from Washington Mutual Bank. In all of its loan documents, WAMU identified the loan as no. 625968631. Carmichael Brentwood signed a promissory note in favor of WAMU,2 and secured it with a deed of trust in favor of WAMU, encumbering the property located at 5914-5920 Stanley Avenue, Carmichael, California.3 On September 25, 2008, WAMU was closed down, and the FDIC was named receiver.4 Approximately two months later, on November 19, 2008, the FDIC as receiver,

The Bankruptcy Court made no findings of fact or conclusions of law with respect to whether JPMorgan Chase, as purchaser of loan no. 625968631, was a party in interest in that proceeding. (See declaration of Richard A. Hall, in Defendants Ex Parte Request for Temporary Restraining Order ..., filed concurrently herewith, p. 4, para. 19. The Court is requested to take judicial notice of the promissory note, which was filed in the lift stay motion, as exhibit A. (See Defendants Request for Judicial Notice, filed concurrently herewith, RJN 1..)
3 2

See RNJ 2, deed of trust, which was filed in the lift stay motion, as exhibit B.

According to the April 6, 2009, limited power of attorney (described later in this brief), under the terms and conditions of a purchase and assumption agreement among the FDIC, acting in its corporate capacity; the FDIC as receiver of WAMU; and JPMorgan Chase Bank, National Association, dated September 25, 2008, JPMorgan acquired among other assets (including without limitation, all real estate), all right, title and interest of the FDIC in and to certain of WAMUs assets and liabilities as of September 25, 2008 (bank closing date). The following month, on October 2, 2008, the FDIC, in its corporate capacity, executed and delivered to JPMorgan Chase a limited power of attorney to implement the provisions of the purchase and assumption agreement, and authorized JPMorgan Chase to execute, acknowledge, seal and deliver certain documents and instruments on behalf of the FDIC, as attorney-in-fact, for the FDIC as receiver of WAMU.It is unknown what documents and instruments JPMorgan Chase was authorized to execute, acknowledge, seal and deliver under the October 2, 2008, limited power of attorney given to it by the FDIC, in its corporate capacity.
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purportedly assigned the Carmichael Brentwood loan to JPMorgan Chase, in a document titled Receivers Assignment.5 . The date of the assignment is important, as will be seen later. The assignment has two exhibits, another important fact. Although effective for all purposes as of November 19, 2008, the assignment was signed only two months ago, on August 30, 2010nearly two years after the effective date of the assignment. Review of page 4, of the assignment, shows that it was signed by the grantor, JPMorgan Chase, as attorney-in-fact for the FDIC, as receiver; and by the grantee, JPMorgan Chase Bank. The same person signed for the grantor and the grantee, Janet J. Scott, First Vice President, JPMorgan Chase Bank. 6 The assignment states the following, in relevant part: For good and valuable consideration in hand paid to Grantor by Grantee, ... Grantor does hereby assign to Grantee, all of Grantors right, title and interest in the Deed of Trust, Security Agreement, Assignment of Lease and Rents and Fixture Filing, more particularly described on Exhibit A attached hereto and incorporated herein, (hereinafter collectively referred to as the Subject Deed fo Trust), together with the Promissory Note referenced therein and all other loan documents referencing Grantors Loan No. 626968631. Exhibit A, referenced above, is a description of the deed that was recorded against the property:
EXHIBIT A - DESCRIPTION OF DEED OF TRUST - That certain Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing dated January 29, 2007, executed by: CARMICHAEL BRENTWOOD, LLC, a California Limited Liability Company, in favor of WASHINGTON MUTUAL BANK, and recorded on January 31, 2007 in BOOK 20070131, PAGE 2379, of the Official Records in the County of Sacramento, State of California.

It is obvious that Exhibit A makes no references to the Promissory Note, identified in the assignment. And while the assignment describes what exhibit A is, it doesnt describe what exhibit B is. The assignments only reference to exhibit B is stuck between the signature lines for

See RJN 3, titled Receivers Assignment, which was filed in the lift stay motion, as as exhibit C. The receivers assignment also has a notary acknowledgment on a blank sheet of paper that omits the identity of the instrument to which it attaches. Directly behind the notary acknowledgment sheet is another blank sheet that says EXHIBIT A, followed by the sheet of paper with exhibit A. Behind exhibit A, there is another blank sheet that says EXHIBIT B, followed by the Apr. 6, 2009, LPOA. (See exhibits A and B to RJN 3.)
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the grantor and the grantee, on page 4, where it says, (SEE EXHIBIT B ANNEXED HERETO). Review of exhibit B shows that it is a limited power of attorney, dated April 6, 2009, from the FDIC as receiver to JPMorgan Chase. It authorizes and empowers JPMorgan to execute documents and instruments, as attorney-in-fact for the FDIC,7 relating to certain loans to which WAMU held record title but that had already been sold off and transferred (by WAMU) prior to the September 25, 2008 takeover. The LPOA states that the FDIC, as receiver, succeeded to the obligation of WAMU to transfer record title to the owners of mortgage loans that had been sold and transferred by WAMU prior to September 25.8,9 Argument Code of Civil Procedure section 527(a) authorizes issuance of injunctions before trial if sufficient grounds exist therefor. Under CCP 526(3) an injunction is authorized whenever it appears, during litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual. For the reasons explained below, defendants are entitled to injunctive relief.

That had not otherwise been expressly authorized under an earlier LPOA dated October 2, 2008, The April 6, 2009, LPOA also states that as of September 25, 2008, the FDIC as receiver, succeeded by operation of law to the obligation of WAMU to the owner of any paid off mortgage loans that had been assets of WAMU but that were paid off prior to September 25, 2007, to release any lien still of record on September 25, 2008.
The LPOA was for the following LIMITED purposes: To execute, acknowledge, seal and deliver on behalf of the FDIC, acting in its capacity as Receiver of [WAMU] and its successors in interest to the right, title and interest of WAMU, all documents and instruments of sale, transfer, conveyance, reconveyance, release, and/or assignment, including, without limitation, endorsement of promissory notes and mortgage assignments or equivalent documents, appropriately completed, with all ordinary or necessary endorsements, acknowledgments, affidavits and supporting documents as may be necessary or appropriate to evidence the sale, transfer, conveyance, endorsement, reconveyance, release, and/or assignment of any interest of the FDIC as Receiver and successor in interest to WAMU in the Sold Mortgage Loans and Paid Off Mortgage Loans and to provide approvals and consents for the transfer of servicing related to the Sold Mortgage Loans.
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1.

Irreparable harm will result if plaintiff obtains an order for appointment of receiver because the order will effectively allow JPMorgan to obtain funds to which it is not entitled. Code of Civil Procedure section 526(a)(2) lists the traditional consideration of

irreparable harm that will be suffered if injunctive relief is not granted. Normally, an injunction will not issue where only money is involved. The rationale is that there is no threat of irreparable harm, because monetary losses are compensable in damages, and thus provide a cleear remedy.10 But, a party may be enjoined from obtaining funds to which it is not entitled.11 Undisputed is that JPMorgan Chase is not the lender named on the subject trust deed and yet claims to be the the legal and beneficial owner of loan no. 625968631 and loan documents regarding loan no. 625968631.12 JPMorgan is claiming that right under a receivers assignment and a LPOA. But as established above, neither the assignment nor the LPOA, separately or together, establish that JPMorgan Chase is the legal and beneficial owner of Loan No. 625968631. Still, JPMorgan asserts, in relevant part, the following in the complaint: Plaintiff does hereby enforce certain of its rights arising under the terms of the Deed of Trust, by obtaining specific performance of the provisions of the Deed of Trust which assign to Plaintiff the rents and income generated by the Property as additional security for the defaulted obligations under the note. Under and by virtue of the Deed of Trust, the right upon any default to have a Receiver appointed for and with relation to the Property is given by defendants and conferred upon Plaintiff and the specific right is further given to Plaintiff to collect rents, issues and profits accruing from the Property and apply them in the discharge rf taxes become due on the Property ... The Deed of Trust contains a specific and absolute assignment of rents for such purposes, and it provides that Plaintiff may take immediate possession of the security through the appointment of a Receiver ... In lieu of taking possession of the Property directly, Plaintiff seeks the appointment of a Receiver to take possession in its stead.

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11

Doyka v. Sup.Ct. (Lord) (1991) 233 Cal.App.3d 1134, 1136.)

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Mitsui Mfrs. Bank v. Texas Commerce Bank (1984) 159 Cal.App.3d 1051, 1057-58 (beneficiary of letter of credit enjoined from negotiating the instrument to obtain funds to which it was not entitled). See RJN 4, Declaration of Mark St. Pierre In Support of JPMorgan Chase Banks Motion for Relief from Automatic Stay, page 3, lines 13-14.
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With respect to defendant Hood, the complaint alleges that David Hood executed a promissory note in favor of WAMU, and promised that on demand of WAMU, as holder of the Note, would pay any and all indebtedness and perform the obligations required under the Carmichael Brentwood loan. Then JPMorgan Chase alleges the following: By reason of its acquisition of the Loan Documents, including the Hood Note Guaranty, by Plaintiff, Plaintiff is now the beneficiary of the Hood Note Guaranty. All of these factual allegations are false, based on the face of the documents offered to support this request for a temporary restraining order. Thus, because an order for appointment of a receiver will result in obtaining funds for its own benefits to which JPMorgan is not otherwise entitled, this constitutes irreparable harm, and in this limited context, irrespective that monetary losses may otherwise be compensable damages. An order for appointment of a receiver will not only effectively restrain the payment of money to defendants, but also act as a prejudgment attachment without the plaintiff having had to comply with attachment statutes. Thus, there is no adequate remedy at law to forestall the result that will occur if the Court refuses to enter the temporary restraining order. 2. Defendants have established a reasonable probability of success on the merits. A preliminary injunction must not issue unless it is reasonably probable that the moving party will prevail on the merits. In San Francisco Newspaper Printing Co., Inc. v. Sup.Ct. (Miller), the review court found the converse of what is being asserted here. There, the Court found it was an abuse of discretion for the lower court to grant an injunction where the plaintiff lacked standing to sue. Here, it would be an abuse of discretion for the court to deny the preliminary injunction where the plaintiff essentially has no stake in the outcome of this litigation. In the end, the defendants here are likely to win and are thus entitled to the relief demanded, because the documents speak for themselves:13 1. An assignment, including two exhibits, says (i) the assignment is effective for all purposes as of November 19, 2008, and that (ii) the grantor assigns all right, title

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Code Civ.Proc. sec. 526(a)(1).

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. 10. 9. 8. 7. 6. 5. 2. 3. 4.

and interest in the deed described on exhibit A, together with the promissory note referenced therein, and all other loan documents referencing loan no. 626968631. Exhibit A does not reference a promissory note. The Carmichael Brentwood loan is loan no. 625968631, not 626968631. The assignment does not describe what exhibit B is or otherwise the relevance of exhibit B to the assignment. The only reference to exhibit B is stuck between the grantors and the grantees signature lines: (SEE EXHIBIT B ANNEXED HERETO). Exhibit B is a limited power of attorney from the FDIC, as receiver, to JPMorgan Chase regarding loans that had been sold off and transferred by WAMU prior to the FDIC September 25 takeover. The assignment, which is effective for all purposes, on November 19, 2008, is effective after the September 25, 2008, FDIC takeover. The signature for the grantor (FDIC, as receiver), is by JPMorgan Chase, as its attorney-in-fact, under the April 6, 2009 LPOA. The same person, Janet Scott, First Vice President, JPMorgan Chase Bank, N.A., signed for both the grantor (FDIC, as receiver, by JPMorgan Chase, its attorney-in-fact.) and the grantee (JPMorgan Chase). The assignment states it transfers the loan documents to loan no. 626968631, which is not the Carmichael Brentwood loan. From the documents, the following conclusions can be made: 1. Presumably exhibit B was attached to the assignment, which is effective for all purposes on November 19, 2008, to show that JPMorgan Chase had attorney-infact power to execute the assignment from WAMU to JPMorgan, for the FDIC, as receiver. But JPMorgan Chase Bank did not have the power of attorney to sign as attorneyin-fact for the FDIC, as receiver, because the LPOA was only with regard to loans that had been sold off and transferred BEFORE the FDIC takeover on

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September 25, 2008. The assignment says, on its face, that it is effective for all purposes on November 19, 2008, which is AFTER the FDIC September 25 takeover. Even if JPMorgan Chase had power of attorney to sign this assignment (which it did not for the reason stated earlier), the assignment is only effective with respect to transferring the Carmichael Brentwood deed of trust, not the Carmichael Brentwood promissory note. This is so because exhibit A makes no reference to the Promissory Note, as represented in the assignment. Even if JPMorgan Chase had power of attorney to sign the assignment (which it did not for the reason stated earlier), the assignment is only effective with respect to transferring the Carmichael Brentwood deed of trust (and not the note) and with respect to transferring all other loan documents referencing Grantors Loan No. 626968631. The Carmichael Brentwood loan is not loan no. 626968631, but loan no. 625968631; thus no loan documents regarding the Carmichael Brentwood loan were transferred. JPMorgan filed the instant action in the capacity as purchaser of Loan No. 625968631. But the documents show no proof of that fact. Thus it is not entitled to an ex parte order for appointment of a receiver and application of funds, at least without notice to the defendants first, including any temporary restraining order that gives a receiver the power to take over immediate possession of the subject property pending any further ex parte order to show cause hearing. Or in other words, Carmichael Brentwood is specifically requesting that this Court NOT grant an ex parte application for appointment of a receiver without FIRST holding an ex parte hearing PRIOR to any OSC hearing. The provision the defendants agreed to when the deed of trust was signed was that the lender may obtain ex parte the appointment of a receiver upon certain conditions. But JPMorgan was not the lenderWAMU was the lender. And the documents offered in support of this TRO establish that JPMorgan Chase is not the successor or the successor-in-interest to the Carmichael Brentwood loan.

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3.

The balance of hardship clearly points in the direction of the defendants. While the statute makes no reference to the traditional equitable concern of balancing

equities, it is a crucial factor inthe judges determination; i.e., the court must exercise its discretion in favor of the party most likely to be injured ... If denial of an injunction would result in great harm to the [defendants], and the plaintiff] would suffer little harm if it were granted, then it is an abuse of discretion to fail to grant the preliminary injunction.14 Further, the Courts determination must be guided by a mix of the potential-merit and interim-harm factors; the greater the defendants showing on one, the less must be shown on the other to support an injunction.15 Here, the defendants will suffer far greater harm from denial of the injunction than JPMorgan faces from its issuance. First, the defendants are likely to prevail on the merits because the documents on their face plainly show that JPMorgan is not entitled to the funds; and the great interim harm to the defendants rights to its own monthly rental stream of income outweighs the relatively slight injury to JPMorgan in restraining it from obtaining the appointment of a receiver for its own benefit to obtain funds to which it is not entitled. Further, if JPMorgan proceeds with non-judicial foreclosure of the property, the defendants may not succeed in any future request for a preliminary injunction to stop the foreclosure if the Court should find that the property is not unique. Thus, in this respect the defendants will suffer far greater harm if the request for a temporary restraining order is not granted, then JPMorgan will suffer if it is granted. That is, granting the requested relief does nothing other than allow JPMorgan establish the legitimacy of its claim while defendants continue to maintain possession and entitlement to the monthly rental income stream. JPMorgan has filed the complaint and made the claim to the Carmichael Brentwood loan. The documents supporting this request for temporary restraining order has brought the issue to the forefront. Concurrent with the filing of this request for temporary restraining order is defendants motion for leave to file a compulsory cross-complaint against JPMorgan, as the purported purchaser of the Carmichael Brentwood loan. The cross-complaint, which makes the
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Robbins v. Sup. Ct. (County of Sacramento) (1985) 38 Cal.3d 199, 205. Butt v. State of California (1992) 4 Cal.App.4th 668.

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same arguments as here, is for declaratory and injunctive relief. Thus, if the Court is reluctant to issue a temporary restraining order at this time until hearing (and hopefully ultimate filing of the compulsory cross-complaint), on the motion for leave to file the cross-complaint, defendants respectfully request the Court defer ruling on this request for temporary restraining order and order to show cause hearing, until the time of the hearing on the motion for leave to file the cross-complaint, which has been scheduled for November 30. Further, the avowed purpose of a preliminary injunction is to preserve the status quo pending a trial on the merits.16 The status quo is that the defendants maintain control of their property, while plaintiff purports to hold the beneficial interest in the Carmichael Brentwood loan, and thus a security interest in it. The effect of granting a temporary restraining order will be to do nothing more than preserve this status quo pending resolution of the matter. That is, the position of the plaintiff will not change and neither will that of the defendants. But, if the plaintiff obtains an order for appointment of receiver, defendants will be dispossessed immediately of their property. In light of the lopsided balance of hardships in this case, a temporary restraining order is warranted. 4. The court has discretion to waive the bond requirement. While a preliminary injunction will not be issued without security, under Code of Civil Procedure section 529, or without a cash deposit in lieu of bond, under Code of Civil Procedure section 995.710, the Court has discretion to waive the bond requirement. No realistic harm to the plaintiff exists from enjoining the appointment of a receiver until JPMorgan has established entitlement to that remedy. That is, if the plaintiffs position is proven that it owns the beneficial interest in the subject loan, then the receivership appointment can proceed. Should appointment of the receivership be temporarily suspended until JPMorgan has established its entitlement to that provisional remedy, the plaintiff is still free to proceed with non-judicial foreclosure (at which time the defendants may or may not succeed in obtaining injunctive relief). Thus, the plaintiffs purported interest is adequately secured by the deed on the property,

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Continental Baking Company v. Katz (1968) 68 Cal.2d 512, 528.

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if it establishes it owns the beneficial interest in the loan, and no bond should be required at this time. Conclusion The defendants anticipate that the plaintiff will seek the appointment ex parte of a receiver on an emergency basis any day now. California law is that a receiver may be appointed ex parte on an emergency basis. The effect of that is the defendants will be required to immediately surrender possession of the property, pending hearing on the ex parte order to show cause. Appointment of a receiver will effectively restrain the payment of money to defendants, and gear it toward the benefit of JPMorgan, who defendants have established have no right to those funds. Here, the defendants have brought forth admissible evidence that establishes that the plaintiff is not the beneficial owner of the Carmichael Brentwood loan. Yet, that is the capacity under which it will seek an order for appointment of the receiver. Thus, plaintiff should be restrained from obtaining ex parte without notice and prior to hearing an order for appointment of receiver, temporarily pending hearing on an OSC. If JPMorgan is not restrained in this way, defendants will upon appointment of a receiver, be immediately and unfairly denied possession of its property and payment of its monthly rental income stream. Lastly, if upon notice of this ex parte application, and prior to this ex parte application being brought to the attention of the Court, JPMorgan preempts this request by obtaining an order ex parte for appointment of a receiver, defendants reserve their rights to have this matter heard prior to November 5, 2010, and with or without further notice to plaintiff. Dated: October 31, 2010. BOTTOMLINE LAWYERS

By: 25 26 27 28 Richard A. Hall Attorneys for Defendants Dave C. Hood, individually, Hood Properties, LLC; and Carmichael Brentwood, LLC

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