Residential Capital, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RESIDENTIAL CAPITAL, LLC, et al.,
Debtors.
)
)
)
)
)
)
)
FOR PUBLICATION
Case No. 12-12020 (MG)
(Jointly Administered)
AMENDED MEMORANDUM OPINION AND ORDER GRANTING MOTIONS FOR
PARTIAL RECONSIDERATION OF THE OPINION SUSTAINING IN PART AND
OVERRULING IN PART THE RESCAP LIQUIDATING TRUST’S
OBJECTION TO CLAIMS FILED BY DUNCAN K. ROBERTSON
A P P E A R A N C E S:
MORRISON & FOERSTER LLP
Attorneys for ResCap Liquidating Trust
250 West 55th Street
New York, New York 10019
By: 	Norman S. Rosenbaum, Esq.
Jordan A. Wishnew, Esq.
Erica J. Richards, Esq.
DUNCAN K. ROBERTSON
Pro Se
3520 SE Harold Court
Portland, Oregon 97202
By: 	Duncan K. Robertson
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court are motions for partial reconsideration (the “Motions”) filed by
Duncan K. Robertson (“Robertson”) (the “Robertson Motion,” ECF Doc. # 8598) and the
ResCap Liquidating Trust (the “Trust”) (the “Trust Motion,” ECF Doc. # 8604). The Trust
previously filed an objection to Robertson’s claims (the “Claim Objection,” ECF Doc. # 8072),1
and after a hearing on the Claim Objection, the Court issued an opinion sustaining in part and
1 	The Claim Objection is supported by the declaration of Kathy Priore (the “Priore Decl.,” ECF Doc. # 8072-
7).
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 1 of 17

2
overruling in part the Claim Objection (the “Opinion,” ECF Doc. # 8533). See In re Residential
Capital, LLC, 531 B.R. 1 (Bankr. S.D.N.Y. 2015). Now Robertson and the Trust each seek
partial reconsideration of the Opinion, arguing that certain rulings the Court made were premised
on clear errors. Each party filed a response to the other party’s Motion. (See “Trust Response,”
ECF Doc. # 8917; “Robertson Response,” ECF Doc. # 8951.) For the reasons explained below,
both Motions are GRANTED. Based on reconsideration, the Claim Objection to the two
remaining causes of action is SUSTAINED and Claim Numbers 2385, 2386, 2387, 2388, and
2389 are EXPUNGED.
I. 	BACKGROUND
A. 	Loan History
On November 1, 1999, Linda Nicholls took out a residential mortgage loan (the “First
Priority Loan”) from non-debtor Old Kent Mortgage Company d/b/a National Pacific Mortgage
(“Old Kent”). (Obj. ¶ 8.) The First Priority Loan is evidenced by a note (the “Note,” Priore
Decl. Ex. A) secured by a deed of trust (the “First Priority DOT,” id. Ex. B) encumbering real
property located in Seattle, Washington (the “Property”). (Obj. ¶ 8.) The First Priority DOT
named N.P. Financial Corporation (“N.P. Financial”) as trustee and was recorded on November
15, 1999. (First Priority DOT at 2–3.)
Debtor Residential Funding Company, LLC (“RFC”) purchased the First Priority Loan
from Old Kent and subsequently securitized it, with Bank One National Association (“Bank
One”) as trustee. (See id. ¶ 9.) On January 20, 2000, Old Kent assigned the First Priority DOT
to Bank One (the “Bank One Assignment,” Priore Decl. Ex. C).2 (Obj. ¶ 10.) In 2004, Bank
2 	The Bank One Assignment was recorded on August 3, 2000. (Obj. ¶ 10.)
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 2 of 17

3
One merged into JPMorgan Chase Bank, National Association (“JPM”) and JPM thereby
became Bank One’s successor in interest to the First Priority Loan. (See id.)
On January 5, 2006, Nicholls granted a second priority deed of trust on the Property (the
“Second Priority DOT”) to secure an $82,000 second priority loan Robertson extended to
Nicholls.3 (See Obj. ¶ 20; Priore Decl. Ex. 1-A at 63.) Robertson acknowledges that the
Property was subject to the previously recorded First Priority DOT at the time the Second
Priority DOT was recorded. (Obj. ¶ 20.)
On October 1, 2006, the Bank of New York Trust Company, N.A. (“BONY”) succeeded
JPM’s interest as trustee of the First Priority DOT and owner of the First Priority Loan after JPM
exchanged its trustee business with BONY. (Id. ¶ 11.) On February 17, 2007, BONY appointed
First American Title Insurance Company (“First American”) as successor trustee of the First
Priority DOT (the “First American Appointment,” Priore Decl. Ex. D).4 (Obj. ¶ 12.)
Robertson became the owner of the Property subject to the First Priority DOT after
foreclosing on the Second Priority DOT and successfully credit bidding at a trustee’s sale held
on September 26, 2008. (Id. ¶ 20.) On October 3, 2008, Robertson was issued a trustee’s deed,
which was recorded on October 7, 2008. (Id.) Robertson never executed an assumption of the
Note. (Id.)
In January 2009, Bank One, the beneficiary of the First Priority DOT, caused the trustee
to initiate a non-judicial foreclosure as a result of Nicholls’s default.5 (Id. ¶ 13.) On January 9,
3 	The Second Priority DOT was recorded on January 6, 2006. (Priore Decl. Ex. 1-A at 63.)
4 	The First American Appointment was recorded on February 23, 2007. (See id. at 2.)
5 	According to the Trust, the beneficiary of record for the First Priority DOT at this time was Bank One,
notwithstanding the prior merger of Bank One into JPM, and JPM’s subsequent transfer of its interest in the First
Priority Loan to BONY. (Id. ¶ 13 n.4.)
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 3 of 17

4
2009, First American executed a notice of trustee’s sale (the “Notice of Sale,” Priore Decl. Ex.
E) scheduling a sale for April 17, 2009;6 however, the trustee’s sale was continued until June 12,
2009. (Obj. ¶ 13.) On May 7, 2009, Nicholls filed for bankruptcy, thereby staying the trustee’s
sale. (Id. ¶ 14.)
On February 16, 2010, Debtor Residential Funding Real Estate Holdings, LLC
(“RFREH”) appointed LSI Title Agency (“LSI”) as successor trustee under the First Priority
DOT (the “LSI Appointment,” Priore Decl. Ex. F). 7 (Obj. ¶ 15.) On July 28, 2010, JPM
assigned its interest in the First Priority DOT to RFREH (the “RFREH Assignment,” Priore
Decl. Ex. G). 8 (Id. ¶ 16.) On July 13, 2012, the RFREH Assignment was corrected to indicate
Bank of New York Mellon, N.A. (formerly BONY), not JPM, as assignor, and RFC, not
RFREH, as the assignee (the “RFC Corrected Assignment,” Priore Decl. Ex. H).9 (Obj. ¶ 16.)
RFC transferred its interest in the First Priority Loan to 21st Century Mortgage Corporation
(“21st Century”) on January 30, 2013. (Id. ¶ 17.) On July 9, 2013, RFC assigned the First
Priority DOT to 21st Century (the “21st Century Assignment,” Priore Decl. Ex. I).10 (Obj. ¶ 17.)
Debtor Homecomings Financial, LLC (“Homecomings”) serviced the First Priority Loan
from September 22, 2000 until it transferred the servicing rights to Debtor GMAC Mortgage,
LLC (“GMACM”) on July 1, 2009. (Id. ¶ 18.) GMACM serviced the First Priority Loan until it
transferred the servicing rights to non-debtor Ocwen Loan Servicing, LLC (“Ocwen”) on
6 	The Notice of Sale was recorded on January 12, 2009. (See id.)
7 	The LSI Appointment was recorded on February 17, 2010. (See id.)
8 	The RFREH Assignment was recorded on August 12, 2010. (See id.)
9 	The RFC Corrected Assignment was recorded on July 27, 2012. (See id.)
10 	The 21st Century Assignment was recorded on July 23, 2013. (See id.)
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 4 of 17

5
February 16, 2013. (Id.) No Debtor foreclosed on the First Priority DOT before servicing was
transferred to Ocwen. (Id. ¶ 19.)
B. 	Procedural History
On May 14, 2012, the Debtors filed petitions for relief under chapter 11 of the
Bankruptcy Code. (See ECF Doc. # 1.) On June 5, 2012, Robertson filed an action (the
“Robertson Action”) in Washington state court (the “State Court”) asserting various state law
causes of action against Debtors GMACM, Executive Trustee Services, LLC (“ETS”), RFREH,
RFC, and Homecomings (collectively, the “Debtor Defendants”) as well as other non-debtor
defendants (the “Non-Debtor Defendants,” and together with the Debtor Defendants, the
“Defendants”). (See Opinion at 5.) In his underlying complaint (the “Complaint,” Priore Decl.
Ex. 1-A), Robertson asserted causes of action against the Debtor Defendants for: (1) wrongful
foreclosure; (2) quiet title; (3) trespass; (4) misrepresentation; (5) fraud and deception;
(6) conspiracy; (7) intentional and negligent infliction of emotional distress; (8) violation of the
Washington Criminal Profiteering Act (the “Profiteering Act”); and (9) violations of the
Washington Consumer Protection Act (the “WCPA”). (Id. at 5.)
The Robertson Action was stayed against the Debtor Defendants for all claims except for
his wrongful foreclosure and quiet title causes of action; Robertson was permitted to proceed on
those claims under the Supplemental Servicing Order (ECF Doc. # 774). (Opinion at 5.) On
November 15, 2012, the Robertson Action was removed to the United States District Court for
the Western District of Washington (the “District Court”). (Id. at 6.) Ocwen took over the
defense of the claims against the Debtor Defendants after servicing of the First Priority Loan was
transferred to Ocwen in February 2013. (Id.)
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 5 of 17

6
On June 27, 2013, the Debtor Defendants filed a motion for summary judgment of
Robertson’s wrongful foreclosure and quiet title causes of action and a joinder in the Non-Debtor
Defendants’ motion for summary judgment of the other causes of action. (See id. at 6; Priore
Decl. Ex. M.) The District Court granted the Defendants’ motions for summary judgment on
November 14, 2013. (See Opinion at 6; “Summary Judgment Order,” Priore Decl. Ex. N.) On
August 11, 2014, Robertson filed a notice of appeal of the Summary Judgment Order, which
remains pending in the United States Court of Appeals for the Ninth Circuit (the “Ninth
Circuit”). (See Opinion at 6; Priore Decl. Ex. O; Trust Response at 7.) On August 20, 2014, the
District Court entered a final judgment dismissing all claims against the Non-Debtor Defendants
with prejudice. (See Opinion at 6.)
Robertson filed Claim Numbers 2385, 2386, 2387, 2388, and 2389 (the “Claims”) in the
Debtors’ bankruptcy cases, asserting an aggregate amount of $772,277 against the Debtor
Defendants based on the causes of action alleged in the Robertson Action. (See id. at 6–7.) The
Trust filed its Claim Objection: Robertson filed an opposition to the Claim Objection (the
“Claim Response,” ECF Doc. # 8238); and the Trust filed a reply (ECF Doc. # 8279). On March
12, 2015, the Court held a hearing on the Claim Objection and took the matter under
submission. 11
On April 28, 2015, the Court entered the Opinion. The Opinion sustained the Claim
Objection as to the declaratory judgment, quiet title, intentional and negligent infliction of
emotional distress, Profiteering Act, and conspiracy causes of action against all Debtor
Defendants (see Opinion at 15–16, 27–29, 32), and the fraud and WCPA claims against
GMACM, Homecomings, and RFC (see id. at 23, 31). The Court overruled the Claim Objection
11 	Robertson appeared at the hearing by telephone.
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 6 of 17

7
without prejudice as to the following claims: (1) trespass against Homecomings alleged to have
occurred on May 24, 2010 (see id. at 19); (2) fraud against RFREH and ETS for their preparation
and execution of the LSI Appointment, and for ETS’s alleged misrepresentations that GMACM
was the holder of the Note (see id. at 23–25); and (3) violation of the WCPA against RFREH and
ETS in connection with their preparation and execution of the LSI Appointment (see id. at 30–
31).
C. 	The Robertson Motion
Robertson argues that reconsideration of the Opinion is warranted for a number of
reasons. First, Robertson asserts that “[a] foundational basis of all of [his] claims against [the]
Debtors Defendants is his assertion that the [First Priority DOT] was void ab initio.” (Robertson
Motion at 2 (emphasis omitted).) According to Robertson, the First Priority DOT is invalid
because Nicholls, the borrower under the First Priority Loan and grantor under the First Priority
DOT, did not obtain legal title to the Property until she was granted a warranty deed to the
Property on November 5, 1999 (the “Warranty Deed,” Trust Response Ex. A)—four days after
the First Priority DOT was executed. (See Robertson Motion at 2, 4 n.4; Claim Response Ex. 3
¶¶ 1.5, 1.7.) Robertson contends that the Trust waived its right to argue otherwise by failing to
respond to this argument. (See id. at 2–3.) Additionally, Robertson argues that the Court erred
in ruling on the Claim Objection without addressing his argument that the First Priority DOT is
invalid. (See id. at 3–4.)
Additionally, Robertson seeks reconsideration of the Court’s rulings sustaining the Claim
Objection as to the following causes of action: (1) conspiracy; (2) intentional infliction of
emotional distress (“IIED”); (3) fraud against Homecomings; and (4) violations of the WCPA
against GMACM. (See id. at 4–5.) First, Robertson argues that the Court erred by not applying
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 7 of 17

8
the correct legal standard of malice in sustaining the Claim Objection to his conspiracy and IIED
claims. (See id.) Second, Robertson contends that the Court erred in holding that the Complaint
did not allege false statements made by Homecomings. (See id. at 5.) According to Robertson,
the Court overlooked his allegation that Homecomings stated that it would provide him with a
payoff statement, which “was false and followed by attempted foreclosures with no notice to
[him].” (Id. (citing Compl. ¶¶ 5.11–5.15, 5.20–5.27).) Finally, Robertson argues that the Court
erred in sustaining the Claim Objection as to the WCPA claim against GMACM because he
alleged that the RFREH Assignment was prepared and executed at GMACM by Thomas Strain
(“Strain”), “a known employee of GMAC[M], putting GMAC[M] on both sides of the
assignment.” (Id. (quoting Compl. ¶ 5.67).)
Robertson further requests that the Court stay further adjudication of the Claim Objection
pending the Ninth Circuit’s resolution of his appeal of the Summary Judgment Order (see id. at
6), and should the Ninth Circuit fail to remand the Robertson Action to the State Court,
Robertson states that he will request leave to amend his Complaint to comply with federal
pleading standards (see id.).
The Trust responds to each of Robertson’s arguments. First, the Trust argues that
reconsideration is not warranted on the basis that the Court did not address Robertson’s argument
that the First Priority DOT is invalid because: (1) Robertson fails to establish that the Court
committed clear error in implicitly rejecting this argument (Trust Response at 2); (2) Robertson
lacks standing to attack the validity of the First Priority DOT because he is not a party to, or
third-party beneficiary of, the First Priority DOT (see id. at 3); and (3) the District Court
previously considered and rejected this argument in the Summary Judgment Order (see id. at 2–
3). Additionally, the Trust contends that it did not waive its right to challenge Robertson’s
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 8 of 17

9
argument that the First Priority DOT is invalid because the arguments made in the Claim
Objection implicitly opposed Robertson’s argument and the Trust expressly reserved its rights to
object to the Claims on any other basis. (See id. at 3 n.2.)
Second, the Trust contends that Robertson has not demonstrated a basis for
reconsideration of the Opinion sustaining the Claim Objection to his causes of action for
conspiracy, IIED, fraud against Homecomings, and violation of the WCPA against GMACM.
According to the Trust, the Court dismissed Robertson’s IIED and conspiracy claims “on
grounds that were independent of [his] arguments that the Debtors acted wrongfully and with
intent, [and therefore] reconsideration . . . on that point would not alter the Court’s decision with
respect to those claims . . . .” (Id. at 5.) The Trust argues that Robertson’s allegation that
Homecomings falsely promised to provide him with a payoff letter would not alter the Court’s
ruling dismissing the fraud claim against Homecomings because “[a]n unfulfilled promise to take
some action in the future does not qualify as a misrepresentation.” (Id. (citation omitted).) The
Trust further argues that Robertson fails to establish grounds for reconsideration of the Court’s
dismissal of his WCPA claim against GMACM because the RFREH Assignment was executed
by Strain on behalf of, and in his capacity as an agent of, JPM, and “Robertson does not allege
any facts that would support an inference that Mr. Strain was not acting in such a capacity or that
the separate corporate identities of GMACM and RFREH should be disregarded.” (Id. at 6.)
Finally, the Trust contends that the Court should deny Robertson’s request for leave to
amend and request for a stay pending resolution of his appeal of the Summary Judgment Order.
(See id. at 7–9.) The Trust argues that amendment would be futile as to the dismissed claims.
(Id. at 7.) Additionally, the Trust argues that Robertson has failed to establish grounds for a stay
pending appeal. (See id. at 7–9.).
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 9 of 17

10
D. 	The Trust Motion
The Trust requests reconsideration of the Court’s overruling of the Claim Objection to
Robertson’s fraud and WCPA claims against RFREH and ETS. (See Trust Motion at 1–4.)
According to the Trust, these rulings were based on three clear errors that would dispose of these
claims. (Id. at 2.) First, the Trust argues that the Court failed to rule on the Trust’s argument
that Robertson lacks “standing to assert any claims against the Debtor Defendants based on
errors in instruments . . . to which Robertson is neither a party nor a beneficiary.” (Id.) Second,
the Trust contends that Robertson failed to adequately plead every element of fraud against
RFREH and ETS. (Id. at 3.) According to the Trust, “Robertson did not adequately allege that:
(1) the Debtor Defendants intended that he act based on representations they made, (2) he was
entitled to rely on the LSI Appointment and statements by ETS regarding the identity of the
holder of the Note, and (3) he relied upon the LSI Appointment for the truth of the statements
therein.” (Id.) Third, the Trust argues that the Court erred in concluding that Robertson stated a
claim for violations of the WCPA for two reasons: (i) the Court held that Robertson
presumptively stated a claim under the WCPA, relying on Bain v. Metropolitan Mortgage
Group, Incorporated, 285 P.3d 34 (Wash. 2012), but the Bain presumption only applies to a
borrower, not a third-party like Robertson; and (ii) “Robertson failed to allege any causal
connection between misstatements in the LSI Appointment and his purported injuries.” (Id. at
3.)
In response, Robertson asserts that “[a]s the undisputed owner of the property being
assaulted, [he] is clearly a party in interest with standing to protect his property.” (Robertson
Response at 4 (citation omitted).) Additionally, Robertson alleges that he adequately pleaded his
fraud and WCPA claims because: (1) instruments filed by the Debtor Defendants evidence their
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 10 of 17

11
intent that he rely on the truth of their contents; (2) he had a “right to rely” on the accuracy of
instruments recorded by the Debtor Defendants; and (3) his allegations of reliance suffice. (See
id. at 4–9.)
II. 	DISCUSSION
A. 	Standard for Reconsideration
Under section 502(j) of the Bankruptcy Code, “[a] claim that has been allowed or
disallowed may be reconsidered for cause.” 11 U.S.C. § 502(j). The Bankruptcy Code does not
define “cause,” but when deciding a motion under section 502(j), the court should:
[a]pply the same analysis that it would to a motion under Fed. R.
Bankr. P. 9023 (incorporating Fed. R. Civ. P. 59) or Fed. R. Bankr.
P. 9024 (incorporating Fed. R. Civ. P. 60), depending on whether
the movant . . . sought reconsideration within [fourteen] days after
the entry of the order disallowing the claim, or did so only later.
In re Terrestar Networks, Inc., No. 10–15446 (SHL), 2013 WL 781613, at *2 (Feb. 28, 2013)
(collecting cases). Rule 9023 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy
Rules”) incorporates Federal Rule of Civil Procedure (“FRCP”) 59, which allows a party to
move to alter or amend a judgment. See FED. R. BANKR. P. 9023; F ED. R. CIV. P. 59.
Bankruptcy Rule 9024 incorporates FRCP 60, which authorizes relief from a final order under
certain circumstances. See FED. R. BANKR. P. 9024; FED. R. CIV. P. 60(b).
In order to establish grounds for reconsideration, a “movant must show that the court
overlooked controlling decisions or factual matters that might materially have influenced its
earlier decision.” In re Asia Global Crossing, Ltd., 332 B.R. 520, 524 (Bankr. S.D.N.Y. 2005);
see also Adams v. United States, 686 F. Supp. 417, 418 (S.D.N.Y. 1988) (“The only proper
ground on which a party may move to reargue an unambiguous order is that the court overlooked
matters or controlling decisions which, had they been considered, might reasonably have altered
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 11 of 17

12
the result reached by the court.”). Reconsideration is not appropriate unless the movant has
demonstrated an “intervening change of controlling law, the availability of new evidence, or the
need to correct a clear error or prevent manifest injustice.” Kolel Beth Yechiel Mechil of
Tartikov, Inc. v. YLL Irrevocable Tr., 729 F.3d 99, 104 (2d Cir. 2013) (citation omitted). A
motion for reconsideration “is not a vehicle for relitigating old issues, presenting the case under
new theories, securing a rehearing on the merits, or otherwise taking ‘a second bite of the
apple.’” Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998) (discussing
reconsideration under FRCP 59). Parties cannot use a motion for reconsideration to advance
new facts or arguments and may not submit affidavits or new material. Asia Global Crossing,
332 B.R. at 524; accord Pereira v. Aetna Cas. & Sur. Co. (In re Payroll Express Corp.), 216
B.R. 713, 716 (S.D.N.Y. 1997). “The standard for granting motions to reargue is strict in order
to dissuade repetitive arguments on issues that have already been considered fully by the court.”
Adams, 686 F. Supp. at 418; see also Family Golf Ctrs., Inc. v. Acushnet Co. (In re Randall’s
Island Family Golf Ctrs., Inc.), 290 B.R. 55, 61 (Bankr. S.D.N.Y. 2003).
The Court concludes that Robertson and the Trust have each established grounds for
reconsideration of the Opinion. The Opinion did not address Robertson’s argument that the First
Priority DOT is void ab initio, an issue that might have materially influenced the Court’s rulings.
Additionally, the Opinion did not resolve the Trust’s argument that Robertson lacks standing to
assert claims based on allegations concerning instruments to which he is not a party or
beneficiary—an issue dispositive of Robertson’s surviving fraud and WCPA claims.
Accordingly, the Court GRANTS the Motions to address whether: (1) the First Priority DOT is
void; and (2) Robertson lacks standing to assert his fraud and WCPA claims against RFREH and
ETS.
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 12 of 17

13
For the reasons discussed below, the Court reconsiders its rulings in the Opinion and
concludes that: (i) Robertson has standing to challenge the validity of the First Priority DOT but
he has not established that it is void ab initio; and (ii) Robertson lacks standing to assert his fraud
and WCPA claims against RFREH and ETS based on instruments to which he is neither a party
nor a beneficiary. Consequently, the Claim Objection is SUSTAINED as to Robertson’s
surviving fraud and WCPA claims.
B. 	The First Priority DOT Is Not Void Ab Initio
The Trust argues that Robertson lacks standing to challenge the First Priority DOT
because he is not a party to, or third party beneficiary of, the contract. (Trust Response at 4.)
The Court disagrees.
Federal courts are limited to adjudicating “cases” and “controversies” under Article III of
the United States Constitution. Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009). As a
result, a plaintiff must establish that he or she has standing. See Raines v. Byrd, 521 U.S. 811,
818 (1997) (“One element of the case-or-controversy requirement is that appellees, based on
their complaint, must establish that they have standing to sue.” (citation omitted)). “Standing
under Article III of the Constitution requires that an injury be concrete, particularized, and actual
or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.”
Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010) (citing Horne v. Flores, 557
U.S. 433, 445 (2009)). The standing doctrine “requires federal courts to satisfy themselves that
the plaintiff has alleged such a personal stake in the outcome of the controversy as to warrant his
invocation of federal-court jurisdiction.” Summers, 555 U.S. at 493 (emphasis omitted) (citation
omitted). Essentially, the standing doctrine requires federal courts to determine “whether the
plaintiff is the proper party to bring th[e] suit . . . .” Raines, 521 U.S. at 818 (citation omitted).
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 13 of 17

14
Robertson, as the undisputed holder of a perfected junior lien on the Property, has
standing to challenge the validity of the First Priority DOT because he has a concrete pecuniary
interest in whether the lien secured by the First Priority DOT is valid. If the First Priority DOT
is void ab initio, Robertson has the only valid lien on the Property and the Debtors lack a legal
basis to take actions against the Property and make representations about the validity of the
senior lien secured by the First Priority DOT.
Nevertheless, Robertson fails to establish that the First Priority DOT is void ab initio
because it was executed by Nicholls before she obtained title to the Property through the
Warranty Deed. It is true that the Warranty Deed is dated November 5, 1999, after the First
Priority DOT was executed on November 1, 1999. (See Warranty Deed at 2; First Priority DOT
at 2.) However, the Warranty Deed recites that the Property was transferred to Nicholls from the
estate of Thelma Louise Kent pursuant to a probate court order dated October 11, 1999. (See
Warranty Deed at 2.) Under Washington state law, a decedent’s title to real property “vest[s]
immediately in his or her heirs or devisees, subject to his or her debts, family allowance,
expenses of administration, and any other charges for which such real estate is liable under
existing laws.” WASH. REV. CODE ANN. § 11.04.250 (West 2010); see State v. Super. Ct. of
Wash. for Walla Walla Cnty., 230 P.434, 435 (Wash. 1924) (“The title to the real estate in
controversy vested immediately by virtue of the will . . . and no deed or order of distribution was
required to pass or perfect the title.”). Therefore, Nicholls had title to the Property at the time
she executed the First Priority DOT in favor of N.P. Financial. Indeed, the District Court came
to this same conclusion in dismissing Robertson’s declaratory judgment claim against the
Defendants. (See Summary Judgment Order at 8 (“Nicholls acquired her ownership in the
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 14 of 17

15
[P]roperty immediately upon the death of her mother and before executing the [First Priority
DOT].”).)
C. 	Robertson Lacks Standing to Assert the Fraud and WCPA Claims
While Robertson has standing to challenge the validity of the First Priority DOT, he does
not have standing to attack the validity of the RFREH Assignment or the LSI Appointment.
Several courts in the Ninth Circuit, including Washington federal courts, have held that “a
borrower lacks standing to challenge an allegedly fraudulent assignment of a deed of trust and/or
an appointment of a successor trustee.” Brodie v. Nw. Tr. Servs., Inc., No. 12-CV-0469 (TOR),
2012 WL 6192723, at *2 (E.D. Wash. Dec. 12, 2012) (collecting cases); accord Cagle v. Abacus
Mortg., Inc., No. 2:13-cv-02157 (RSM), 2014 WL 4402136, at *5 (W.D. Wash. Sept. 5, 2014);
Zhong v. Quality Loan Serv. Corp. of Wash., No. C13-0814 (JLR), 2013 WL 5530583, at *3
(W.D. Wash. Oct. 7, 2013) (citations omitted); Ukpoma v. U.S. Bank Nat’l Ass’n, No. 12-CV-
0184 (TOR), 2013 WL 1934172, at *4 (E.D. Wash. May 9, 2013) (citations omitted); see also
Javaheri v. JPMorgan Chase Bank, N.A., No. 2:10-cv-08185 (ODW), 2012 WL 3426278, at *6
(C.D. Cal. Aug. 13, 2012) (holding that mortgage borrower lacked standing to assert claims
based on alleged robo-signing of substitution of trustee, noting that “[t]he foreclosure would
occur regardless of what entity was named as trustee, and so [plaintiff] suffered no injury as a
result of th[e] substitution” (citation omitted)). These courts reason that any improprieties in an
assignment of deed of trust or appointment of successor trustee cannot injure a borrower because
the borrower is neither a party to nor a beneficiary of such instruments. See Brodie, 2012 WL
6192723, at *3 (observing that alleged robo-signing of assignment of deed of trust and
appointment of successor trustee “had no bearing whatsoever upon Plaintiff’s obligation to make
her mortgage payments”).
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 15 of 17

16
It stands to reason that if a borrower lacks standing to challenge alleged irregularities in
an assignment of his deed of trust, a non-party to the deed of trust also lacks standing.
Accordingly, Robertson, a non-party to the First Priority DOT and Note, does not have standing
to assert claims based on the RFREH Assignment or the LSI Appointment. Robertson’s fraud
claim against ETS similarly fails to the extent it depends on his allegation that ETS
misrepresented GMACM’s status as holder of the Note because he has not established that he
had a right to rely upon a representation concerning a loan document to which he is neither a
party nor a beneficiary.12 See Stiley v. Block, 925 P.2d 194, 204 (Wash. 1996) (en banc) (holding
that a plaintiff must establish nine elements to state a claim for fraud, including his “right to rely
upon” a “representation of an existing fact”). In light of the foregoing, the Claim Objection is
SUSTAINED as to Robertson’s fraud and WCPA claims.
D. 	Robertson’s Remaining Arguments
Robertson has failed to establish any clear error justifying reconsideration of the Court’s
rulings sustaining the Claim Objection as to the IIED and conspiracy claims, or the fraud claim
against Homecomings. First, the Court sustained the Claim Objection to Robertson’s IIED and
conspiracy claims on several bases, none of which would be materially altered by applying the
legal standard of malice that Robertson contends is correct.13 Second, Homecomings’s allegedly
broken promise to provide Robertson with a payoff statement does not materially alter the
Court’s conclusion that Robertson failed to state a fraud claim against Homecomings because
12 	For the same reason, Robertson’s arguments concerning Strain’s alleged execution of the RFREH
Assignment on behalf of GMACM do not warrant reconsideration of the Opinion.
13 	The Court held that Robertson failed to: (1) adequately plead that any of the Debtor Defendants engaged in
sufficiently outrageous conduct to support his IIED claim (see Opinion at 26–27); (2) meet his burden of responding
to the Trust’s arguments rebutting the prima facie validity of the IIED claim (see id. at 27); and (3) adequately plead
that any of the Debtor Defendants entered into an agreement to support his conspiracy claim (see id. at 31–32).
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 16 of 17

17
such a promise is not a representation of an existing fact, a required element of a fraud claim.
See Nyquist v. Foster, 268 P.2d 442, 445 (Wash. 1954) (“Where the fulfillment or satisfaction of
the thing represented depends upon a promised performance of a future act, or upon the
occurrence of a future event, or upon particular future use, or future requirements of the
representee, then the representation is not of an existing fact.”). Finally, Robertson’s requests for
leave to amend and for a stay pending appeal are not appropriately raised in a motion for
reconsideration.
III. 	CONCLUSION
For the above reasons, the Motions are GRANTED and the Claim Objection to
Robertson’s fraud and WCPA claims against RFREH and ETS is SUSTAINED.
IT IS SO ORDERED.
Dated: September 4, 2015
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
12-12020-mg Doc 9108 Filed 09/04/15 Entered 09/04/15 10:34:05 Main Document
Pg 17 of 17