Alaska: Federal Judge Gives Securitization a Cold Reception




For more information please call 954-495-9867 or 520-405-1688

This is not a legal opinion on any case inside or outside of Alaska. This article is for general information only and is directed at attorneys who can understand what this Federal Judge is talking about.


Hat tip to Eric Mains who did most of the work on this article.

This is another case that uses some very detailed and thought out analysis of the securitization process and use of MERS to do assignments. The judge rules properly as he should on the MTD putting the burden of proof where it belongs—on the movant. He rules for the Plaintiff, who if they follows the trail as have here, they should get a win or settlement out of Nationstar…….  However for all the good analysis he does, he somewhat blows it at the end by stating the presumption that the Trust is the true creditor for the loan, it’s investors MUST be owed money, or have rights to foreclose… but  we are getting there step by step!

Full case with background here:

Gardner v. Nationstar Mortgage, LLC

United States District Court for the District of Arizona

December 7, 2015, Decided; December 7, 2015, Filed

No. 2:13-cv-1641-HRH; [Consolidated with No. 2:13-cv-2478-HRH]


2015 U.S. Dist. LEXIS 163703


et al., Defendants.JAY N. GARDNER and RACHEL B. GARDNER, Plaintiffs, vs. NATIONSTAR

MORTGAGE, LLC, et al., Defendants.

Allegations that Defendants are not the Lender or Note Holder

Plaintiffs have alleged that the person who signed the First Assignment was not authorized to do so.

Plaintiffs have pled a plausible claim that the First Assignment was invalid. It appears to the court that plaintiffs are challenging more than the MERS system. They are challenging the authority of the people who were actually signing documents for MERS. The court concludes for purposes of the motions to dismiss that plaintiffs have stated a plausible claim that defendants lacked authority to conduct the trustee’s sale (presently noticed but [*27] held in abeyance) because the First Assignment was not valid.

Allegations Based on Plaintiffs’ Challenges to the Assignments of the Deed of Trust

Defendants contend that all of plaintiffs’ claims, directly or indirectly, rely on plaintiffs’ allegations that the Deed of Trust was not properly assigned to MERS as beneficiary in the first instance, and thus any subsequent assignments (to Aurora and to Nationstar) were invalid. Plaintiffs contend that MERS could have transferred its nominee status under the Deed of Trust, but that did not mean it could transfer any beneficiary rights under the Deed of Trust.

Plaintiffs have stated a plausible claim that the person who signed the First Assignment was not authorized to do so on behalf of MERS.

Securitization and Split Note / Deed of Trust Arguments

Defendants believe that plaintiffs are alleging that because their Note was sold as part of a securitization mortgage trust shortly after the Deed of Trust was recorded, they somehow have the right to stop the foreclosure sale. Plaintiffs disagree. Plaintiffs contend that they have alleged that the securitization of their loan means that the Certificateholders are the lender and note holder. Based [*28] upon that contention, plaintiffs assert that only the Certificateholders can declare default on the Note, accelerate it, and tell the trustee to initiate foreclosure.

The respective roles of the various entities involved in the multiple transactions affecting plaintiffs’ Deed of Trust are not entirely clear. Some relevant documents evidence at least uncertainty as to the parties’ roles. It is plausible that MERS had the authority to transfer the lender’s beneficial interest in the Deed of Trust. But the issue remains: did the person who signed the First Assignment have the authority to act on behalf of MERS.

Count One — Declaratory Action

Plaintiffs’ Count One seeking declaratory relief states a plausible cause of action. The court will exercise its discretion to entertain plaintiffs’ Count One. As suggested by the foregoing, a primary issue which must be addressed by the parties and the court is the validity of the First Assignment. The validity of the First Assignment will depend upon two factors: (1) who — under the Deed of Trust, the pooled Trust Agreement, and other relevant documents — had the authority to assign or otherwise change beneficiary status under the Deed of Trust, and [*29] (2) was that authority validly exercised?

If the First Assignment was valid, then it will become necessary to evaluate proceedings that took place following the First Assignment. However, if the First Assignment were invalid, then much of what followed will also fail.

Count Two — Breach of Contract

Plaintiffs have plausibly alleged a breach of the Deed of Trust based upon their contention that the First Assignment was invalid — which, if established, would render the Second Assignment invalid.

Count Three — Breach of Duty of Good Faith and Fair Dealing

Because plaintiffs have stated a plausible breach of contract claim (Count Two), then it follows that their breach of implied covenant claims are also plausible.

Count Four — Quiet Title and Slander of Title

Plaintiffs contend, based upon A.R.S. § 33-420.A, that one or more of the defendants caused a forged, groundless, or false statement of claim as to the real property in question to be recorded. Defendants argue that none of the recordings made by them contain false statements or misrepresentations or, in the alternative, that any misstatements were not material to the plaintiffs.

If, as plaintiffs contend, the First and Second Assignments of the Deed of [*30] Trust are invalid, then plaintiffs’ claim that a purported lien holder has caused the recording of a knowingly groundless or false claim against the real estate in question is plausible. Because of the significant rights that go with beneficiary status, the recording of a groundless or false assignment of a deed of trust is material to the plaintiffs, for beneficiary status carries with it the right to accelerate the loan, to declare a default, and to proceed with foreclosure.

Count Five — Negligence per se Claims

Plaintiffs have pled a plausible negligence per se claim based upon A.R.S. § 39-161 because plaintiffs allege that defendants recorded the First Assignment that is alleged to have been signed by someone without authority to do so. Plaintiffs have also stated a plausible negligence per se claim based upon A.R.S. § 33-420 and the recording of documents containing material false statements as discussed above. At this stage of proceedings, the court is unpersuaded that plaintiffs have pleaded this claim with insufficient particularity.

Count Six — Fair Debt Collection Practices Act Claim

Count Six of plaintiffs’ Fourth Amended Complaint alleges a Fair Debt Collection Practices Act Claim against T.D. Service Company, [*31] Japp, and Goff. Each of these defendants were substituted as trustees under the Deed of Trust. ²’[A] non-judicial foreclosure proceeding is not the collection of a ²debt² for purposes of the FDCPA.’² Zinni v. Jackson White, P.C., No. CV 11-02143-PHX-FJM, 2012 U.S. Dist. LEXIS 33896, 2012 WL 869008, at *2 (D. Ariz. March 14, 2012) (quoting Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1182 (D. Ariz. 2009)). ²Moreover, ’mortgagees and their assignees, servicing companies, and trustee fiduciaries are not included in the definition of ²debt collector.²’² Id. (quoting Mansour, 618 F. Supp. 2d at 1182). Because trustees in non-judicial foreclosure proceedings are not debt collectors, plaintiffs’ Count Six is dismissed. [Editor’s note: But the alleged beneficiary IS a debt collector. This might have resulted from a problem with the wording of the pleading.]

Count Seven — Cancellation of Trustee’s Sale Claim

This claim is asserted against Nationstar, T.D. Service Company, Japp, and Goff. Plaintiffs argue that Japp and Goff were obligated to cancel the trustee’s sale set by T.D. Service Company. A.R.S. § 33-813 requires that a trustee cancel a pending sale if a trustor has reinstated the deed of trust through payment of amounts due. Here, there has been no such reinstatement. Plaintiffs’ Count Seven does not state a plausible claim. Indeed, it appears to the court that plaintiffs’ Count Seven merely states a potential remedy that might be imposed if plaintiffs prevail on their declaratory action (Count One). Plaintiffs’ Count [*32] Seven is dismissed.

Count Eight — Intentional Interference with Contractual Relations

The elements of a cause of action for intentional interference with contract are a contract between the plaintiff and a third party; knowledge of the defendant that the contract exists; intentional interference by the defendant which causes the third party to breach the contract; a showing that the defendant acted improperly; and a showing that damage resulted to the plaintiff. Barrow v. Arizona Bd. of Regents, 158 Ariz. 71, 761 P.2d 145, 152 (Ariz. Ct. App. 1988). Plaintiffs allege that ²[e]ach defendant has intentionally interfered with the contracts between the Gardners and GreenPoint, thereby causing one or more breaches of those contracts.²114

Plaintiffs contend that they have adequately alleged that defendants interfered with their contract with the true lender. Plaintiffs contend that the Certificateholders, the note holder, and the lender on the loan are the only ones who can be true beneficiaries of the Deed of Trust. Plaintiffs contend that defendants interfered with plaintiffs’ contract with the Certificateholders. Defendants argue that plaintiffs are not parties to the pooled Trust Agreement and have no standing to assert rights there under. [*33]

As stated above, the court has concluded that plaintiffs’ Count One for declaratory relief states a plausible cause of action. It is the court’s perception that in the course of ruling on Count One, the court will necessarily confront and decide who is and who is not a beneficiary under the Deed of Trust for purposes of enforcing the Deed of Trust if the Note is not paid. Plaintiffs’ Count Eight is plausible if, as plaintiffs contend, only the lender/note holder can be the beneficiary. The court declines to address that proposition at this time.

Statute of Limitations

Defendants contend that all of plaintiffs’ claims rely on a theory that MERS could not have been a true beneficiary and that all assignments and substitutions flowing from its appointment were invalid.

Defendants also argue that all claims that depend upon a purported defect in acknowledgment of a recorded document are time-barred. 114 Fourth Amended Complaint at 50, ¶ 287, Docket No. 82.

The court declines to take up the parties’ statute of limitations arguments until plaintiffs’ claims (especially those in connection with Count One for declaratory relief) are better defined.

Claims against T.D. Service Company, Japp, and Goff

T.D. Service Company, Japp, and Goff argue that all claims [*34] against them should be dismissed pursuant to A.R.S. § 33-807(E). That statute provides in pertinent part that a trustee should not be joined in a legal action except for breach of the trustee’s obligations under the statute or the deed of trust in question. Plaintiffs contend that there were multiple breaches of obligation by the trustees in question, including their knowledge that Nationstar was not the true beneficiary for purposes of initiating foreclosure proceedings.

Taking the allegations of plaintiffs’ complaint as true, plaintiffs have stated plausible claims against T.D. Service Company, Japp, and Goff.

Plaintiffs’ Standing

[Editor’s Note: While not particularly sexy or interesting to lay people, this part of this lawsuit should grab the attention of any good lawyer. I have long contended that an immediate proactive attack should be filed against the parties involved in a NOTICE OF SUBSTITUTION OF TRUSTEE in non judicial states.

This is a linch-pin of the banks and if you pull it out, they have nothing. The seemingly innocuous notice of substitution is, in reality, a bare knuckled attempt to a create a paper trail that is unsupported by any actual transaction. It is a self-serving document that declares the identity of the beneficiary.

If left undisturbed it results in essentially “the law of the case” in which the named beneficiary becomes the real beneficiary for legal purposes and the named trustee becomes the real trustee for purposes of the subject case.

Attacking it and proving that neither the “beneficiary” nor the “substituted Trustee” are or ever were authorized to act as beneficiary or trustee, that they do not conform to the definition of beneficiary and trustee, and that the substituted trustee is just a puppet of a stranger to the transaction who is attempting to steal the debt, steal the house and steal fees from both the homeowner and the investor brings   focus to the attack and will likely win the day even in trial courts.

A successful attack eliminates the new trustee and defeats the assertion of ownership by the beneficiary. It may be fairly assumed that the old trustee will not act as the puppet of the pretender lenders, but that remains to be seen]

Nationstar argues that plaintiffs have no standing to challenge the validity of the Third Substitution, which plaintiffs contend was void because AMSL Legal Group LLC does not exist. This quarrel has to do with use of the company named AMSL Legal Group LLC, as opposed to AMSL Legal Group LLP.

Plaintiffs have standing to inquire into the validity of the various documents underlying the Notice of Sale recorded for purposes of enforcing plaintiffs’ Deed of Trust.

Declaratory Relief

Defendants argue that plaintiffs’ request for declaratory injunctive relief should be denied because [*35] they are remedies for underlying causes of action and not independent causes of action. Plaintiffs have stated a plausible cause of action for declaratory relief, and the remedies for which they pray remain viable.

Allegations Not Contained in Proposed Fourth Amended Complaint

The AMSL defendants argue that plaintiffs have improperly included allegations in their Fourth Amended Complaint that were not contained in the proposed Fourth Amended Complaint.

The court has already rejected that argument when it ruled upon the Nationstar defendants’ motion to strike.115


The motions to dismiss are granted in part and denied in part. Count Six as to T.D. Service Company of Arizona, Japp, and Goff is dismissed. Count Seven as to Nationstar Mortgage, T.D. Service Company of Arizona, Japp, and Goff is dismissed. Count Six and Seven are dismissed with prejudice as plaintiffs have had multiple opportunities to plead the claims asserted in these counts. The motions to dismiss are denied as to all other counts and contentions.

The court reminds the parties of its conviction that plaintiffs owe a debt that is secured by a Deed of Trust. Laying aside the technicalities [*36] of the voluminous records over which the parties disagree, the money which the plaintiffs owe (or the proceeds of the security for the Deed of Trust) ultimately belongs to the LEHMAN XS TRUST, Series 2007-15N, Certificateholders, for whom U.S. Bank National Association acts as the trustee. There is no doubt but that someone on behalf of the Certificateholders and the trustee for the Certificateholders is entitled to collect payments, declare a default if payments are not made, and, if the default is not cured, demand foreclosure. The parties would save themselves a great deal of effort and money if they were to reach an agreement identifying the entity presently entitled to demand payment of plaintiffs’ debt, the entity entitled to declare a default if payment is not made, and the trustee entitled to foreclose if full payment of plaintiffs’ debt is not made.

Editor’s Note: Clearly the court has not been educated fully on the premise of securitization. This again could be a problem with the wording of the complaint that should have alleged that the “trust” doesn’t exist because there is nothing in it and/or has likely been “resecuritized” (which fits the description of most REMIC Trusts). Perhaps that could be enhanced by an allegation that the trust was never funded. As to whether the beneficiaries of the REMIC trust have a claim as certificate-holders, my impression is that they might have a claim — but only after they accounted for all payments, including servicer advances, and that the claim is not secured, provided however that the certificate holders can show no privity with any of the parties who “Handled” or “processed” the deed of trust.

The court urges the parties to seriously consider engaging a private mediator or requesting the designation of a United States magistrate judge to assist them with a settlement conference.

DATED at Anchorage, Alaska, this 7th day of December, 2015.

/s/ H. Russel Holland

United States District Judge

11 Responses

  1. […] Alaska: Federal Judge Gives Securitization a Cold Reception […]

  2. […] Alaska: Federal Judge Gives Securitization a Cold Reception […]

  3. Thanks

  4. Judge Holland from Anchorage is sitting by ‘designation’ to hear selected cases from Arizona due to a severe judge shortage in the Arizona District. Judge Holland writes in an easy to understand conversational style.

  5. Can some one tell me how or why a federal judge out of Alaska is ruling on a AZ case? When I read this case some of the wording sounds off a little to me, not lawyer talk, but more common words . I also have read some good reports on this AZ lawyer Barbara Forde. Sounds to me that she has a good understanding of this con game. I wished others would open their eyes as to who is gaming who for the free house!!

  6. Regarding FDCPA they are debt collectors in non judicial states


  7. I think we are having that old problem called: not seeing the forest for the trees.

  8. Arizona

    Sent from my iPhone


  9. What the article DOESN”T say is this is yet another winning case by Scottsdale AZ lawyer Barbara Forde.

  10. Hmmm…

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