Rfs Opposition BOFA for FILING

8/6/2019 Rfs Opposition BOFA for FILING

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UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re:

ROBERTO ALMARAZ,

Debtor and Debtor-in-Possession.

Case No. 2:10-bk-50424-PC

Chapter 11 Proceeding

Hon. Chief Judge Peter Carroll, Presiding

OPPOSITION TO MOTION FOR RELIEFFROM AUTOMATIC STAY FILED BYBANK OF AMERICA, N.A. AS SUCCESSOR

BY MERGER TO LASALLE BANK NA ASTRUSTEE FOR WASHINGTON MUTUALMORTGAGE PASS-THROUGHCERTIFICATES WMALT SERIES 2007-1TRUST; SUPPORTING DECLARATION

HEARING:

Date: April 21, 2011Time: 9:30 A.M.Place: United States Bankruptcy Court

255 East Temple StreetCourtroom 1539,

Los Angeles, CA 90012

TO BANK OF AMERICA, N.A. AS SUCCESSOR BY MERGER TO LASALLE

BANK NA AS TRUSTEE FOR WASHINGTON MUTUAL MORTGAGE PASS-

THROUGH CERTIFICATES WMALT SERIES 2007-1 TRUST, HONORABLE PETER

ORANTES LAW FIRM, P.C.Giovanni Orantes, Esq. 1900603435 Wilshire Blvd. Suite 1980Los Angeles, CA 90010Tel: 213-389-4362Fax: 877-789-5776

General Insolvency Counsel forDebtors and Debtors-in-Possession


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CARROLL, UNITED STATES BANKRUPTCY CHIEF JUDGE; THE OFFICE OF THE

UNITED STATES TRUSTEE AND ALL OTHER INTERESTED PARTIES:

COMES NOW, Roberto Almaraz (the Debtor) in Opposition to that Motion for Relief

from Automatic Stay (the Motion) filed by Bank of America, N.A. As Successor by Merger to

LaSalle Bank NA as Trustee for Washington Mutual Mortgage Pass-Through Certificates

WMALT Series 2007-1 Trust states as follows:

I.

FACTUAL BACKGROUND

Roberto Almaraz filed a voluntary Chapter 11 petition commencing this reorganization

case on September 22, 2010 (the Filing Date). The Debtor is an individual.

The property of the estate includes 11 multi-family residential properties (duplexes, 3-

plexes and 4-plexes), a total of about 30 residential units. All are located within Los Angeles

County. The debtor personally occupies one of the units of a triplex and the remaining two units

are rental assets.

The properties have a collective value of about $4.3 million and secure a total of 18

mortgages. Several of the properties have only one mortgage, most of them have two mortgages

and one of them has three mortgages. The total debt is substantially in excess of the properties

values.

Some of the mortgages on debtors properties are adjustable. In hindsight, Debtor realizes

that he should not have heeded the advice of the banks and mortgage brokers who convinced him

to accept such mortgages, but, in any event, he needs to correct the problems caused by the fact

that such mortgages were adjusting over the last several months prior to the petition and reduced

the net income generated by the properties to the point where he needs to seek to reduce the

monthly payments through this bankruptcy process.

This Motion and opposition relates to the property commonly known as 3622-3626 West

110th

Street, Inglewood, CA 90303 (3622 W. 110th

Street). The Motion should be denied as

3622 W. 110th

Street is essential to the Debtors reorganization and the Debtor already filed a

disclosure statement and plan of reorganization, which may be confirmed within a reasonable


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amount of time. Although objections to confirmation have been filed which are related to four of

the 11 properties in the estate, the Debtor is confident that his plan of reorganization will be

confirmed as the cashflow projections appended to the plan of reorganization, of which it request

that the Court take judicial notice, demonstrate that the plan is eminently feasible and, as will be

further detailed in reply to the objections, the Debtor already has at least one vote from impaired

classes that would allow him to confirm a plan under Section 1129(b).

In any event, Movant has not made a prima facie case that its Motion should be granted

under any circumstances as it has failed to comply with Rule 9014 and Rule 7004 of the Federal

Rules of Bankruptcy Procedure, which require service of the Motion on the Largest 20 creditors o

the Debtor pursuant to the requirements of Rule 7004. Here, for example, the entities guaranteed

by the Federal Deposit Insurance Corporation should have been served to the attention of the

appropriate President or Corporate Officer via certified mail. Since that was not done, the Court

should deny this Motion out of hand. In addition, as further detailed below, Movant does not eve

have standing to bring this Motion as it has not presented competent evidence that it actually hold

the note related to the property and Deed of Trust at issue herein.

II.

THE MOTION FOR RELIEF FROM THEAUTOMATIC STAY UNDER 11 U.S.C. 362

SHOULD BE DENIED BECAUSE THE PROPERTY IS NECESSARY FOR THE

DEBTORS EFFECTIVE REORGANIZATION WITHIN A REASONABLE TIME.

The Moving party cannot obtain relief from the automatic stay under section 362(d)(2)

merely by establishing no equity for the purposes of section 362(d)(2)(A). The conjunction and

connecting the no equity test of section 362(d)(2)(A) and section 362(d)(2)(B), means that a relie

from stay cannot be granted unless subsection (B) is also satisfied. In this case, relief cannot be

granted because, as explained in Mr. Alfaros declaration, the property is, in fact, necessary for th

Debtors effective reorganization.

Once a moving party shows that the debtor has no equity in the property, the burden shifts

to the debtor to establish that the property is "necessary to an effective reorganization" and that


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there is "a reasonable possibility of a successful reorganization within a reasonable time." United

Sav. Ass'n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 376, 108 S. Ct. 626, 98 L. E

2d 740 (1988) (internal quotations and citation omitted). The debtor must show "not merely that i

there is conceivably to be an effective reorganization, this property will be needed for it; but that

the property is essential for an effective reorganization that is in prospect." Id. (emphasis in

original).

3622 W. 110th Street is essential to the Debtors successful reorganization as it contribute

net monthly income of $672 to the Debtors plan of reorganization.

III.

ALTERNATIVELY, THE MOTION FOR RELIEF FROM AUTOMATIC STAY UNDER

11 U.S.C. 362 SHOULD BE DENIED BECAUSE THE DEBTOR CAN PROVIDE

ADEQUATE PROTECTION UNDER 11 U.S.C. 361 TO THE MOVING PARTY

Section 361 does not define adequate protection; rather, section 361 specified non-

exclusive methods of providing adequate protection. The U.S. Supreme Court explained what

adequate protection is warranted in United Savings Association of Texas v. Timbers of Inwood

Forest Associates, Ltd. 484 U.S. 365, 109 S.Ct. 626 (1988) (Timbers) where a Chapter 11 debtor

an apartment complex with rental income and a deed of trust with an assignment of rents, owed

more to the secured creditor than the value of the property. Even though the property was worth

less than what was owed to the secured creditor, it was not depreciating in value. The secured

creditor moved for relief from the automatic stay contending that adequate protection under

section 362(d) included payment to it of lost opportunity costs. The U.S. Supreme Court in

Timbers rejected this argument and found that under 11 U.S.C. 1129(b), a secured creditor has a

right under a plan the present value of their collateral. This entitlement arises, however, not from

the phrase indubitable equivalent in 1129(b)(2)(A)(iii), but from the provision of

1129(b)(2)(A) )(i)(II) that guarantees the secured creditor "deferred cash payments . . . of a valu

as of the effective date of the plan, of at least the value of such [secured claimant's] interest in the

estate's interest in such property." (Emphasis added.) Under this formulation, even though the


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undersecured creditor's "interest" is regarded (properly) as solely the value of the collateral, he

must be tendered payments that assure him that value as of the effective date of the plan. In

361(3), by contrast, the relief pending the stay need only be such "as will result in the realization

. of the indubitable equivalent" of the collateral. (Emphasis added.) It is obvious (since 361 an

362(d)(1) do not entitle the secured creditor to immediate payment of the principal of his

collateral) that this "realization" is to "result" not at once, but only upon completion of the

reorganization. It is then that he must be assured of "realization . . . of the indubitable equivalent"

of his collateral. To put the point differently: similarity of outcome between 361(3) and 1129

would be demanded only if the former read "such other relief . . . as will give such entity, as of th

date of the relief, the indubitable equivalent of such entity's interest in such property."

One method of adequate protection specified is periodic cash payments to the lien creditor

equal to the decrease in value of the creditors interest in collateral. If no other option were

available, Debtor can meet the adequate protection burden of section 362 by making cash

payments equal to the depreciation on the property under section 361(1). However, since the

value of the Debtor property is largely stable, no periodic payments are warranted.

IV.

THE MOTION FOR RELIEF FROM AUTOMATIC STAY UNDER 11 U.S.C. 36

SHOULD BE DENIED BECAUSE MOVANT FAILED TO SERVE THE MOTION AS

REQUIRED BY RULE 4001-1

Rule 4001-1 states that a motion for relief from an automatic stay provided by the Code o

a motion to prohibit or condition the use, sale, or lease of property pursuant to 363(e) shall be

made in accordance with Rule 9014 [which requires compliance with F.R.B.P. 7004] and shall be

served on any committee elected pursuant to 705 or appointed pursuant to 1102 of the Code o

its authorized agent, or if the case is a Chapter 9 municipality case or a Chapter 11 reorganization

case and no committee of unsecured creditors has been appointed pursuant to Sec. 1102, on the

creditors included on the list filed pursuant to Rule 1007(d), and on such other entities as the Cou

may direct.


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Movant failed to comply with this Rule and as of today nothing has been filed to prove

differently. Here, for example, the members of the largest 20 creditors of the Debtor whose

deposits are guaranteed by the Federal Deposit Insurance Corporation should have been served to

the attention of the appropriate President or Corporate Officer and via certified mail. Since that

was not done, the Court should deny this Motion out of hand.

V.

IN ANY EVENT, MOVANT DOES NOT HAVE STANDING

TO SEEK RELIEF FROM STAY

For the sake of completeness, the Debtor must raise the issue that Movant does not have

standing even to file this Motion as (1) Attachment 1 to the Motion (page 10-11 of 14 of the

Motion itself) does not say anywhere that the Movant actually holds the Note in the transaction at

hand as it is a declaration from a vice president of JPMorgan Chase Bank, N.A. that says that

JPMorgans records show that Bank of America, N.A. holds possession of the original note

needless to say, the Movant needs to submit competent evidence from a qualified witness that

Movant actually holds the note the inadmissible declaration of a third party does not confer

standing on Movant; and (2) its own Exhibit 3 shows that Mortgage Electronic Registration

Systems, Inc. (MERS) purported to assign the Note in this case to the Movant on September 15

2010 (!!), which is simply not possible as MERS has no authority to effect such assignment, and

even if it had some semblance of authority, such assignment is fatally untimely by a few years

under the Pooling and Servicing Agreement governing securitized loans such as the one in the

instant case.

Indeed, the recently thorough and well-reasoned opinion ofIn re Agard, 2011 Bankr.

LEXIS 488 (Bankr. E.D.N.Y. Feb. 10, 2011), which analyzes MERS standing under the New

York law governing transactions such as the one at hand, and in which MERS had ample

opportunity to brief this complex issue, the Court ruled that MERS had no standing to effect such

assignments under any of its absurd theories:

The legislative history of Section 362 "suggests that, notwithstandingthe use of the term 'party in interest', it is only creditors who mayobtain relief from the automatic stay."Id. at 573-74. (citing H.R.


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Rep. No. 95-595, 95th Cong., 1st Sess. 175, reprinted in 1978U.S.Code Cong. & Ad. News 5787, 6136); see also Greg RestaurantEquip. And Supplies v. Tour Train P'ship (In re Tour Train P'ship),15 B.R. 401, 402 (Bankr. D. Vt.1981) (finding that a judgmentcreditor of the debtor was not a "party in interest" because thejudgment creditor was not itself a direct creditor of the bankrupt).In the context of a lift stay motion where the movant is seeking to

commence or continue with an action to foreclose a mortgage againstreal property, the movant must show that it is a "party in interest" byshowing that it is a creditor with a security interest in the subject realproperty. See Mims, 438 B.R. at 57 (finding that as movant "failedto prove it owns the Note, it has failed to establish that it hasstanding to pursue its state law remedies with regard to the Mortgageand Property"). Cf.Brown Bark I L.P. v. Ebersole (In re Ebersole),440 B.R. 690, 694 (Bankr. W.D. Va. 2010) (finding that movantseeking relief from stay must prove that it is the holder of the subjectnote in order to establish a 'colorable claim' which would establishstanding to seek relief from stay).Under New York law, Movant can prove that U.S. Bank is the holderof the Note by providing the Court with proof of a writtenassignment of the Note, or by demonstrating that U.S. Bank hasphysical possession of the Note endorsed over to it. See, eg., LaSalleBank N.A. v. Lamy, 12 Misc. 3d 1191[A], 824 N.Y.S.2d 769, 2006NY Slip Op 51534[U], 2006 WL 2251721, at *1 [N.Y. Sup. Ct.2006]. The only written assignment presented to the Court is not anassignment of the Note but rather an "Assignment of Mortgage"which contains a vague reference to the Note. Tagged to the end ofthe provisions which purport to assign the Mortgage, there islanguage in the Assignment stating "To Have and to Hold the saidMortgage and Note, and also the said property until the saidAssignee forever, subject to the terms contained in said Mortgage

and Note." (Assignment of Mortgage (emphasis added)). Not only isthe language vague and insufficient to prove an intent to assign theNote, but MERS is not a party to the Note and the record is barren ofany representation that MERS, the purported assignee, had anyauthority to take any action with respect to the Note. Therefore, theCourt finds that the Assignment of Mortgage is not sufficient toestablish an effective assignment of the Note.the parties in this case have adopted a process which by its veryterms alters this practice where mortgages are held by MERS as"mortgagee of record." By MERS's own account, the Note in thiscase was transferred among its members, while the Mortgageremained in MERS's name. MERS admits that the very foundation of

its business model as described herein requires that the Note andMortgage travel on divergent paths. Because the Note and Mortgagedid not travel together, Movant must prove not only that it is actingon behalf of a valid assignee of the Note, but also that it is acting onbehalf of the valid assignee of the Mortgage.MERS argues that notes and mortgages processed through theMERS System are never "separated" because beneficial ownership ofthe notes and mortgages are always held by the same entity. TheCourt will not address that issue in this Decision, but leaves openthe issue as to whether mortgages processed through the MERS


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system are properly perfected and valid liens. See Carpenter v.Longan, 83 U.S. at 274 (finding that an assignment of the mortgagewithout the note is a nullity);Landmark Nat'l Bank v. Kesler, 289Kan. 528, 216 P.3d 158, 166-67 (Kan. 2009) ("[I]n the event that amortgage loan somehow separates interests of the note and the deedof trust, with the deed of trust lying with some independent entity,the mortgage may become unenforceable").

There are several published New York state trial level decisionsholding that the status of "nominee" or "mortgagee of record"bestowed upon MERS in the mortgage documents, by itself, does notempower MERS to effectuate an assignment of the mortgage. Thesecases hold that MERS may not validly assign a mortgage based onits nominee status, absent some evidence of specific authority toassign the mortgage. See Bank of New York v. Mulligan, 28 Misc. 3d1226[A], 2010 NY Slip Op 51509[U], 2010 WL 3339452, at *7[N.Y. Sup. Ct. 2010]; One West Bank, F.S.B. v. Drayton, 29 Misc.3d 1021, 910 N.Y.S.2d 857, 871 (N.Y. Sup. Ct. 2010);Bank of NewYork v. Alderazi, 28 Misc. 3d 376, 900 N.Y.S.2d 821, 824 (N.Y.Sup. Ct. 2010) (the "party who claims to be the agent of anotherbears the burden of proving the agency relationship by apreponderance of the evidence");HSBC Bank USA v. Yeasmin, 27Misc. 3d 1227[A], 911 N.Y.S.2d 693, 2010 NY Slip Op 50927[U],2010 WL 2089273, at *3 [N.Y. Sup. Ct. 2010];HSBC Bank USA v.Vasquez, 24 Misc. 3d 1239[A], 901 N.Y.S.2d 899, 2009 NY Slip Op51814[U], 2009 WL 2581672, at *3 (N.Y. Sup. Ct. 2009);LaSalleBank N.A. v. Lamy, 12 Misc. 3d 1191[A], 824 N.Y.S.2d 769, 2006NY Slip Op 51534[U], 2006 WL 2251721, at *2 (N.Y. Sup. Ct.2006) ("A nominee of the owner of a note and mortgage may noteffectively assign the note and mortgage to another for want of anownership interest in said note and mortgage by the nominee."). SeealsoMERS v. Saunders, 2010 ME 79, 2 A.3d 289, 295 (Me. 2010)("MERS's only right is to record the mortgage. Its designation as the

'mortgagee of record' in the document does not change or expandthat right...").But see US Bank, N.A. v. Flynn, 27 Misc. 3d 802, 897N.Y.S.2d 855 (N.Y. Sup. Ct. 2010) (finding that MERS's "nominee"status and the mortgage documents give MERS authority to assign);Crum v. LaSalle Bank, N.A., No. 2080110, 2009 Ala. Civ. App.LEXIS 491, 2009 WL 2986655, at *3 (Ala. Civ. App., Sept. 18,2009) (finding MERS validly assigned its and the lender's rights toassignee);Blau v. America's Servicing Company, et al., No. CV-08-773-PHX-MHM, 2009 U.S. Dist. LEXIS 90632, 2009 WL 3174823,at *8 (D. Ariz. Sept. 29, 2009) (finding that assignee of MERS hadstanding to foreclose).the rules of membership do not grant any clear authority to MERS to

take any action with respect to the mortgages held by MERSmembers, including but not limited to executing assignments. Therules of membership do require that MERS members name MERS as"mortgagee of record" and that MERS appears in the public landrecords as such. Section 6 of Rule 2 states that "MERS shall at alltimes comply with the instructions of the holder of mortgage loanpromissory notes," but this does not confer any specific power orauthority to MERS.The Court finds that the record of this case is insufficient to provethat an agency relationship exists under the laws of the state of New


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York between MERS and its members. According to MERS, theprincipal/agent relationship among itself and its members is createdby the MERS rules of membership and terms and conditions, as wellas the Mortgage itself. However, none of the documents expresslycreates an agency relationship or even mentions the word "agency."MERS would have this Court cobble together the documents anddraw inferences from the words contained in those documents. Forexample, MERS argues that its agent status can be found in the

Mortgage which states that MERS is a "nominee" and a "mortgageeof record." However, the fact that MERS is named "nominee" in theMortgage is not dispositive of the existence of an agency relationshipand does not, in and of itself, give MERS any "authority to act."

In re Agard, 2011 Bankr. LEXIS 488 (Bankr. E.D.N.Y. Feb. 10, 2011), *29-*56.

Although the Debtor in this case believes that there is no cause for the Court to grant relie

from stay as the property at issue is essential to his plan of reorganization which is reasonably

anticipated to be confirmed and the initial hearing on it is to take place on April 21, 2011. If the

Court is inclined to entertain the Movants motion, the Debtor prays that the Court postpone the

hearing on the Motion approximately 90 days to conduct discovery to allow Debtor to brief fully

the complex but important issues involved in this case regarding whether this particular

Movant can even request relief from stay, especially since even the investors in these

transactions (the true parties in interest as to all these properties), to whom Movant owes

fiduciary duties, are themselves defending themselves against lenders who seek to disposses

them of their investments instead of agreeing to reasonable loan modifications which would

maximize the return on the investors capital instead of lining the pockets of greedy banks.


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VI.

CONCLUSION

The Debtor prays that the motion for relief from stay be denied as the property is necessar

to an effective reorganization and there is a reasonable possibility of a successful reorganization

within a reasonable time. Indeed, even though the Debtors would be willing to make adequate

protection payments to the Movant, if necessary, since there is no evidence that the Propertys

value has depreciated in any perceptible way post-petition, no payments are warranted prior to

confirmation of a plan of reorganization, which the Debtor anticipates in the near future.

Date: April 9, 2010 ORANTES LAW FIRM,

A PROFESSIONAL CORPORATION

By: /s/ Giovanni OrantesGiovanni Orantes, Esq.Attorney for Debtor and Debtor-In-Possession


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DECLARATION OF ROBERTO ALMARAZ

I, ROBERTO ALMARAZ, hereby declare and state as follows:

1. I am over 18 years of age. I am the Debtor and Debtor-In-Possession in a

Chapter 11 proceeding, Case No. 2:10-bk-50424-VK. Except when based on information and

belief, I make this declaration based on facts within my personal knowledge and if called as a

witness, could and would testify thereto.

2. I filed my voluntary petition under Chapter 11 of Title 11 of the United States

Code (the Bankruptcy Code) on September 22, 2010 (the Petition Date).

3. The property of the estate includes 11 multi-family residential properties

(duplexes, 3-plexes and 4-plexes), a total of about 30 residential units. All are located within

Los Angeles County. I occupy one of the units of a triplex and rent the other two.

4. The properties have a collective value of about $4.3 million and secure a total of

18 mortgages. The total debt is substantially in excess of the properties values.

5. Some of the mortgages on my properties are adjustable. In hindsight, I realized

prior to filing this petition that I should not have heeded the advice of the banks and mortgage

brokers who convinced me to accept such mortgages, especially since I had a superior credit

rating at the time, but, in any event, I need to correct the problems caused by the fact that such

mortgages were adjusting over the last several months prior to the petition and reduced the net

income generated by the properties to the point where I need to seek to reduce the monthly

payments through this bankruptcy process.

6. This Motion relates to the property commonly known as 3622 through 3626

West 110th

Street, Inglewood, CA 90303 (3622 W. 110th

Street). This Motion should be

denied as 3622 W. 110th Street is essential to my reorganization as it generates net monthly

income of approximately $672 and I already filed a disclosure statement and plan of

reorganization, which may be confirmed within a reasonable amount of time as I already have

the vote of one impaired class. While relatively small in amount, when aggregated, it is

important.


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