Case Studies
Case Study 3 – Standing
21st Mortgage Corporation v. Linda C. Nicholls; Duncan K. Robertson, et al.
21st Mortgage Corporation (“21st Mortgage”) filed a judicial foreclosure action against Linda C. Nicholls and Duncan K. Robertson on July 24, 2014, in the Superior Court of the State of Washington for King County, Case No. 14-2-20431-1 SEA.
As background, Linda Nicholls inherited a house in southwest Seattle (“Property”). In 1999, she borrowed $100,000 from Old Kent Mortgage Company and executed a promissory note (“Note”) secured by a deed of trust (“1st Deed of Trust”) that encumbered the Property.
In 2006, Ms. Nicholls obtained a private mortgage loan in the amount of $82,000 from Mr. Robertson which was also memorialized by a promissory note and secured by a deed of trust (“2nd Deed of Trust”). About two years later, Ms. Nicholls defaulted on the 2nd Deed of Trust whereupon Mr. Robertson instituted a nonjudicial foreclosure action. The sale took place on September 26, 2008, at which time, Mr. Robertson purchased the Property subject to the 1st Deed of Trust.
Following the trustee’s sale, Mr. Robertson attempted to locate the owner of the 1st Deed of Trust to request a payoff quote. A title search in the King County Recorder’s Office revealed that the 1st Deed of Trust had been assigned several times making it uncertain who the current owner of the debt was.
Rather than cooperate with Robertson, the trustee of the 1st Deed of Trust repeatedly filed notices of trustee’s sale to foreclose upon the Property, which Mr. Robertson blocked.
Frustrated by the situation, Mr. Robertson filed a Complaint in the Superior Court of the State of Washington for King County, Case No. 12-2-19854-3 SEA on June 6, 2012, to quiet title and to assert other claims such as for wrongful foreclosure, fraud and deception, violation of the implied covenant of good faith and fair dealing, etc. (“Robertson’s Action”).
Robertson’s Action was stayed because several of the named defendants in his lawsuit, including Residential Funding Company (“RFC”), filed for bankruptcy on May 14, 2012.
During the pendency of the RFC bankruptcy, Berkshire Hathaway purchased a portfolio of non-performing mortgage loans from the RFC debtors, which allegedly included the Nicholls loan. At Berkshire Hathaway’s direction, the RFC debtors conveyed the mortgage loans to the Knoxville 2012 Trust (“Trust”). In February 2014, 21st Mortgage began servicing the mortgage loans on behalf of the Trust.
Five months later, on July 24, 2014, 21st Mortgage filed a judicial foreclosure action against Linda C. Nicholls and Duncan K. Robertson in the Superior Court of the State of Washington for King County, Case No. 14-2-20431-1 SEA. Ms. Nicholls did not respond to the foreclosure complaint and defaulted. The case against Mr. Robertson proceeded and on December 8, 2015, Mr. Robertson engaged McDonnell Property Analytics (“MPA”) to investigate the following:
- Trace the ownership history of the Nicholls Note and Deed of Trust to the extent possible using all available resources.
- Determine what interest in the Nicholls Mortgage Loan GMAC Mortgage LLC, Residential Funding Company, LLC, or other ResCap companies might have had held on May 14, 2012, when Residential Capital, LLC and 50 of its affiliates filed for bankruptcy.
Marie McDonnell produced a Preliminary Research Memorandum on March 3, 2016, that was submitted to the Court in support of Mr. Robertson’s opposition to 21st Mortgage’s Motion for Summary Judgment. Ms. McDonnell concluded:
- The Nicholls Mortgage Loan was allegedly securitized on March 30, 2000, into the Residential Asset Securities Corporation, Series 2000-KS2, a New York common law trust over which Bank One, National Association served as Trustee, and Residential Funding Corporation was appointed Master Servicer.
- The Residential Asset Securities Corporation, Series 2000-KS2 trust was paid off and dissolved during the month of October 2006. At that time, the outstanding principal balance on Nicholls’ Mortgage Loan was $93,518.08. The Servicer as of October 2006 was reported to be GMAC RFC.
- No available evidence exists as to who may have acquired the assets of the Residential Asset Securities Corporation, Series 2000-KS2 Trust once it had been paid off and dissolved.
- After a concerted attempt to learn more about the circumstances of the dissolution of the Residential Asset Securities Corporation, Series 2000-KS2 in October of 2006; and finding no trace of the Nicholls Mortgage Loan in another securitization, I concluded that discovery is necessary to unearth the truth about what became of the Nicholls Mortgage Loan thereafter.
- When the Note Endorsements, Note Allonges, Assignments of Deed of Trust, my Preliminary Research Memorandum, and my Chain of Title Tracking Tool are read together, it becomes obvious that there remain genuine issues of material fact that preclude Summary Judgment in favor of Plaintiff 21st Mortgage at this juncture.
- In fact, the paper trail reveals there has been a concerted attempt along the way to suppress the identity of the Note Owner.
- In my expert opinion, all that Residential Funding Company, LLC held as of May 14, 2012, when the ResCap entities filed for bankruptcy was the right to service the Nicholls Mortgage Loan.
Robertson also engaged a Forensic Document Examiner who submitted an expert affidavit detailing the reasons why he concluded the Note and Allonges proffered by 21st Mortgage were fabricated “copies” and not originals.
On April 28, 2016, the Trial Court entered an order of final judgment in favor of 21st Mortgage that disregarded Ms. McDonnell’s chain of title analysis and ignored the Forensic Document Examiner’s findings.
Mr. Robertson successfully appealed that order and on October 30, 2017, the Court of Appeals for the State of Washington, Division 1, remanded the case for trial to determine if the Note and Allonges were original, and whether the Allonges were permanently affixed to the Note on the date 21st Mortgage filed its Complaint.
A week before trial, the Judge hearing the matter disqualified the Forensic Document Examiner which severely hampered Mr. Robertson’s defense.
21st Mortgage’s attorney filed five (5) motions to exclude Ms. McDonnell’s testimony as “irrelevant” which the Judge denied.
Ms. McDonnell testified on behalf of Mr. Robertson on September 30th and was cross-examined by 21st Mortgage’s attorney on October 4, 2021. When asked a speculative question about whether 21st Mortgage might have been in possession of the Allonges but forgot to attach them to the Complaint, Ms. McDonnell replied:
Well, we can fantasize all day about the possibilities, but the evidence is clear and convincing: the Allonges were not affixed to the Note on July 24, 2014, the date the Complaint was filed. In fact, they were non-existent until Mr. Robertson’s attorney asked about them in June 2015.
On October 5, 2021, after deliberating for approximately two hours, the jury returned a verdict in favor of Mr. Robertson finding that the three (3) Allonges were not affixed to the Note on July 24, 2014, when 21st Mortgage filed its Complaint.
Under Washington law, 21st Mortgage Corporation did not have standing to foreclose upon the 1st Deed of Trust because the Note was not specifically indorsed to it or indorsed in “blank” so that the person holding the Note could enforce it.
Case Study 2 – Fraud on the Court
Wells Fargo Bank v. Juza, 2019 WI App. 39 (Wis. Ct. App. 2019)
Thomas and Michelle Juza refinanced their primary residence with Bank of America, N.A. on February 23, 2004, in the amount of $900,000.00. Due to the Financial Crisis of 2008, the Juzas’ real estate development company suffered irreversible losses, which severely impacted their cash flow and their ability to keep up with their home mortgage payments.
On July 13, 2009, Bank of America, N.A. filed a Complaint for Foreclosure of Mortgage with the Brown County Circuit Court claiming to be the current owner and holder of the Juzas’ Note and Mortgage.
On December 8, 2009, Bank of America, N.A. filed a Motion for Summary Judgment attached to which was the Affidavit of Robert F. Rybarczyk, Assistant Vice President of Bank of America, N.A. Based on the Rybarczyk Affidavit, the Court granted Bank of America, N.A.’s Motion for Summary Judgment on February 5, 2010. Shortly thereafter, Bank of America, N.A. assigned its judgment and rights to Wells Fargo Bank, N.A., as Trustee for Banc of America Mortgage 2004-D Trust.
The foreclosure proceedings were delayed due to a number of factors but in March 2016, the Court ordered the Juzas to submit their written objections to Wells Fargo’s motion to confirm the Sheriff’s Sale and further ordered Wells Fargo to provide proof that they own the Juzas’ Mortgage. It was at this point that the Juzas contacted McDonnell Property Analytics for assistance.
Our research showed that Bank of America, N.A. was not, in fact, the owner and holder of the Juzas’ Note and Mortgage when it filed its Complaint on July 13, 2009. Moreover, we found that the Rybarczyk Affidavit was permanently and fatally flawed because it contained a number of statements that were duplicitous, inaccurate, or untrue and because it grossly overstated the amount due under the terms of the Juzas’ Note.
The Juzas subsequently engaged Marie McDonnell to serve as their expert. Ms. McDonnell composed a 45-page Affidavit supported by 92 pages of exhibits documenting her findings. She sent the Affidavit to the Juzas’ attorney, Reed Peterson, and suggested that he file it in opposition to Wells Fargo’s motion to confirm the Sheriff’s Sale, but also, that he file a motion to vacate the judgment of foreclosure and to dismiss the case with prejudice due to the fraud on the court Ms. McDonnell had uncovered.
Mr. Peterson did indeed file the McDonnell Affidavit with the Circuit Court on July 25, 2016, as Exhibit #2 to the Juzas’ Motion to Vacate Judgment of Foreclosure and Motion to Dismiss Plaintiff’s Foreclosure Claim.
A hearing was held on February 6, 2017, at which Thomas Juza and Marie McDonnell testified on behalf of Defendants. Wells Fargo did not cross-examine Ms. McDonnell and offered no witnesses of its own. After closing arguments, the Court ruled from the bench vacating its own 7-year-old Judgment of Foreclosure and granting the Juzas’ motion to dismiss. The court explained:
- It appears to me that this Robert Rybarczyk was, in fact, a robo-signer. And I granted that motion for summary judgment because I believed that he knew these facts on his individual knowledge and was setting forth an affidavit to the Court for the Court to rely on. He didn’t. And he is not here today to say otherwise.
- And you [counsel for Wells Fargo] had possession of the affidavit from [the Juzas’] counsel and [McDonnell] knowing that they are challenging the veracity of this robo-signer, Robert Rybarczyk, and you didn’t get an affidavit from him to the contrary, you didn’t bring him in here today. So, I’m left with nothing but to believe that he just was a robo-signer, and given his inaccuracies and false statements, it was fraud on the Court.
Further, the Court dismissed the case with prejudice and declared the Juzas’ $900,000.00 Mortgage to be void as a sanction for Bank of America, N.A.’s and Wells Fargo Bank, N.A.’s considerable fraud upon the court.
Wells Fargo appealed the Trial Court’s Order but on June 25, 2019, in a per curiam decision, the Court of Appeals of Wisconsin, District Three affirmed the Trial Judge’s rulings.
Case Study 1 – Void Foreclosures
U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (Mass. App., 2011)
Marie McDonnell played a pivotal role in two landmark cases decided on appeal by the Massachusetts Supreme Judicial Court on January 7, 2011, U.S. Bank, National Association v. Ibanez, and Wells Fargo Bank N.A. v. LaRace, collectively referred to as Ibanez.
On April 28, 2009, the Massachusetts Land Court, Division of the Trial Court granted Ms. McDonnell’s motion to intervene as a “friend of the court” after plaintiffs’ attorneys filed post-trial motions to reconsider the Land Court’s decision to vacate two foreclosures based on the fact that neither plaintiff had received an assignment of the mortgage prior to noticing the sale and conducting the foreclosure.
Ms. McDonnell’s seminal contribution was to fortify the Land Court’s ruling, but also, to shift the gravamen beyond the recorded assignments of mortgage to defects in the securitization process that proved plaintiffs were not the present holders of the mortgage at the time plaintiffs noticed and conducted the sale.
The Ibanez decision rendered by the Massachusetts Supreme Judicial Court was the first in the nation to address the complexities of securitization within the context of residential mortgage foreclosures, and it is cited widely by courts in many other jurisdictions nationwide.
