BY BRIAN KORTE AND SCOTT WORTMAN

192
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 10021953 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.

Transcript of BY BRIAN KORTE AND SCOTT WORTMAN

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 10021953

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.

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, 2001

10:50 a.m. - 2:25 p.m.

Broward County Courthouse

201 S.E. 6th Street

Room 775

Fort Lauderdale, Florida 33301

Florida Court Reporting 561-689-0999

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 33301

ON BEHALF OF THE DEFENDANTS:

BRIAN KORTE, ESQUIRE

-andSCOTT

J. WORTMAN, ESQUIRE

KORTE & WORTMAN, P.A.

2101 Vista Parkway

West Palm Beach, Florida 33411

Florida Court Reporting 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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 2006. 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

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 561-689-0999

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.

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 561-689-0999

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 673.3011 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 673.3011,

it gives rights to a holder of a note and a

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 561-689-0999

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, 2004. 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, 1938. 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

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 561-689-0999

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. 2009-88614-CA-21 down in the 11th

Circuit. If I may approach, Your Honor.

THE COURT: Yes.

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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 673.3011 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,

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 561-689-0999

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

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 561-689-0999

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.

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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.

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 561-689-0999

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

opportunity to read it. And that is really a

problem for them, because they created this

trust on March, 2006. We had a closing date of

March 30th, 2006. The closing date is

Florida Court Reporting 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

Page: 24

some time after the making in September of

2005. 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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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, 2005.

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

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 561-689-0999

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.

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 561-689-0999

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

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 561-689-0999

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

hard date and there had to have been the

transfer of the documents into the trust on

March the 30th, 2006. 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 561-689-0999

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?

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 561-689-0999

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

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 561-689-0999

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.

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 561-689-0999

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?

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 561-689-0999

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?

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 561-689-0999

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

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 561-689-0999

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.

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 561-689-0999

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

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 561-689-0999

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.

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 561-689-0999

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

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 561-689-0999

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?

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 561-689-0999

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.

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

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 561-689-0999

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

believe Merrill Lynch has standing.

MS. HEYER: Merrill Lynch executed the

allonge.

THE COURT: Right.

MS. HEYER: Divesting itself of the

interest based on the mortgage purchase

Florida Court Reporting 561-689-0999

Page: 48

agreement giving and selling loans to Merrill

Lynch Investors. David Rogers testified he

signed the allonge. He signed it in blank

because they had to wait for the trust to get

set up. Does that make it unenforceable? No.

In fact, blank endorsements are enforceable,

too. But in this case it got transferred over

to the custodian, LaSalle. LaSalle then became

the trustee, affixed the endorsement on the

allonge, which then got affixed to the note and

has been held in the trust ever since.

Merrill Lynch wouldn't have standing to

come before this Court. Number one, it sold

the loans. Number two, it endorsed the notes.

And, number three, it signed an assignment. It

can't possibly as an assignor come before this

Court and attempt to enforcement the loan

documents.

THE COURT: I wasn't suggesting that they

could. It's because of their argument that

they believe that the proper party is Merrill

Lynch, one of them, either the investors or the

mortgage company. I guess to me Tidewater is

as they've said at the last hearing,

evidentiary hearing, they're not saying that

Florida Court Reporting 561-689-0999

Page: 49

they're not in default. They're not saying

that they don't owe the money. They're just

saying not to U.S. Bank. So today I ask well

who does Tidewater think should get the money

or be able to enforce the default? And unless

I misunderstood, they're saying Merrill Lynch

Mortgage and/or Merrill Lynch Investors.

MS. HEYER: Well, what would have to

happen, Your Honor, is Tidewater would have to

come before this Court and show that there was

an exception in the transaction so that this

loan was not put into the trust. But there

wasn't. There's no evidence whatsoever that

this loan did not go into the trust, stay in

the trust, and remain in the trust as of today.

THE COURT: Well, their argument is

because the trust has a deadline for when

things could be transferred in there.

MS. HEYER: Correct. If you look to that

deadline, it says March 30th, 2006. What

evidence does the Court have before it that

that loan actually went into the trust on

March 30th, 2006? Look to the affidavit of

Plaintiff as well as the answers, amended

answers to interrogatories. And if you look at

Florida Court Reporting 561-689-0999

Page: 50

the loan history screen, which is a multi-page

document, it shows when the loan got booked as

a brand new loan. Once it hit the trust, the

servicer's roll then became effectuated, and

they had to then start monitoring and servicing

the loan. And on that very last page, and I'll

just show this to the Court instead of having

to flip through the binders to try to find it.

But the very first entry is March 30th, 2006

six, a new loan booked by the servicer. And

from there to today's date, the loan has been

serviced.

MR. KORTE: May I see what document you're

referring to.

MS. HEYER: It's the last page of the

answers to interrogatories. And it's also

attached to the affidavits.

MR. KORTE: Okay.

THE COURT: Thank you.

MS. HEYER: So the loan hasn't been

anywhere else since the master servicer and

special servicer took on their duties with

respect to this particular allonge to Tidewater

on March 30th, 2006. And there's no contrary

evidence from a third party saying it's been

Florida Court Reporting 561-689-0999

Page: 51

any place else.

THE COURT: Right. So as to their

alleged, Tidewater's alleged disputes of fact,

whether or not an allonge executed to Merrill

Lynch Investors, you don't find that to be a

material fact; is that correct?

MS. HEYER: Correct. I think the only

issues before this Court are questions of law.

THE COURT: Right.

MS. HEYER: In applying Florida law versus

New York law or even if you apply Florida law,

how do you apply Florida law.

THE COURT: So it appears that there were

no written documents where Merrill Lynch

executed any kind of written documents to

transfer ownership of the notes to Merrill

Lynch Investors, correct?

MS. HEYER: Right, because they were

directed by the depositor under the documents

to immediately assign it to the trustee.

THE COURT: Okay.

MS. HEYER: Which is exactly what they

did.

THE COURT: So there isn't a dispute of

fact here because both sides agree there was no

Florida Court Reporting 561-689-0999

Page: 52

written documents between the two of them.

MS. HEYER: Correct.

THE COURT: But also U.S. Bank's position

is that it's not material. It's not even

relevant. And then two, whether those notes

were physically delivered. I'm not sure what

that means even. How could -- because a trust

is not something physical. What's your

response to that, their allegation that the

notes were physically delivered to the trust,

that that's in dispute?

MS. HEYER: We don't think that's a

disputed fact. Because if you look at the PSA

and the mortgage purchase agreement that they

introduced into the Court file, it specifically

directs the depositor -- the depositor

specifically directs the original lender, move

it to the trustee. Immediately sign all the

documentation, I hereby direct you on my behalf

to do so. So there's no issue.

THE COURT: Well, they say that Mr. Rogers

testified he's never seen the note.

MS. HEYER: Yes. Because at the time that

he signed -- when the loan was originated by

the closer, the closer sent the documents to

Florida Court Reporting 561-689-0999

Page: 53

LaSalle's custodian. LaSalle held the original

documents while they were doing the

securitization. David Rogers on behalf of

Merrill Lynch signed the allonge along with all

kinds of other allonges for other pools, not

necessarily this particular pool, and that

allonge was immediately sent to LaSalle as

custodian to hold all of the original loan

documents for purposes of setting up the trust

and putting the loans into the trust.

MR. KORTE: Your Honor.

THE COURT: Yes.

MR. KORTE: We have to object to that

entire line. There's no evidence of any of

that in any record or any deposition

transcript, no document or anything that points

to that line of facts that she just gave the

Court.

THE COURT: Let's break it down. What

facts do you want the Court to consider that

you believe are in part of the Court file or

part of your motion?

MS. HEYER: If you look at the amended

answers to interrogatories, Your Honor,

documents were sent to LaSalle after the

Florida Court Reporting 561-689-0999

Page: 54

closing. I know they try to point out when the

allonge was signed. The allonge is not dated

by David Rogers. He signed that allonge in

blank. Absolutely nothing wrong with that.

Absolutely proper. The fact that he didn't

have possession of the original doesn't mean

anything, because it immediately went to the

custodian and then went to the trustee.

THE COURT: All right.

MS. HEYER: He didn't have to have

possession to sign the allonge on behalf of

Merrill Lynch. If they are saying he wasn't

authorized on behalf of Merrill Lynch, then we

definitely would have an issue. But that's not

the issue before the Court.

THE COURT: So there is no dispute whether

Mr. Rogers saw the notes. Both sides agree he

never saw the notes?

MS. HEYER: Correct.

THE COURT: You're just saying it doesn't

matter?

MS. HEYER: It doesn't seem like there's

any factual disputes. I think they're all

legal issues.

THE COURT: I'm not going to rule right at

Florida Court Reporting 561-689-0999

Page: 55

this second. I'm also going to let Tidewater

know that I did not receive any documents from

you last week. I don't know how. I had my JA

just double-check.

MR. WORTMAN: Judge, we personally hand

delivered a box of our 45 page brief to you.

You never received that?

THE COURT: When was it done?

MR. KORTE: Wednesday.

MR. WORTMAN: That was done Wednesday

evening.

THE COURT: I'll have my JA look on my

couch in my hearing room. Hold on.

MR. WORTMAN: Your Honor, I thought you

had indicated in the opening of today's hearing

that you received the briefing on all this?

THE COURT: No, no, no. I told

Plaintiffs' counsel.

MR. WORTMAN: Your Honor, we hand

delivered -

THE COURT: Hold on. My JA is going to

look on the couch.

MR. WORTMAN: I have a copy of the cover

letter that shows it was delivered.

THE COURT: I'm not disputing that it was.

Florida Court Reporting 561-689-0999

Page: 56

I'm just instant messaging my JA to look on my

couch in my hearing room, which is not where I

normally have things delivered.

MR. WORTMAN: We delivered it to the Court

as well as Your Honor's chambers directly due

to the time constraints that were opposed on

the parties.

THE COURT: She's looking on my couch now.

As you know, I have two rooms. I have the

hearing room and then I have my chambers. And

documents for me to read are put in my

chambers, not my hearing room where parties

come in to argue. I don't have things in my

hearing room. So I don't know how it got

there.

MS. HEYER: Your Honor, is the Court going

to rule on the motion to exclude testimony or

are you also deferring on that as well?

THE COURT: Yes, I'll defer on that as

well. I'm obviously going to read -- I'm

waiting to hear back. My judicial assistant is

going to be typing something. Yes. She said

that there is a box on my couch. But I

would -- I don't look on my couch for things.

MR. WORTMAN: Your Honor, we didn't put it

Florida Court Reporting 561-689-0999

Page: 57

specifically on the couch. We delivered it to

a representative of Your Honor's chambers.

THE COURT: No, I'm sure. I don't know

how it got there. Because normally it's taken

by my JA and it's put in a special box that I

look to when I go to get materials to be

prepared and there was nothing. The only thing

I did get the Plaintiffs' notebook, but I did

not get yours. And I don't know how it got on

my couch.

MR. WORTMAN: We delivered a 45 page

brief, Your Honor, along with a box of

exhibits.

THE COURT: Right. My JA is just writing,

don't know where that came from and how it got

in there. I'm going to tell her don't bring it

down because there's no way I can read it now.

MR. WORTMAN: Your Honor, I think this

hearing actually would have been probably

shorter, a lot more smooth if Your Honor had

had the opportunity to read our brief in

advance. It lays out -

THE COURT: Yeah. Well, again, I don't

know -- the good news is at least I have it.

But whoever delivered it, talk to them to find

Florida Court Reporting 561-689-0999

Page: 58

out, you know, who they delivered it to.

Because obviously I got it. But I didn't know

that I received it. Because, again, I don't

look at my couch.

MR. WORTMAN: I know, Your Honor. But we

handed it to a representative of Your Honor's

office.

THE COURT: Okay. No, I know. I'll go

ahead and read it.

MR. WORTMAN: Please do.

THE COURT: Yes I will.

MR. WORTMAN: We spent a great deal of

time and energy and we laid out the arguments

we think very cogently and in a very organized

fashion. I think it will have a big impression

on Your Honor's decision.

THE COURT: Okay. Anything else?

MS. HEYER: Yeah. The only other motion

we have, Your Honor, I don't know if you were

going to take a lunch recess is the motion for

sequestration.

MR. WORTMAN: Your Honor, if I may address

that. In light of the fact that Your Honor

hasn't had an opportunity to read our brief,

and the really sole issue for purposes of the

Florida Court Reporting 561-689-0999

Page: 59

motion for sequestration of rents is whether or

not U.S. Bank as Plaintiff is properly a

mortgagee for purposes of sequestering rents.

All the issues as it relates to what we laid

out in our 45 page brief and what we argued

here this morning are obviously going to

determine Your Honor's ruling as it relates to

sequestration of rents. Thus, we feel it's

totally inappropriate to proceed with the

sequestration of rents and will rely upon our

briefs for that purpose in that the ruling on

the summary judgment motion will dictate Your

Honor's ruling on the motions for sequestration

of rents, except perhaps if it goes against us.

But we think it's quite critical Your Honor

have an opportunity to read our brief.

THE COURT: Well, what response do you

have to that argument about -- yeah, go ahead.

MS. HEYER: Your Honor, Tidewater filed a

response, a memorandum in opposition on

November 22nd of last year to our motion for

sequestration. We don't think that this matter

should be delayed any further. This motion for

sequestration has been pending for over a year.

I'm sorry, six months. And the statute

Florida Court Reporting 561-689-0999

Page: 60

requires an expedited hearing. We've planned

to be here. We've given up the two days to

hopefully get this all done in two hours. So

we think that today is a perfect opportunity to

do that.

THE COURT: Well, I could -- I don't know

how long it will take me to read the material,

but I could read it. I don't know how long.

I'm a fast reader.

MR. WORTMAN: It's a 45 page brief with

exhibits about this thick, Judge. You've

gotten the essence of the argument. But

they're laid out in a very particular manner.

And obviously we think it's critically

important that Your Honor rule that in advance

of obviously ruling on the motion for summary

judgment and the sequestration of rents,

because it comes down to whether or not they're

the mortgagee. That's it. And to make a

ruling on a sequestration of rents without

being able to have the benefit of our legal

arguments in written format we think would be

wholly improper.

THE COURT: Do you agree that standing,

it's the same issue?

Florida Court Reporting 561-689-0999

Page: 61

MR. WORTMAN: Yes, Your Honor.

THE COURT: No, I know you do. U.S. Bank.

MS. HEYER: I'll concede that they think

that it is. Your Honor, absolutely not. In

fact, Your Honor has requested that we prepare

a memorandum of law with respect to the

standard of care and the burden of proof for

sequestration. There's not a whole lot out

there. We were able to dig up the legislative

history which we have provided to counsel, and

we do have a memorandum of law for Your Honor.

It's fairly simple, fairly straight forward,

because there's not a whole lot out there. But

we don't think standing comes into this at all.

THE COURT: Well, I do think this.

Certainly if I grant -- I don't think there are

any -- there's any factual disputes. I don't.

Which means of course -- and I could change my

mind. But I'm inclined -- you know, I think

whether I allow this expert, and I don't even

know that I need -- that this person is an

expert. But this affidavit submitted by the

Defense, if I allow that in, then there might

be a dispute of fact. But we may -- I don't

know if it's going to get to the point. Bottom

Florida Court Reporting 561-689-0999

Page: 62

line is I might be able to rule on both motions

for summary judgment. And if I do, then the

sequestration of rent question is very simple I

think. You don't think so?

MS. HEYER: It is simple. But we don't

think that the motion for summary judgment is

dispositive. We still think the sequestration

of rents needs to be dealt with by the Court.

THE COURT: Well, why don't we take a

lunch break and I'll see how much I can get

through the brief.

MR. WORTMAN: Your Honor, as an aside, on

Thursday we did call Your Honor's chambers and

we had left a message for your JA just

confirming that Your Honor had got the box and

brief.

THE COURT: Really. What did she say?

MR. WORTMAN: We had to leave a message.

THE COURT: I'm sorry. But the bottom

line is I'm certainly not going to rule without

reading it. So I'm going to read it. We could

take a lunch break. If I have 90 minutes, I

could get through a lot of it I'm sure.

MR. WORTMAN: Okay, Judge.

THE COURT: I might even be able to finish

Florida Court Reporting 561-689-0999

Page: 63

it. I am a fast reader. So we'll come back

here at 1:30, and I'll let you know if I have

any questions.

(Thereupon, a lunch recess was held off

the record and the proceedings continued as

follows:)

THE COURT: We're back on the record. The

parties are present. I was able to read

through your memorandum. I wasn't able to read

through all the cases, but I did read through

the memo. And as you said, it's pretty much

what you had said earlier. Let me ask U.S.

Bank about how did U.S. Bank get the authority

to be the trustee? My understanding from

reading through the documents was that it was

LaSalle Bank who no longer was trustee that

signed the documents giving authority to U.S.

Bank. So what's your response to that? I know

you said it before, but say it again.

MS. HEYER: No problem.

THE COURT: All right.

MS. HEYER: LaSalle resigned as successor

trustee.

THE COURT: Yes.

MS. HEYER: In it's place, U.S. Bank was

Florida Court Reporting 561-689-0999

Page: 64

appointed as trustee.

THE COURT: I thought there was Wells

Fargo in between there.

MS. HEYER: Wells Fargo came in briefly.

But Wells because of a conflict and merger with

Wachovia was unable to perform the duties as a

trustee. So they resigned. LaSalle then

transferred them to U.S. Bank as Trustee. U.S.

Bank became the trustee and did a notice to all

parties of their appointment as trustee.

THE COURT: And there's a document of

record that assigns the powers to U.S. Bank?

MS. HEYER: Correct. The instrument of

successor trustee as well as the notice that

was put out by U.S. Bank once it was appointed

as trustee to all parties of the pooling and

servicing agreement was either attached to an

affidavit, interrogatories. I can't put my

finger on it at this moment. I also think

there was a notice of filing that was done as

well by the Defense, including those

appointments of trustee.

THE COURT: But at the time that this was

executed by LaSalle, was LaSalle a trustee?

MS. HEYER: Yes. Because if you look at

Florida Court Reporting 561-689-0999

Page: 65

the effective date of the appointment of

trustee as U.S. Bank, it relates back to

June 30th, 2008. That was the same day that

they resigned. So as of that point in time,

they were able to transfer their power over to

U.S. Bank and resign and be done.

THE COURT: But what was the date of that

agreement, the date that they signed?

MS. HEYER: The effective date of that

was -THE

COURT: Not the effective date. What

was the date that LaSalle signed that

agreement? Does anyone have a copy of the

agreement that I can look at? That way I can

see it myself. Do you have it?

MR. WORTMAN: Yes. Let me just shed some

light on this. There was a notice of

appointment from successor trustee from Wells

Fargo, not LaSalle, that was effective making

U.S. Bank as Trustee January 2nd 2009, not

June 30, 2008. June 30, 2008 is when LaSalle

resigned and then Wells took over. And Wells

allegedly resigned and U.S. Bank became trustee

January 2nd, 2009.

THE COURT: So you're saying there's a

Florida Court Reporting 561-689-0999

Page: 66

document dated January 2nd, 2009 where Wells

Fargo -

MR. WORTMAN: Resigned and U.S. Bank

became appointed as trustee at that time.

THE COURT: Okay.

MR. WORTMAN: Which is important for

several reasons. Because U.S. Bank got

allegedly assigned the mortgage in September of

2008 by LaSalle who had already resigned. And

U.S. Bank wasn't even the trustee at that

point. If I could approach, Judge, I'll give

you the notice of appointment.

THE COURT: Yes. Yeah, sure. Okay. The

Court file must have all these documents,

right?

MR. WORTMAN: Yes, Your Honor.

THE COURT: I'm not going to look at it

now.

MS. HEYER: Your Honor, just for

reference, the instrument of appointment of

successor trustee is actually attached to

Plaintiffs' affidavit in support of summary

judgment. And the reference to the June 30th

date, Your Honor, that I was making reference

to, when LaSalle stepped down and U.S. Bank

Florida Court Reporting 561-689-0999

Page: 67

became trustee, it then directs your attention

over to the assignment, which is Exhibit "G" to

the verified complaint. And LaSalle assigned

all of its rights and assigned the note, the

mortgage, and related loan documents to U.S.

Bank as Trustee. And that document is actually

signed in September of '08. But it has the

effective date, which is what I was referencing

before of June 30th, 2008. And, again, that's

Exhibit "G" to the verified complaint.

MR. WORTMAN: Your Honor.

THE COURT: Yes.

MR. WORTMAN: Again, the assignment of

mortgage that was executed by LaSalle who had

already resigned, yes, it makes some reference

to an effective date. But you can't have the

retroactive intent to do something three months

earlier when you had already resigned and been

divested of all your authority as trustee.

Moreover, Judge, the assignment of

mortgage in September, 2008 was to U.S. Bank as

Trustee before U.S. Bank was even the trustee.

The trustee assignment or the appointment of

U.S. Bank trustee took place in January of

2009. You can't give something to a trustee

Florida Court Reporting 561-689-0999

Page: 68

who has not been named yet as trustee. That's

one of about 10 arguments that we have in our

brief.

MS. HEYER: Your Honor, our brief response

is that it's not relevant because it's already

sitting in the trust. It's been in the trust.

The fact that you have predecessor trustees,

successor trustees is completely irrelevant to

the issue as to whether who was an owner and

holder.

THE COURT: Right. All right. Well, I

want to go through all the documents myself,

the actual agreements and assignments. I'll

hear argument on the motion for sequestration.

MS. HEYER: Your Honor, as I mentioned

before the break, we prepared the memorandum of

law as to the difference in standard between

sequestration of rents and appointment of

receiver. If I may approach.

THE COURT: Okay. Thank you.

MS. HEYER: Now, as the Court is aware

from our last evidentiary hearing on the

appointment of receiver, an evidentiary hearing

is mandated by case law for receiver. No such

mandate is in place for sequestration of rents.

Florida Court Reporting 561-689-0999

Page: 69

And the standards are different. There is no

case outlining the procedure. It references

you to the statute. So what I have provided to

the Court is the legislative history as to why

they needed 697.07, as a simplified procedure

to allow for the enforcement of the assignment

of rents before final adjudication of the

issues in a case.

One of the cases that's attached that shed

some light on this very issue is the very last

case in the packet of Ormond Beach Associates

versus Citation Mortgage. And it's a Fifth DCA

case from.

THE COURT: You say it's the last case in

the packet?

MS. HEYER: Last case attached to the

supplemental memorandum.

THE COURT: Right. I have Whetstone

Partnership as the last case.

MS. HEYER: Sorry about that. You're

right. We'll go ahead and deal with Whetstone.

You're right. That is the very last case. I

apologize, Your Honor.

Whetstone is a 1995 case from the Second

District. In that particular case, the trial

Florida Court Reporting 561-689-0999

Page: 70

court actually made findings of fact and

conclusions of law as part of the

sequestration, which was held to be error. The

Court really is only to look to the two items

in the statute for purposes of determining an

absolute enforcement of an assignment of rents.

It's not intended as an evidentiary hearing.

It's not intended as a final hearing on the

rights or positions of the parties.

In fact, the court stated that a hearing

at issue is not a trial upon the final

determination of rights, and provided only that

the rental income stream be placed in control

of the court subject of course to final

determination of entitlement at trial.

So in this case, the court, the lower

court was admonished for making findings and

conclusions of law on the mortgagor's defenses

and counter claims. It's U.S. Bank's position

in this case that there really are two issues

only for the Court to determine, and that is

whether there was a default, and whether there

was a demand for rents. Because, again, we're

not going to a final adjudication. We're

merely sequestering the rents, whether it's in

Florida Court Reporting 561-689-0999

Page: 71

the registry of the Court or in an escrow

account. There's no prejudice to the parties.

We'll make that determination at the end of the

case once the Court has fully flushed out all

claims, defenses, avoidances, et cetera, et

cetera.

So we think that Whetstone Partnership

versus General Electric is some guidance to

this Court. Also, if you look to the elements

for a receivership, the elements of a

receivership are quite high. You have to show

a likelihood that the Plaintiff will prevail in

the underlying action. That's not required

under 697.07. All you need to merely establish

are the two elements so that the assignment of

rents, which is contained in the mortgage in

this case becomes effective. If you look at

the assignment of rents that's contained in the

mortgage documentation, it clearly states that

it's not security. It is an absolute right

upon default.

So based on the guidance we've gotten from

Whetstone as well as looking to the issues in

this case, it's never been disputed that there

actually was a demand made for the rents to be

Florida Court Reporting 561-689-0999

Page: 72

put in the registry of the Court. There's

never been a dispute that there's been a

default. The question at this point is does

the Court need to look to any defenses. Well,

the statute says you're not required to look at

and in fact it's reversible error to look at

any defenses. And Whetstone tells us we cannot

make any conclusions of law or findings of fact

with respect to any defenses. Is standing a

defense? Absolutely. Has standing in holder

status been asserted as a defense? Absolutely.

Based on the construction of the statute and

the case law, we can't look to that issue yet.

The only issue for purposes of whether we need

to put that money in a safe harbor, i.e.,

registry of the Court is whether there's been a

default and whether there's been a demand.

At this point in time the Court has

already heard evidence obviously from the

evidentiary hearing from Mr. Weist (phonetic)

that $77,000 a month is currently being

collected by Tidewater Estates. So there's

rents still being collected as of today on a

monthly basis that's not being accounted for to

the Court; that loan payments are not being

Florida Court Reporting 561-689-0999

Page: 73

made. We don't know what is being done with

those rents on a monthly basis.

The demand for rents was made over a year

ago. The motion for sequestration of rents was

made six months ago. The appointment of

receiver for those rents was made a year ago.

And still to this day, here we are a year

later, and we don't know what's going on with

the rents. Certainly sequestration of the

rents doesn't prejudice the parties. Provides

an opportunity for the Court to flush out all

the issues in the case if there are any

remaining now that we've had summary judgment

arguments, and make a final determination.

As further guidance for the Court, we went

ahead and looked at Broward cases pending on

sequestration of rents, and we were able to

actually find, and I'll provide a copy to

counsel, from Bank of America versus McVision.

If I may approach.

THE COURT: Yes.

MS. HEYER: Where Judge Ease on motion

calendar heard a motion for sequestration and

granted a motion for sequestration. No

evidentiary hearing required. We think that

Florida Court Reporting 561-689-0999

Page: 74

because the Plaintiff has been waiting a long

time in this case for a year now to get a

disposition as to these rents, the statute

mandates an expedited hearing. It can be done.

It can be done quickly. Because the main

factor in this case is no one is getting

control of the rents. They're not being turned

over to the Plaintiff. They're being placed in

a safe harbor. And there's no prejudice to the

Defense.

THE COURT: Well, I appreciate all the

research you did. As far as Judge Eade's

order, I'm not going to consider it because the

facts of that case may be very different. I

don't know that the defendants even objected to

this.

MR. WORTMAN: Your Honor, we haven't seen

this before.

THE COURT: Right.

MS. HEYER: Your honor, we didn't have any

guidance. And I know Your Honor was

questioning whether it can be heard on motion

or whether it can be done by evidentiary

hearing or not.

THE COURT: Right.

Florida Court Reporting 561-689-0999

Page: 75

MS. HEYER: Certainly in this case the

motion was actually attached to the back. It

was not agreed to. Certainly it doesn't

reflect as an agreed order. I'm not clearly

providing it to the Court as dispositive of

anything.

THE COURT: Right. I appreciate it.

Okay. Thank you.

MR. WORTMAN: Your Honor, the

sequestration of rents statute states in

subsection two, if such an assignment is made,

the mortgagee shall hold a lien on rents. Not

to beat a dead horse here, but obviously the

key word is mortgagee. It's our position as

hopefully, Your Honor, had an opportunity to

read our brief and see that U.S. Bank for a

variety of reasons and I think there are 10 in

number is not the mortgagee. The only party

that Tidewater has ever dealt with as far as

being a lender is Merrill Lynch Mortgage

Lending, the original lender.

So if this particular Plaintiff is

incapable as we pause it of proving ownership

of this loan, then they are simply not the

mortgagee. Not only because they don't have

Florida Court Reporting 561-689-0999

Page: 76

the note, but also because of all the problems

associated with the mortgages. It's crystal

clear in our opinion that this securitization

process here is laden with defects and

problems. And the documents speak for

themselves in terms of this particular entity

not having any control or ownership or ability

to enforce any of the loan documentation. And

it goes without saying, if that is true, then

they should not have this serious and drastic

remedy of taking the revenue of the community,

either taking it for themselves or depositing

it into the Court's registry.

So for that reason, sequestration of rents

is totally inappropriate. And I'll be happy to

go item by item, issue by issue through our

brief so we could further flush out, you know,

this argument as it relates to the fact that

U.S. Bank is not the mortgagee. And perhaps it

would be a good opportunity. It is a lengthy

brief.

THE COURT: Right. Oh, I've read it. I

think it's very clearly stated. And I've heard

sufficient argument. I don't have any other

questions.

Florida Court Reporting 561-689-0999

Page: 77

MR. WORTMAN: Okay. Well, we strenuously

disagree with the interpretation of the statute

that this is just an automatic you don't have

any right to present any defense or argument to

the sequestration of the rents. That would

just create a total absurd result if some third

party, a "stranger" to this loan, which is the

way we're characterizing U.S. Bank, had the

right to do things like this. I mean

theoretically that would enable any company or

entity or person up the street saying, hey, I

believe I'm the mortgagee. So I automatically

get to have the rents sequestered. Then the

Court gets to figure it out later.

THE COURT: Right. Well, what standard do

you believe the Plaintiff needs to meet under

697.07?

MR. WORTMAN: Like my adversary had

represented, there is a dearth of case law on

this statute. We searched high and low for any

type of precent or guidance as to the standard.

There's just no specific case that says whether

it's a preponderance of the evidence or

substantial likelihood of success. I think it

is logical that the Court adopt a high

Florida Court Reporting 561-689-0999

Page: 78

standard, either clear or convincing evidence

or substantial likelihood of success on the

merits in order to avoid this type of absurd

result. They have to prove and the Court has

to be fairly well convinced that this is the

right party here to enforce these loan

documents. Whether or not that translates into

a substantial likelihood of success or clear

and convincing, I think that's a very fair

interpretation of what due process requires.

Because this is divesting the community of

basically every penny that comes in.

THE COURT: Well, that's not true.

Because under 697.074, I can allow that money

be taken out of the rents before it's deposited

to pay the reasonable expenses to protect,

preserve, and operate the real property,

including without limitation real estate taxes

and insurance.

So if I were to order sequestration of

rents, it would not -- it most likely would not

be the entire rent.

MR. WORTMAN: I agree with, Your Honor,

obviously. To the extent in the event that

Your Honor either denies both motions for

Florida Court Reporting 561-689-0999

Page: 79

summary motion or adjudicate it at some later

point in time, perhaps that would be a fair

interim remedy.

THE COURT: Well, here's what I think. I

think like the Defense said at the first

evidentiary hearing for the Court to assign or

appoint a receiver, there's no question that

Tidewater signed documents that obligated them

to make payments. I mean they took out a loan

of over $6 million. And at some point they

defaulted in that agreement. The only question

that remains is who, who gets that money. But

there's no question in my mind. I put it even

beyond the highest standard possible, which is

proof evident, presumption great, which is even

higher than a jury trial that Tidewater owes

money to an entity, whether it's U.S. Bank or

as Defense counsel says Merrill Lynch.

So I think that I should sequester some of

the money from the rents sufficient to pay

whatever their monthly mortgage payments would

be, and that hopefully would leave them with

money for real estate taxes, insurance, upkeep,

that sort of thing.

MR. WORTMAN: I understand that, Your

Florida Court Reporting 561-689-0999

Page: 80

Honor. However, we feel that our cross motion

for summary judgment has substantial merit. We

believe it should be granted for the variety of

reasons that we laid out. I believe there are

10 separate arguments as to why this loan is

not owned and controlled by U.S. Bank.

THE COURT: Yes. They are all very

technical arguments. Because if you look at

what -- if you look at the actions as opposed

to the letters -- the I's being dotted and the

T's being crossed, if you look at what

happened, U.S. Bank has acted as trustee at a

certain point in time. That point in time the

parties dispute. But that's a legal issue I

think. I don't know that it's a factual issue.

I need to mull this over and think whether

there is any dispute of fact or not.

But that being said, then there was quite

some time when Tidewater was paying money and

it was going to U.S. Bank who was acting as

trustee. Merrill Lynch has never demanded.

And the Defense is arguing that it's Merrill

Lynch that would have the right, that would

have standing here. Merrill Lynch has never

asked for any money for this note or mortgage.

Florida Court Reporting 561-689-0999

Page: 81

They've never asked for it. And U.S. Bank of

course argues that Merrill Lynch assigned -the

reason they haven't asked for it is because

they don't believe they're entitled to it.

They've assigned their rights to this mortgage

and note eventually over to U.S. Bank.

MR. WORTMAN: Your Honor, can I make an

analogy?

THE COURT: Sure.

MR. WORTMAN: As a board certified real

estate attorney, I've handled thousands and

thousands of real estate transactions. I've

reviewed hundreds of abstracts of title and

prepared and oversaw the execution of warranty

deeds. Like I said, quite a number of real

estate transactions. You could have a well

intended purchaser and seller sitting at a

closing table executing a warranty deed, and

the seller is purporting to transfer title to a

piece of property to a buyer. They shake hands

and they walk out of a room. But there's no

witnesses and no notary. While you have two

parties that clearly thought there was a

transfer of that real estate, because those I's

were not dotted and those T's were not crossed,

Florida Court Reporting 561-689-0999

Page: 82

and the technicalities were not followed, there

has been no conveyance of title. That's what

happened here about 10 times over.

THE COURT: Well, that's the question. If

an I wasn't -- there are also times when

technicalities are not followed and it doesn't

have any effect. And the question is: What

effect do these technicalities, these 10

technicalities, if you will, what effect does

it have if any on U.S. Bank's standing? Maybe

it has an effect. Maybe it doesn't.

MR. WORTMAN: Well, Judge, there are

reasons why assignments of mortgage are

supposed to follow a chain. Why allonges are

supposed to be executed in a certain manner.

Why there must be a specific intent to transfer

the loan from Merrill Lynch Mortgage Lending to

LaSalle. But that didn't occur because David

Rogers who executed the allonge just signed it.

It got back dated. Then the actual stamp from

LaSalle came some time thereafter.

There's a panoply of reasons here why the

securitization process that they avail themself

of. We didn't ask to participate in this. We

didn't ask to be a participant in this trust.

Florida Court Reporting 561-689-0999

Page: 83

We didn't ask to abide by a pooling and

servicing agreement. This is their

transaction.

THE COURT: Right.

MS. HEYER: These are their rules that

they blatantly violated.

THE COURT: So you're just basically

saying so Tidewater doesn't have to pay back

the $6 million loan?

MR. WORTMAN: As it relates to U.S. Bank

today, Judge, absolutely.

THE COURT: Okay.

MR. WORTMAN: That doesn't mean -

THE COURT: Yeah.

MR. WORTMAN: That doesn't mean that

Merrill Lynch Mortgage Lending, Inc. at some

point -- and what's going on with these

securitizations is there's a massive amount of

re-purchasing that's going on because of

defects like this where the loan is being put

back to the original lender, and the original

lender is coming in and taking over and taking

control.

That's what needs to happen here. U.S.

Bank because of the 10 reasons should not be a

Florida Court Reporting 561-689-0999

Page: 84

Plaintiff in this lawsuit. It should be

re-purchased by Merrill Lynch and let them do

what they want as it relates to this loan,

enforcement, default, foreclosure. Fine. But

as it stands right now, this Court is bound to

look at the facts as it relates to U.S. Bank

and whether or not they own and control and

possess this loan properly.

So for that reason as it relates to

summary judgment and sequestration of rents, we

believe they do not have rights as it relates

to any enforcement provision of these loan

documents.

THE COURT: Well, sequestration of rents,

I believe that there should be a sequestration

of rents. And if the parties, they can put it

either in the Court registry or in a trust

account. I'm sure the parties could agree on a

trust account. Because that way they don't

have to pay the court registry fees and maybe

they can earn some interest. I don't know.

But I'm also amenable to instead of ordering

all the rent, to see what the mortgage payments

would have been, and to see if there's enough

money left over to take care of the place. You

Florida Court Reporting 561-689-0999

Page: 85

know, taxes and insurance, and that sort of

thing. I don't know.

MS. HEYER: Your Honor, we'd just request

that the order reflect the language in the

statute. The statute does provide for only net

rents. And it defines it by -- it uses

collected rents and then it talks about net

rents allowing for maintenance and necessary

expenses to maintain the property. And

certainly we don't have any objection to

crafting language as to what those approved

expenses are. But I certainly would not want

Tidewater solely on their own making a decision

as to what those necessary expenses are, and

certainly would ask Court guidance with respect

to that.

THE COURT: Right. Well, I think the

first starting point is to see if the parties

can reach an agreement on that. And if not,

then I'll address it. But it does say that the

Court shall require the mortgagor, which would

be Tidewater, to account to the Court and the

mortgagee, which for purposes of this statute

and at this time I'm going to say is U.S. Bank,

for the receipt and use of the collected rents

Florida Court Reporting 561-689-0999

Page: 86

and may also impose other conditions, et

cetera.

But I would think that Tidewater would

have a position as to how much money they have

left over after they pay for upkeep, et cetera.

MS. HEYER: Yeah. Well, the statute

actually makes reference to collected rents

going into the registry of the court and then

the mortgagor applying for the payment of those

necessary expenses either with our approval or

Court approval. And certainly I haven't seen

the list of expenses. But certainly I don't

think we're going to have objection if it's for

purposes of maintenance of the property, taxes,

insurance, the like, the necessary expenses.

If there's an issue, then certainly we can

bring it before the Court.

THE COURT: I mean I can do it that way,

or it also authorizes me to do it before it's

deposited if you look at four, subsection four.

MR. WORTMAN: That would be our

preference, Judge, because obviously we have

vendors that need to get paid on a timely

manner. And to have to wait to have a court

order to have monies released from the court's

Florida Court Reporting 561-689-0999

Page: 87

registry -

THE COURT: Right. I don't have a problem

with that. But I want to see -- I have no idea

how much money would be left over for the

mortgage payments, do you?

MS. HEYER: Correct, Your Honor. We don't

either.

THE COURT: Right. What do you know?

MR. WORTMAN: Precise amount, not off the

top of my head, Judge. I'd have to sit down

with the property manager and the board. And

I'd be happy to meet with counsel for the

Plaintiff in short order to make a specific

proposal. But we've turned over all the

financial documents to them. So they should

have an idea.

THE COURT: So you should have an idea

also, right?

MR. WORTMAN: Off the top of my head, no,

I don't, Judge. It won't take very long for me

to figure it out and come up with the numbers.

THE COURT: Because I'm hoping, maybe I'm

being too optimistic, that there will be enough

for the mortgage payments to be made out of

that amount. But I don't know. And the other

Florida Court Reporting 561-689-0999

Page: 88

issue then is whether Tidewater would want to

agree to a receiver to if there are for example

tenants that aren't paying their maintenance,

their monthly maintenance, and thus imposing an

undo burden on the other tenants who are making

the monthly payments, a receiver helps to get

that taken -

MR. WORTMAN: Your Honor, we have a very

sophisticated property manager that is handling

the affairs of the community in a very well

managed fashion. And the receiver is not

something we're interested in, nor is it before

the Court today.

THE COURT: I know. I know. I'm just

throwing that out there.

MS. HEYER: Your Honor, one last issue on

the rents. The statute references it goes back

to the date of demand for the collected rents.

The demand was back in April of 2010. And I

don't know if you may recall from the

evidentiary hearing, but certainly from

Mr. Weist's deposition, they have been putting

money aside from the net income from the

property, and it's been kind of just sitting in

an account. That money should also then be

Florida Court Reporting 561-689-0999

Page: 89

part of whatever, whether it's a trust account,

registry of the court or whatever.

MR. WORTMAN: Your Honor, I don't believe

those funds have been specifically segregated.

There's been a variety of capital improvement

projects and variable expenses that these

monies are used for. So there's not a separate

segregated account for that purpose.

MS. HEYER: Your Honor, as of the

evidentiary hearing, Mr. Weist said there was

about $200,000 set aside in a market, money

market account.

MR. WORTMAN: Nothing is set aside. It's

just that money is in an account. It's not set

aside.

THE COURT: Okay. But it's in an account.

The Court wants to make sure that while it's

important for the trailer park to have its

expenses paid, this mortgage, you need to pay

it. And if it's not to U.S. Bank, it needs to

get paid. It needs to get paid. You don't

just borrow $6 million and then not pay it

back.

MR. WORTMAN: Your Honor, if I could just

comment on that.

Florida Court Reporting 561-689-0999

Page: 90

THE COURT: Yes.

MR. WORTMAN: The reason why we're going

through all these arguments today. The

community who I've come to meet and know many

of the residents quite well. They're very

caring, well meaning people. From the onset of

their dealings with U.S. Bank and Midland, the

initial goal was to have a loan modification,

was to try and just simply bring down the

payments not a ton, not in half, a little, with

perhaps an extension of a maturity date. We

got nothing but stonewalled.

So this was thrust upon us to have to then

investigate whether or not this U.S. Bank

ultimately owns and controls this loan. So to

say that we or that Tidewater as a whole, as a

group, you know, is getting away with this or

getting away with that or not doing the right

thing, I just want the Court to know our true

intentions from the onset of our dealings,

which was to get a modification of this loan to

make it a more manageable payment. It just

turned out that when we started to dive into

these documents, we found defect after defect

after defect.

Florida Court Reporting 561-689-0999

Page: 91

And while I understand the Court's

concern, again, this is their securitization

debacle that they created, not by us. We would

have been happy to deal with Merrill Lynch

Mortgage Lending. And like my partner

mentioned, this would be a less shorter and

less contentious hearing. But this is their

mess that's now being thrust on us to untangle.

And if they screwed up the transfer of the loan

and to some extent actually benefits Tidewater

on a temporary basis, then so be it. They

should have done things better when they

decided to flip this loan on Wall Street and

Goldman Sachs and the investment banks and

LaSalle Bank and Wells Fargo and ultimately

U.S. Bank.

So we believe the sequestration of rents

should not be granted. The cross motion for

summary judgment should be granted. This case

should be dismissed.

THE COURT: Well, I've already ruled. So

the parties -- I'm going to give the parties

how much time? I would say just I'm thinking

maybe five days to see if they can reach an

agreement whether there's enough money to -

Florida Court Reporting 561-689-0999

Page: 92

whether you can agree on something or not. If

not, you come in front of me and we'll have

another hearing on that. And I'll figure out

how much money should go into either the court

registry or a separate trust account.

MR. WORTMAN: Okay.

THE COURT: I'm going to defer ruling on

the motions for summary judgment.

MS. HEYER: Thank you, Your Honor.

MR. WORTMAN: Thank you, Judge.

THE COURT: So five days from today. How

about I give you till the end of the week. Is

that enough time realistically? I think it

should be more than enough time.

MS. HEYER: Yes.

MR. WORTMAN: That's fine.

THE COURT: Okay. And if you need help,

come in on motion calendar maybe if you want.

Thank you everyone. The Court will be

adjourned.

(Thereupon, the proceedings concluded.)

Florida Court Reporting 561-689-0999

Page: 93

CERTIFICATE

STATE OF FLORIDA )

COUNTY OF PALM BEACH )

I, TRACY LYN FAZIO, Court Reporter and

Notary Public within and for the State of Florida at

Large, duly commissioned and qualified, do hereby

certify that pursuant to a notice to take said hearing

heretofore filed, the examination was reduced to

writing under my supervision; and that the transcript

is a true record of my stenographic notes.

IN WITNESS WHEREOF, I have hereunto set my

hand and affixed my official seal this 26th day of

April, 2011.

(Signer's identity unknown) Signed by Tracy Fazio <[email protected]> Time:

2011.04.26 13:29:29 -04'00' Reason: I am the author of this document and attest to the integrity of this

document. Location: Boca Raton, FL

(Signer's identity unknown) Signed by Tracy Fazio <[email protected]> Time:

2011.04.26 13:29:23 -04'00' Reason: I am the author of this document and attest to the integrity of this

document. Location: Boca Raton, FL

_______________________

TRACY LYN FAZIO

Court Reporter and

Notary Public, State of

Florida at Large

Florida Court Reporting 561-689-0999