Lauren Paulson, Pro Se

3980 S. W. 170th Ave.

Aloha, OR 97007
971 219 5859
Plaintiff

UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF OREGON, Portland Division
LAUREN PAULSON, )
)
) Civil Action No. CV
Plaintiff, ) 08-982-PK
)
)
v. )
) .
)
FAIRWAY AMERICA )
CORPORATION, fka )
FAIRWAY COMMERCIAL ) PLAINTIFF’S MOTION FOR
MORTGAGE CORPORATION, )
Oregon corporations, FHLF, LLC, )
an Oregon corporation, MATT )
BURK, STERLING SAVINGS BANK, ) DECLARATORY JUDGMENT
a Washington corporation, )
WELLS FARGO FOOTHILLS, a )
California corporation, JOAN DOE, )
a mortgage broker, ) AND STAY OF ALL PROCEEDINGS
FRANKI KEEFE, a real estate broker )
and JOEL PARKER )
)
Defendants, )

The Plaintiff hereby moves the Court to declare the rights of the

parties in accordance with the following:

14 JUDGES

Aquinas conceives of what is known as the laws of nature. The Laws

of Nature are different from man-made laws such as statutes and case-by-

1
case law. Judges are required to follow the latter not the former. Judges

are required to follow Man-Made laws which are known as The Rules of

Law. Laws of Nature are different. When judges follow the Laws of Nature

they are being “free agents”. They are not applying nor following the Laws

of Man. Therefore, they are not following Common Law. They are not

following the law of precedents.

Laws of Nature should be left to those who discovered them in the

first place: scientists. Laws of nature should be left to those who

discovered them in the first place: philosophers. Laws of human conduct

or Man Made laws are made by legislatures. Laws of Nature are

discovered by scientists and philosophers. Man Made Laws are supposed

to be discovered and applied by judges. Once so discovered and applied,

these laws are supposed to be followed by subsequent judicial rulings as

precedent. The public cannot possibly know how to conduct themselves in

the field of human affairs unless they can rely on judge made law or

Common Law. This is also known as Case Law. Case law is the law

enunciated by cases decided by judges in our highest courts.

“Aquinas conceives the Laws of Nature which the scientist discovers

as laws implanted in the very nature of things at their creation by God.”

2
Mortimer Adler, Great Ideas, The Lexicon of Western Thought, Macmillan

Publishing Company, Page 417(1952, 1992)

The problem is that the Judiciary has decided that it is free to follow

the Laws of Nature; that is the laws divined by God, rather than the

Common Law. In a word, Judges have decided they are Gods and may

follow their own instincts and do not have to follow Man-Made law. This is

a case in point. It is why 14 different judges have fallen into a black hole of

decision making.

All the while, the Common Law is clear. A lender may not assign a

security instrument (a mortgage or deed of trust) without also assigning

debt instrument) the promissory note. Second, banks (and all lenders)

must maintain a clear chain of title. Just like ownership of a car. If banks

assign the security instrument without also assigning the promissory note

they make a fatal mistake. Once these two documents are separated,

controlled by two separate areas of the law, they cannot enforce the

security instrument. Simple eh? None of the 14 judges, in three years of

litigation have taken notice of these simple principles of Man-Made law.

None of these 14 judges have taken notice of this aspect of Common Law

even though Paulson has repeatedly raised the issue formally in his

Motions and pleadings. They have just ignored Common Law. Not a word

3
have they said about this area of the Common Law. Rather, they, all 14 of

them, have divined themselves free to make any decision they want to

make eschewing clear Man-Made law. The problem is they are not Gods,

therefore constrained not to follow their view of natural law. In other words,

they may not make any decision they want motivated by how they feel that

day. They must follow statutes and case (or common) law. They must

follow precedent. See, Appendix for specifics as to how each judge has

assiduously diverted Common Law from their considerations.

UNFAIR FORECLOSURES IN THE REAL WORLD

(Or How I Learned to Love my 14 judges in a Simple, Single Asset

Bankruptcy)

Morton J. Horwitz, in his book, Transformation of American Law, 1870

to (Present), tells us that early law was chiefly for the benefit of the

merchants. So, it is now. It was chilling in my recent appearance in

Bankruptcy Court to learn that the overriding standard for the entire

bankruptcy process is “...for the paramount interests of the creditors”.

Because I did not know that, my Bankruptcy Judge Randall Dunn told me

at my last hearing before him that “I had a pure heart, but an empty head.”

4
 Thus admonished, I now see the process as it really is. You, as the

debtor, are nothing more than a fly on the wall. The only way that the

public will have a chance against the merchants is to unite.

My website search tells me that could happen, but is not happening

now. But, my research tells me more. Our legal system discovered that

the banks have been doing it wrong since at least 2004. It is essential that

debtors, know what banks have been doing wrong. This knowledge is a

hydrogen bomb in the hands of debtors. It is the end of the world for the

financial institutions (banks and mortgage brokers) who have been doing it

wrong. It has to do with STANDING.

LEGAL STANDING

Judges have a remarkably full tool kit to dispatch disfavored debtors

to the dust bin. In some states that is exactly what judges have been doing

since at least 2004. However, now there is a tsunami that is about to

engulf the financial industry that there is nothing the judges can do to favor

the merchants. It comes in the form of the formidable legal concept of

Constitutional Standing. There is nothing judges can do about it except

rule in favor of the debtors. Debtors either have it and they win. Or they

don’t and they lose. There are few areas of the law that are black or white.

This is one of them. You will have to read further to see how powerful the

5
concept of Standing is for debtors. You will have to read my story. It is a

sad tale of predatory practices, judicial incompetence and fraud. Outright

fraud.

LEGAL MEMORANDUM

It has recently come to light to Paulson, by virtue of Judge Garr

King’s 2010 ruling in Rinegard cited below, that FHLF, LLC has no standing

before any of the forums mentioned below. The issue of whether or not a

party has standing cannot be waived. ‘Constitutional Standing’ is a

“threshold jurisdictional requirement, and cannot be waived”. Pershing

Park Villas Homeowners Assoc. v. Unified Pac. Ins. Co., 219 F3d 895,

899-900 (9th Cir 2000).

PRELIMINARY

The Plaintiff, Lauren Paulson, was represented by Attorney Matt

Arbaugh during the bankruptcy proceedings from April, 2009 until May,

2010 and throughout, from Chapter 11, Chapter 7 until the bankruptcy

appeal. Notwithstanding that this is a simple, single asset case; apparently

no one in any of the antecedent proceedings considered a glaring

defect: FHLF, LLC has no standing before any of these forums

because they were not the ‘Holder’ of the Note. Thus, FHLF, LLC had no

6
standing to file a proof of claim, obtain relief from stay, appear as a party of

interest in any forum, file any motions herein, much less a motion for

summary judgment, nor conduct a nonjudicial foreclosure.

FHLF, LLC as the assignee of the trust deeds from Fairway

Commercial Mortgage Corporation (Fairway), the lender, did not ever come

into possession of the underlying promissory Notes. The lender, Fairway

Commercial Mortgage Corporation, did not assign, endorse nor transfer

possession of the underlying promissory Notes to FHLF, LLC. Therefore,

FHLF, LLC had no standing before any of the courts including this court

because it never held the debt instrument.

Such failure is fatal to FHLF, LLC’s ability to appear as a party in any

litigation. It is fatal to their ability to assert the debt in the bankruptcy forum

or foreclose under the law in Oregon and under the law across the United

States. They have no legal standing to file any pleadings in any court.

PROCEDURAL POSTURE

This matter has been before fourteen (14) judges in six (6) separate judicial

forums involving eight (8) lawyers not to mention a filing by Paulson with the

Oregon Attorney General’s Office. It began in August, 2008. It presently pends in

the Washington County Circuit Court, the Oregon Court of Appeals, the U.S.

7
Bankruptcy Appellate Panel for the Ninth Circuit, the Oregon Federal District

Court, Portland Division and the U.S Court of Appeals, Ninth Circuit as follows:

1. Oregon Bankruptcy Case No. 09-32439rd11/7

2.Washington County Circuit Court Case No. C 10084

3.Washington County Circuit Court Case No. C 10085

4.Washington County Circuit Court Case No. C 10086

5.Oregon Court of Appeals Case No. A14569

6.Oregon Court of Appeals Case No. A14570

7.Oregon Court of Appeals Case No A14671

8.United States Bankruptcy Appellate Panel Case No. BAP OR-10-1173

9.Oregon District Court Case No. 3:10-cv-00048-MO

10.United States Court of Appeals Ninth Circuit Case No. 10-35745

11.Oregon District Court Case No. cv-08982-ST/PK

ISSUE

Does FHLF, LLC have legal standing before any of the forums on any of

the pending matters?

ANSWER

No. State law requires that when mortgages (here deeds of trust) are

assigned that the promissory Note be transferred to or endorsed to the assignee,

FHLF, LLC. That wasn’t done. This means that the security instrument was

separated from the Note between two companies. Fairway held the promissory

Notes and FHLF, LLC held the deeds of trust. The Rinegard case in Oregon and

8
the law across the United States says that when the security instruments (deeds of

trust) are separated from the debt obligation, (the promissory Notes) by such a

defective assignment, the security instruments become ineffective. The debt

obligation is no longer secured. (See cases below)

This means that FHLF, LLC, which was only assigned the security

instruments, not the Notes; had no standing in these forums nor had a right to

foreclose because they did not possess nor have an interest in the debt instruments

—i.e., the promissory Notes.

THE FACTS

At issue here are two 2005 trust deed transactions with two promissory

Notes between Paulson and Fairway Commercial Mortgage Corporation (Fairway).

Fairway Commercial Mortgage Corporation subsequently morphed into a new

organization yclept “Fairway America”. Mathew (Matt) W. Burk is the President

of all the creditor entities (Fairway Commercial Mortgage Corporation, Fairway

America, FHLF, LLC, and Skylands Investment Corporation) involved here. The

2005 transaction only involved Fairway Commercial Mortgage Corporation.

Huber-Wheeler Crossing, LLC (with Paulson as the sole member) is the

borrower on one Note and Lauren Paulson, Trustee of his testamentary trust is the

borrower on the other. On the instructions of Paulson’s attorney, Matt Arbaugh,

both properties were subsequently quitclaimed to Lauren Paulson as an individual

9
prior to and as part of the commencement of the bankruptcy proceedings in April,

2009.

The original lender, Fairway Commercial Mortgage Corporation, assigned

their deeds of trust to FHLF, LLC on February 6, 2006, but failed to assign,

endorse nor deliver the underlying promissory Notes to FHLF, LLC. Fairway

Commercial Mortgage Corporation remained the lender and ‘Holder’ on the

promissory Notes following this ineffective assignment. It should be noted that

neither Fairway nor FHLF, LLC gave the debtor notice of the 2006

assignment.

FHLF, LLC’s current attorney, Craig Russillo, also represents Fairway

America, Matt Burk and Wells Fargo Foothills. Mr. Russillo was the attorney for

FHLF, LLC in the FED state court cases as well as the attorney for FHLF, LLC in

the bankruptcy proceedings. In addition, Mr. Russillo was formally designated as

the agent for Joel Parker, the successor trustee at the foreclosure sale.

FHLF, LLC, through Schwabe attorney Joel Parker as successor trustee and

Schwabe attorney Craig Russillo as his agent; conducted a nonjudicial foreclosure

on September 25, 2009. This foreclosure was defective due to multiple other

mistakes made by FHLF, LLC and their counsel, but those defects are addressed

elsewhere.

THE LAW

Absolute Assignment

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FHLF, LLC’s attorney, Mr. Russillo, has asserted the notion that the ‘Absolute

Assignment’ in 2006 of the deeds of trust does the job for them. They say this

because there is general ‘Note’ transfer language found in that document. In other

words, FHLF, LLC would say that the language in the deeds of trust assignment is

enough to include the Note in the deeds of trust assignment. This notion is refuted

by the Rinegard case discussed below among all the others. An attempt to assert a

general transfer of a Note in the mortgage (deeds of trust) assignment was an issue

in Bellistri v. Ocwen Loan Servicing, LLC 284 SW 3rd 619, 623 (Mo Ct App

2009). The court found as it did in Rinegard, that ‘blanket mortgage assignment

language’ in an attempt to include the Note is of no force because no actual transfer

of possession of the Note occurs as required by the law.

But, even if such an assignment were enough (which it is not because how

the Note is transferred is governed by the UCC, as is discussed below; NOT by the

law of assignments) there are specific requirements under the law of absolute

assignments which must be followed:

• The entire debt must be assigned. That did not happen here.

• The assignment must be in writing.

• The intention of the parties must be clear.

• Written notice of the assignment must be given to the debtor.

That did not happen here. Failure to provide Paulson with notice of

the Note assignment renders it void under the law of assignments.

11
 Condor Asset Management Ltd v. Excelsior Eastern Ltd., NSWSC

1139, (2005)

• Then, under an ‘absolute assignment’ the assignor, Fairway, must be

joined in any foreclosure and that was not done here.

The Uniform Commercial Code

Before one can legally own a car, a person must physically come into title.

One may not legally transfer ownership of a car to another without signing off on

the title first. One cannot expect money from the transfer of car ownership without

having first been in title and then legally transferring one’s interest in that legal

instrument. In other words, one cannot legally enforce a car sale if that person

didn’t own the car in the first place. FHLF, LLC can’t enforce the debt alleged to

be owed to them by Paulson without owning the Notes first. One cannot refer to

‘other documents’; the endorsements (signatures) must be on the title document

itself or permanently attached.

1. Negotiation and Transfer of Notes: -- The Uniform Commercial Code

(UCC), with state-specific variations, has been adopted as law by all 50 states and

governs a major portion of the law with respect to deeds of trust and accompanying

promissory (mortgage) Notes. Article 3 applies to the negotiation and transfer of

promissory Notes as they are ‘negotiable instruments’ as defined in that section of

the UCC. Article 9 of the UCC governs the sale of promissory notes. Oregon’s

UCC law is identical to all UCC references here.

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 2. Enforcement of Notes Requires Delivery: -- A negotiable promissory

Note is transferred when it is “delivered” for the purpose of giving the transferee

the right to enforce the note. [See UCC Section 3-203(a), ORS 73.0203(1)]

Fairway never ‘delivered’ the promissory Notes to FHLF, LLC. Under the UCC if

an entity never came into possession of the Note then they are not entitled to

enforce the Note. [UCC Section 3-301] Because FHLF, LLC never came into

possession of Paulson’s promissory Notes, they are not entitled to enforce the

Notes. [ORS 73.0301] Therefore, FHLF, LLC had no standing to appear in the

bankruptcy proceedings, file a proof of claim, obtain a relief from stay, file

motions, nor to foreclose. (See the Kemp case cited and discussed below)

3. Delivery Requires Endorsement: -- Moreover, ‘delivery’ requires

endorsement on the Note or on an ‘allonge’(a separate paper permanently attached

to the Note, used in case all the other endorsement spaces are taken up) by the

‘Holder’, Fairway, to FHLF,LLC. Actual endorsement on the document is required

so FHLF, LLC can prove it didn’t just come into possession --by stealing the

negotiable instrument, to use an extreme example. Here, there was no

endorsement of Paulson’s promissory Notes by Fairway to FHLF, LLC which is a

complete obstacle to FHLF,LLC becoming a ‘Holder’ of the Notes.

4. Thus, FHLF, LLC is not the ‘Holder’ of the Notes: -- To enforce a Note

against the borrower, a person must prove that one is a “Holder” or it is a transferee

13
with the rights of a ‘Holder’. [ORS 73-0301] Fairway Commercial Mortgage

Corporation is the only ‘Holder’ of these Notes.

There is a purpose behind these stringent requirements in the UCC. A debtor

is only required to pay money to the ‘Holder’ of the Note, so he/she does not have

to worry about multiple and conflicting claims against the debtor. Vis:

Conflicting Creditor Claims

At least four of Matt Burk’s corporations have variously and inconsistently

asserted a creditor’s interest in this matter:

A. Fairway Commercial Mortgage Corporation: -- This is the only

company that Paulson dealt with in the 2005 loan transactions and with

whom Paulson ‘contracted’. (Even this part of the transaction has been

bungled by Fairway. Apparently, there does not exist a ‘loan agreement’,

that has been signed by Fairway. Mr. Seidenwurm for whom there is a

signature space, is no longer with the company and did not sign in the

signature space for Fairway.

It is only Fairway Commercial Mortgage Corporation that

issued the 11/25/2008 “Notice of Default and Election to Sell”.

FHLF, LLC is not mentioned in this recorded document. The

inconsistency is obvious. Why would Fairway Commercial Mortgage

Corporation be issuing a 2008 ‘Notice’ in this matter if they assigned

their interest to FHLF,LLC in 2006? Why would Fairway Commercial

14
 Mortgage Corporation be doing anything in 2008 when Fairway America

is the replacement corporation?

B. FHLF, LLC: -- Following Paulson’s filing of Chapter 11 bankruptcy in

April, 2009 the next pleading filed in the bankruptcy matter is by FHLF,

LLC through their attorney, Craig Russillo on April 22, 2009.

C. Fairway America: -- There is an undated memorandum on Fairway

America letterhead signed by Mathew W. Burk as President of Skylands

Investment Corporation assigning “the rights and interest in the

Assignment of Leases and Rents …to FHLF, an Oregon limited liability

company” This undated memo states: “Fairway America, LLC

successor in interest to Fairway Commercial Mortgage

Corporation.”(sic) If Fairway America became a successor in interest to

Fairway Commercial Mortgage Corporation sometime in 2006 why is

Fairway Commercial Mortgage Corporation still filing documents in

this case in 2008 and 2009?

The initial ‘demand to cure’ letter to the Plaintiff came on

August 12, 2008 from Attorney Joel Parker representing Fairway

America. On April 27, 2010, Attorney Craig Russillo acting on behalf of

Fairway America filed FHLF, LLC’s Memorandum in bankruptcy court

in support of the Trustee’s intent to settle the Paulson’s lawsuit. The

15
 April 27, 2010 Memorandum is supported by a declaration signed by

Fairway America’s General Counsel Greg Blair.

Yet in a pleading filed by Attorney Craig Russillo in the United

States Court of Appeals for the Ninth Circuit on January 5, 2011 Mr.

Russillo states:

“(Paulson) incorrectly names Fairway America

Corporation as a defendant-respondent in this appeal. No
such entity exists to the best of defendants-respondents’
knowledge. The entity that Plaintiff presumably intended
to name is Fairway Commercial Mortgage Corporation,
nka Skylands Investment Corporation.”

However, in the same pleading he provides another Declaration

by Greg Blair as “…general counsel for Fairway America, successor in

interest to the business of Fairway Commercial Mortgage Corporation

(Fairway).”

D. Skylands, Who?: -- Throughout the debtor’s 2005 loan transactions

with Fairway, there was no mention of Skyland’s Investment

Corporation. Skylands is first mentioned in 2008 when a curious

document is found in the “chain of title” recorded in Washington

County’s Taxation and Assessment Department. In this 2008 document

“Fairway Commercial Mortgage Corporation”, is listed as “Grantor”of

the deed of trust assignment (they probably meant to put Huber-Wheeler

Crossing, LLC as the actual Grantor of the deeds of trust) and this

16
 document appoints a successor trustee, Joel Parker, who is an attorney

for Schwabe law firm. This document is signed by “Mathew W. Burk,

President” of “Skylands Investment Corporation, an Oregon corporation,

Manager”. To this day, the Plaintiff has no idea who Skylands

Investment Corporation is nor what role they have in any of the

transactions encompassed here. Skylands signs as Manager of FHLF,

LLC.???

E. Fairway America LLC -- Is an entity that registered with Oregon’s

Corporation Division on . It is the entity that should have been

identified as the successor corporation to Fairway Commercial Mortgage

Corporation instead of the entity that does not exist --- ‘Fairway America’.

However, the Plaintiff previously provided the Court with a signature

page by Mr. Russillo dated March 20th, 2009 where he signs himself as the

attorney for “Fairway America Corporation”. Then as recently as April 10,

2010 Mr. Russillo signs himself as the attorney for “Fairway America, the

entity that does not exist. In summary, in addition to the contracting

Fairway entity: -- Fairway Commercial Mortgage Corporation, the actual

lender has variously used the names Fairway America LLC, Fairway America

Corporation and just plain Fairway America. The Oregon Business Registry

identifies the probable proper entity as “Fairway America LLC”.

17
 Causing further confusion is the fact that in the same current pleading

Craig Russillo states that “Fairway Commercial Mortgage Corporation” is now

known as “Skylands Investment Corporation”. (Def. Res. at fn1, Page 1).

On the other hand, Greg Blair states in his declaration that “Fairway

America, LLC” is the successor in interest to the “…business of Fairway

Commercial Mortgage Corporation” (Blair Dec#1, Page 1) to this current

day.

“Fairway America” is the entity designation on all of Fairway’s

‘letterhead’ communications.

On the Motion for Summary Judgment filed in the instant case,

Mr. Russillo signed as the attorney for “Fairway America Corporation”.

There was testimony in a court proceeding by Attorney Joel Parker

that there are individual investors on Paulson’s loan. These investors loaned

funds to Fairway to finance Paulson’s loan and to whom Fairway may owe

about $200,000. These individuals may have an additional interest in these

matters.

Thus, there are at least four creditors who are asserting claims against

the Plaintiff since 2005; Fairway Commercial Mortgage Corporation,

Fairway America, FHLF, LLC and Skylands Investment Corporation. Even

the bankruptcy judge, Judge Dunn, was confused. He thought the dispute

was between Paulson and “Fairway” when in truth and in fact, the only

18
 matters before Judge Dunn in the bankruptcy proceeding were the claims of

FHLF, LLC.

FHLF, LLC Is Not A ‘Holder’

As discussed above, any claim asserted by FHLF, LLC in these matters is

unenforceable against Paulson and his property under Oregon law. The underlying

promissory Notes are negotiable instruments under Oregon’s version of the

Uniform Commercial Code . [ORS 73.0104]. and according to the specific

language of these loan documents. A party is entitled to enforce a negotiable

instrument if they are (A) the ‘Holder’ of the Note or (B) under certain

circumstances when they are a ‘nonholder’ in possession with the rights of a

‘Holder’, or (C) a person not in possession, but who is entitled to enforce the note

when it is, for example, lost or stolen.

A. Holder—This is the person in possession of the note if payable to that

identified person. Since FHLF, LLC was never in physical possession of

the note, it cannot qualify as the ‘Holder’ of the note.

B. Nonholder in possession -- FHLF, LLC could otherwise qualify under

the UCC under certain circumstances if it had ever come in possession of

the Note before foreclosure. Since FHLF, LLC never came into

possession of the Notes, it cannot qualify under this rule.

C. Nonholder not in possession -- This applies, among other things, to lost

or stolen notes and is inapplicable here. [See ORS 73.0301]

19
 Thus, it is clear that FHLF, LLC was never the ‘Holder’ of Plaintiff’s

promissory Notes under the Uniform Commercial Code (UCC) applicable here.

Attorney Craig Russillo has written a recent E-mail that purports to anoint

‘Holder’ status for both Fairway Commercial Mortgage Corporation and

FHLF,LLC simultaneously. That is impossible under the law of physics, under

statutory law (the UCC) and the Common Law. Mr. Russillo states:

• “FHLF, LLC appointed Fairway Commercial Mortgage Corporation

as its servicer and held the note and trust deeds on behalf of FHLF,
LLC”. (emphasis supplied)
• “Bottom line, FHLF held both the trust deeds and the
indebtedness…” (emphasis supplied)
• “Here, there was no separation of those estates, as FHLF holds both
the note and trust deeds.” (emphasis supplied)

Under Mr. Russillo’s representations he would have BOTH Fairway and

FHLF, LLC be a ‘Holder’ at the same time. That is silly. There was no

negotiation. There was no transfer. There was no delivery. There was no

endorsement. FHLF, LLC has no Notes in their possession on this matter. The

proof is in the pudding.

A check of the recorded chain of title found in Washington County reflects

an assignment of the mortgage, but not an assignment of the Note. Russillo

provides no proof of his assertions of who is the ‘Holder’ and will not allow

inspection of his original documents. Proof is essential in order to establish a chain

of title. Proof is essential here to establish standing.

20
 All lender billings for payments to Paulson have been by Fairway. Only

Fairway has sent income tax information to Paulson. Only Fairway has to account

for the monthly payments sent to them by Paulson which clearly reflects that as of

2008 Fairway Commercial Mortgage Corporation calls itself the ‘lender’ on the

transaction. Moreover, Fairway America as successor in interest to Fairway

Commercial Mortgage Corporation is being actively represented as the servicer

and lender in these forums by their General Counsel, Greg Blair through and

including April, 2010. Therefore, it is clear that Fairway Commercial Mortgage

Corporation cum Fairway America are the lender and the servicer of Paulson’s loan

to this date.

5. The Deeds of Trust follow the Notes, Not the Other Way Around:

-- The law across the United States and the common law for centuries is: “The

mortgage (here deeds of trust) follows the Note.” This means that if a promissory

note is assigned, that the security interest (deeds of trust) follows the note. The

converse is NOT true. The promissory note DOES NOT follow the mortgage.

Thus, an assignment of the mortgage without the concomitant assignment of the

Note is a nonevent. One can enforce the bare Note, but one cannot enforce the

bare security interest.

The current economic meltdown has disclosed that financial institutions across

the country have made the same mistake Fairway and FHLF, LLC made here:

21
• Kemp v. Countrywide, USDC of New Jersey, Case No 08-18700- JHW

(11/16/10) {The debtor successfully expunged the proof of claim in

bankruptcy adversary proceeding because the Note was neither endorsed to

transferee nor put in transferee’s possession}

• Schwend v. US Bank, N.A, et al., USDC of Missouri, Case No 4:10 CV

1590 CDP (12/3/10) { A debtor successfully resisted a Motion to Dismiss

her claim for wrongful foreclosure citing Missouri law that a foreclosure is

invalid if the person causing the foreclosure does not actually hold title to

the Note}

• Cogswell v. CitiFinancial Mortgage Company, Incorporated, US Court of

Appeals, 7th Circuit, No 08-2153 (10/5/10) {Debtor successfully avoided

foreclosure when CitiFinancial assigned its interest in a mortgage but never

delivered the Note to the assignees. Citing Illinois law, the Court stated that

only the ‘Holder’ of the Note may foreclose}

• Servido v. US Bank N.A. et al., District Court of Appeal for State of Florida,

Fourth District, Case No 4DE10-1898 (10/27/10) {Holding that the party

seeking foreclosure must present evidence that it owns and holds the note

and mortgage in question}

• BAC Home Loans Servicing, LP fka Countrywide v. White, Court of Civil

Appeals of Oklahoma, Case No 108,736, (12/3/10) {Court holds that a

mortgage is merely an incident and accessory to the Note. Under Oklahoma

22
 law an assignment of the mortgage to one other than the holder of the note is

of no effect}

• Fawn Ridge Partners, LP v. BAC Home Loans Servicing, LP, U.S.

Bankruptcy Appellate Panel of the Ninth Circuit, Bk. No 09-15088-TD,

BAP No. CC-09-1396-HPDu , before Hollowell, Dunn and Perris,

Bankruptcy Judges, (3/29/10) { Countrywide, the lender, has a practice of

retaining the original Notes. Because Countrywide did not endorse and

transfer the Note to BAC, the latter had no standing to request a relief from

stay. 11 USC Section 362(d) Court holds that Constitutional standing is a

‘threshold jurisdictional requirement, and cannot be waived (citing cases)’”

Under California law, to qualify as a ‘Holder’, one must be in possession of

the instrument, and the instrument must be properly endorsed.}

• LNV CORP v, Madison Real Estate, Supreme Court of New York, Index No.

103576/2010, (12/09/2010) {Under New York law a party foreclosing must

show that they are the owner of the Note as well as the mortgage at the time

the action is commenced. Absent an effective transfer of the debt as well as

the note, the assignment of the mortgage is void and the party may not

foreclose. That party has no standing.}

• HSBC v. Thompson, et al., Court of Appeals of Ohio, Trial Court Case No.

07-CV-9439, 2010-4158 (9/3/2010) {Trial Court decision affirmed granting

debtor summary judgment and dismissing foreclosure action because HSBC

23
 failed to establish that it was the ‘Holder’ of the promissory Note. Without

that showing HSBC has no standing to bring the foreclosure. Standing is a

threshold issue for the courts to decide for it to proceed to adjudicate the

action. In a foreclosure action the real party in interest is the current holder

of the note and mortgage. Financial institutions, noted for insisting on their

customers’ compliance with numerous ritualistic formalities, are not

sympathetic petitioners in urging relaxation of an elementary business

practice. “For nearly a century, Ohio courts have held that whenever a

promissory note is secured by a mortgage, the note constitutes the evidence

of the debt and the mortgage is mere incident to the obligation. Edgar v.

Haines, 109 Ohio St. 159, 164, 141 NE 837 (1923) Moreover, a financial

institution cannot cure its lack of standing by subsequently obtaining an

interest in the mortgage or Note. Accord Bank of New York v. Gindele,

Hamilton App. No. C-C090251, 2010-Ohio-542.}

• Country Place Community Association, Inc. J.P. Morgan Mortgage

Acquisition Corp, District Court of Appeal of Florida, Case No. 2D10-569,

(12/29/10) Country Place sued J.P. Morgan for attorney fees after the

circuit court dismissed J.P. Morgan’s mortgage foreclosure action. J.P.

Morgan never produced any evidence that it owned the note and mortgage

that were subject to the previous proceeding. Thus, Country Place

successfully dismissed the case on summary judgment and now seeks their

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 attorney fees. The court agreed that without proof that it owned the note,

J.P. Morgan had no standing. The court holds that if a ruling of a trial court

is not worthy of support then J.P. Morgan should confess error.

The common law rule that ‘the mortgage follows the note’ is codified in

Article 9 of the UCC, Section 9-203(g) which states: “The attachment of a security

interest in a right to payment or performance secured by a security interest or other

lien on…real property is also attachment of a security interest in the security

interest, mortgage, or other lien.” [ORS 79.0203(7)]

As the following cases demonstrate, the mortgage note does not follow the

mortgage if there is an attempted assignment of the mortgage alone or if there is an

assignment separate from the mortgage note as happened here. Bellistri v. Ocwen

Loan Servicing, LLC 284 SW 3rd 619, 623 (Mo Ct App 2009) An assignment of

the deed of trust separate from the note has no ‘force’. Saxon Mortgage Serf. Inc

v. Hillery, No C-08-4357 EMC, 2008 WL5170180, at 4-5(ND Cal Dec 9 2008).

For there to be a valid assignment, there must be more than just an assignment of

the deed of trust alone; the note must also be assigned. In re Wilhelm, 407 BR

392, 400-05 (Bankr D Idaho 2009). Oregon cases support the concept that the

security, here the Deed of Trust, is ‘merely an incident to the debt.’ West v. White,

307 Or 296, 300, 766 P2d 383 (1988)

Where, as here, the note and the trust deed are split, the transfer of

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the trust deed is ineffective. Bellistri v. Ocwen Loan Servicing, LLC, 284 SW 3rd

619, 623-24 (Mo Ct App 2009) A putative transfer of the note in the trust deed

assignment is ineffective because the UCC governs the transfer of a promissory

Note. Because Fairway Commercial Mortgage Corporation never physically

transferred the Notes to FHLF, LLC, Joel Parker as successor trustee on the

security interests did not have a legally cognizable interest in the property.

Therefore, Parker had no standing to foreclose on FHLF, LLC’s behalf. Saxon

Mortg. Serv., Inc v. Hillery, No C-08-4357 EMC, 2008 WL 5170180. That

Fairway Commercial Mortgage Corporation remained the lender on the transaction

is evidenced by the fact that only Fairway Commercial Mortgage Corporation, as

lender, continued to collect on and enforce the debt following the putative

execution of the Notes in 2005. Further, only Fairway Commercial Mortgage

Corporation, as beneficiary, issued the 2008 Notice of Default and Election to Sell.

This is a clear break in the ‘chain of title’. Fairway had supposedly assigned their

interests to FHLF, LLC in 2006 according to the official records. Yet in 2008

Fairway is representing itself as the real party at interest in the trust deeds while

two years earlier Fairway had assigned their trust deed interests to FHLF, LLC.

This ‘Notice’ contains no mention of FHLF,LLC. Then, as discussed above,

Fairway then morphed into Fairway America and participated variously in these

proceedings as described.

It is clear that FHLF,LLC did not have standing in this Court, nor

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standing to either seek relief from the bankruptcy stay, seek an FED, nor

move forward with foreclosure because FHLF, LLC was never in possession

of the promissory Notes. The other Fairway entities were just hopelessly

confused.

As stated above, Judge Garr King in Rinegard-Guirma v. Bank of

America, et al U.S. District Court, District of Oregon, Portland Division Civil

Case No 10-1065-PK decision dated October 6, 2010, Held: that when the

lender splits the trust deed from the promissory notes, any foreclosure is

ineffective. That is exactly what happened here. In short:

In Rinegard the lender, Mortgage Lenders Network (MLN) assigned the deed of trust to LaSalle who appointed the
successor trustee

In Paulson, the lender, Fairway Commercial Mortgage Corporation (FCMC) assigned the deed of trust to FHLF
who appointed the successor trustee

In Rinegard the lender, MLN, physically retained the promissory notes as well as the servicing rights to the
mortgages.

In Paulson, the lender FCMC physically retained the promissory notes as well as the servicing rights to the
mortgages.

In Rinegard payments were to be made to the lender, Mortgage Lenders Network, USA

In Paulson, payments were to be made to the lender, Fairway Commercial Mortgage Corporation.

Fairway Commercial Mortgage Corporation split the trust deeds from the

promissory Notes when they made the 2006 assignments of the trust deeds to

FHLF, LLC, but did not assign nor transfer possession of the promissory Notes to

FHLF, LLC. Therefore, all proceedings with them as a party or participant in any

forum including the foreclosure leading to the FED action was defective and void

because FHLF, LLC had no standing in any judicial forum.

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 Constitutional Standing

The issue of standing involves both “constitutional limitations on federal

court jurisdiction and prudential limitations on its exercise”. Warth v. Seldin, 422

US 490, 498 (1975). In order to have constitutional standing FHLF, LLC must

show that it suffered an actual concrete and particularized injury in fact, caused by

the debtor which would result in likely redress. Lujan v. Defenders of Wildlife,

504 US 555, 559-560 (1992). Here, FHLF, LLC can show no interest in the

underlying debt instrument nor that it paid anything for this transaction. FHLF,

LLC cannot show that it was either the transferee or assignee of the Note.

Therefore, FHLF, LLC cannot demonstrate that it has been injured by the debtor’s

putative default on the loan. As such, FHLF, LLC did not have constitutional

standing to file anything, foreclose, much less for a relief from Stay or to

participate in these proceedings at all.

Prudential standing requires that FHLF, LLC assert its own claims rather

than the claims of another. Dunmore v. United States, 358 F3d 1107, 1112 (9th Cir.

2004). It is clear that FHLF, LLC is nothing more than a shell company attempting

to assert the claims of Fairway. As such it has no financial interest and no standing

under any doctrine.

PERSONAL PROPERTY

Paulson previously asked the Courts for an emergency Stay to protect

the property. In August, 2010 when the Defendants were threatening to remove

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and destroy all of Paulson’s personal property Paulson again moved for an

emergency stay. None of the Courts were willing to have a hearing on these

emergency motions. Now, that removal and destruction of Paulson’s property and

personal property has occurred. Paulson has no idea where that property has been

taken nor whether that property has been destroyed. In light of the current issue of

constitutional standing, Paulson is again asking the courts to issue a preliminary

injunction and stay requiring the Defendants to return Paulson to the premises and

requiring the Defendants to return Paulson’s personal property.

This is probably the only case in history where the Court has

allowed one party to litigation to confiscate all of the other party’s litigation

materials, including the computer hard drive of the adversary, while the litigation

was pending. The Defendants not only have all of Paulson’s personal property,

they also have his family irreplaceable heirlooms dating back over 100 years.

That’s not all. The Defendant’s also have over 2,000 client files and the client list

of Paulson’s for over 300 clients. In theory, one would suppose one business

would not be allowed the customer lists of another business, but that is allowed

here. It shouldn’t have been allowed.

The Defendants also have confiscated three of Paulson’s vehicles

including a classic motor home.

And then there is the other computer hard drive belonging to Paulson in the

custody of Attorney Paul Berg’s paralegal who is defending Craig Russillo by the

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Professional Liability Fund, Oregon’s lawyer malpractice insurance carrier. This

hard drive contains confidential client information and confidential financial

information belonging to Paulson.

Paulson has asked for a stay of the Appellate Panel proceedings so the

Portland Bankruptcy Court may consider the issue of standing at the bankruptcy

trial court level. The Portland Bankruptcy Court has been asked to schedule an

evidentiary hearing to determine chain of title and to determine if the putative

creditor, FHLF, LLC has constitutional standing. It doesn’t.

Dated this 10th day of January, 2011

_________________________
Lauren Paulson

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