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Jeffrey J. Whitehead, Esq. Nevada Bar No. 3183 Whitehead Law Offices 2431 W. Horizon Ridge Pkwy. Suite 110 Henderson NV 89052 VOX: (702) 451-7272 FAX: (702) 451-2947 email: jeff@whiteheadlaw.org Attorney for Debtors Joan Maria Anderson and Todd J. Shelly UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: JOAN MARIA ANDERSON and TODD J. SHELLY CASE NO.: 2:10-31903-lbr CHAPTER 13

HEARING DATE: June 15, 2011 Debtors HEARING TIME: 10:30 a.m.

16 17 18 19 20 21 22 23 24 25 26 27 28 1 DEBTORS AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J. P. MORGAN AND OPPOSITION TO MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PHH MORTGAGE CORPORATION

PLEASE TAKE NOTICE that the Debtors, Joan Maria Anderson and Todd J. Shelly, by and through their counsel, Jeffrey J. Whitehead , Esq., pursuant to 11 U.S.C. 502 (b) and Bankruptcy Rules 3007 and 9014, hereby object to the Proof of Claim filed on January 31, 2011 by J. P. Morgan Mortgage Acquisition Corporation and oppose the Motion for Relief from Automatic Stay filed on February 3, 2011 by Creditor PHH Mortgage Corporation. This Amended Objection and Opposition is made based upon the following Memorandum of Points and Authorities and the arguments of counsel at the Hearing of this matter.

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MEMORANDUM OF POINTS AND AUTHORITIES

FACTS AND PROCEDURAL POSTURE OF THE CASE.

On January 31, 2011, Creditor J. P. Morgan Mortgage Acquisition Corporation (hereinafter referred to as J. P. Morgan) filed a Proof of Claim in the sum of $ 738,399.51. The basis for the claim is listed as Money loaned. In this Claim , J. P. Morgan also claims secured status. No basis for perfection of this claim is listed. On February 3, 2011, PHH Mortgage Corporation (hereinafter referred to as PHH) filed a Motion for Relief from Automatic Stay. This Motion is based on the same claim set forth above.

Pursuant to 11 U.S.C. 502 (b) (1), the Court, if an Objection to Claim is made, after notice and a hearing, shall determine the amount of the claim and disallow the claim if it is unenforceable against the Debtors or the Debtors property. Here, the Debtors, Joan Maria Anderson and Todd J. Shelly, respectfully request that this Honorable Court issue an Order declaring that J. P. Morgans and PHHs claims are unenforceable against them and their property for all of the reasons set forth below.

A chronological review of the chain of events as set forth in the documents relevant to J. P. Morgans and PHHs claims, which they attach as Exhibits, clearly illustrates fatal flaws thereby rendering the debt unenforceable against the Debtors and the Debtors property.

Debtor Joan Maria Anderson

purchased the property located at 8570 West LaMadre

Way, Las Vegas, Nevada 89149 and executed a promissory Note and a Deed of Trust on June 18, 2007. The Deed of Trust names PHH as the ostensible lender and also names Mortgage

Electronic Registration Systems, Inc. (MERS) as the alleged beneficiary and nominee. Significantly, what the Deed fails to do, however, is grant MERS any legal authority to transfer ownership of the promissory Note. This Deed of Trust is on file at the Clark County Nevada Recorders Office and is, therefore, self-authenticating as a public record. Fed. R. Evid. 902 (9) and 2

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1005.

Next, pursuant to an ASSIGNMENT OF DEED OF TRUST dated April 18, 2010, MERS ostensibly assigned all beneficial interest under that certain Deed of Trust dated as of June 18, 2007 to J. P. Morgan. (See pages 27-28 attached to Claim 17 Filed January 31, 2011). This Assignment is also on file at the Clark County Nevada Recorders Office and is, therefore, selfauthenticating as a public record. Fed. R. Evid. 902 (9) and 1005.

In this ostensible assignment, MERS purported to assign to J. P. Morgan the Deed of Trust together with the Promissory Note. The Note is made payable to PHH. However, not only did MERS not hold the Note so as to be able to convey the Note; but even if it did, the UCC does not recognize an assignment as a valid method of transferring a Note. A valid transfer of a Note can only be accomplished by negotiation and endorsement. Nev. Rev. Stat. 104.3201 and 104.3204. Therefore, not only did the assignment not transfer possession of the Note to J. P. Morgan which is fatal to J. P. Morgans claim against the Debtors such a transfer of the Deed alone would have split the Deed from the Note thereby rendering the debt unenforceable against the Debtors.

Dispositvely, the promissory Note attached to J. P. Morgans Proof of Claim (pages 21-25 of Claim 17 filed January 31, 2011) is devoid of any endorsements whatsoever. Moreover, there is no evidence that MERS ever held the promissory Note or that PHH ever gave MERS any

authority to transfer the promissory Note. Therefore, any assignment or transfer of the Deed of Trust alone would have legally separated the Note from the Deed of Trust. Specifically, the ASSIGNMENT OF DEED OF TRUST dated April 18, 2010 would have transferred ownership of the Deed only to J. P. Morgan but would have split and left ownership of the promissory Note with PHH. And any separation of the Debtors Note and Deed of Trust renders J. P. Morgans and PHHs claims unenforceable against the Debtors and the property of the Debtors as a matter of law. Therefore, J. P. Morgans and PHHs Claims are fatally flawed and should be held unenforceable against the Debtors and the Debtors property. 11 U.S.C. 502 (b) (1). 3

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II.

THE APPLICABLE LAW IS THAT GOVERNING NEGOTIABLE PAPER.

Bankruptcy law does not provide for the enforcement of promissory Notes generally. Thus, in a bankruptcy proceeding, the legal right and liabilities of the parties regarding negotiable paper are determined by applicable state law. Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed. 136 (1979) (nature and extent of property interests are determined by applicable state law). In re Mims, 438 B. R. 52, 56 (Bkrtcy. S.D.N.Y. 2010); In re Weisband, 427 B. R. 13, 18 f. 2 (Bkrtcy. D. Ariz. 2010); In re Montagne, 421 B. R. 65, 73 (Bkrtcy. D. Vt. 2009); In re Wilhelm, 407 B. R. 392, 401 (Bkrtcy. D. Idaho 2009). As the Court held in In re Hwang, 396 B. R. 757, 762 (Bkrtcy. C.D.Cal. 2008):

In the United States, the law of promissory notes is not unified at the federal level. Instead, each state has its own law on promissory notes. However, every state has adopted a version of the UCC to govern negotiable promissory notes Thus, we turn to (our states) version of the UCC.

Similarly, as the Nevada Supreme Court clearly held in Giorgi v. Pioneer Title Insurance Company, 85 Nev. 319, 454 P.2d 104, 105 (1969):

In the case of a payment of a mortgage or deed of trust securing a negotiable instrument, the rule suggested by the great weight of authority is that the rights of the parties thereto, as well as third persons, are governed by rules relating to negotiable paper. Under this law the maker of a negotiable note secured by a mortgage or deed of trust cannot discharge his liability by payment to one not the holder or one not authorized by the holder to receive payment. And a debtor is not justified as against an assignee of the security in making payments to a mortgagee or a beneficiary named in a deed of trust who does not have possession of the instrument. (Internal citations omitted.)

Nev. Rev. Stat. 40.506 defines the term Secured lender. Secured lender means the holder of an obligation secured by a mortgage. Blacks Law Dictionary, p. 800 (9th Ed. 2009) defines holder as: A person who has legal possession of a negotiable instrument and is entitled to receive payment on it. Pursuant to these definitions, neither PHH nor J. P. Morgan is a secured 4

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lender, since they are not entitled to receive payment on the promissory Note, and the alleged debt is therefore unenforceable against the debtor and the property of the debtor. 11 U.S.C. 502 (b) (1).

Pursuant to the applicable laws, neither alleged creditor here is entitled to enforce and collect on the Debtors promissory Note and Deed of Trust according to the proof , and lack of proof, presented to this Court. That is chiefly because the legal effect of the Assignment from MERS to J. P. Morgan would have transferred only the Deed of Trust to J. P. Morgan and left PHH holding only the note. But where one entity holds the promissory Note and another entity holds the Deed of Trust, the alleged debt is unenforceable against the debtor and the property of the debtor. 11 U.S.C. 502 (b) (1).

III.

THE ALLEGED CREDITORS HAVE THE BURDEN OF PROVING THAT THEY OWN AND CAN ENFORCE THE DEBT.

A party seeking to invoke a federal courts jurisdiction must prove its standing. In re Wilhelm, 407 B. R. 392, 399 (Bkrtcy. D. Idaho 2009). As applied in the stay relief context, movants bear the burden of proof on standing , in addition to the other elements necessary to obtain relief. Wilhelm, 407 B. R. at 400. The movant, MERS in this case, bears the burden of proving it is the real party in interest. Mortgage Electronic Registration Systems, Inc. v. Chong, 2009 WL 6524286, p. 3 (D. Nev. December 4, 2009);

11 U.S.C. 362 (d) (1) allows the Court, at the request of a party in interest to grant relief from the automatic stay. A movant for relief from stay bears the burden of proof that it has standing to bring the motion. In re Weisband, 427 B. R. 13, 18 (Bkrtcy. D. Ariz. 2010); In re Minbatiwalla, 424 B. R. 104, 111 (Bkrtcy. S.D.N.Y. 2010) (Chase has the burden to establish its standing).

Under Nevada law, a negotiable promissory note is enforceable by: (1) the holder of the 26 27 28 5 note, or (2) a nonholder in possession of the note who has the rights of a holder. In re Mitchell,

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2009 WL 1044368, p. 5 (Bkrtcy. D. Nev. 2009) [citing Nev. Rev. Stat. 104.3301 (1)]. A holder is the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. Nev. Rev. Stat. 104.1201 (u) (1).

An alleged Creditor must prove that it is, in fact, a holder of the Debtors Note. Kemp v. Countrywide Home Loans, Inc., 440 B. R. 624, 631 (Bkrtcy. D. New Jersey 2010) (plaintiffs here, as makers of the notes, may properly press defendant to establish its holder status).

Most importantly, an alleged Creditor must show that it

is the holder o f both the

Debtors promissory Note and the Deed of Trust. In re Algard, ___ B. R. ___, ___, 2011 WL 499959, p. 16 (Bkrtcy. E.D.N.Y. 2011) [in order to have standing to seek relief from stay, Movant ... must show that (it) holds both the Mortgage and the Note], p. 17 (it is the Movants burden to show that it is the holder of the Note as well as the Mortgage), p. 24 (the moving party must show that it validly holds both the mortgage and underlying note in order to prove standing before this Court) (emphasis added); Accord, In re Canellas, 2010 WL 571808, p. 4 (Bkrtcy. M.D. Fla. 2010) (only the holder of the Note and Mortgage , or its authorized agent, has standing to bring the Motion to seek relief from the automatic stay) (emphasis added).

In addition to the data concerning payment on the loan, movant must provide evidence that the underlying debt is owing to it, and evidence of the security interest (if the obligation is secured). In re Vargas, 396 B. R. 511, 519 (Bkrtcy. C.D. Cal. 2008).

Under the Bankruptcy Code, a party seeking relief from stay must establish entitlement to that relief. Foreclosure agents and servicers do not automatically have standing and must show authority to act for the party which does.... Only the holder of the obligation secured by the deed of trust is entitled to foreclose. Having an assignment of the deed of trust is not sufficient because the security follows the obligation secured, not the other way around. In re Jacobson, B. R. 359, 367 (Bkrtcy. W.D. Wash. 2009) (citations omitted).

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IV.

THE ALLEGED CREDITORS LACK STANDING TO SEEK RELIEF.

Unless an alleged Creditor in fact qualifies as a creditor, it does not have standing to request relief from the automatic stay. In re Mims, 438 B. R. 52, 55 (Bkrtcy. S.D.N.Y. 2010). To be a creditor, an entity must have a claim, which means a right to payment against a debtor. 11 U.S.C. 101 (5) (A) ,(10) (A). As the Court held in Mims: Because Wells Fargo has not offered evidence that it owns the original Note, Wells Fargo lacks standing to foreclose on the Mortgage and has therefore failed to demonstrate it is the holder of a claim. In re Mims, 438 B. R. at 56. Thus, to be a creditor, an entity must have a right to payment that came into existence by the time the petition was filed. In re Wells, 407 B. R. 873, 882 (Bkrtcy. N.D. Ohio 2009).

In re Canellas, 2010 WL 571808, p. 4 (Bkrtcy. M.D. Fla. 2010) is significant for its ruling on what must be shown to prove standing in a Motion seeking relief from the automatic stay: Movants Motion, however, is due to be denied because Movant has failed to establish it has standing to seek stay relief .... Only the holder of the Note and Mortgage, or its authorized agent, has standing to bring the Motion. (Emphasis added).

The Restatement (Third) of Property Mortgages 5.4 (c) (1997) provides that: A 17 18 19 20 21 22 23 24 25 26 27 28 7 In In re Weisband, 427 B. R. 13, 20 (Bkrtcy. D. Ariz. 2010), the Court rejected the argument that an Assignment by MERS of the Deed of Trust provided it with standing and held that the language in the Deed of Trust naming MERS as a beneficiary and nominee confers no economic benefit on MERS. Weisband held that because MERS has no financial interest in the Note ... MERS cannot satisfy the requirements of constitutional standing. Weisband, 427 B. R. at 20. Moreover, because the assignee stands in the shoes of the assignor, taking only those right mortgage may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures. This means that the security instrument (the Deed of Trust) may only be enforced by a person who is legally entitled to enforce the loan (the promissory Note) that the Deed secures. Here, however, neither alleged creditor can do so.

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and remedies the assignor would have had, MERS ostensible assignee cannot satisfy the requirements of constitutional standing either. Id.

In a recent decision in this District, In re Mitchell, 2009 WL 1044368, p. 3 (Bkrtcy. D. Nev. 2009), MERS argued that it allegedly had standing because it was named as the beneficiary in a Deed of Trust. However, the Court ruled that: MERS does not have standing merely because it is the alleged beneficiary under the deed of trust. It is not a beneficiary and, in any event the mere fact that an entity is a named beneficiary of a deed of trust is insufficient to enforce the obligation. Id. at p. 4. The Court in Mitchell explained the reasoning for its decision noting that: MERS is not a beneficiary as it has no rights whatsoever to any payments, to any servicing rights, or to any of the properties secured by the loans. Id. at p. 5.

That holding was very recently confirmed in another case involving MERS decided by the United States District Court for the District of Nevada, Vega v. CTX Mortgage Company, ___ F. Supp. ___ , 2011 WL 192514 (D. Nev. 2011). In Vega, Court held that the foreclosure may have been statutorily defective because MERS purported to assign all beneficial interest under a deed of trust pursuant to an Assignment. However, MERS is not in fact the beneficiary because it does not own the debt. MERS does not have the ability to transfer the interest in the loan without more evidence of its agency ... than being named as nominee on the (Deed of Trust). Id. at 2. Accord, Weingartner v. Chase Home Finance, LLC, 702 F. Supp.2d 1276, 1281 (D. Nev. 2010) (MERS is not a beneficiary and does not have the ability to transfer the beneficial interest in a promissory note without more evidence of its agency in this capacity than being named as a nominee on a deed of trust).

As the Court held in In re Jacobson, 402 B. R. 359, 366 (Bkrtcy. W.D. Wash. 2009): The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced. Even if a servicer or agent has authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer, which must be the moving party, and so identified in the papers and in the electronic docketing done by the moving party's counsel. 8

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And for a securitized loan, the rule is clear: If a loan has been securitized, the real party in interest is the trustee of the securitization trust, not the servicing agent. In re Hwang, 396 B. R. 757, 766 (Bkrtcy. C.D. Cal. 2008).

MERS CANNOT TRANSFER PROMISSORY NOTES.

Here, MERS unequivocally admits that: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Despite its use of Assignment documents to transfer Deeds of Trust, which also contain a vague reference to the Note, In re Agard, ___ B. R. ___, ___, 2011 WL 499959, p. 17 (Bkrtcy. E.D.N.Y. 2011), MERS admits that: The manner in which the MERS system is structured 9 MERS and the Member agree that: (I) the MERS Commercial System is not a vehicle for creating or transferring beneficial interests in commercial mortgage loans. (Emphasis Added.) * * This admission comes from page 1 of the MERS Terms and Conditions (See attached Exhibit B) which is available for download and inspection from MERS website at www.mersinc.org/files/filedownload.aspx?id=282&table=ProductFile. Similarly, in Number 6 of MERS Terms and Conditions, it clearly states that:

Although MERS tracks changes in ownership of the beneficial

rights for loans registered on the MERS System, MERS cannot transfer the beneficial rights to the debt. The debt can only be transferred by properly endorsing the promissory note to the transferee. (Emphasis Added.) * * This admission comes from page 63 of the MERS Procedures Manual (See attached Exhibit A) which is available for download and inspection from MERS website at http://www.mersinc.org/MersProducts/manuals.aspx?mpid=1 . Then download Procedures Manual, Version 19.0, Version 6/14/10 and view page 63.

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provides that when the beneficial interest in a loan is sold, the promissory note is transferred by an endorsement and delivery. Id. at 17 (Emphasis added).

In Mortgage Electronic Registration Systems, Inc. v. Nebraska Department of Banking & Finance, 270 Neb. 529, 704 N.W.2d 784 ( 2005), MERS admitted that it does not own the promissory notes secured by the mortgages and has no right to payments on the notes.Id.. at 787. (Emphasis added.) Therefore, the Nebraska Supreme Court held, MERS has no independent right to collect on any debt because MERS itself has not extended any credit, and none of the mortgage debtor owes MERS any money. Id.. at 788. Therefore, MERS cannot assign to another any alleged right to payment that it itself does not have.

Thus, pursuant to the express terms of Nev. Rev. Stat. 104.3203 (2) which provides that Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument the purported transferee of a Note via an Assignment from MERS acquires absolutely nothing because MERS has no rights to enforce the instrument. As the Court explained in In re Thomas, ___ B. R. ___, ___, 2011WL 576830, p. 8 (Bkrtcy. D. Mass. 2011):

Furthermore, CitiMortgage may not rely on the recorded assignment of the plaintiff's mortgage from MERS to CitiMortgage as evidence that the note was transferred to it. While the assignment purports to assign both the mortgage and the note, MERS, which is a registry system that tracks the beneficial ownership and servicing of mortgages, was never the holder of the note, and therefore lacked the right to assign it. While MERS was the mortgagee of record, it was acting only as nominee for Allied, its successors and assigns. MERS is never the owner of the obligation secured by the mortgage for which it is the mortgagee of record. (Emphasis added.) In construing a UCC Statute identical to Nev. Rev. Stat. 104.3203 (2), the Court in In re Hwang, 396 B. R. 757, 763 (Bkrtcy. C.D. Cal. 2008) held that: A fundamental feature of negotiable instruments is that they are transferred by the delivery of possession, not by

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contract or assignment. (Emphasis added.) Similarly, as the Court held in Kemp v. Countrywide Home Loans, Inc., 440 B. R. 624, 633 (Bkrtcy. D. New Jersey 2010):

On behalf of the Bank of New York, Countrywide contends that the written mortgage assignment in this case, which purports to assign both the note and mortgage in this case, and which was properly executed and recorded with the appropriate county clerk's office, serves to properly transfer the note to the new owner, enabling the new owner to enforce both the note and the mortgage. The recorded assignment of mortgage does include provision for the assignment of the note as well. However, the recorded assignment of the mortgage does not establish the enforceability of the note. As discussed above, the UCC governs the transfer of a promissory note. (Emphasis added.) In re Wilhelm, 407 B. R. 392, 404 (Bkrtcy. D. Idaho 2009) further confirmed that a Note may not be properly transferred by an Assignment it must be negotiated (endorsed and delivered):

Movants apparently rely upon an assignment document to show that the notes were transferred to them. The signature block in these assignments typically indicate that MERS executed the assignments on behalf of the original lender and that lender's successors and assigns. Movants seem to presume that the assignments, standing alone, entitle them to enforce the underlying notes. Such a presumption is unfounded, however, because Movants have not established MERS's authority to transfer the notes at issue. As noted above, the relevant deeds of trust name MERS as the nominal beneficiary for the lender. Further, MERS is granted authority to foreclose if required by custom or law. But what this language does not doeither expressly or by implicationis authorize MERS to transfer the promissory notes at issue. (Emphasis added.) In In re Wilhelm, 407 B. R. 392, 404 (Bkrtcy. D. Idaho 2009), the alleged creditor claimed the following regarding Assignments by MERS: Movants seem to presume that the assignments, standing alone, entitle them to enforce the underlying notes. Such a presumption is unfounded, however, because Movants have not established MERS authority to transfer the notes at issue.

If presentment is made on behalf of another person, (the proponent must provide) reasonable evidence of authority to do so. Nev. Rev. Stat. 104.3501 (2) (b) (2) As the United States District Court for the District of Nevada held in Mortgage Electronic Registration Systems, Inc. v. Medina: Since MERS provided no evidence that it was the agent or nominee for the

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current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing. Mortgage Electronic Registration Systems, Inc. v. Medina, 2009 WL 4823387, p. 3 (D. Nev. December 4, 2009). (Emphasis added.) MERS holds no authority to act as an agent and holds no property interest in the mortgaged land. MERS v. Southwest Homes of Arkansas, 209 Ark. 152, 301 S.W.3d 1, 5 (2009) (non-judicial foreclosure).

Similarly, in In re Wells, 407 B. R. 873, 880 (Bkrtcy. N.D. Ohio), the Court noted that each 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 In Vega v. CTX Mortgage Company, LLC, ___ F.Supp.2d ___, ___, 2011 WL 192514, pp. 3-4 (D. Nev. 2011), the United States District Court for the District of Nevada discussed the Rules set forth in the Restatement (Third) of Property Mortgages 5.4 (1997). The Court noted that 5.4 (b) states that: Except as otherwise required by the Uniform Commercial Code, a transfer of a mortgage also transfers the obligation the mortgage secures unless the parties agree otherwise. (Emphasis added.) VI. THE SEPARATION OF THE NOTE AND DEED RENDERS THE ALLEGED DEBT UNENFORCEABLE AGAINST THE DEBTORS. Finally, the Nevada Bankruptcy Courts ruling in In re Mitchell is in accord: MERS must establish there has been a sufficient transfer of both the note and deed of trust, or that it has authority under state law to act for the notes holder. In re Mitchell, 2009 WL 1044368, p. 6 (Bkrtcy. D. Nev. 2009). of the assignments (by MERS) purports to assign both the mortgage and the note. However, the Court held such alleged assignments invalid under the UCC: The right to enforce a note cannot be assigned instead, the note must be negotiated in accord with ... the Uniform Commercial Code. Id. at 880 (Emphasis added). Since MERS is not in the business of holding promissory notes ... the Court finds that MERS has altogether failed to show that it is entitled to enforce the note here at issue in this case. In re Vargas, 396 B. R. 511, 520 (Bkrtcy. C.D. Cal. 2008).

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Here, the parties have clearly agreed otherwise. Here, MERS unequivocally admits that:

Although MERS tracks changes in ownership of the beneficial

rights for loans registered on the MERS System, MERS cannot transfer the beneficial rights to the debt. The debt can only be transferred by properly endorsing the promissory note to the transferee. (Emphasis Added.) * * This admission comes from page 63 of the MERS Procedures Manual (See attached

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Exhibit A) which is available for download and inspection from MERS website at http://www.mersinc.org/MersProducts/manuals.aspx?mpid=1 . Then download Procedures Manual, Version 19.0, Version 6/14/10 and view page 63.

Similarly, in Number 6 of its Terms and Conditions, MERS clearly states that:

MERS and the Member agree that: (I) the MERS Commercial System is not a vehicle for creating or transferring beneficial interests in commercial mortgage loans. (Emphasis Added.) * * This admission comes from page 1 of the MERS Terms and Conditions (See attached Exhibit B) which is available for download and inspection from MERS website at www.mersinc.org/files/filedownload.aspx?id=282&table=ProductFile.

As the Court observed in In re Agard, ___ B. R. ___, ___, 2011 WL 499959, p. 18 (Bkrtcy. E.D.N.Y. 2011):

In simple terms the Movant relies on the argument that a note and mortgage are inseparable. See Carpenter v. Longan, 83 U.S. 271, 274, 16 Wall. 271, 21 L.Ed. 313 (1872).While it is generally true that a mortgage travels a parallel path with its corresponding debt obligation, the parties in this case have adopted a process which by its very terms alters this practice where mortgages are held by MERS as mortgagee of record. By MERS's own account, the Note in this case was transferred among its members, while the Mortgage remained in MERS's name. MERS admits that the very foundation 13

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of its business model as described herein requires that the Note and Mortgage travel on divergent paths. Because the Note and Mortgage did not travel together, Movant must prove not only that it is acting on behalf of a valid assignee of the Note, but also that it is acting on behalf of the valid assignee of the Mortgage. (Emphasis added). Under the MERS business model, MERS assigns Deeds of Trusts to other entities but the corresponding promissory Notes to those Deeds of Trust must be transferred by endorsement and delivery to any new holder of the Note. As the Court ruled in In re Jacobson, 402 B. R. 359, 367 (Bkrtcy. W.D. Wash. 2009): Only the holder of the obligation secured by the deed of trust is entitled to foreclose.... Having an assignment of the deed of trust is not sufficient because the security follows the obligation secured, rather than the other way around.(Internal citations omitted.) For this reason, an assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. In re Vargas, 396 B. R. 511, 517 (Bkrtcy. C.D. Cal. 2008).

As the Supreme Court of Kansas recently held: Indeed, in the event that a mortgage loan somehow separates interests of the note and deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. Landmark Bank v. Kesler, 289 Kan. 528, 216 P.3d 158, 166-167 (2009) (Emphasis Added). The Kesler Court further held that:

The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust. Id., citing Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W. 3d 619, 623 (Mo. App. 2009). (Emphasis Added).

All of this was precisely summarized by the Honorable Linda B. Riegle of the Bankruptcy Court for the District of Nevada in In re Mitchell, 2009 WL 1044368, p. 5 (Bkrtcy. D. Nev. 2009) in the following rulings:

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VII.

Under Nevada law a negotiable promissory note is enforceable by: (1) the holder of the note, or (2) a nonholder in possession of the note who has the rights of a holder. Thus if MERS is not the holder of the note, then to enforce it MERS must be a transferee in possession who is entitled to the rights of a holder or have authority under state law to act for the holder. Simply being a beneficiary or having an assignment of a deed of trust is not enough to be entitled to foreclose on a deed of trust. For there to be a valid assignment for purposes of foreclosure both the note and the deed of trust must be assigned. A mortgage loan consists of a promissory note and a security instrument, typically a mortgage or a deed of trust When the note is split from the deed of trust, the note becomes, as a practical matter, unsecured. Restatement (Third) of Property (Mortgages) 5.4 cmt. a (1997). A person holding only a note lacks the power to foreclose because it lacks the security, and a person holding only a deed of trust suffers no default because only the holder of the note is entitled to payment on it. See Restatement (Third) of Property (Mortgages) 5.4 cmt. e (1997). Where the mortgagee has transferred only the mortgage, the transaction is a nullity and his assignee, having received no interest in the underlying debt or obligation, has a worthless piece of paper. 4 Richard R. Powell, Powell on Real Property, 37.27[2] (2000). (Emphasis added.) Thus, because the Debtors promissory Note has been split from her Deed of Trust, then the Court should rule, as a matter of law, that the alleged Creditors claims are unenforceable against the debtor and property of the debtor. 11 U.S.C. 502 (b) (1).

THE SECURITIZATION PROCESS INVALIDATES THE DEBT.

Securitization of residential mortgages is the process of aggregating a large number of notes secured by deeds of trust in what is called a mortgage pool, and then selling security interests in that pool of mortgages.In re Weisband, 427 B. R. 13, 21 (Bkrtcy. D. Ariz. 2010) (internal citation omitted).

Moreover, securitization is so common as to be the norm.During the 1990s, securitization exploded as the primary source of capital for home equity lending. By 2005, nearly 70 % of all residential mortgage loans were securitized. The percentage for subprime residential mortgage loans is even higher. Foreclosures: Defenses, Workouts and Mortgage Servicing, 1.2.2 Securitization of Mortgage Loans, p. 5 (2nd Ed. Aug. 2007) (Citations Omitted). In addition, approximately 85

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% of all home mortgages originating in 2006 and 2007 were securitized. In re Hwang, 396 B. R. 757, 761 f.3 (Bkrtcy. C.D. Cal. 2008). The loan in this case originated on June 18, 2007.

The significance of securitization, as it respects enforcement of the alleged debt in this case, is that Debtor Joan Andersons promissory Note was separated from her Deed of Trust and probably sold in a Wall Street securitization scheme that fractionalized ownership of the debt over many different persons and entities located in many different countries in the world. And, significantly, this would make it impossible for the alleged Creditors to enforce the alleged debt and would render their claims unenforceable against the debtor and property of the debtor. 11 U.S.C. 502 (b) (1). If this loan was not securitized, it would be J. P. Morgans burden to prove otherwise and prove that it owned both the Deed of Trust and the promissory Note at the time it filed its Proof of Claim in this case.

Here we know that the Debtors promissory Note was separated from her Deed of Trust due to the MERS Assignment which transferred ownership of only the Deed. Moreover, it is very important to observe that under the MERS business model, these assignments are not publicly recorded. In re Agard, ___ B. R. ___, ___, 2011 WL 499959. P. 18 (Bkrtcy. E.D.N.Y. 2011) MERS holds the mortgage lien for the lender who may freely transfer its interest in the note, without the need for a recorded assignment in the land records. Id. at 19.

This is confirmed by Nevada law, specifically Nev. Rev. Stat. 106.210 (1), by which all such assignments need not be recorded:

NRS 106.210 Recording of assignments of mortgages or beneficial interests in deeds of trust; constructive notice.

1. Any assignment of a mortgage of real property, or of a mortgage of personal property or crops recorded prior to March 27, 1935, and any assignment of the beneficial interest under a deed of trust may be recorded, and from the time any of the same are so filed for record shall operate as constructive notice of the contents thereof to all persons. (Emphasis added.) 16

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Thus, the one Assignment that just happens to be recorded at the Clark County Recorders Office in this case is definitely not necessarily all the Assignments that actually took place in this case. In states like Nevada, where assignments of mortgages or beneficial interests in deeds of trust need not be publicly recorded, it would actually take a forensic securitization audit to definitively prove the true state of affairs. In any event, it is J. P. Morgans duty to prove that this loan was not additionally assigned and that it owned both the Deed of Trust and the promissory Note at the time it filed its Proof of Claim in this case.

As simply explained in Consumer Bankruptcy Law and Practice, 14.4.3.4.7 Standing Challenges to Proofs of Claim Based on Securitized Mortgage Debt,p. 424 (9th Ed., Vol. 1, 2009):

As securitization of mortgages has become widespread, it has become increasingly difficult for mortgage servicers to provide documentation of their standing to assert the rights of mortgage holders. Original documents are lost in the securitization chain and can not be produced or, when they are located, they are frequently missing the endorsements or assignments necessary to prove their transfers in the chain. Courts have ruled that, without documentary proof that an entity is in fact the party entitled to enforce a mortgage, that entity can not file a proof of claim (or seek relief from the automatic stay). Lenders use of the Mortgage Electronic Registration System (MERS) as the named mortgagee in order to avoid normal recording procedures for transfers of mortgages has also led to an inability to enforce loans when proceedings are brought in the name of MERS. (Citations omitted.) VIII. THE ALLEGED CREDITORS NEED TO PRODUCE THE ORIGINAL NOTE. Here the alleged creditors claims must be denied because they have not produced the original Note. A party against whom a negotiable instrument is being enforced is entitled to demand that the claimant exhibit the instrument it seeks to enforce. Nev. Rev. Stat. 104.3501 (2) (b) (1) (Emphasis Added). Mckay v. Capital Reserve Company, Ltd., 327 Ark. 737, 940 S.W.2d 869, 871 (Ark. 1997) [In action to foreclose mortgage in non-judicial foreclosure state, assignee of mortgage could not prevail in enforcing promissory Note by using duplicate of Note; rather, assignee was required to either produce original Note or satisfy Uniform Commercial Code (UCC) requirements for lost negotiable instruments]. 17

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The Federal Rules of Evidence apply in Bankruptcy cases. Fed. R. Bankr. P. 9017. Pursuant to the Original Documents Rule (otherwise known as the Best Evidence Rule): To prove the contents of a writing, ...the original writing... is required. Fed. R. Evid. 1002. Otherwise, instead of presenting for payment the original of a check, it would be like someone trying to cash a photocopy of a check. Since no creditor in the world would accept or pay any money in exchange for such proof due to the substantial risk of having to pay the check twice when some one else presented the original and requested payment, which is the same risk the Debtors face here it is only fair that the alleged creditors here should be held to the same standard they demand from others regarding presentment and payment of similar negotiable instruments.

In In re Vargas, 396 B. R. 511, 520 (Bkrtcy. C.D. Cal. 2008) pursuant to a commercial code provision identical to Nev. Rev. Stat. 104.3501 (2) (b) (1) defining presentment, which requires that the alleged holder shall exhibit the instrument the Court held that this law requires that the person making a demand shows its right to enforcement by showing the original of the promissory note. (emphasis added). Similarly, in In re Mims, 438 B. R. 52, 56 (Bkrtcy. S.D.N.Y. 2010), the Court held that: Wells Fargo has not presented any evidence that it is in possession of the original Note and was, therefore, denied relief from the automatic stay. (Emphasis added.)

IX.

THE ALLEGED CREDITORS HAVE FAILED TO AUTHENTICATE PROOF.

A promissory note cannot be admitted into evidence unless it is authenticated. In re Vargas, 396 B. R. 511, 519-520 (Bkrtcy. C.D. Cal. 2008). Fed. R. Evid. 901 (a) provides that: The requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims.

Thus, unless and until the alleged Creditors provide adequate proof authenticating the promissory Note, it cannot be considered by the Court and is not enforceable against the Debtors or the property of the Debtors. 11 U.S.C. 502 (b) (1).

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X.

CONCLUSION

For all of the foregoing reasons, the Debtors, Joan Maria Anderson and Todd J. Shelly, respectfully request that the Court issue an Order declaring that the claims asserted by J. P. Morgan and PHH are unenforceable against them and their property and denying PHHs Motion for Relief from the Automatic Stay for all of the reasons set forth herein .

DATED May 11, 2011.

Respectfully submitted, 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 ___/s/ Jeffrey J. Whitehead__________ Jeffrey J. Whitehead, Esq. Nevada Bar No. 3183 Whitehead Law Offices 2431 W. Horizon Ridge Pkwy. Suite 110 Henderson NV 89052 VOX: (702) 451-7272 FAX: (702) 451-2947 email: jeff@whiteheadlaw.org Attorney for Debtors Joan Maria Anderson and Todd J. Shelly WHITEHEAD LAW OFFICES

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CERTIFICATE OF SERVICE

It is hereby certified that the foregoing DEBTORS AMENDED OBJECTION TO 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 ________/s/ Charles R. Powell___________ WHITEHEAD LAW OFFICES Joan Maria Anderson, Debtor Todd J. Shelly, Debtor 8570 West LaMadre Way, Las Vegas, Nevada 89149 It is also hereby certified that the foregoing DEBTORS AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J. P. MORGAN AND OPPOSITION TO MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PHH MORTGAGE CORPORATION was sent May 11, 2011 to the following person(s) by the following method(s): Kevin Hahn, Esq., on behalf of Creditor PHH Mortgage Corporation kevin@mclaw.org Cindy Stock, Esq., on behalf of Creditor PHH Mortgage Corporation clstock@lvcoxmail.com Jeffrey Sloane, Esq., on behalf of Creditor Wells Fargo Bank, N. A. jsloane@kssattorneys.com Rick A. Yarnall, Trustee, ecfimport@lasvegas13.com Arun Gupta, Esq., on behalf of Debtors attorney@theguptalawfirm.com PROOF OF CLAIM FILED BY J. P. MORGAN AND OPPOSITION TO MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PHH MORTGAGE CORPORATION was sent May 11, 2011 to the persons, listed below, through the Courts electronic service system:

X9 U.S. Mail, by depositing a true and correct copies of same in the United States Mail, postage prepaid at Henderson, Nevada, to the persons at the addresses listed below: