I.

Jurisdictional Statement

Appellant, Beverlyann Lee, appeals from the Order Dismissing Adversary

Proceeding (“Order 3”), issued by the Honorable Peter C. McKittrick of the United States
Bankruptcy Court for the District of Oregon (“Bankruptcy Court”) on May 9, 2019. The
Court’s Order 3 finalized the Court’s August 7, 2017 Order on Motion for Summary
Judgment (“Order 1”) and the September 15, 2017 Order Denying Appellant’s Amended
Motion to Alter or Amend Judgment Pursuant to Fed. Rule. Civ. Proc. 59(e) or 54(b)
(“Order 2”).

The Bankruptcy Court’s Aug. 7, 2017 Ruling held that Appellant failed to pay
real property taxes assessed in a timely manor, and further held that the Loan Agreement
payment terms unambiguously state Appellant’s real property tax payment , to pay real
property taxes, “ in a timely manor,” can only mean that real property taxes must be paid
by May 15th of the year following assessment, by law, and granted partial summary
judgment to the Appellee stating that lender’s real property tax payments, for all years
2011-15 were “proper” wherein also dismissing all allegations found in the Complaint
dependant upon a ruling that the Appellee’s real property tax payments were improper.

The Bankruptcy Court had jurisdiction over the matter under 11 U.S.C. § 1334
and § 157. The Decision is a final order and, under 28 U.S.C. § 158(a)(1), may be
appealed.

The Appellant filed its Notice of Appeal on May 22, 2019 within 14 days of the
entry of the Order 3 as prescribed by Fed. R. Bankr. P. 8002. No party elected to have
the appeal heard by the district court, and therefore the United States Bankruptcy
Appellate Panel of the Ninth Circuit (“BAP”) has jurisdiction under 28 U.S.C. § 158(a)
(1), (b)(1), (c)(1).

II. Statement of Issues

A. Did the Court err by ruling that the Appellant’s real property tax payment
responsibility and default date for non-payment is unambiguous, such that payment in “a
timely manor,” by law, can have only one meaning: payment prior to the statutory due
date?

B. Did the Court err by inserting into the HECM loan documents a real property tax
payment default date of May 15th of each tax year into the Adjustable Rate Home Equity
Conversion Line of Credit Deed of Trust ( “DOT”) after the Court ruled that the terms of
the DOT were unambiguous?

C. Did the Court err by ruling that Home Equity Conversion Loan Agreement (“Loan
Agreement”) “has been properly authenticated and is admissible” in its August 7, 2017
Order, when the Loan Agreement document was filed with the Court by the attorney for
the Appellee who claims that the Appellee gave him (the attorney) the copy of the Loan
Agreement originated by a different lender, which was executed by an unidentifiable
person, which lacked notarization required by Oregon statutes for security instruments
affecting real property, and which was filed without any indication that Loan Agreement
was recorded together with the DOT in Multnomah County land records.

D. Did the Court err in its ruling that the omission of the Loan Agreement and the
Repayment Plan Agreements (“RPPA”) from Appellee’s Claim 5-1, after denying that
Loan Agreement was omitted and after acknowledging multiple RPPAs were offered to
the Appellant, a non-prejudicial and an excusable “mistake” based upon the Court’s
belief that terms of the Loan Agreement support the Appellee’s claim that its tax
payments were “proper?”

E. Did the Court err by ruling that the disputed Loan Agreement, specifically Section
2.10.5, permits the Appellee to bill legal fees and property preservation expenses incurred
as HECM Loan Advances, without allowing for the full effect of Section 2.16 of the
Loan Agreement which limits the total of HECM Loan Advances “to the extent possible?

III. Standard of Review

The standard of review for contract interpretation or for the Bankruptcy Court’s
legal conclusion or whether the bankruptcy court applied or rested its conclusion on an

2
erroneous legal standard is de novo. Los Angeles Cnty. Treasurer & Tax Collector v.
Mainline Equip., Inc. (In re Mainline Equip., Inc.), 539 B.R. 165, 167 (9th Cir. BAP
2015). For the issue regarding the Court adding a specific date to the terms of the contract
after ruling, by law, that payment terms were unambiguous, the standard of review is
recognized to be review under the clearly erroneous standard.

The standard of review of the Court’s ruling that Loan Agreement was properly
authenticated and admissible and the Court’s determination that the Loan Agreement
filed past the claims deadline was not prejudicial are matters recognized as matters that
that are both subject to review using an abuse of discretion standard. Hutton v. Treiger
(In re Owens), 552 F.3d 958, 960 (9th Cir. 2009); Sullivan v. Harnisch (In re Sullivan),
522 B.R.604, 611 (9th Cir. BAP 2014).

Issue five involves a mixed issue of fact and law. The Court’s determination that
the HECM real property tax contracted payment terms are unambiguous is subject to the
clearly erroneous standard, and the for the Court’s interpretation of state law and its
partial summary judgment order issued in favor of the Appellee which declared the
Appellee’s property preservation payments were “proper”, the recognized standard of
review is de novo. Mele v. Mele (In re Mele), 501 B.R. 357, 362 (9th Cir. BAP 2013).

IV. Statement of the Case

A. Factual Background

The Appellant is the debtor in possession of real property located at 3457 NE Couch
St. Portland, OR. 97232 (“Property”). Golden Heritage Financial, by and through agency
with Bank of America, NA, originated the Appellant’s Home Equity Conversion
Mortgage (“HECM”) on March 26, 2009. Three writings comprise the HECM loan
forming and integrated contract including: a.) the Adjustable Rate Home Equity
Conversion Line of Credit Deed of Trust (“DOT1”)[ER 48], b. the Adjustable-Rate Note

1
The Loan Agreement specifically provides a definition for the term “Security Agreement, “ stating that
the DOT, together with the Loan Agreement, are both the security for the repayment of the loan.

3
Home Equity Conversion (“Note2”)[ER 57] and the Home Equity Conversion Loan
Agreement (“Loan Agreement”). [ER 218]

An HECM Note is a negotiable instrument because an agreed upon Principle Limit

restricts and limits the total amount of Loan Advances that can be made. [ER ] The value
the instrument is simply the outstanding Principal Balance, which can be determined by
adding up all permissible Loan Advances made to date any day after HECM’s origination
until the HECM Note is cancelled. [ER ]

Any payment made by the Appellant, if not fully retiring the debt, is accounted for as
an HECM partial prepayment, and the prepayment, as applied to the outstanding HECM
Principal Balance pursuant to paragraph #5 of the Note, increases the Appellant’s
available credit. Cancellation of an HECM loan occurs at the time the outstanding
balance is pre-paid in full, pursuant to the Loan Agreement, Section 4.6 . [ER 222] No
evidence can be brought forward to show that Appellant HECM payments to the
Appellee are required and/or in default because no payments are ever required from the
Appellant. [ER 52, UC 10]

The Appellee admittedly paid real property taxes assessed on the Property for the tax
years 2011-18 by charging the amount of each alleged payment as a Loan Advance to the
outstanding Principal Balance of the Appellant’s HECM. The Appellee, after each real
property tax payment, also admitted offering the Appellant successive Repayment Plan
Agreements (“RPPA”). RPPAs are a permissible loss mitigation option for use only
when the borrower’s HECM line of credit has insufficient credit remaining to pay then
outstanding and defaulted upon property charge payment obligation including real
property taxes. [ ]

The RPPAs represent new, additional debt separate from the HECM debt and is
evidenced by the fact that RPPAs require monthly principal payments directly from the
Appellant and RPPAs do not have any interest requirement. The HECM terms state that
enforcement of any portion of the HECM debt can only come from the proceeds of the

2
The Term, “Note,” is defined in the Loan Agreement to be the Note, together with the Loan Agreement
signed by the borrower, as evidence of Appellant’s promise to repay.

4
sale of the property. HECM terms that further state that the Appellant is not ever
personally responsible for the repayment of any of the HECM principal balance. [ER ]
Even if the proceeds of the sale of the house are insufficient to cover the outstanding
principal balance, any such deficiency becomes a claim that will be covered by the
HECM loan’s required mortgage insurance.[ER ]

Appellant signed the RPPAs and made payments pursuant to the RPPAs to prevent
the Appellee from seeking HUD approval to call the loan immediately due and payable.
The Appellant and Appellee agree that Appellant made monthly payments pursuant to the
terms of the RPPAs totaling $8,581.55 between Nov. 2011 and Jan. 2015. The Appellee
accepted and retained Appellant’s RPPA payments, but admitted that these RPPA
payments were posted or applied to the Appellant’s HECM loan instead of retiring the
RPPA debt. [ER ]

The Appellant’s Chap 13 plan was made in good faith, and with the expectation that
the Appellee would file copies of each of the RPPA contracts along with copies of the tax
payment receipts and base its claim upon those RPPAs.

Neither the Loan Agreement, nor any of the RPPAs were filed with Appellee’s Proof
of Claim 5-1filed in the Appellant’s Chap. 13 bankruptcy case # 16-32793. The Appellee
admittedly offered the RPPAs, but did not amend its claims to attach copies of these
RPPAs with any of its Claims filed in Appellant’s bankruptcy case. The Appellee did not
amend its Claim 5-1until Sept. 27, 2017, more than a month after the Bankruptcy Court’s
Aug. 7, 2019 opinion partially granted the Appellee’s cross-MSJ. The Appellee did
attach a copy of the Loan Agreement with its March 30, 2017 Response to Appellant’s
Motion for Sanctions.

The Bankruptcy Court’s August 7, 2017 written opinion on Appellant’s Motion for
Summary Judgment does not address the Appellee’s failure to include copies of their
admittedly offered RPPAs with its Claim 5-1, and the written opinion does not address
the fact that the RPPAs were offered under the name of “Champion Mortgage.” The
Champion Mortgage name is a service mark of the Appellee and is not the name of a

5
stand-alone legal entity without legal rights to enter into a contract or to be named as the
beneficiary of an assignment of real property under any Oregon law or any federal laws.

B. Procedural History

Appellant’s Chap 13 petition was filed with the bankruptcy clerk on July 18,
2016, and a bankruptcy plan was confirmed on Oct. 6, 2016 that provided for 100%
repayment to all creditors under case number 16-32793-pcm13. The Appellee filed a
Special Notice Request on July 28, 2016, yet Appellee filed its Claim 5-1 on the claims
deadline, Nov. 14, 2016, more than thirty days after Appellant’s plan was approved
without inclusion of the Loan Agreement or any of the RPPAs.

Appellant amended its bankruptcy plan on Dec. 12, 2016 to disclose an asset that
would belong to the trust resulting from a possible award in a complaint against the
Appellee that Appellant intended to file as an adversary proceeding in the active
bankruptcy case. The adversary proceeding, Case: 16-03156-pcm13 (“AP”), was filed on
Dec. 28, 2016, and it is the order dismissing this AP that is the final order from which the
Appellant seeks review now by the 9th Circuit Bankruptcy Appellate Panel.

Appellant filed an objection to the Appellee’s Claim 5-1 on Jan. 3, 2017 and an
amended objection to Claim 5-1 on Jan. 17, 2017. The Bankruptcy Court consolidated
the Appellant’s claim objection with the AP pending by order on Oct. 5, 2017 following a
hearing on the matter.

The Appellee answered the AP on Jan. 31, 2017, and the Appellant filed its
Motion for Summary Judgment (“MSJ”) on March 9, 2017. The Appellee filed its
response to Appellant’s MSJ on April 14, 2017 and included a cross-motion for summary
judgment. The Appellant filed a reply to the Appellee’s cross-motion for summary
judgment on April 28, 2017.

On March 30, 2017 the Appellee filed its response to Appellant’s Motion for
Sanctions Under Sec. 9011, which Appellant later filed on April 4, 2017 after waiting the
prescribed time before filing its motion for sanctions. The Bankruptcy Court held a

6
hearing on April 25, 2017 and denied the Motion for Sanctions and stated that the
omission of the Loan Agreement was not prejudicial.

The Bankruptcy Court agreed with the Appellee’s contention that Loan
Agreement, the same omitted writing, under Sec. 2.10.5, required the Appellee to charge
the property charges paid by the Appellee to the Appellant’s HECM loan as a Loan
Advance, and further ruled that, even though the Appellee's Claim 5-1 failed to
substantially conform to Official Form 410A with its claim, the Bankruptcy Court’s
ruling excused the Appellee’s failure to adhere to stated rules.

The Bankruptcy Court’s Aug. 7, 2017 written opinion denied the Appellant’s MSJ
and granted, in part, the Appellee’s cross motion for summary judgment. The Court
subsequently dismissed all but the Appellant’s breach of contract allegation as the
Court’s partial summary judgment dismissed all the specific claims the Appellant made
that were dependent on a ruling that Appellee’s claimed real property payments made on
behalf of the Appellant were not authorized by the terms of the HECM loan.

The Bankruptcy Court also ruled at this time that the Appellant’s real property tax
payment terms were unambiguous, but also inserted a default date of May 15th of the tax
year pulling this date from an Oregon State Law prescribing the date of delinquency, by
law May 15th, as default date by which the Appellant must effect its real property tax
payment. The Bankruptcy Court’s ruling makes non-payment of taxes on or before their
statutory “due date” an HECM loan default under the terms of DOT, even though the
State of Oregon, the entity actually owed the payment only considers the same unpaid
real property taxes only to be “delinquent.”

On Aug. 9, 2018 the Appellee purports to have paid the outstanding real property
taxes for both the 2016 and 2017 assessments on the Property totaling $20,302.62 by
charging these real property tax payments, as with all prior tax payments Appellee claims
it made on behalf of the Appellant, to the Appellant’s HECM Principal Balance. The
Appellee additionally paid the 2018 assessed real property taxes on Nov. 29, 2018, in

7
full, totaling $9,277.51, again, by adding the payment to the outstanding HECM Principal
Balance.

The Appellant filed its Motion to Reopen Chap. 13 Bankruptcy on May 15, 2019,
and the case was reopened and the dismissal was set aside by Court order on June 12,
2019. The Appellant’s objection to Claim 5-2 remains an unresolved, contested matter in
the Appellant’s reopened bankruptcy case.

V. Summary of Argument

The Appellant believes that the Appellee knowingly filed its Claim 5-1 attempting to
recover the very payments that the Appellee sought and received reimbursement
previously from Fannie Mae, the former owner of the Note. The Appellant’s bankruptcy
plan provided $31,417.22 to repay the total of remaining RPPA debt plus the three years
of taxes purportedly paid by the Appellee after the Appelle returned the Appellant's Feb.
2015 RPPA payment, but prior to the Appellant’s bankruptcy filing. The Appellant made
no plan provisions to pay any portion of the HECM loan debt, and Appellant also argues
that as soon as the Appellee charged their payments as Loan Advances and added each
payment to the HECM Principal Balance, pursuant to the same DOT UC#2, the
Appellant was no longer personally responsible for paying that year’s tax payment.. [ER
49, UC 2]

Appellee filed its Claim 5-1 without any of the Champion Mortgage RPPAs they had
offered to the Appellant using only that assumed business name on the RPPAs, and
omitted the Loan Agreement. The Appellee's Claim 5-1 attached, as Ex. A, a transaction
history wherein reporting that all its tax payments had been added to the outstanding
HECM Principal Balance. [ ] More unbelievably, the Appellee’s Claim 5-1 claims that
the Appellant’s HECM loan had a default balance that could be cured through
Appellant’s bankruptcy plan payments. The fact is HECM debt can only be enforced
through the sale of the property. [ER 52, UC 10]

Appellant filed its Objection to Claim because RPPAs are used as an HUD approved
foreclosure prevention option where Appellee contracts directly with the Appellant who

8
agrees to repay Appellee for its payment of defaulted property charges outside of the
HECM loan. [ER 109, Option 1] RPPAs can only be offered when the Appellant’s
reported HECM Principal Balance has reached the HECM Principal Limit for the
Appellant’s HECM loan. This means that the Appellee could not make further HECM
Loan Advances to pay defaulted property taxes. [ER 106, ¶ 1]] Instead, the Appellee
should have made the tax payments by way of a Corporate Advance using its own cash,
and not a Loan Advance from a reported HECM loan that had no available funds from
which to make any further Loan Advances. [ER 109, Option 1]

The Appellee admits that all cash payments received were applied as to the
Appellant’s HECM loan [ER 179, ¶ 1] , and the Appellee did not refute Appellant’s
Motion for Order to Show Cause claim that the Appellee’s Claim 5-1 (and 5-2) included
a spreadsheet attachment, Ex. A, to its Official Form 410A that included a column
heading, “Code.” [ER 39, Bottom] The Appellant’s research determined that the codes
provided for each transaction listed in the spreadsheet were in-fact eBoutique™ action
codes published by Fannie Mae, and that servicing companies servicing Fannie Mae
owned loans are required to assign the appropriate action code to each and every
transaction posted to an account. [ER 233-237]

Appellee did not dispute the Appellant’s argument that the codes Appellee listed for
each transaction corresponded directly with specific action codes that Fannie Mae posts
and updates regularly on its website. The Appellee did not rebut Appellant’s claims that
these codes revealed that Appellee coded each of its claimed real property tax payments
as a fee charged to the Appellant’s account for making a tax payment, and not the actual
payment of the real property tax paid to the county.

The Appellee's own Asst. Secretary, Daryl Sanders declared that the Appellee was the
agent for the owner, Fannie Mae, of the Appellant's loan at the time it filed its Claim 5-1.
[ER 263-4] The Appellee chose not to file a response to the Appellant’s Motion for
Order to Show Cause even though its cross motion for summary judgment had not been
fully adjudicated.

9
 By coding its entire tax payment as a reimbursable fee, instead of not reporting
Appellee’s Corporate Advance tax payment as an HECM transaction, the Appellee was
reimbursed by Fannie Mae, in cash, in less than two days as opposed to Fannie Mae
making no reimbursement because the transaction was a non-reimbursable Corporate
Advance tax payment. [ER 235, Code 90] Corporate Advances for real property taxes
are regularly paid ahead of all claims from the proceeds of a sale of the property.

The HECM note is a negotiable instrument and at when the HECM Principal Balance
reaches the HECM Principal Limit, no further Loan Advances can be made. [ER ]
Advances made by the Appellee for both Mortgage Insurance Payments, Interest,
monthly servicing fees, and other fees approved by HUD are each made as Loan
Advances pursuant to the Loan Agreement, regardless of whether the Appellant’s
Principal Balance has reached the HECM Principal Limit. These fees can to be added to
the Appellant’s Principal Balance, even after the HECM Principal Balance reaches the
HECM loans Principal Limit because the Principal Limit increases each month by exactly
the same amounts. [ER 220, 2.6.1]

Appellee’s advances made for payment of property preservation tax payments upon
Appellant’s payment default, made when the Appellant’s HECM Principal Balance had
reached the HECM’s Principal Limit, can only be made as an HECM Loan Advance
pursuant to Section 2.16 of the Loan Agreement. Corporate Advances a servicing
company may choose to make out of its own funds to pay Appellant’s real property taxes
when Appellant’s Principal Limit had been reached can not be made part of the
Appellant’s HECM Principal Balance. On the other hand, once the Appellee’s tax
advances are labeled as Loan Advances and made part of the HECM debt, the DOT
Uniform Covenant 2 states that the Appellant is no longer responsible for payment for
those taxes paid, even if these expenses have been improperly added to the HECM
Principal Balance. [ER 49, UC 2]

To state the Appellee’s plan in terms of the end result, the Appellee was able to draw
from a line of credit, or have a third-party agent use their own cash to pay Appellant’s
outstanding real property taxes, then in less than two days, the Appellee turned borrowed

10
funds, or third party’s tax payment, into cash in the Appellee’s hands by coding the tax
payment as a reimbursable expense and getting Fannie Mae to return the payment to
them. Appellee greatly improves it cash position, on demand, and the interest charges for
the use of this cash is transferred to the Appellant’s HECM loan and, presumably paid out
of the proceeds of a sale controlled by the Appellee. Perhaps the most troubling fact is
that the Appellee's tax payments, when magically converted to an earned HECM fee,
becomes reportable income when the actual payment is received. That the Appellee
chose to target senior citizens in its scheme ranks very close to the top of the troubling
scale.

VI. Argument

A. Did the Court err by ruling that the Appellant’s real property
tax payment responsibility and default date for non-payment is
unambiguous, such that payment in “a timely manor,” by law, can have
only one meaning: payment prior to the statutory delinquency date?

The Appellant’s property charge payment responsibilities for both real property
insurance and taxes are expressly excluded from the DOT’s written list of property
charge payments that the Appellant must make “on time directly to the entity that is owed
the payment.”[ER 50] Without having a specific payment default date actually written
into the DOT, the Appellant argues that its real property tax payment responsibility is
satisfied if payment is made anytime between when the real property taxes become
payable with a discount, on Nov. 15th of the tax year, and the date that the real property
taxes assessed for each year become “due and payable.” In Oregon, taxes become “due
and payable” three years from the first date of delinquency pursuant to 2017 ORS
312.010.

The Court ruled that the Appellant is responsible to perform its contractual real
property tax payment obligation prior to a statutory delinquency date found in 2017 ORS
311.510, but not found within the four corners of the HECM writings. The Appellee’s
own notices and enforcement actions taken with respect to the Appellant’s real property

11
tax payment responsibility, its course of performance, shows that even the Appellee did
not send out its dunning `letters until months after the May 15th delinquency date the
Bankruptcy Court ruled, by law, was the Appellant’s real property tax payment default
deadline. [ER 68 & 70]

The Appellant asserts that the terms may be unambiguous, yet the default date ruled
by the Bankruptcy Court conflicts with the first sentence of Uniform Covenant 5 which
lists property charge payments the Appellant is responsible to pay on time, but the terms
exclude both real property taxes and insurance from the list of payment’s the Appellant is
to pay “on-time.”[ER 50]

B Did the Court err by inserting a real property tax payment default
date of May 15th of each tax year into the Adjustable Rate Home
Equity Conversion Line of Credit Deed of Trust ( “DOT”) after the
Court ruled that the terms of the DOT were unambiguous?

One of the central issues on appeal is whether the Bankruptcy Court erred when
ruling that the Appellant’s property charge payment responsibility, specifically the
Appellant’s requirement to pay real property taxes “in a timely manor,” is unambiguous
and can only mean that the Appellant must pay real property taxes prior to the
delinquency date Oregon statutes prescribe to be May 15th of each year.

Under Generally Accepted Accounting Principles (“GAAP”), a payment

obligation first becomes “payable,” after which the payment becomes “due”, and is
followed by the date the payment is considered to be “due and payable.” A default
occurs if debt is not paid on or before the date the debt payment is “due and payable.”
The Appellant argues that regardless of whether a real property tax payments is made
prior to the due date, on the due date, or it is paid prior to the expiration of any grace
period offered after the due date, each payment has been made in ”a timely manor.”

The Bankruptcy Court erred by ruling that the Appellant’s property charge payment
responsibilities under the DOT are unambiguous while also inserting a specific default
date into the terms of a standardized federally insured loan. The Appellant suggests that

12
the standardized, HUD insured HECM writings purposely did not identify a specific real
estate tax payment default date due to the fact that most states in the country have varying
payment due dates and each state may assess non-payment penalties at different times.
Will all HECM borrowers across the country have this May 15th default date?

Merriam-Webster's dictionary provides more than one meaning for the term
"timely" when used as an adjective, as it has been used in the Appellant's HECM DOT:
a.) coming early or at the right time, and b.) appropriate or adapted to the times or the
occasion. Neither definition indicates that a payment in a timely manor can only have
one, and only one, possible payment date. Uniform Covenant 5 of the DOT states that
the if Appellant "fails to make the property charges required in Paragraph 2 in this
Security Instrument," then the Appellee has permission to pay the Appellant's real
property taxes. Failure to make the property charges

C. Did the Court err by ruling that Home Equity Conversion Loan
Agreement (“Loan Agreement”) “has been properly authenticated and
is admissible” in its August 7, 2017 Order, given the fact that the Loan
Agreement lacked notarization and/or evidence of recordation as
required by Oregon statutes for security instruments affecting real
property?

Appellant argues that Bankruptcy Court should not have considered the Loan
Agreement because Article 1.12 of the agreement defines the Security Instrument to be
the DOT together with the Loan Agreement. The Appellant argues that the Loan
Agreement remains hearsay evidence that can never fit into the business records
exclusion. Appellee’s attorney filed the Loan Agreement stating that he had received the
document from a representative of the Appellee, but the Appellee did not originate the
Loan Agreement and the most that the Appellee can say is that the document offered is
the one that was given to them by the loan originator.

Appellee’s attempt to authenticate the Loan Agreement’s terms would have to be

considered hearsay because the Loan Agreement may have been produced in the regular

13
course of the originator’s business, but not the Appellee’s business. The Appellant
argues that that the originating company, Bank of America, NA, can’t demonstrate that
the bank regularly executes Loan Agreements without identifying the name or title of the
person that executes contracts as an agent for the bank. For this reason, the Bankruptcy
Court’s determination that, “there is no reasonable basis to conclude that the Loan
Agreement could never be authenticated” [ER 190, last sent.] does not fit the facts of the
case.

Neither the Loan Agreement nor any of Repayment Plan Agreements were filed with
Appellee’s Claim 5-1. The Appellant argues the Bankruptcy Court should not have
considered the Loan Agreement in its Aug. 7, 2017 ruling on the Appellant’s Motion for
Summary Judgment or accepted the Appellee’s excuse that they erroneously omitted
Loan Agreement without requiring the Appellee to explain how or why the Loan
Agreement could have been mistakenly omitted. Fed. Rule of Bank Proc. 3001(c) (1)
requires that some explanation of an omission of a writing must be provided, but the
Bankruptcy Court's excusal of the Loan Agreement's omission runs counter to this rule.

The facts are that no amount of debt can be determined without the Loan Agreement
because it is the only writing that includes the loan’s original Principal Balance, the
loan’s stated Principal Limit, and the contract terms that determine when and if the
Appellee can pay real property taxes with a Loan Advance from the HECM. The very
basis of the claimed default was a clause in the DOT, UC #2, and that clause clearly ends
with the words “as provided for in the Loan Agreement.” [ER 49, UC 2] Omission of
one of the three writings that constitute an integrated agreement has to be prejudicial,
especially if the writing supports the Appellant's argument.

The Assignment of Deed of Trust document filed by Bank of America, NA states that
the "Original Loan Amount" was $855,000.00,[ER 63] but the recorded Deed of Trust
only states that the loan amount to be "up to a maximum principal amount of
$855,000."[ER 48]. The actual loan amount grows monthly from interest, MIPs and
upon an HECM Loan Advance, thus, the Assignment materially misstates the outstanding
Principal Balance, and this document was not only recorded in Oregon land records, it

14
was filed in a United States court in order for the Appellee to secure bankruptcy claim
payments. Actions based upon, or occurring after the filing of a false document should
not be deemed proper for any reason.

Neither the Appellee nor the Bankruptcy Court addressed the Appellant’s claim that
the interest free RPPA forbearance agreement debt was added to the Appellant’s interest
bearing HECM Principal Balance without the Appellee providing the itemized interest
statement required by Fed. Rules Bank Proc 3001(c)(2)(a). Furthermore, the Bankruptcy
Court failed to address the Appellant’s argument that Section 1.12 of the Loan
Agreement provides that the term, “Security Agreement,” is defined as the Loan
Agreement together with the DOT, combined, to be the security agreement for the
HECM loan, not just the DOT. [ER 218, 1.5]

As such, the Appellant argued that the lack of notarization and non-recording of the
Loan Agreement should have precluded the Bankruptcy Court the Loan from considering
the Loan Agreement in its ruling. Fed. Rules Bank Proc 3001(e) requirements to provide
proof of a perfected interest in the Appellant’s property have not been met by the
Appellee, without a possible cure. The fact also remains that there is no way to
determine the identity of the person who signed the Loan Agreement on behalf of the
originating lender. [ER 224]

D. Did the Court err in its ruling that the omission of the Loan
Agreement and the Repayment Plan Agreements (“RPPA”) from
Appellee’s Claim 5-1 was a non-prejudicial and an excusable
“mistake” based upon the Court’s belief that terms of the Loan
Agreement support the Appellee’s claim that its tax payments were
“proper,” after Appellee denied that Loan Agreement was omitted
and after acknowledging multiple RPPAs were offered to the
Appellant,

HECM prepayments increase Appellant’s available line of credit available under the
Appellant’s HECM open-ended loan. Lowering the Principal Balance by the amount pre-

15
paid necessarily increases the amount available for a prospective Loan Advance as the
Section 2.6.1 of the Loan Agreement shows Loan Advances can be requested and made if
the Principal Limit minus the Principal Balance after making the advance is greater than
zero. [ER 221, 2.61] The Bankruptcy Court’s determination that the omission of the
Loan Agreement and all the RPPA’s was not prejudicial wrongly held that the Loan
Agreement’s section 2.10.5 permits Appellee to pay outstanding taxes as an HECM Loan
Advance.

Bankruptcy Court’s ruling was based upon an incorrect reading of the terms of the
disputed Loan Agreement and DOT. The DOT and the Note and the Loan Agreement are
an integrated agreement, and each state that Appellee’s real property tax payments on
behalf of the Appellant, after payment default, are mandatory. With that said, the
Appellee “mandatory” property charge payments are only mandatory when they can be
made as a Loan Advance, out of Appellant’s available HECM credit [ER 221, 2.16]

The Loan Agreement, Section 2.10.5 clearly states that if the Appellee pays the
annual property taxes using Loan Advances from the Appellant’s available HECM line of
credit, then no Loan Advance shall exceed the amount permitted by Section 2.6.1,
because the Appellant originated a Line of Credit HECM.[ ER 48] As discussed earlier,
Section 2.6.1 states Loan Advances can be made up to the HECM Principal Limit and no
more. Section 2.10.6 states that the Appellant is to receive notice from Appellee anytime
it is determined that the Appellant’s Line of Credit payments will be insuffi\cient to pay
property charges. No such notices were ever sent to the Appellant.

Appellee’s provided “codes” also reveal that the Appellee offered multiple
RPPA’s to the Appellant and accepted thousands of dollars of RPPA payments while at
the same time the RPPA’s were in effect, requested permission from HUD multiple times
to foreclose on the Appellant’s HECM loan. The RPPAs are essentially forbearance
agreements that the Appellant believed would halt efforts by the Appellee to foreclose
upon the Property. The following table provides a timeline of the actions Appellee had
taken prior to Appellant’s bankruptcy filing.

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 Date Code Description of Notification .

08/17/2011 53 HECM was referred to HUD to accelerate debt; however

servicer is setting up Repayment Plan Agreement.
10/22/2013 013 Borrower has requested suspension of his or her
scheduled payments / access to line of credit.
10/22/2013 51 HECM was referred to HUD to accelerate the debt as a
result of borrower’s failure to make T&I payments.
05/01/2014 54 Unknown.
06/25/2014 51 HECM was referred to HUD to accelerate the debt as a
result of borrower’s failure to make T&I payments.
04/16/2015 57 HECM was referred to HUD for a decision to accelerate
the debt as the result of borrower’s non-payment of
T&I.
07/01/2015 13 Mortgage Loan has been referred to foreclosure due to
unpaid T&I.
07/20/2016 15 Borrower declared bankruptcy or that other litigation

The Appellant argues that the Appellee's real property tax payments made were never
intended to help the Appellant. All RRPA payments were applied to a different debt (ie
the Appellant's HECM loan), and while the RPPAs were in effect, the above table made
from Appellee provided "codes" show that Appellee actively sought permission from
HUD to foreclose the HECM loan while continuing to offer RPPAs and accept payments
pursuant to these RPPAs. The Appellant argues that the Court's determination that each
of the Appellee's tax payments was "proper," in light of these facts, is not sustainable.

The Appellee’s own Claim 5-1 attempts to account for its tax payments and
Appellants RPPA payments made to the Appellee as HECM transactions within the
claim’s Official Form 410A. No beginning balance is provided, only an ending balance
in Column M, “principal balance.” The stated balance, $542,140.81, is the total claim
amount of the Appellee’s Claim 5-1. As such, every dollar of Appellee’s real property
tax advances are included within the Appellee’s stated outstanding HECM Principal
Balance. As discussed previously, no part of the outstanding Principal Balance can be
enforced except through the sale of the Property.

The Appellee failed to address the fact that both the DOT and the Note clearly and
prominently refer to the Loan Agreement and that without the Loan Agreement no
3
The Plaintiff/Borrower never asked for a suspension of access to her credit line at any time.

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amount of outstanding Principal Balance can be determined. The DOT filed states that
the amount owed is some amount up to a maximum of $855,000 [ER 48]and the Note
states only that the Appellant promises to pay a Principal Amount determined by the
Loan Agreement. [ER 59]

By filing a bankruptcy claim, the attorney signing the claim does so under treat of
severe penalty for a false filing. The Appellee’s Claim 5-1 was filed with only the DOT
and the Note and not the Loan Agreement, and its omission should be considered nothing
less than gross negligence by counsel or a deliberate omission by the Appellee.

The Bankruptcy Court’s ruling on the Appellant’s MSJ held that Appellant’s claim
that a tax payment default only occurs if payment is not made prior to the State of Oregon
imposing a penalty for non-payment can not be considered because Appellant’s claim “is
not supported by facts in the record and defies any common sense construction of the
plain meaning of the HECM loan documents.” Yet facts in the record, together with the
terms of the HECM loan documents, do support the Appellant’s claimed “due and
payable” default date and do not support the Bankruptcy Court’s use of the statutory
“delinquency” date as the Appellant’s payment default date.

The Appellant could not have had any reason to believe that a default occurs if real
property tax payments were not paid by the by the first day the taxes are considered
delinquent by the State of Oregon. The State of Oregon’s real property tax laws
effectively make the real property tax default date the date thirty-six (36) months from
the first day of delinquency. Payment rendered to the state of Oregon anytime prior to
the default date can be made with interest expenses but without any penalty under ORS
312.010.

Support for the Appellant’s argument is clearly written into Uniform Covenant 12(c)
(b) of the DOT. The Appellant argues that UC 12 of DOT provides the controlling terms
for dealing with liens that have priority over that of the Appellee's and states that
Appellant may choose to defend against enforcement of a lien that has priority over the
Appellee’s lien in legal proceedings as an alternative to promptly discharging the lien.

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[ER 53] In Oregon, such proceedings only can be held after thirty-six months from the
first day of delinquency, the day real property taxes in Oregon become “due and payable”
after which, if not paid in full, the Appellant would be in default and the unpaid taxes
would subject to collection by the state.

 The 9th Circuit has held that Federal Debt Collection Protection Act (FDCPA) does
not define the term "default"; however, "[i]n applying the FDCPA, courts have repeatedly
distinguished between a debt that is in default and a debt that is merely outstanding,
emphasizing that only after some period of time does an outstanding debt go into
default." Amelina v. Mfrs. & Traders Tr. Co., No. 14CV1906 WQH (NLS), 2015 WL
7272224, at *6 (S.D. Cal. Nov. 17, 2015) (quoting Alibrandi v. Fin. Outsourcing
Servs., Inc., 333 F.3d 82, 86 (2d Cir. 2003)) The Appellant argues that the HECM
writings, like the FDCPA, does not provide a definition for the term, "default," but
appeals courts across the United States do agree that outstanding debt does not default
upon the date such debt is considered to be "delinquent." Consensus among the circuits
insist that some period of time must pass without payment after a due date prior to the
Court ruling that a payment default has occurred.

We all know that the only way one can defend against tax collection efforts is to pay
the amount owed, remember death and taxes are the only sure things. The Appellant is
under no contractual obligation to "defend" against such enforcement of any tax lien
prior to the time at which the lien can be legally enforced. The Appellee can not point to
any HECM term that restricts the Appellant from taking advantage of any payment terms
provided by the State of Oregon for the payment of real property taxes.

E. Did the Court err by ruling that the disputed Loan Agreement,
specifically Section 2.10.5, permits the Appellee to bill legal fees and
property preservation expenses incurred as HECM Loan Advances,
without allowing for the full effect of Section 2.16 of the Loan
Agreement which limits the total of HECM Loan Advances “to the
extent possible?

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 The HECM Note is a negotiable instrument with terms that specify the dollar amount
of the HECM’s Principal Limit which is compared to the Loan’s Principal Balance to
determine the amount, if any, of a permissible Loan Advance. Section 2.10.5 of the Loan
Agreement states that Appellant’s failure to pay property charges in a timely manor the
Appellee is then required to pay the property charges as a Loan Advance as required
under Section 2.16. Section 2.16 states that Loan Advances made pursuant to Section
2.10.5 (and other Sections) shall be made from a line of credit under Section 2.6.1, to the
extent possible. Section 2.6.1 states that Loan Advances are permissible if the Principal
Balance of the loan after the loan advance is less than or equal to the applicable Principal
Limit. Moreover, Section 2.16 limits such advances "to the extent possible."[ER221,
Sec. 1.6] The Appellant argues that the Bankruptcy Court did not account for the fact
that "to the extent possible" can only mean "up to the Principal Limit of the HECM loan."

Pursuant to Section 2.10.4 of the Loan Agreement the Appellee is clearly restricted
from making an HECM Loan Advance to pay Appellant’s real property taxes in excess of
the amount representing the difference of the Appellant’s HECM Principal Limit and the
Principal Balance when the Appellant has elected to have the Appellee pay the real
property taxes on behalf of the Appellant. The Appellee asks the Court to believe that
there is a different set of unwritten rules when the Appellee pays the real property taxes
without having been asked to do so by the Appellant. [ER 221, 2.10.4]

VII Conclusion

The Appellee’s course of performance, pursuant to UCC § 1-303, does not show
that the Appellee took any actions prior to the delinquency date other than paying the
Appellant’s real property taxes prior to the date taxes become “payable," which is prior to
the May 15th default date ordered by the Bankruptcy Court, in the year when it attempted
a non-judicial foreclosure.

The Appellee admits that it offered multiple RPPAs, and the Appellee admitted that
the same debt was added to the Appellant’s separate and interest bearing HECM principal
balance, but the Appellee made no attempt to reconcile the fact that the RPPAs were

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interest free [ER 76], while debt added to Appellant’s HECM balance is subject to
monthly interest this is capitalized monthly.[ER 59, ¶2]

The Appellee acknowledges they knew that HECM debt is not enforceable against the
bankruptcy estate in the first paragraph of its "Disclosure Statements" made in its Claim
5-1 [ER 33] Column "M" of Claim 5-1 is the reported HECM Principal Balance as of the
date of the Appellant's Chap. 13 filing on July 16, 2016.[ER 33, Col. M] This stated
balance includes every real property tax payment made by the Appellee up to the
Appellant's filing date. As such, the Appellee has disclosed that the Principal Balance
stated has no recourse provisions though the Appellant's bankruptcy, yet the Appellee
still filed its Claim 5-1 seeking $31,477.22 of their stated Principal Balance. This fact
supports the Appellant's argument that no default exists within its HECM loan, and that
Appellee's Claim 5-1 seeks payment of the HECM debt directly from the Appellant
which is not permitted by the HECM terms. [ER 49, 4(c)]

The Note (made up of both the Note and the Loan Agreement by definition [ER 218,
Sec. 1.5]) is a non-recourse note and is considered a negotiable instrument. As such,
there are no provisions which allow the holder or the servicing company to inflate the
note’s principal balance beyond the originally agreed to Principal Limit of the HECM
loan. The Appellee’s accounting for the Appellant’s HECM loan, as stated in its
attachment to its Claim 5-1’s Official Form 410 Claim 5-1 (and 5-2), wrongly includes
all real property tax payments and attorney’s fee payments as HECM transactions that
increase the Appellant’s HECM Principal Balance.

Appellant argues that corporate advances made by the Appellee, in addition to the
legal fees properly associated with its foreclosure attempt, are not Loan Advances that
can be made part of the Appellant's Principal Balance. The DOT's UC #11, entitled
"Reinstatement," provides the only contractual authority for the Appellee's corporate
advances made to be capitalized into the Appellant's HECM Principal Balance. Terms
which allow for reinstatement show that correcting the reason for the resulting immediate
loan acceleration is a condition precedent to any reinstatement.

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 Only after correcting the reason for the loan being called due and payable can the
Appellee then capitalize any legal fees and costs directly associated with a foreclosure
action. Appellant's HECM has not been reinstated, and the Appellee has added each and
every attorney expense it incurred in defense of the Appellant's complaint, Motion for
Sanctions, and objection to claim filings to the Appellant's HECM Principal
Balance.Terms of the HECM simply do not support the Appellee's adding its real
property tax corporate advances to the outstanding HECM Principal Balance.

Thus, payment in full to the Appellee for all outstanding corporate advances and
reinstatement of the Appellant's loanmust occur prior to the Appellee adding any of the
fees and costs associated with a pending foreclosure to the Appellant's HECM Principal
Balance. UC #11 shows that the agreement never intended the Appellee to add its
corporate advance real property tax payemtnsthe Appellee "due an payable" An HECM
loan is cancelled when the entire outstanding balance is pre-paid, at which time no further
loan advances are permitted and the loan cancels. Any partial prepayment increases the
line of credit principal limit.[ER 60, Sec. 6.] Thus, any partial prepayment made can
become a future loan advance some time after prepayment was made and until the loan is
cancelled.

Because the HECM DOT does not specify any specific property charge payment
default date within the four corners of the integrated HECM writings, the Appellant
contends that Bankruptcy Court’s determination, by law, that the HECM real property tax
payment terms are unambiguous necessarily precludes the Bankruptcy Court from
inserting a default date into the DOT.

The Bankruptcy Court’s determination that the Appellee’s tax payments were
“proper” and correctly accounted for as a loan advance within the Appellant’s HECM
accounting fails to explain how the Appellee can use the bankruptcy court claims process
to enforce or collect HECM debt prior to the sale of the property directly from the
Appellant who is never responsible for repayment of any portion of a debt that
contractually can only be enforced through sale of the property. [ER 52, UC 10, ER 59,
4(c)]

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__________________________________ ____________

Beverlyann Lee Aug. 21, 2019

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