IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

In re: § Chapter 11
§
LA VILLITA MOTOR INNS, J.V. § Case No. 10-54864
§
Debtor. §

LA VILLITA MOTOR INNS, J.V., §

Plaintiff §
v. § ADV. PRO. NO. __________________
GS MORTGAGE COMMERCIAL §
SECURITIES CORPORATION II, §
COMMERCIAL MORTGAGE PASS- §
THROUGH CERTIFCIATES SERIES §
1999-C1; U.S. BANK, NATIONAL §
ASSOCIATION; ORIX CAPITAL §
MARKETS, LLC; AND UNKNOWN
DEFENDANTS

COMPLAINT TO DETERMINE SECURED STATUS, AVOID LIENS,

REMOVE CLOUD FROM TITLE, AND OTHER RELIEF

To the Honorable United States Bankruptcy Judge:

COMES NOW LA VILLITA MOTOR INNS, J.V. (the “Debtor” or “La Villita Motor

Inns”), the Debtor in the above captioned case (the “Case”), and hereby files this

Complaint to Determine Secured Status and Amount of Secured Claim, Avoid Liens,

Remove Cloud from Title, and for Other Relief (the “Complaint”). In support of this

Motion, the Debtor respectfully represents as follows:

I.
JURISDICTION AND VENUE

1. This is an adversary proceeding brought pursuant to Rule 7001 of the

Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).

2. This Court has jurisdiction over this adversary proceeding pursuant to

28 U.S.C. §§1334 and 2201(a), 11 U.S.C. §§ 105, 502, 506, 544, 550, and 551.

COMPLAINT
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 3. This adversary proceeding is a core proceeding as defined by 28 U.S.C. §

157.

4. Venue is proper under 28 U.S.C. § 1409.

II.
PARTIES

5. Plaintiff La Villita Motor Inns is a Texas joint venture and is the Debtor in

the above-styled bankruptcy proceeding (the “Bankruptcy Case”).

6. Defendant GS Mortgage Commercial Securities Corporation II,

Commercial Mortgage Pass-Through Certificate Series 1999-C1 (the “Trust”) is a New

York trust with its principal place of business located at 85 Broad Street, New York,

NY 10004. Defendant may be served with process of this Court by mailing a copy of

the Summons and Complaint to USB, as defined in paragraph 7 below.

7. Defendant U.S. Bank, National Association (“USB”) is a national bank

with its principal place of business located in Minneapolis, Minnesota. USB can be

served through private process on its registered agent, CT Corporation System, 350 N.

St. Paul St., Suite 2900, Dallas, Texas 75201-4234. Defendant is being sued in its

individual capacity and as Trustee for the Trust.

8. Defendant ORIX Capital Markets, LLC (“ORIX”), is a foreign limited

liability company organized in Delaware. ORIX can be served through private process

on its registered agent, Corporation Service Company D/B/A/ CSC Lawyers

Incorporating Service Company at 701 Brazos Street, Suite 1050, Austin Texas 78701

or through its attorney Claiborne Gregory, Jr. at Jackson Walker LLP, 112 E. Pecan

Street, Suite 2400, San Antonio, Texas 78205. Defendant is being sued in its

individual capacity and as special servicer for USB in its capacity as Trustee for the

Trust.

COMPLAINT
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 9. Unknown Defendants 1 through 10 are business entities and/or

individuals that may have a legal interest in the promissory note, deed of trust,

assignments, or the real property which is the subject of this proceeding and/or who

may be responsible for the acts complained of herein.

10. Collectively the defendants named above will be referred to herein as

“Defendants.”

III
STATEMENT OF THE CASE

11. Historically, financial institutions made loans with the intent to retain

the loans in their portfolio, collect the payments for their own account and make

money on the spread between the interest rate paid on their deposits and the rate

collected on loans. Beginning in the late 1970s the traditional lending model began to

change. Wall Street Investment banks introduced the concept of securitization—

issuing securities against the dedicated stream of mortgage payments. It allowed

financing institutions to avoid risks associated with holding mortgages on their own

books. By the mid 2000s, securitization transactions accounted for an estimated

$10.24 trillion in debt in the U.S. alone, and their flawed structure nearly collapsed

the world economy.

12. In the years since the 2008 economic collapse, courts have been called

upon to unravel the convoluted structures of securitizations, beginning with

residential mortgage-backed securities. A growing number of courts have come to

discover serious flaws in the manner in which these transactions were consummated

and documented at the outset and the means by which their terms arewere being

enforced. Problems included procedural defects, invalid transfers, outright

counterfeiting of documents, and predatory servicing practices that precipitated

borrower default.
COMPLAINT
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 13. The liens against the Debtor’s assets in this case were originated for the

express purpose of transferring the loan and associated mortgage and security

interests to a trust in a securitization transaction. The Debtor alleges that the note

and security documents were improperly transferred in contravention of the

requirements of the Pooling and Servicing Agreement and accordingly are void under

New York trust and gift law and under the Texas Property Code.

14 As a result of the acts and omissions of the Defendants, the Debtor is left

to guess who is the rightful holder of the lien which allegedly encumbers its assets,

and suffer the risks should an unknown lien claimant appear at a later date asserting

that it is the rightful holder of the mortgage or the security agreement or the note.

This adversary seeks certainty in the face of the uncertainty introduced by the

Defendants and asks this Court to avoid lien claims of one or more of the Defendants

pursuant to section 544 of the Bankruptcy Code.

15. The Debtor further seeks a determination of the allowed amount of the

claim, if any, of the legal holder of the claim against this Debtor by virtue of the note

in question. The Debtor objects to the amount alleged by one or more of the

Defendants to be owed on the following basis:

a. To the extent this Court determines that Defendants’ claims are

unsecured, Defendants claims should be disallowed in their

entirety as unenforceable under the terms of the agreements

between the parties;

b. Defendants claim is excessive because it alleges the indebtedness

to be greater than the amount owed under the contract; or in the

alternative, Debtor asserts affirmative claims for breach of

COMPLAINT
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 contract arising from the Defendant’s’ assessing interest charges

in amounts greater than provided for in the contract;

c. Defendants’ claim for default rate interest should be disallowed

with regard to pre-petition amounts because they are

unenforceable against the Debtor under any agreement or

applicable law;

d. Defendants’ claims for post petition default interest should be

disallowed pursuant to § 506(b) due to Defendant’s inequitable

conduct; and

e. Defendants’ claims for attorneys’ fees and costs should be denied

in its entirety as unreasonable and unnecessary.

III.
FACTUAL AND PROCEDURAL BACKGROUND

A. Petition for Relief

16. On December 17, 2010 (the “Petition Date”), the Debtor filed a voluntary

petition for relief under Chapter 11 of title 11 of the United States Code, 11 U.S.C. §§

101-1330 (as amended, the “Bankruptcy Code”).

17. The Debtor continues to manage and operate its business as debtor-in-

possession pursuant to §§ 1107 and 1108 of the Bankruptcy Code. No creditors’

committee has been appointed in this case by the United States Trustee. No trustee or

examiner has been requested or appointed.

18. The statutory predicates for the relief requested herein are Sections

105(a) , 363(b), 502, 544 and 550 of the Bankruptcy Code.

B. Nature of the Debtor’s Business

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 19. The Debtor is a Texas joint venture, formed on or about April 14, 1980,

that owns and operates a hotel located at 100 La Villita in San Antonio, Texas, known

as the Riverwalk Plaza Hotel (the “Hotel”).

20. The Hotel has 129 guest rooms, including deluxe, junior and executive

suites. The Hotel offers its guests a 24-hour fitness center, a 24-hour business center,

an outdoor heated swimming pool, a full-service coffee bar, a restaurant, parking and

other services that generate revenue. The Hotel also has multiple convention rooms

for meeting space, including a 2,349 square foot ballroom.

C. 1998 Commercial Loan Obligation

21. On or about September 25, 1998, the Debtor executed a Fixed Rate Note

(the “Note”) with AMRESCO Capital L.P. (“AMRESCO”) in the original principal amount

of $8.4 million. The Note is a non-recourse obligation. At inception, the Note was

secured by certain real property and improvements, including the Hotel, as well as all

accounts, inventory, all personal property located on the Hotel premises, and all rents

and proceeds generated by operations of the Hotel, to the extent described in the

“Mortgage, Deed of Trust, and Security Agreement” (the “Deed of Trust”); Security

Agreement (the “UCC Security Agreement”); and Assignment of Leases and Rents (the

“Assignment of Rents”); (collectively, the “Loan Documents”). The Deed of Trust was

recorded on September 28, 1998, at Volume 7651, Page 00245 et seq., in the Official

Public Records of Real Property in Bexar County, Texas and again on November 20,

1998, at Volume 7718, Page 1425 et seq. True and correct copies of the Note, first-

filed Deed of Trust, and refilled Deed of Trust are attached hereto as Exhibits A. B

and C, respectively.

22. The Note required monthly payments of $56,874.97 in arrears (the

“Monthly Payment”) for a term of ten (10) years, beginning October 1, 1998, with a

COMPLAINT
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fixed interest rate of 6.53% (the “Non-Default Interest Rate”) and a final balloon

payment due September 1, 2008. 1 The Note specifically provided that the monthly

payments were calculated by applying the Non-Default Interest Rate to the $8.4

million original principal amount over a twenty five year amortization period. The

amount of the balloon payment is not stated in the Note.

23. At the inception of the loan, AMRESCO intended to sell the Note in a

securitization transaction and did not intend to hold it as a portfolio asset. At the time

the Note was funded, the Trust (the alleged holder of the Note, Deed of Trust, UCC

Security Agreement and Assignment of Rents) did not exist.

24. The Trust was not formed until January 10, 1999 (more than 3 months

after the Loan Documents were executed) by the execution of a trust agreement, which

is known in the securitization industry as a “pooling and servicing agreement.” The

Trust’s Closing Date was January 20, 1998.

25. Specifically, the Trust was created by, controlled by and subject to the

Pooling and Service Agreement Dated as of January 10, 1999, for Commercial Mortgage

Pass-Through Certificate, Series 1999-C1, among GS Mortgage Commercial Securities

Corporation II, Seller, GMAC Commercial Mortgage Corporation, Master Servicer,

Lennar Partners, Inc., Special Servicer, LaSalle National Bank, Trustee, et al., (the

“PSA”). A true and correct copy of the PSA is attached hereto at Exhibit D.

26. The Trust is a common law trust created under the laws of the State of

New York, and its existence, actions and governance are controlled by New York law.

1
The maturity date was incorrectly stated in the Note and subsequently corrected by
AMRESCO in the Deeds of Trust recorded in the Official Public Records of Real Property in
Bexar County, Texas. See Deed of Trust at p. 52.
COMPLAINT
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 27. New York trust law and the terms of the PSA require delivery of the Note,

Deed of Trust, UCC Security Agreement and Assignment of Rents in accordance with

the manner and means prescribed in the PSA.

28. The PSA provides that the sole settler of the Trust was GS Mortgage

Securities Corporation II, a Delaware Corporation, (referred to in the PSA and herein

as the “Seller”). See PSA at § 2.01. The PSA further requires that the Seller deliver to

the Trust the following documents or instruments (among others):

a. the Original Note endorsed in a manner proscribed in the PSA,

“which Note and all endorsements thereon shall . . . show a complete chain of

endorsement from the related Originator to the Trustee.” See PSA at § 2.01(i).

b. an executed Assignment of Mortgage and any related security

agreement separate from the Mortgage, assigned to the Trustee. See PSA at § 2.01(iii)

and (iv).

29. The Note was endorsed without recourse from AMRESCO to AMRESCO

Capital Limited, Inc. (“ACLI”) by virtue of an Allonge dated September 25, 1998 (the

“ACLI Allonge”). A true and correct copy of the ACLI Allonge is attached hereto at

Exhibit E.

30. The Note was then endorsed without recourse from ACLI to LaSalle

National Bank (“LNB”) “as Custodian or Trustee” for an undisclosed beneficiary or

trust by virtue of an Allonge dated September 25, 2998 (the “LNB Allonge”). A true

and correct copy of the LNB Allonge is attached hereto at Exhibit F.

31. The Deed of Trust and Assignment of Leases and Rents was assigned by

AMRESCO to LNB “as Custodian and Trustee” by virtue of an assignment dated

September 25, 1998, which was recorded in the official Public Records of Real

Property of Bexar County, Texas, Volume 7651, Page 0094, on September 29, 1998

COMPLAINT
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(the “Mortgage Assignment”). A true and correct copy of the Mortgage Assignment is

attached hereto as Exhibit G.

32. No other allonges or assignments (i) have been provided to the Debtor in

connection with the state court litigation or this Case or (ii) have been recorded in the

Bexar County property records. According to the Defendants, the transfer of the Note,

Deed of Trust and Assignment of Leases and Rents was made to a trustee for a Trust

which did not exist at that time and would not come into existence for more than 3

months after the date of the alleged transfers to LNB. There are no written documents

that reflect that the Note, Deed of Trust, UCC Security Agreement or Assignment of

Leases and Rents were ever owned by GS Mortgage Securities Corporation II, the

Seller and sole settlor of the Trust under the PSA.

33. The PSA sets out specific requirements for the transfer and delivery of

certain mortgage loans, including the Loan Documents, into the Trust. The PSA

requires a transfer of the Note, Deed of Trust, UCC Security Agreement and

Assignment of Leases and Rents from the Seller to the Trustee without recourse.

34. Section 2.01 of the PSA provides that:

The Seller [GS Mortgage Securities Corporation II], concurrently with the
execution and delivery hereof, does hereby sell, transfer, assign, set over
and otherwise convey to the Trustee [then LNB] without recourse (except
to the extent herein provided) all the right, title and interest of the
Seller [emphasis added] in and to the Mortgage Loans, …

The PSA also requires physical delivery to the Trustee of each transfer and assignment

of the mortgage loans from originator to Trustee. Specifically, Section 2.01 of the PSA

states:

In connection with such transfer and assignment, the Seller shall, on or

prior to the Closing Date, deliver to, and deposit with, the Custodian (on
behalf of the Trustee), with copies to the Master Servicer, the following
documents or instructions with respect to each Mortgage Loan so
assigned ….

COMPLAINT
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The PSA then lists categories of documents to be delivered, including, but not limited

to, the Note, Deed of Trust, UCC Security Agreement and Assignment of Leases and

Rents. The PSA requires that such transfers, assignments, and deliveries occur prior

to the “Closing Date” defined as January 20, 1999. PSA § 1.01.

35. On information and belief, the Loan Documents were not assigned to the

relevant parties pursuant to the PSA, prior to the Closing Date, or any possible

contractual extension thereof, and as a result are invalid pursuant to the terms of the

Governing Documents, the applicable federal REMIC tax laws, and the trust and gift

laws of the State of New York.

36. On further information and belief, Defendants failure to abide by the

“chain of title” established in the PSA and required under Texas law has created lapses

in that chain of title such that the transfer of the Deed of Trust, UCC Security

Agreement and Assignment of Leases to the Trust did not occur or is defective.

37. In its First Amended Motion for Relief from the Automatic Stay to Allow the

Texas Supreme Court to Issue Order(s) in a Pending Appeal [Docket No. 53] (the “Motion

to Lift Stay”), filed January 25, 2011, ORIX asserts that U.S. Bank, National

Association (“USB”) has succeeded BOA as Trustee for the Trust. See Motion to Lift

Stay at ¶ 12. Other than the naked assertion of the transfer of the Loan Documents to

USB, no evidence has been provided to the Debtor to support that allegation.

38. As various entities have asserted at various times that they are the

Trustee for the Trust, including LNB, BOA and USB, the term “Trustee” shall be used

in this Complaint to refer to LNB, BOA, USB or any other Defendant who asserts that

it holds the Note and/or Deed of Trust as a trustee or custodian for the Trust.

D. Attempts to Obtain Payoff Amount and Refinance

COMPLAINT
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 38. The Debtor began attempting as early as January 2008 to obtain

refinancing that would allow it to make the balloon payment due under the Note in

September 2008.

39. By the second week of August, 2008, Bank of Texas sent a letter of

commitment based on getting a final number of the exact amount due on the

underlying note. Bank of Texas was unable to obtain that number from Capmark, the

master servicer.

40. On or about October 1, 2008, ORIX claimed to replace LNR as the special

servicer.

41. A month after the balloon payment due date, the Debtor had made

sufficient progress with another lender, WorldBanc, to the point that the parties’

lawyers were preparing the standard loan documents. But WorldBanc likewise could

not obtain a principal balance. The Debtor never received a final payoff number from

ORIX or anyone else associated with or claiming to be associated with Trust.

42. The Debtor had paid every Monthly Payment under the Note on a timely

basis. Upon the Note’s maturity, the Debtor continued to make monthly interest-only

payments and attempted to negotiate with ORIX on either an extension of the Note or

a payoff, and provided all documents ORIX requested in this regard.

43. On March 16, 2009, ORIX sent a Notice of Default and Recourse Trigger,

advising the Debtor that certain loans from individuals and entities affiliated with

Piranithe Debtor’s principals from as early as April 16, 2008, constituted Events of

Default as a breach of a representation made at the time the loan was made and

demanded all rents collected from that date to the present and retroactively applied a

default rate of interest to the Note. See Notice of Default and Recourse Trigger dated

March 16, 2009, a true and correct copy of which is attached hereto as Exhibit H.

COMPLAINT
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 44. On or about April 13, 2009, the Debtor made another written request for

a final payoff statement. On April 14, 2009, ORIX sent the Debtor a Notice of

Foreclosure.

45. On April 17, 2009, the Debtor made a written offer to ORIX to pay in full

all amounts due under the Note for $5,500,000.00 along with a demand for ORIX to

provide copies of the purported transfers and assignments of the Loan Documents to

the parties now claiming to be the Trustee and Special Servicer. ORIX did not

respond. On April 17, 2009, the Debtor again made a written offer to ORIX to pay in

full all amounts due under the Note for $5,700,000.00 along with another demand for

copies of the transfers and assignments. ORIX still did not respond.

E. State Court Litigation

46. To stop the foreclosure, the Debtor filed suit against ORIX, the Trust and

other potential services on May 9, 2009, in the 150 th Judicial District Court, Bexar

County, Texas, for negligent misrepresentation, breach of contract, and fraud as well

as seeking an accounting. The trial court entered judgment against ORIX and found

that ORIX “intentionally interfered with [the Debtor’s] ability to avoid foreclosure and

pay the note” and “intentionally interfered with [the Debtor’s] ability to avoid

foreclosure and pay off the note.” See Findings of Facts and Conclusions of Law, La

Villita Motor Inns, J.V., et al. v. ORIX Capital Markets, LLC, Cause No. 2009-CI-07339,

in the District Court, 150th Judicial District, Bexar County, Texas (August 28, 2009) ,

a true and correct copy of which is attached hereto as Exhibit I. ORIX appealed and

rejected the Debtor’s offer to pay the monetary judgment.

47. On August 25, 2010, the Fourth Court of Appeals reversed the trial

court’s judgments, rendering some judgments and remanding others for determination

by the trial court; the Fourth Court of Appeals did not set aside the findings of the

COMPLAINT
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trial court as they pertained to certain of ORIX’s bad acts. See ORIX Capital Markets,

LLP et al. v. La Villita Motor Inns, J.V. et al, ___ S.W.3d ___, 2010 WL 3331702

(Tex.App.—San Antonio 2010). Specifically, the Fourth Court of Appeals found that

the amount due under the Note, excluding attorneys’ fees, was $7,044,041.20. Id.

48. On November 30, 2010, the Debtor renewed efforts to settle through

ORIX. ORIX rejected the Debtor’s $7.25 million offer and sought the appointment of a

receiver. The Fourth Court of Appeals entered an order setting a hearing to appoint a

receiver. Debtor’s attempts at negotiation with ORIX failed, thereby precipitating the

filing of this Chapter 11.

F. The ORIX Proof of Claim

49. On April 20, 2011, ORIX filed a proof of claim with the Bankruptcy Court

asserting a secured claim against Plaintiff in the amount of $8,564,759.68, and, to the

extent ORIX is an oversecured creditor, additional sums for post petition interest and

fees, costs and charges (the “ORIX Claim”).

50. ORIX identifies itself as the “creditor” in the ORIX Claim and does not

purport to file the claim in an agency or representative capacity, but as the owner and

holder of the claim. Moreover, ORIX alleges to be a secured creditor based on the

Loan Documents attached as exhibits to the ORIX Claim. Accordingly, ORIX

represents to this Court that it is the owner and holder of the Note, the Deed of Trust,

the UCC Security Agreement and Assignment the Assignment of Rents.

COUNT I
DETERMINATION OF EXTENT AND VALIDITY OF LIEN (TRUST)
11 U.S.C. § 506(d) and § 544(a)

51. The allegations set forth in paragraphs 1 through 50 above are

incorporated herein by reference.

52. Tex. Local Gov’t Code §192.007 requires as follows:

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 RECORDS OF RELEASES AND OTHER ACTIONS. (a) To
release, transfer, assign, or take another action relating to
an instrument that is filed, registered, or recorded in the
office of the county clerk, a person must file, register, or
record another instrument relating to the action in the
same manner as the original instrument was required to be
filed, registered, or recorded.

53. No document exists in the public records of Bexar County, Texas

reflecting any transfer or assignment of any of the Loan Documents from LNB to the

Trust.

54. The Trust has not filed a proof of claim in this case and has failed to file

any document evidencing that it is the transferee, owner or holder of the Note or the

other Loan Documents. Moreover, the Trust has failed to provide any evidence that it

has acquired an interest in the Loan Documents in conformity with the requirements

of the PSA.

55. The PSA provides that the sole settlor of the Trust was GS Mortgage

Securities Corporation II. GS Mortgage Corporation II never owned or held the Loan

Documents and therefore cold not have conveyed any interest in the Loan Documents

to the Trust.

56. The Loan Documents were transferred, assigned or otherwise conveyed

to LNB “as Custodian or Trustee” prior to the establishment of the Trust by the PSA

and in contravention of the terms of the PSA.

57. Neither the PSA nor any other agreement authorizes AMRESCO to

directly transfer the Loan Documents to LNB on behalf of the Trust.

58. Section 8.02(b)(vii) of the PSA prohibits the Trustee from accepting any

contribution of assets to the Trust after January 20, 1999.

COMPLAINT
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 59. The PSA is governed by New York law. See PSA at § 10.03. New York

Estate Powers and Trust Law § 7-2.4 provides that transactions undertaken by a

trustee in contravention of the trust agreement are void.

60. Pursuant to the PSA, New York law, Texas law and 11 U.S.C. § 506(d),

the Trust’s lien is void. Accordingly, the Deed of Trust, the UCC Security Agreement

and Assignment the Assignment of Rents should be deemed void and/or satisfied.

61. 11 U.S.C. § 544(a) provides that the Plaintiff is vested with the rights and

status of a hypothetical judicial lien creditor whose lien was perfected at the time of

the bankruptcy petition. Such status under 11 U.S.C. § 544(a) allows Plaintiff to avoid

an unperfected security interest in a debtor’s assets.

62. As a result of the failure of the Trust’s alleged security interest as set

forth herein, this Court should determine that the Trust does not hold a perfected

security interest in any assets of the Debtor as of the Petition Date.

63. Alternatively, the Trust’s alleged liens are avoidable by a hypothetical

creditor that, on the Petition Date, extended credit to the Debtor and obtained with

respect to such credit (1) a judicial lien on all property on which a creditor on a simple

contract could have obtained a judicial lien and (2) an execution against the debtor

that is returned unsatisfied at such time.

64. Pursuant to 11 U.S.C. §§ 544(a)(1) and (2), 550, 551, and 506, the

Trust’s alleged security interest should be declared void; the Trust’s claim should be

disallowed in its entirety as a secured claim; the lien should be preserved for the

benefit of Plaintiff’s bankruptcy estate.

COMPLAINT
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 COUNT II
DETERMINATION OF EXTENT AND VALIDITY OF LIEN (ORIX)
11 U.S.C. § 506(d) and § 544(a)

65. The allegations set forth in paragraphs 1 through 64 above are

incorporated herein by reference.

66. ORIX alleges in the ORIX Claim that it is the owner and holder of the

Loan Documents and is a secured creditor of the Plaintiff with liens encumbering the

Plaintiff’s real and personal property.

67. No document exists in the public records of Bexar County, Texas

reflecting any transfer or assignment of any of the Loan Documents from LNB (the last

holder of record of the Loan Documents) to ORIX. The ORIX Claim fails to establish

that (i) ORIX holds any claims against Plaintiff; (ii) that ORIX is in possession of or is a

transferee, holder or holder in due course of the Note or is the owner of any of the

Loan Documents.

68. Pursuant to the laws of the State of Texas, and specifically Tex. Bus. &

Com Code §§ 3.201, 3-203, and 3.306, Tex. Local Gov’t Code §192.007 (among others)

and 11 U.S.C. §§ 544(a) and 506(d), ORIX is not a creditor of this Debtor.

69. Any alleged security interest on behalf of ORIX in the Debtor’s assets is

voidable by a hypothetical creditor that, on the date on which the petition commencing

this case was filed, extended credit to the debtor and obtained with respect to such

credit (1) a judicial lien on all property on which a creditor on a simple contract could

have obtained a judicial lien and (2) an execution against the debtor that is returned

unsatisfied at such time.

70. Pursuant to 11 U.S.C. §§ 544(a)(1) and (2), 550, 551, and 506, the

alleged security interest of ORIX should be declared void; ORIX’s claim should be

COMPLAINT
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disallowed in its entirety as a secured claim; and the lien should be preserved for the

benefit of Plaintiff’s bankruptcy estate.

COUNT III
DETERMINATION OF EXTENT AND VALIDITY OF LIEN (TRUSTEE)
11 U.S.C. § 506(d) and § 544(a)

71. The allegations set forth in paragraphs 1 through 70 above are

incorporated herein by reference.

72. The Mortgage Assignment and the LNB Allonge purport to transfer the

Note and the other Loan Documents to LNB as “Custodian or Trustee.”

73. On the date the LNB Allonge and the Mortgage Assignment were

executed, the Trust did not exist.

74. Neither the LNB Allonge nor the Mortgage Assignment is effective to

create a trust under applicable law.

75. The Deed of Trust constitutes an interest in real property.

76. No written document purports to identify the bailee, trust or beneficiary

of the trust or bailment for whom LNB (and ultimately its successors, including the

Trustee) served.

77. The LNB Allonge and the Mortgage Assignment are void under applicable

law

78. Plaintiff seeks a determination under 11 USC § 506 and 28 USC 2201(a)

as to the extent and validity, if any, of the liens asserted by the Trustee and a

determination of the identity of the beneficial owner(s) of the Note and other Loan

Documents.

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 79. As a result of the failure of the Trustee’s alleged security interest as set

forth herein, the Trustee does not have a perfected security interest as of the Petition

Date. Based upon the foregoing, and pursuant to 11 U.S.C. § 544(a), 550, 551 and

506, Plaintiff may avoid the Trustee’s alleged lien because any such lien is not

perfected. Accordingly, the Trustee’s alleged Lien is unenforceable as against the

Plaintiff.

80. Pursuant to 11 U.S.C. §§ 544(a)(1) and (2), 550, 551, and 506, the above-

described security interest should be declared void; the above-described claim should

be disallowed in its entirety as a secured claim; the lien should be preserved for the

benefit of Plaintiff’s bankruptcy estate.

COUNT IV
DETERMINATION OF EXTENT AND VALIDITY OF LIEN (UNKNOWN DEFENDANTS)
11 U.S.C. § 506(d) and § 544(a)

81. The allegations set forth in paragraphs 1 through 80 above are

incorporated herein by reference.

82. Plaintiff seeks a determination under 11 USC § 506 and 28 USC 2201(a)

as to the extent and validity, if any, of the liens asserted by the Unknown Defendants

and a determination of the identity of the beneficial owner(s) of the Note and other

Loan Documents.

83. As a result of the failure of the alleged security interest as set forth

herein, the Unknown Defendants do not have a perfected security interest as of the

Petition Date. Based upon the foregoing, and pursuant to 11 U.S.C. § 544(a), 550,

551 and 506, Plaintiff may avoid the alleged liens of any Unknown Defendants

because any such lien is not perfected. Accordingly, any lien alleged by an Unknown

Defendant is unenforceable as against the Plaintiff.

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 84. Pursuant to 11 U.S.C. §§ 544(a)(1) and (2), 550, 551, and 506, the above-

described security interest should be declared void; the above-described claim should

be disallowed in its entirety as a secured claim; the lien should be preserved for the

benefit of Plaintiff’s bankruptcy estate.

COUNT V
DETERMINATION OF EXTENT AND VALIDITY OF UCC LIEN OF ALL
DEFENDANTS
11 U.S.C. § 506(d) and § 544(a)

85. The allegations set forth in paragraphs 1 through 84 above are

incorporated herein by reference

86. Defendants assert a valid and perfected Security interest pursuant to

Article 9 of the Tex. Bus. & Comm. Code on all of the Debtor’s tangible and intangible

personal property, including but not limited to the accounts receivable and proceeds

generated by the Debtor from operations.

87. Under applicable law, the extent, validity and priority of an alleged lien

upon the revenues generated from the operations of a hotel are governed by Article 9

of the Tex. Bus. & Comm. Code.

88. On or about September 25, 1998, AMRESCO filed a UCC-1 financing

statement with the Secretary of State for the State of Texas, perfecting its lien upon

certain assets of the Debtor (the “AMRESCO UCC-1”).

89. On or about September 25, 1998 AMRESCO entered into a Total

Assignment of Financing Statement transferring “all of its rights” under the AMRESCO

UCC-1 to LNB. As of that date, AMRESCO no longer held any rights or interest in the

UCC Security Agreement.

90. The AMRESCO UCC-1 was effective to perfect a lien only for a period of 6

years from the date of its original filing.

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 91. On or about August 11, 2003 and again on April 28, 2008, AMRESCO

filed continuation statements purporting to continue the effectiveness of the perfection

of the UCC Security Agreement.

92. At the time the continuation statements were filed by AMRESCO,

AMRESCO was no longer an operating entity and held no rights or interests in the

UCC Security Agreement, having previously transferred all such rights to LNB.

93. LNB has never filed any continuation statements with the Texas

Secretary of State, nor has any other party alleging a lien upon assets of the Debtor.

94. As a result of the failure of the Defendants’ alleged UCC security interest

as set forth herein, the Defendants’ do not have a perfected security interest as of the

Petition Date. Based upon the foregoing, and pursuant to 11 U.S.C. § 544(a), 550,

551 and 506, Plaintiff may avoid the Defendants’ alleged lien because any such lien is

not perfected. Accordingly, the Defendants’ alleged Lien is unenforceable as against

the Plaintiff.

95. Pursuant to 11 U.S.C. §§ 544(a)(1) and (2), 550, 551, and 506, the above-

described UCC security interest should be declared void; the above-described claim

should be disallowed in its entirety as a secured claim; the lien should be preserved

for the benefit of Plaintiff’s bankruptcy estate.

COUNT V
OBJECTION TO THE ORIX CLAIM

96. The allegations set forth in paragraphs 1 through 95 above are

incorporated herein by reference.

A. Offsetting Claims for Breach of Contract

97. The Claim should be disallowed because the Debtor is not indebted to

ORIX in any amount.

COMPLAINT
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 98. In the Alternative, and in the event ORIX is a creditor, the ORIX Claim

should be disallowed in the amount stated because it overstates non-default interest

owed under the Note.

99. The Note provides that the Monthly Payment of $56,874.97 was

calculated by applying the Non -Default Interest Rate to the original principal amount

and amortizing the indebtedness over a period of twenty-five (25) years.

100. The Note further provides that the interest on the principal sum “shall be

calculated on the basis of the actual number of days elapsed in the applicable

calendar month multiplied by a daily rate based upon a 360-day year,…” a day-count

formula known as “Actual/360.” The Actual/360 formula calls for the borrower to pay

interest for the actual number of days in a month, the effect of which is 5 or 6

additional days of interest payments a year, causing the Applicable Interest Rate to be

higher than represented and leaving the loan balance 1 to 2% higher than a

conventional 30/360 10-year loan with the same payment.

101. Based on the foregoing allegations, the Debtor alleges that the Trust

breached the Note by applying an effective interest rate that exceeded 6.53% Non

Default Interest Rate provided for in the Note.

102. Accordingly, the Debtor requests the Court reduce the amounts due and

owing under the Loan Documents, if any, by the excess interest charged on the Note.

B. Failure To Credit Impound Accounts

103. On August 18, 2009, the Special Servicer provided a statement to the

Debtor showing impound account balances totaling $175,427.40. See Capmark

Statement, dated August 18, 2009, a true and correct copy of which is attached hereto

at Exhibit I. At the request of ORIX, the Debtor made an additional escrow payment

of $293,637.28 for the limited purpose of funding impound accounts. Accordingly, the

COMPLAINT
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impound accounts totaled $469,064.68. Out of these accounts, ORIX paid property

taxes in the amount of $240,993.63, leaving a remaining balance of $228,068.05.

104. The allowed amount of any claim arising out of the Note should be

reduced by an amount equal to the remaining balance in the impound account.

C. Disallowance of Pre-Maturity Date Penalty Interest

105. The Note provides that on an Event of Default, the Debtor “shall pay

interest on the entire unpaid principal sum and any other amounts due under the

Loan Documents at the rate equal to the lesser of (a) the maximum rate permitted by

applicable law, or (b) the greater of (i) five percent (5%) above the Applicable Interest

Rate or (ii) five percent (5%) above the Prime Rate….” See Note at p. 3.

106. On March 16, 2009, ORIX sent a Notice of Default and Recourse Trigger

(the “Notice of Retroactive Default”), alleging that certain loans from individuals and

entities affiliated with the Debtor’s principal from as early as April 16, 2008,

constituted Events of Default. The Notice of Retroactive Default alleged that the loans

from insiders were a breach of a representation resulting in the immediate imposition

of the default interest rate under the note, applied retroactively to the date of the

alleged default. The Notice of Retroactive Default alleged that the insider loans

triggered a default under Section 23(e) of the Deed of Trust as a breach of a

representation made to the lender. See Notice of Retroactive Default, dated March 16,

2009, a true and correct copy of which is attached hereto as Exhibit J.

107. Section 23(e) of the Deed of Trust provides as follows:

The term “Event of Default” as used herein shall mean the

occurrence or happening, at any time and from time to
time, of any one or more of the following:

(e) if any representation or warranty of Mortgagor, or of

any Guarantor, made herein, in any Loan Document, any
guaranty, or in any certificate, report, financial statement
or other instrument or document furnished to Mortgagee
shall have been false or misleading in any material respect
when made;

COMPLAINT
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See Mortgage at § 23(e)(emphasis added). In its Notice of Retroactive Default, ORIX

omitted the words highlighted above (“when made”) from its quoted portion of the

Mortgage provision and substituted an ellipsis instead. The omitted words are

precisely the portion of the phrase that make the Event of Default inapt: On

September 25, 1998, the date the Mortgage was executed by the Debtor, the Debtor

had not incurred any indebtedness (other than the Note) and had no intention to do

so.

108. Section 23(l) of the Deed of Trust provides that a breach of a covenant is

an event of default, but requires the Mortgagee to provide the Mortgagor notice of the

default and twenty days within which to cure. Claimants failure to abide by the terms

of the Note and Deed of Trust and afford the Debtor the contractually -required

opportunity to cure must result in the disallowance of the pre-maturity default

interest asserted in the Claim.

109. The amount sought in the ORIX Claim for default interest accruing prior

to September 25, 2008 should be disallowed in its entirety.

D. Disallowance of Late Charges

110. The Note provides that if any installment payment, including the final

balloon payment, is not received within ten days of its due date, then the borrower

must pay “upon demand an amount equal to the lesser of (a) five percent (5%) of such

unpaid sum or (b) the maximum amount permitted by applicable law to defray the

expenses incurred by [the Trustee] for the loss of the use of such delinquent

payment….” See Note at p. 2.

111. The Debtor failed to pay the balloon payment on October 1, 2008. At

that time and at all times subsequent, ORIX was entitled to default interest (discussed

above) and suffered no expenses on account of the unpaid balloon. Accordingly, ORIX

should have applied the “lesser” of the two provisions ($0 in expenses) and not the

$333,040.01 in late fees added to the balance due under the Note by charging the

Debtor 5% of the unpaid portion of the Note.

COMPLAINT
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 112. The “Late Fee” asserted in the ORIX Claim should be disallowed in its

entirety.

E. Disallowance of Attorneys’ Fees and Costs

113. The Claim seeks an unspecified amount for alleged attorneys fees and

costs.

114. Plaintiff asserts that the fees are unreasonable, unnecessary, excessive

and exceed the value of the services provided.

115. The unliquidated and contingent attorneys fees and costs alleged in the

ORIX Claim should be disallowed in their entirety.

F. Disallowance of Pendency Penalty (Default Rate) Interest

116. The ORIX Claim seeks an unspecified amount for post-petition interest.

117. The default rate provided in the Note is 11.53%, a spread of 5% above the

Non Default Interest Rate.

118. To the extent the Court determines that assessment of post-petition

interest is appropriate on the ORIX Claim, the Court should apply a rate less than or

equal to the Non-Default Interest Rate based on a balancing of the equities, including,

but not limited to the following:

(a) The spread between the default and Non-Default Interest Rates is

substantial;

(b) The spread between the default interest rate and the market rate of

interest during the period in question is substantial;

(c) Defendants have charged and attempted to collect inappropriate late fees

and default interest;

(d) Defendants have charged and attempted to collect Non Default Interest

in excess of the contractually permitted Non Default Interest Rate;

(e) Defendants’ inequitable conduct as found by the State Trial Court in its

Findings of Fact and Conclusions of Law, including the following

(i) intentional interference with Plaintiff’s ability to avoid foreclosure

and pay the Note;

COMPLAINT
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 (ii) intentional interference with Plaintiff’s efforts to refinance and

therefore pay off the Note; and

(iii) Defendants’ failure to comply with the terms of the Note.

104. The extent this Court determines that ORIX is entitled to assess

pendency rate interest on the principal balance of its claim, the Court should allow

such interest at a rate equal to or less than the Non Default Interest Rate.

WHEREFORE, the Debtor respectfully requests that the Court enter orders

granting the relief requested herein and granting such other and further relief as is

just and equitable.

Respectfully submitted this the ______ day of May, 2011.

OPPENHEIMER, BLEND,
HARRISON & TATE, INC.
711 Navarro, Sixth Floor
San Antonio, TX 78205
Telephone: (210) 224-2000
Facsimile: (210) 224-7540

By: ___/s/ Debra L. Innocenti________________

Raymond W. Battaglia
State Bar No. 01918055
Debra L. Innocenti
State Bar No. 24046135

ATTORNEYS FOR DEBTOR

COMPLAINT
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 CERTIFICATE OF SERVICE

I hereby certify that I have served a true and correct copy of the above and
foregoing document by First Class mail, postage prepaid, or by electronic mail on this
the ______ day of May, 2011, addressed to the following parties:

Claiborne Gregory, Jr.

JACKSON WALKER LLP
112 E. Pecan Street, Suite 2400
San Antonio, Texas 78205
(210) 228-2410
(210) 978-7790 facsimile
Email: cgregory@jw.com

___/s/ Debra L. Innocenti_________________

DEBRA L. INNOCENTI

COMPLAINT
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