BY BRIAN KORTE AND SCOTT WORTMAN

Transcription

1 BY BRIAN KORTE AND SCOTT WORTMAN Page: 1 IN THE CIRCUIT COURT OF THE 17TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA CASE NO.: CA CE U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF MLCFC COMMERCIAL MORTGAGE TRUST 2006-I, COMMERCIAL MORTGAGE PASSTHROUGH CERTIFICATES, SERIES 2006-I, Plaintiff(s), vs.

2 TIDEWATER ESTATES CO-OP, INC., A FLORIDA NOT-FOR-PROFIT CORPORATION AND ALL OTHER UNKNOWN PARTIES, INCLUDING CLAIMANTS, PERSONS OR PARTIES, NATURAL OR CORPORATE, OR WHOSE LEGAL STATUS IS UNKNOWN, CLAIMING UNDER ANY OF THE ABOVE NAMED DEFENDANTS, Defendant(s). / --COURT PROCEEDINGS HELD BEFORE THE HONORABLE MICHELE TOWBIN-SINGER -- Monday, April 25, :50 a.m. - 2:25 p.m. Broward County Courthouse

3 201 S.E. 6th Street Room 775 Fort Lauderdale, Florida Florida Court Reporting

4 Page: 2 APPEARANCES: ON BEHALF OF THE PLAINTIFFS: LORI L. HEYER-BEDNAR, ESQUIRE ROETZEL & ANDRESS 350 East Las Olas Boulevard Suite 1150 Fort Lauderdale, Florida ON BEHALF OF THE DEFENDANTS: BRIAN KORTE, ESQUIRE -andscott J. WORTMAN, ESQUIRE KORTE & WORTMAN, P.A Vista Parkway

5 West Palm Beach, Florida Florida Court Reporting

6 Page: 3 --P R O C E E D I N G S THE COURT: I'm sorry I'm late. My motion calendar took a little longer. MS. HEYER: We understand. We've been on the other side of that. THE COURT: Thanks. Appreciate it. And for those of you in the audience who aren't familiar with motion calendar. Every morning I have what is called motion calendar and I don't think I have a limit. I could have up to 40 cases starting at 8:45. I hope to finish at 10, but sometimes it takes a little longer. So I apologize to keep you waiting. All right. Can the parties announce their names for the record. MS. HEYER: Lori Heyer on behalf of

7 Plaintiff, U.S. Bank as Trustee. MR. KORTE: Brian Korte on behalf of the Defendants, Tidewater Estates. MR. WORTMAN: Scott Wortman on behalf of Tidewater Estates. THE COURT: You can proceed. MS. HEYER: Sure, Your Honor. We'd like to go ahead and start with Plaintiffs' motion Florida Court Reporting

8 Page: 4 for summary judgment. THE COURT: All right. MS. HEYER: Your Honor, we forwarded over to the Court a binder back on April 14th. Hopefully you've got it with all the other binders you have. THE COURT: I do, yes. And I've read everything in there. All the cases and everything. MS. HEYER: Terrific. Thank you, Your Honor. I'm here today along with Steve Reynolds, a representative of U.S. Bank as Trustee. This

9 case has been pending, Your Honor, for over a year and it's been in default for over a year. And at this juncture, Plaintiff thinks that the case is ripe for summary judgment because there's no issue of material fact. In fact, that happens to be admitted by Defendants, because Defendants are also seeking summary judgment today as well. So really what we have here is an issue of law and applying the law to the facts as they are before the Court. Who should be victorious in summary judgment? If you look at the promissory note and Florida Court Reporting

10 Page: 5 mortgage, it's undisputed it's executed by Tidewater Estates. And if you look to the governing language of the promissory note and the mortgage, both of them clearly provide that the note shall be governed, construed, applied and enforced in accordance with the laws of the state where the property is located. It's undisputed the property is located in Deerfield Beach, Florida in this county. Why is that important? That's important because Florida law, the transfer of promissory notes, the enforcement of mortgages is going to come down to an interpretation of Florida law. The loan was transferred after it was originated into a trust. That's just a matter of fact. It's not relevant for purposes of enforcement. It's just a background fact. U.S. Bank is a trustee for that trust here enforcing that note. From the time that the

11 loan got transferred into the trust in March of 2006, payments were paid by Tidewater Estates to the servicer up until 2009, when they stopped making payments. That's when they stopped making principal and interest payments. They made a few interest payments thereafter, Florida Court Reporting

12 Page: 6 but then went into default again and stopped making any payments whatsoever. The payment stream is actually attached to Plaintiffs' affidavit in support of its motion for summary judgment. No one else has been collecting rents -- excuse me -- collecting mortgage payments on this particular loan. Why is that important? Because obviously on behalf of the trust, the servicer is acting in collection of the rents, and then the special servicer is here to enforce the documents. There's been no one else who has held the note, has held the mortgage. From the day it was originated until today, we can actually track where that loan has been and why it is actually here today. In fact, we have possession of the original. We've had possession of the original at every hearing before this Court. Has there been a default? Yes. Is that

13 disputed? Absolutely not. Has there been a demand? Absolutely. Is that disputed? Absolutely not. So really the whole crux of the case comes down to who is the owner and holder and how do we enforce the documents? The owner and holder is U.S. Bank as Trustee. Florida Court Reporting

14 Page: 7 Why do we know that? Well, first we have an endorsement on the allonge in which the loan was actually transferred to the trust to LaSalle as Trustee. Is there an endorsement from LaSalle Bank as Trustee to U.S. Bank as Trustee? No. Is that necessary? No. Because the operating fact is that it went into the trust. After that, LaSalle stepped down as trustee and U.S. Bank became the successor trustee. How do we know that? Well, it's in the pooling and servicing agreement. It's also in the instruments appointing the trustee. Not only as LaSalle resignation, but also the appointment of U.S. Bank as Trustee. Those are also attached to the affidavit filed in support of Plaintiffs' motion for summary judgment. Is that the only thing the Court needs to look to in this case? No. Because in fact there's a lot of consistency here. We have a verified complaint. We have a verified motion for sequestration of rents. And then we have

15 the affidavit in support of Plaintiffs' motion for summary judgment. In addition, we also have amended answers to interrogatories. And in the amended answers to interrogatories, it Florida Court Reporting

16 Page: 8 restates the exact same facts that I just laid out; that there was a trust. It was put into the trust. The loan has been in the trust ever since Has there been a change in trustees? Yes. Is Midland the special servicer entitled to enforce? Yes. That's undisputed. Defendants don't dispute that at all. In fact, under the pooling and servicing agreement, and the limited power of attorney attached to the amended answers to interrogatories, they're here before the Court with the rights to enforce the loan. Do they have to necessarily be the owner? No. U.S. Bank as Trustee is the owner. Midland is here entitled to enforce the documents on behalf of U.S. Bank. Now not only do we have endorsement. We also have possession. We currently possess and have to present to the Court the original promissory note, the original allonge, and the original mortgage. We also happen to have the

17 original loan agreement and all the related documents thereto. But of importance is the original note. We have a transfer. It got transferred into the trust. We have the Florida Court Reporting

18 Page: 9 allonge that shows that. We also have an assignment. If you look to the assignments that were attached to the verified motion -excuse me -- to the verified complaint, you'll see where the loan actually got tracked from its originator to the first trustee. And then you have an assignment of the note and mortgage from LaSalle Bank to U.S. Bank. And on top of all that, we have an affidavit that states that the owner and holder of the note is U.S. Bank as Trustee. Now in my opinion that's overkill under Florida law. Because Florida law is very clear. You do not need to have all of those things to be the owner and holder. Any one of those items, any evidence of intent to transfer the loan is sufficient under Florida law. You can have proof of the purchase, you can have an assignment of the mortgage, or you can have an endorsement. In fact, in this case we have them all.

19 One of the important cases, Your Honor, that happens to be one of the most recent cases we cite to in our papers is Taylor versus Deutsche Bank, which is tab L in the binder. Florida Court Reporting

20 Page: 10 That's a Fifth DCA case. And it interprets the Uniform Commercial Code. Ironically in that case the defendants asserted the exact same defense that they assert here, lack of standing. Court grants a summary judgment in favor of the lender. And the court looked to the code. It looked to of Florida Statutes, which defines who a holder is. Who is entitled to come before this Court and enforce the documents. In that case there wasn't an endorsement to the note. There wasn't an allonge. And there wasn't a specific assignment. But the lender was still entitled to come forward before the Court and enforce the documents. Any evidence of a valid assignment, proof of purchase or evidence of an effective transfer is all that's required. Any indicia of transfer, any indicia of intent is sufficient. In fact, if you look to , it gives rights to a holder of a note and a

21 non-holder of a note. With or without possession, they can come before this Court. Now one of the defense asserted in the answers in affirmative defenses by Tidewater is Florida Court Reporting

22 Page: 11 that the assignment has got an unusual date. It's actually dated from LaSalle to U.S. Bank after the effective date of the transfer. Well, that's completely unholy irrelevant because we look to the indicia of transfer. If the assignment is evidencing a prior transfer, it's sufficient. How do we know that? We look to WM Specialty Mortgage versus Salomon, which is a 4th DCA case, In that case, the written assignment was executed after the transfer and it was found to be sufficient. Because it's merely evidencing the prior transfer. Interestingly enough, WM Specialty Mortgage cites to a Supreme Court of Florida case, Johns versus Gillian, Predates all of us. In that case the court held that a written assignment of mortgage was absolutely not required. Intent to pass title, some

23 evidence of intent is absolutely sufficient under the law to transfer the note and mortgage to the holder. What's interesting in this case is the Defense cites to York Construction and New York trust law. They'd like this Court to Florida Court Reporting

24 Page: 12 completely ignore the Uniform Commercial Code and completely ignore Florida law, and go to a completely different jurisdiction. Unfortunately, we're here looking to enforce documents that are controlled by Florida law. The borrower, Tidewater Estates, was not a party to the pooling and servicing agreement, not a party to the trust. The trust documents are not before this Court for enforcement; the loan documents are. This case is not a case of first impression. Defense would like you to think that that's the case. However, we have found supplemental authority that we have filed with the Court and provided to counsel in U.S. -excuse me -- in Deutsche Bank versus Castillo, Case No CA-21 down in the 11th Circuit. If I may approach, Your Honor. THE COURT: Yes.

25 MS. HEYER: I hate to burden the Court with more paper. THE COURT: Thank you. MS. HEYER: Why is this case instructive? In this case, the borrower asserted the exact same argument that's being asserted here. The Florida Court Reporting

26 Page: 13 Defense wanted the Court to look to New York law. They cited to York construction as a authority for that proposition. The borrower also moved for summary judgment the same time as the plaintiff. Starting to sound familiar. However, the court in the 11th Circuit, Judge Thomas, granted summary judgment for the plaintiff finding Deutsche Bank the holder and owner of the loan documents, and interpreted the documents under Florida law and completely ignored New York law as completely irrelevant. What I provided to the Court, since the orders are merely orders granting or denying the summary judgment, I have provided a copy of the transcript from that court hearing in which York Construction was argued strenuously by defense counsel and New York law as well. Interestingly enough, defense counsel in its papers in this action besides trying to

27 cite New York law, actually try to go into a little bit of Florida law. And the cases cited by Tidewater actually support Plaintiffs' position. In fact, Lizio versus McCullom, which is a Fourth DCA case, and Judge Eade was the judge, presiding judge in the lower court Florida Court Reporting

28 Page: 14 found that assignee was a holder. Possession of the originals was sufficient. Additionally, Tidewater also cites to Servedio, S-e-r-v-e-d-i-o, versus U.S. Bank. Another Fourth DCA case. And the court reaffirmed the requirements to enforce a note and mortgage. You can have an endorsement or an assignment or an affidavit of ownership. And in that case, the plaintiffs submitted evidence of assignment -- excuse me -- can submit evidence of an assignment from the payee to the plaintiff or an affidavit of ownership to prove its status as holder of the note. And in fact we have done both of those in this case. There is no evidence supplied by any counter affidavits, any deposition testimony to show that U.S. Bank is not the owner. There's no one that's come forward to say it never got

29 transferred or to say, by the way, I'm holding the note, not U.S. Bank. One of the last cases cited by the Defense that actually addresses Florida law is Riggs versus Aurora. That supports Plaintiffs' position. That's also a Fourth DCA case. And Florida Court Reporting

30 Page: 15 Judge Lynch was affirmed on appeal. In that case, possession of the original, albeit the note was endorsed in blank, established lawful holder of a note and summary judgment was affirmed by the Fourth DCA. One of the last defenses asserted by Tidewater is that U.S. Bank has to be a holder in due course. Well, that's really not relevant. It's legally immaterial in this case whether U.S. Bank is a holder or a holder in due course. A holder can enforce just like I mentioned previously under under the code. You can be a holder, a non-holder or a possessor and enforce the note under certain circumstances. A holder in due course is only the special term given to a particular holder to defeat certain personal defenses. Even if that was the case, and we're not saying that we're not a holder in due course,

31 we just don't think that it's relevant because there's no personal defenses asserted in this case. The only issue that's been raised is whether we're a holder. So it doesn't really make a difference. It doesn't really make a difference what type of holder that we are, Florida Court Reporting

32 Page: 16 just that we're a holder able to come forward before this Court and enforce the note is sufficient. And in fact one of the cases cited by Defense for the proposition of a holder in due course, and that we're not a holder in due course, and therefore cannot enforce actually goes on to say that a holder of a note is entitled to summary judgment. You didn't have to necessarily be a holder in due course. Now what evidence does the Court have before it that U.S. Bank is not the holder? Well, there aren't any deposition transcripts. There's no factual witness whose come forward in an affidavit to say, I'm the holder. U.S. Bank is not the holder. The only thing that they have filed with the Court is an affidavit of an expert, which we received with their cross motion for summary judgment late

33 Wednesday of last week. Our office and the courts were closed on Friday. But I have prepared and filed with the Court this morning and have provided to opposing counsel Plaintiffs' motion to exclude the expert report and his opinions. Not only is it hearsay, the Florida Court Reporting

34 Page: 17 bigger issue and the bigger problem in this case is the report only contains legal conclusions. If I may approach, Your Honor. THE COURT: Yes. Thank you. MS. HEYER: We think that this Court should not look to the expert report filed by Tidewater. In fact, the expert is not an attorney. Yet he's opining on New York law. And he's also opining that the documents here violate New York law. Well, that really isn't an expert's realm of expertise for this case. The legal conclusions to draw from the documentation in this case rests with the Court. And we've cited to two decisions, Your Honor, two cases that when an expert's testimony is to determine the terms and meaning of documentation, that expert testimony is completely and wholly inappropriate and reversible error.

35 It should not be admissible for a person to come before this Court and opine that a document is null and void as a matter of law; that it is in violation and null and void under New York law. There are five opinions rendered. Each of them deals with legal Florida Court Reporting

36 Page: 18 conclusions and should be inadmissible for purposes of this proceeding. That is the only thing that has been filed in opposition. There have been no other affidavits or anything like that filed. Granted we have had deposition transcripts filed. Which, Your Honor, can see if you look at the papers filed by Tidewater, nothing in those papers shows to anyone other than U.S. Bank as the owner and holder of the documents. No one has -- we've taken discovery in this case. There's been no correspondence, no affidavits, no assertions whatsoever of any third party who has made claim to these documents. So what does the Court have before it? It has an endorsement. It has an assignment. It has an affidavit of ownership. And more importantly and most importantly, we have the

37 original note and mortgage. And on that basis, it should be sufficient for this Court for purposes of the issue, the main issue, which is who is the owner and holder of the documents. THE COURT: Thank you. MR. KORTE: Good morning, Your Honor. Florida Court Reporting

38 Page: 19 THE COURT: Good morning. MR. KORTE: Your Honor, I'm going to start with the last argument that counsel made and start with that while it's fresh in our mind. They have the original note and mortgage. That's terrific, but the Court doesn't. Under Booker v. Sarasota, the Court is required to have possession of that document 20 days in advance of a motion for summary judgment. It's a fatal error not to have filed the note and mortgage. With such, they cannot prove or prevail on a summary judgment in a foreclosure action. That's basically the simplest argument the Court can follow. Beyond that argument, Your Honor, it's very straight forward. The note is not made out to the Plaintiff in this case. We've had

39 lots of discussions whether or not -- we've got these transfers back and forth between a trust. As counsel has pointed out, the trust is not an issue. It's a sideline. It's not at evidence today. Then they have no authority to be here, Your Honor. The note is made out to Merrill Lynch Mortgage Lending with a very questionable allonge sending it to LaSalle. They are not Florida Court Reporting

40 Page: 20 the proper party. Unless they can prove the entire chain to get them here, they're not the proper party to be before the Court. Now they want to gloss over the pooling and servicing agreement and the assignments that are there, and all the misdeeds contained therein, but they need to get that point. They're putting the burden on the Defendants by saying, we have possession of the note and mortgage. We get to foreclose. Clearly UCC would be at play if this was a negotiable instrument. But it has a specific endorsement. It's no longer a negotiable instrument and it falls outside of the UCC. If it's endorsed in blank, negotiable instrument. Specifically endorsed, not UCC. Riggs. I'll call it Riggs II, because Riggs I came down and said the theory was that an endorsement in blank with nothing more would be insufficient.

41 The Fourth said, no, no, no. We're going to allow Riggs II to stand and say endorsements in blank, possession will get you there. But that's not the case here. They may or may not have possession, because they've not filed the note. But they don't have an endorsement in Florida Court Reporting

42 Page: 21 blank. So Riggs fails for them. But let's go back and start where they started. They're saying that it was transferred into a trust. Well, although that's the claim, Your Honor, we've had some testimony that it was or was not transferred into a trust. If they want to now argue that the document was transferred into a trust, they need to prove it was done correctly. And they then take the Court on a wild goose chase in saying, New York law doesn't apply, because it's only Florida law under the note and mortgage. That's true. Under the note and mortgage Florida law applies. But New York law applies to the trust itself. And the Court has to interpret New York law, because the trust is governed thereafter. And it says, any action that the trust takes that's in direct conflict with the trust provisions are void. We laid that out in our memo very clearly for the Court. I'm hoping the Court has had an

43 opportunity to read it. And that is really a problem for them, because they created this trust on March, We had a closing date of March 30th, The closing date is Florida Court Reporting

44 Page: 22 significant under the trust documents because if they didn't get the documents in within that period of time, the trust would fail to be able to accept those documents. There is discussion between Mr. Rogers who created the assignment for Mortgage Lending, Merrill Lynch Mortgage Lending, and he created the endorsements in blank on the back of the allonge and then later had them stamped to LaSalle, as to what the date was that he actually signed the documents. Counsel argues that it's an indicia of intent to transfer that's required here. Under Taylor v. Deutsche and WM Specialty, which we rely on heavily, absolutely it is that intent to transfer that becomes important. There is no intent to transfer at the time that the endorsements are made to the allonge. They don't know who it's going to, where it's going to, but they know that it's not going to be endorsed in blank. He doesn't even have possession of the note in

45 which to affix the allonge. There can be no intent to transfer from Merrill Lynch Mortgage Lending to any party when you don't have possession of the note in which to do it, and Florida Court Reporting

46 Page: 23 you're endorsing allonges to be affixed there after. At some point in time thereafter. But it comes up to that same argument, Judge, and it kind of ties right back into the March 30th date. On March 30th, if they didn't have possession of that note and mortgage endorsed specifically to LaSalle, their trust will fail. If their trust fails, they are not permitted to accept it. Which means the trustee would over step its authority to do so. These arguments have been made in other courts and are currently up on appeal throughout the state, but not like this. In this case we have a specific endorsement to a specific party who is not the Plaintiff in this case. Counsel argued that they can track the note and mortgage from its inception to today. That's simply not true. We've asked over and over in depositions filed with this Court, when

47 was the note transferred from Merrill Lynch Mortgage Lending to LaSalle. No one can give a date. In fact, what they do is they tell you that the mortgage was transferred pursuant to a loan purchase agreement between Merrill Lynch Mortgage Lending and Merrill Lynch Investors Florida Court Reporting

48 Page: 24 some time after the making in September of Well, that's great, but no one can pinpoint the date when the notes actually physically transfer or when any monies actually change hands to pay for them. According to the trust documents, only the depositor can make the deposit into the trust. Simply didn't happen here. In fact, we've got testimony from all the parties that there's a direct A to Z transfer. From Merrill Lynch Mortgage, the first party, into LaSalle directly avoiding the depositor. A direct violation of their own pooling and servicing agreement. It continues, Your Honor. Did the parties over step their authority thereafter to get here today? Comes down to the assignments of mortgages. The assignments of mortgages become critical to the Court's consideration as to whether or not they have the authority to make any type of a mortgage foreclosure. And I need to stop and discuss

49 the two different parts. We have the note, which is the debt itself, and we've got the mortgage, which is the right to foreclose. Even if the Court were to find the debt to be Florida Court Reporting

50 Page: 25 enforceable, it still also has to find that the mortgage is in the possession of the Plaintiff, and that's clearly not the case. As we pointed out in our brief over and over again, and the documents clearly lay out, there is a transfer of the mortgage to LaSalle at some point in time into the trust. Then there is a subsequent transfer of the mortgage to U.S. Bank. The problem is that the subsequent transfer from LaSalle to U.S. Bank occurs after LaSalle has been terminated as the trustee of the trust. Had no authority to make that assignment. So those subsequent assignment are ineffectual. They can't send out more rights than it has, which are zero. So counsel argued that, well, it's in the trust and we're going to make hay with the assignments is true. Whether it made it into the trust or not, the trustee had no authority

51 to make the assignment for which they're traveling under today. In fact, it would be Wells Fargo who became the interim trustee who would have had to make that discussion and that decision to make those transfers. Counsel didn't even mention the words Wells Fargo Florida Court Reporting

52 Page: 26 during her entire argument because she knows she fails on those points. And In response to Plaintiffs most critical point is possession of the note and assignment are all that's required. Possession of the note if endorsed in blank may give them the right to enforce it along with the mortgage and the assignments thereafter. But, in this case, especially in this case, the note that they purport to have has an unaffixed allonge to it. The document is multi-page for the actual note and mortgage, and then we've got an allonge that comes thereafter. Possession of an allonge that was never affixed to a note and is simply paper-clipped to it does not create the intent to transfer they're required to have. In fact, all it does create is a mess of paperwork. Now I don't know if the Court wants us to

53 take up on a separate matter our motion for summary judgment or take it up now? THE COURT: You could do it now, because I think they're obviously related. MR. KORTE: Well, then let's go back to the argument which is raised at page 100 of Florida Court Reporting

54 Page: 27 Mr. Reynolds' deposition. He's asked at line five, page 100, "What information would be contained in the allonge at the time of your signature?" And clearly he would have no way of knowing what was contained in this. All he can tell you is that the allonge was some time signed by some lawyer in a different room to LaSalle. And he would have signed it some time around September the 9th, Well, that's important. Because how could Mr. Reynolds have had the specific intent to assign a mortgage or note that he didn't have in his possession, that he didn't know who it was going to, and it wasn't dated? He cannot have that intent. And in fact he is the person who would have started the ball rolling. Merrill Lynch Mortgage Investors -- Mortgage Lenders would have had to be the person who starts the first assignment. And he's the person put forward by Merrill Lynch to discuss this. He's the guy who signed it. He had no

55 intent to send it to LaSalle or any third party. There's a quirk in Florida law that requires that the person whom is endorsing the Florida Court Reporting

56 Page: 28 note whether in blank or in special endorse on the note if there is physical room and not attach other pieces of paper. And it's to avoid this exact situation. We don't want allonges floating around that are not attached to the note, because it creates this fraud and intent problem that we see here today. On this note, if the Court actually looks at the copy that's been provided to us, there's plenty of room to have endorsed. The Florida law interprets that as being a non-effectual assignment. So because he didn't have physical possession of the note, he created his own problem with the assignment by not endorsing on the note itself. Because under his testimony, it was in another state. The note had never been transferred to Merrill Lynch Mortgage Lending ever and that he was just merely executing allonges in mass. Robo signing for an easier word.

57 So we have this problem under Florida law. Is an allonge effective if in fact the allonge was unnecessary, because there was plenty of room to have created the assignment on the note itself. The answer is clearly it's an Florida Court Reporting

58 Page: 29 ineffectual assignment. And the fact that it may cause some distress to Plaintiffs is of their own making. Had they actually just delivered the notes to Mr. Rogers to endorse them and sign them and date them, it would have been very simple. But in their own expediency, they never bothered to do it. They just presented him hundreds of blank sheets of paper to execute allonges. So even their allonge fails on its face. To rehash a little bit, Your Honor. We have heard about Lizio v. McCullom at 36 So.3d 927, Florida Fourth DCA. In those cases we discussed whether or not they have the right to foreclose these properties in the name of U.S. Bank. And in that vein we talked a little bit about Ms. Rosenthal's deposition which was filed with the Court where she really discussed the authority of the trust. She was produced as the person with the most knowledge of the trust. Whether the authority of the trust

59 would allow for them to actually do that. And she answers in the negative, that given the violation of the mortgage problem and assignment of the mortgage problem, they would Florida Court Reporting

60 Page: 30 have no authority to enforce the mortgage. Moreover, she goes forward and says, under Section 2.01, that there would be a problem, and there would have to be an exception report given their issue of the late dating of the entry of the mortgage into the pool. And no such exception was done for this particular mortgage, Your Honor. And finally, Your Honor, we have this discussion whether or not Section 2.01 and 2.02 of the trust allow for Plaintiffs to accept documents after the cutoff date on the face of the documents and then subsequently enforce them. We initially talked about Florida law. But New York trust law very specifically says this is not a case of equity. It's a case of law. They have to specifically perform under the trust in which to be there. Well, under 2.01, the cutoff date is a

61 hard date and there had to have been the transfer of the documents into the trust on March the 30th, By their own testimony it didn't happen till May. They have no right to enforce it. They have no right to be here today. And in fact, Your Honor, they're the Florida Court Reporting

62 Page: 31 wrong parties to have brought this action. THE COURT: Who is the right party? MR. KORTE: Merrill Lynch Mortgage Investors would be the proper party or Merrill Lynch Mortgage Lending, the first party who made it. One of the two. Because there is a purchase agreement between Merrill Lynch Mortgage Lending and Merrill Lynch Mortgage Investors which appears have been executed and actually delivered. One of those two parties would be the proper party to bring the action. THE COURT: And if Merrill Lynch, both those entities signed documents stating that any rights they had to this note and mortgage are hereby transferred to U.S. Bank, then what?

63 MR. KORTE: Absolutely. If the Merrill Lynch Mortgage Investors and Merrill Lynch Lending had actually executed documents saying that U.S. Bank has the right to enforce, then U.S. Bank would have the right to enforce directly. But it's not U.S. Bank bringing this action. This is U.S. Bank as a trustee of a trust. And the trustee of the trust cannot violate the terms and conditions of the trust. More importantly, Your Honor, if that had Florida Court Reporting

64 Page: 32 actually happened, we'd expect to see the documentation showing those actual assignments between the parties and we'd have no problem. If this is Merrill Lynch Mortgage Lending here today, this would be a very short hearing. If this was Merrill Lynch Mortgage Investors, it probably wouldn't be as bad. But the fact is this is a third trustee on a fourth transfer of a document where we're left with back dated, admittedly back dated documents, admittedly back dated mortgage assignments, and parties without authority to make assignments making them to get U.S. Bank as trustee as the Plaintiff here today into Court. THE COURT: Okay. MR. KORTE: If I may address finally counsel's argument that we should strike the affidavit of Lane Houk. Your Honor, there are some legal conclusions contained in the

65 affidavit obviously. But the Court is permitted to carve out those parts that are not legal conclusions and still maintain the action. More importantly, Your Honor, even if the Court were not to consider the affidavit of Lane Houk in its entirety, that doesn't mean Florida Court Reporting

66 Page: 33 they've cured their defects. In fact, they have not met their burden for purposes of summary judgment today because there is questions contained even in the affidavits -the depositions of their own people as to whether there was ever an assignment or an intent to make an assignment. Whether or not the loan actually made it on time. Clearly a March 30th cutoff date is in the pooling and servicing agreement, not before the Court. And there's testimony that on May the 2nd the actual transfer occurred. So they've testified to issues as far as this is concerned. So the Court doesn't need to even reach Mr. Houk's deposition transcript or affidavit. THE COURT: What dispute of facts are there as opposed to legal conclusions? MR. KORTE: There are several disputes of fact, Your Honor.

67 THE COURT: If there are disputes of fact, how could I possibly grant your motion for summary judgment or are you just saying as to theirs? MR. KORTE: As to theirs. Our motion for summary judgment is a cross motion for summary Florida Court Reporting

68 Page: 34 judgment that doesn't require the facts to be proven. We're saying they do not have standing and have not yet produced a single affidavit saying that they do have it. THE COURT: What are the disputes of fact? MR. KORTE: Very simply, Your Honor. The first is whether or not Merrill Lynch Mortgage Investors ever transferred the loans to LaSalle Bank. Whether the notes physically were ever transferred, ever been a deliverance of them. Under Florida law delivery of the documents is important whether U.S. Bank has authority to be here today. THE COURT: Wait a minute. You're saying there's a requirement that they be physically -- that the note and mortgage be physically delivered?

69 MR. KORTE: There are three ways to be in Court, Your Honor, on a mortgage foreclosure action. The first is to be here on an assignment, which has not been produced today, Your Honor. There's been no assignment as between LaSalle Bank and U.S. Bank today. You need some kind of a documentation before the Court saying, we hereby assign, and that's not Florida Court Reporting

70 Page: 35 here. You need some kind of documentation saying, we are assigning between Merrill Lynch Mortgage Investors and Merrill Lynch Mortgage Lending saying we're going to assign. THE COURT: This is all legal argument, right? MR. KORTE: That's a question of fact. Whether or not the assignments actually occurred. THE COURT: That's a question of law. I'm asking where are the disputes of fact? For example, whether or not Merrill Lynch transferred the loan, that's going to be a legal -- that's a legal issue. So what are the disputes of fact?

71 MR. KORTE: Well, I think perhaps that's exactly -- and just if the Court would indulge me for one moment. THE COURT: Sure. MR. KORTE: Whether or not Merrill Lynch Mortgage Lending actually executed and delivered the notes to Merrill Lynch Mortgage Investing is a question of fact which despite the fact we've asked the question in deposition of Mr. Rogers, we've not received an Florida Court Reporting

72 Page: 36 affirmative response. To the contrary, we received a response that he never had possession of the original notes to make the transfer. Second thing, Your Honor, whether or not those notes were actually transferred to the trust. THE COURT: That's a legal conclusion. MR. KORTE: Well, physically, Your Honor. The question is -- a physical delivery is required if you don't have an assignment of the mortgage or assignment of the note. Under Florida law, you can enforce a note either by possession of it, or if you were the holder of it and lost it, you could enforce it by re-establishing a lost note. Only two ways to do it. So if they have physical possession of

73 it and they deliver it, that is the intent to make the delivery that's the question. Whether I sell to you the notes and never deliver them to you, never invests in you the right to enforce the notes. You have the right to sue me and maybe collect payments. But you don't have the right to enforce the note because you don't have it under the UCC as a negotiable Florida Court Reporting

74 Page: 37 instrument. If in this case it's an endorsement specifically made or outside of the UCC. And we need specific endorsements all the way down the chain. The question is whether or not there's any endorsement specifically that allows U.S. Bank to be here today. THE COURT: That's a legal issue I think the way you phrased it just now. MR. KORTE: Your Honor - THE COURT: But so far I understand that you're claiming two areas of factual dispute. First, whether or not Merrill Lynch executed the notes to Merrill Lynch Investors. And whether those notes were physically delivered to the trust.

75 As to point number two, the facts or allegations that U.S. Bank is asserting to show delivery, are they disputed by you? MR. KORTE: Yes, Your Honor. THE COURT: Which ones? MR. KORTE: The physical delivery portion, Your Honor. In the deposition of Mr. Rogers, he never had physical possession of the notes. He testified that he had never seen the notes. That's why he had to execute blank allonges in Florida Court Reporting

76 Page: 38 mass. The notes were in a different state from him, and he didn't know who had them or where they were. So it's okay to assign things, but you can assign only what you possess. THE COURT: Are you saying that U.S. Bank has claimed that the notes were physically delivered to the trust? MR. KORTE: Your Honor, we don't know whether they were or were not physically delivered to the trust. THE COURT: U.S. Bank is not relying on that fact. MR. KORTE: But they must, Your Honor. Under the trust agreement, 2.01 and 2.02, physical delivery is a condition precedent to

77 accept this. So unless they -- if they don't claim they had physical possession of the documents, then they fail under 2.01 and 2.02 of the trust and have no right to enforce. THE COURT: Well, basically you're arguing that that's a material fact. And I'll hear from U.S. Bank as to whether they agree and what their possession is on whether the notes were -- first off, whether the notes were physically delivered to the trust and whether Florida Court Reporting

78 Page: 39 that's a material fact. And then, one, whether or not Merrill Lynch executed the notes to Merrill Lynch Investors. Again, I'll hear from U.S. Bank whether they agree that that's disputed or if it's material. What other? Any other disputes of fact? MR. KORTE: Your Honor, whether or not LaSalle had authority to make an assignment of a mortgage after it had been removed as the trustee of the trust. In this case, there's a back dated assignment. THE COURT: I think that's a legal question. Because the documents that U.S. Bank are relying on to make that argument -actually, they're arguing that they don't -well, there is no dispute about the documents that were signed that would give U.S. Bank the basis to argue that LaSalle assigned the mortgage.

79 MR. KORTE: No, Your Honor. The question is whether LaSalle had authority to make that assignment at the time - THE COURT: I understand. I'm saying that I don't think that's a dispute of fact. MR. KORTE: Then no more, Your Honor. Florida Court Reporting

80 Page: 40 THE COURT: Okay. Do you want to respond? MS. HEYER: Of course. First, Your Honor, with respect to the very first argument made by Tidewater's counsel that we had to file the note and mortgage 20 days before the hearing is not what Booker says. In fact, if you look to Riggs versus Aurora, which is Judge Lynch's case, so long as you've got possession at the summary judgment hearing for purposes of tendering it to the Court, it's adequate. And we have the originals here. With respect to transferring of the mortgage separate from the note, and ones got to be transferred one way and ones got to be transferred another way, that's not what Florida law says. Florida law says that the

81 mortgage follows the note. The note is the obligation and the mortgage is always going to follow that note wherever that note may be. Whether it be by assignment, whether it be by endorsement, whether it be by possession. It just so happens that I don't think that argument warrants any merit because we have possession of both originals today. Florida Court Reporting

82 Page: 41 The assignment of trustees - THE COURT: I'm sorry. The case law that you cited regarding the argument of possession, the significance of possession, do those cases talk about when it's blank? They're arguing that those cases are distinguishable because here we've got the note made out to a specific party. MS. HEYER: In fact, there is a case where it wasn't endorsed to the lender who was enforcing it. And it was found to be sufficient, Your Honor. It was First Franklin was the original lender. And the Court found that even though it was made payable to First Franklin, it was sufficient for the assignee to be the holder to enforce it. THE COURT: What case is that?

83 MS. HEYER: Lizio. It was one of them, Your Honor. And that was a Judge Eade case. And that case, because they possessed the original note and mortgage, and there was -the note was payable to an individual who died. And then there was a subsequent assignment by the personal representative for the estate. The Court found that the assignee was a holder Florida Court Reporting

84 Page: 42 and granted him standing to seek foreclosure of the note. There also is another case - THE COURT: Is that in the binder here? MS. HEYER: That's in Defendants' binder, Lizio. There's also -- let's see if I can find the First Franklin case. The First Franklin case is in my binder. It's Taylor versus Deutsche Bank, and that's tab L. It was not endorsed by the original lender. THE COURT: Now here of course -- well, in the Deutsche Bank case - MS. HEYER: It deals with MERS.

85 THE COURT: Right. And there was no question that the note and mortgage had been assigned to Deutsche Bank. Here the defenses are that the assignment in this case is also flawed. MS. HEYER: I'm going to get to that next, Your Honor. THE COURT: Okay. MS. HEYER: Tidewater's argument is that Merrill Lynch Mortgage, the original lender, transferred it to Merrill Lynch Investors, the depositor, to put into the trust. That's true. Now was there an assignment from Merrill Lynch Florida Court Reporting

86

87 Page: 43 Mortgage to Merrill Lynch Investors, the depositor? No. Is one required? No. Why? Because if you look at the mortgage purchase disagreement that's been filed in this action, I believe Defense filed it with their stack last week, but also it's attached to our amended answers to interrogatories. And if you look at the purchase agreement, also if you look at the pooling and servicing agreement, in that the depositor buys the loans. Now purchase under Florida law is enough, too, by the way to show intent for transfer. The depositor bought the loans, but it didn't take possession. It just bought them. Why? Because it wanted all the original lenders, in this case Merrill Lynch Mortgage, to transfer them to the servicer, the trustee, et cetera. And if you look to page three of the mortgage purchase agreement under Section II, conveyance of the mortgage loans, the seller, that was Merrill Lynch Mortgage, the original

88 lender, hereby represents and warrants that it has or will have on behalf of the purchaser, depositor, delivered to the trustee on or before the closing dates the documents and Florida Court Reporting

89 Page: 44 instruments specified below with respect to each loan. And what's in there? An original executed mortgage note, an allonge, an original or copy of the mortgage, an assignment of leases, an original executed assignment, and then another assignment of all unrecorded documents. So it goes through this whole litany of documents that have to be transferred. In other words, the depositor's focus is setting up the trust, buying the loans, and putting the loans into the trust. Does it physically have to have possession to effectuate that? Absolutely not. In fact, it directs the seller on its behalf to transfer it immediately to LaSalle. And in fact, according to the answers to interrogatories, the documents after closing were immediately transferred to LaSalle. Once the trust got set up, LaSalle put on its trustee hat and held the documents thereafter as trustee. LaSalle then

90 executed an assignment to U.S. Bank as trustee. It has an effective date in that assignment of June 30th. That is the effective date. And so it had the power to go ahead and transfer that Florida Court Reporting

91 Page: 45 before it signed. So long as the effective date evidences the transfer, it's sufficient. It doesn't matter what date the assignment was actually signed. So we think that the documents filed by the Defense as well as the answers to interrogatories under the pooling and servicing agreement and under the mortgage purchase agreement show how the loans moved from the original lender to the depositor into the trust, and have been in the trust and are still in the trust as we stand here today. The last argument Tidewater asserts about possession. The focus of possession under the code and under Florida law is before the Court at the time of enforcement. Where it went from the chain, although we've established the chain of title, the key focus for the Court is are you a holder at the time you brought the

92 lawsuit? Are you a holder at the time you're moving for summary judgment? Possession is a focus at that point in time. We have possession of both the original note, the allonge, and the mortgage. With respect to the endorsement issue, Florida Court Reporting

93 Page: 46 they raise a small argument with respect to their having to be an endorsement on the actual promissory note. I can find no case in Florida that requires that even though they say that that's the case. Florida law does not state that. In fact, Florida law states that if there is an allonge, it does become part and parcel of the instrument. It is basically the endorsement. There's no requirement that you have to endorse like a check on the back of the check. THE COURT: Right. MS. HEYER: In fact, for a promissory note, it's standard in the industry, standard practice and absolutely enforceable under Florida law to do it via an allonge. THE COURT: Does not the allonge have to

94 be affixed to the document? MS. HEYER: That was going to be my very last argument, Your Honor. Yes. But what does affixed mean in the dictionary? Does it mean that the allonge at the time that it's assigned has to be attached? No. Can they both be transferred and then held together by the trustee, the trust in this case and now here Florida Court Reporting

95 Page: 47 today? Yes. They are affixed. They are one and one the same. They've been held by the custodian. They've been held in the trust ever since their origination together. I don't care if it's a paperclip, a staple. They get stapled. They get unstapled. They get copied. I can't tell you how many times it's been. So the fact that one moment in time it may have a staple on it or one moment in time it's got a paperclip, does that mean it's not negotiable? Does that mean it's not enforceable? Absolutely not. That would be a ludicrous result. And I believe as today, I believe it actually is stapled for purposes of tendering to the Court. THE COURT: Have you considered getting any kind of waivers or any kind of documents from Merrill Lynch to -- you know, Tidewater is saying, look, you guys don't have standing. We