fdic response to homestead

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BLACK HELTERLINE LLP805 SW Broadway, Ste. 1900

Portland, OR 97205503 224-5560

Page 1 of 6 FEDERAL DEPOSIT INSURANCE CORPORATION ASRECEIVER FOR COWLITZ BANKS REPLY TO DEBTORS RESPONSE TOOBJECTION TO DEBTORS CLAIM OF HOMESTEAD EXEMPTION745579

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The Hon. Paul B. Snyder Chapter 7Federal Building500 W. 12th Street, 2nd Floor Vancouver, WashingtonHearing Date: October 1, 2013

Hearing Time: 9:00 amResponse Date: September 24, 2013

UNITED STATES BANKRUPTCY COURTWESTERN DISTRICT OF WASHINGTON

AT TACOMA

In re

Mark A. Leonard,

Debtor.

Case No. 13-43836-PBS

FEDERAL DEPOSIT INSURANCECORPORATION AS RECEIVER FOR COWLITZ BANKS REPLY TODEBTORS RESPONSE TOOBJECTION TO DEBTORS CLAIMOF HOMESTEAD EXEMPTION

Comes now Federal Deposit Insurance Corporation as Receiver for Cowlitz

Bank (Creditor) and hereby replies to Debtors Response to Objection to Debtors Claim of

Homestead Exemption (Response) and states:

1. The Debtor cannot demonstrate actual good faith intent to support his

claim of homestead exemption in the commercial property located at 5225 Meeker Drive,

Kalama, Washington 98625 (the Meeker Drive Property).

Case 13-43836-PBS Doc 50 Filed 09/26/13 Ent. 09/26/13 16:04:05 Pg. 1 of 28


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THE LEASE

4. The Supreme Court of Washington has determined that in the case of

declaring a valid homestead during occupancy of the premises by a tenant, the owner must

take steps to dispossess the tenant that will allow him or her to move upon the premises and

use it as a home. Canadian Bank of Commerce v. Kellough , 142 Wash. 335, 337, 253 P. 124

(1927). In Canadian Bank of Commerce , the court determined that because the defendant did

not take any action to obtain possession of the premises, his declaration of homestead had not

been filed in good faith. The Court stated:

True, he attempted to enter into possession and be physicallythereon with intent to file his declaration, but, as we havealready seen, he did this by subterfuge, and his action canhardly be characterized as being in good faith, and in so far asthe court found that the declaration was filed in good faith, wemust hold that this was error. It is apparent that the purpose of filing this declaration was to avoid the execution upon his

property

Id.5. Like the defendant in Canadian Bank of Commerce , the Debtor was

leasing the Meeker Drive Property at the time he executed and recorded the Declaration of

Homestead on April 26, 2013.

6. The lease was made to Tytan International, Inc. (Tytan), a subsidiary

owned by Tytan Holdings, Inc. (Holdings). The Debtor controls both Tytan and Holdings

by virtue of his majority ownership in preferred stock of Holdings. The Debtor acts as the

President of Tytan and the CEO of Holdings.

7. The lease, a copy of which is attached hereto as Exhibit E, is dated

July 6, 2008. It provides a term of seven years and monthly payments to Mark Leonard in

the amount of $4,000.00 beginning July 6, 2008.

8. According to the OTC Pink Basic Disclosure Guidelines (OTC) that



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the Debtor, as CEO of Holdings, submitted to the United States Securities and Exchange

Commission on June 27, 2013 2, the Meeker Drive Property is leased to Holdings, not Tytan.

As stated in the OTC, the Meeker Drive Property acts as corporate headquarters, a retail

dealership, inventory storage, service shop, parts department, shipping depot and showroom,

not as a residence.

9. In order to support the homestead exemption in the Meeker Drive

Property, the Debtor states in his Response that Tytan is in default of the lease and that he

now intends to cancel the lease and re-enter the property (subject, of course, to the Chapter 7

Trustees ownership of property of the estate).10. According to Tytan Holdings, Incs Quarterly Report March 31, 2012

(Report), which was executed on May 15, 2012 by Mark Leonard, as CEO of Holdings, no

rent had accrued under the Meeker Drive Property lease, making it questionable whether a

default actually exists. A copy of the Report is attached hereto as Exhibit F, which refers to

the lease under Note D on page. 9.

11. Because the validity of the Debtors Declaration of Homestead is

measured on the date it was filed, the Debtor cannot manufacture his good faith intent by

attempting to obtain possession of the Meeker Drive Property now, over four months after he

filed his Declaration of Homestead. See Bank of Anacortes , 10 Wn.App. at 397. In fact,

until filing his Response, the Debtor has evidenced a completely contrary intent. Between

the time of his claim of homestead and the filing of his bankruptcy, Tytan has defaulted

under the lease by failing to make payments yet the Debtor continued to allow it to operate

its business on the Meeker Drive Property.

2 Exhibit B, pp. 3-4 attached to the Objection to Homestead Exemption, filed as Dkt . No . 27.



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HIGHWAY COMMERCIAL DISTRICT ZONING OF PROPERTY

12. The Meeker Drive Property is zoned C-2, Highway Commercial

District, by the City of Kalama, Washington. A mixed use or multiple use building in the

C-2 zone, such as could contain a residence, is considered a conditional use. Kalama,

Washington, Code of Ordinances, Title 17, Zoning (Code), 17.60.020.

13. According to the Code, Section 17.48.010 allows nonconforming use

of a structure without a conditional use permit only if the use was in existence as of the

effective date of the ordinance, which was 2007. See Kalama City Ordinance 1204. If any

building or part thereof formerly used by a nonconforming use has been unoccupied or unused continuously for a period of at least one year, the building or part thereof shall not be

reoccupied except by a conforming use. Code , 17.48.030.

14. Through his own admission under penalty of perjury, the Debtor

claimed the property located at 160 Horseshoe Bend Estates, Kelso, Washington as his

residence in August 2010. 3

15. Thus, in order to legally consider the Meeker Street property as a

mixed or multiple use building and have his residence there, the Debtor needed to obtain a

conditional use permit. Code , 17.54.010- 17.54.090. 4

16. As discussed supra, good faith intent is measured at the time the

Debtor recorded the Declaration of Homestead. Bank of Anacortes , 10 Wn.App. at 397. At

the time the Debtor recorded the Declaration, any present or future residence at the Meeker

Drive Property was illegal without a conditional use permit.

3 Exhibit A, p. 1 attached to Creditors Objection to Exemption filed as Dkt. No . 27.4 The Debtors statement in the Response that he been assured by Mr. Matt Herman, who is in fact a KalamaCity Planner, not a Cowlitz County Commissioner, that his residency is not contrary to any zoning ordinance ishearsay and should be given no weight in this proceeding.



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17. Unlawful use of the Meeker Drive Property does not comport with the

statutory requirement of good faith intent to make a dwelling a residence. It is not the

purpose of the homestead exemption to enable one to escape just liabilities or to perpetrate a

fraud or injustice. See Clark v. Davis , 37 Wash.2d 850, 852 (1951).

DATED this 26 th day of September, 2013.

BLACK HELTERLINE LLP

By: /s/ Britta E. WarrenRonald T. Adams, WSBA No. [email protected] E. Warren, WSBA No. 43329

[email protected]: (503) 224-6148Of Attorneys for Federal Deposit InsuranceCorporation as Receiver for Cowlitz Bank



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Portland, OR 97205503 224-5560

CERTIFICATE OF SERVICE745579

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CERTIFICATE OF SERVICE

I hereby certify that I served a true and correct copy of the foregoing FEDERAL

DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR COWLITZ BANKS REPLY TO

DEBTORS RESPONSE TO OBJECTION TO DEBTORS CLAIM OF HOMESTEAD

EXEMPTION upon:

Mark A. Leonard PO Box 1249Kalama, WA 98625

Debtor

McCarthy & Holthus, LLP19735 10th Ave. NE, Ste. N200Poulsbo, WA 98370

Special Notice Request GMAC Mortgage, LLCATTN: Bankruptcy Department1100 Virginia Dr.Fort Washington, PA 19034

Special Notice Request

GE Capital Retail Bank c/o Recovery Management Systems Corporation25 SE 2nd Avenue, Suite 1120Miami, FL 33131-1605

Special Notice Request

by mailing a true copy thereof in a sealed, first-class postage prepaid envelope, tosaid addresses as shown above and deposited in the United States Mail at Portland, Oregon on thedate set forth below.

And upon:

Russell D. [email protected]

Chapter 7 Trustee

Robert C. [email protected]

Debtors Attorney

US Trustees [email protected]

US Trustee

by electronic notification via the Courts ECF system.

DATED this 26 th day of September, 2013.

BLACK HELTERLINE LLP

By: /s/ Britta E. WarrenRonald T. Adams, WSBA No. [email protected] E. Warren, WSBA No. 43329

[email protected]: (503) 224-6148Of Attorneys for Federal Deposit InsuranceCorporation as Receiver for Cowlitz Bank



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TYTA~ LEASF:

THIS LEASt maue this __ 6Ih __ Jay of __ . Jl,lb _/\ ! .I:omu'd, lessor, and J) tall rnt~.InrUi(}nallJ.LL __ ..__. _

,\ ITNESSETfI:

__. 2008, hCtWl.'(:\1 \1ark

_ _ . . . < 1 . . , $Lcs:'l\.'e.

I. LEASE OF PRF\-JlSES. T 1 1 . :r.~SSOI' dues hereby It:ase to lessee. and Lc~.sttdoes hcreb) I.;asc from Lessor. thosl::certain Premise~ situate in the City of Kalama. Count., of Cowlitz. State of Washington. described as follows:

)225 I\lccker Drive. Kalama \VA 986::'5 Parcel i f . 315105 or T2H

.;. fRSI'\'ESS Pl 'BrOSt:'. 1 he Premises are !O be us~d for the purpose of conducting therein __ T\-l31LTracror Busi~ .________ and g.eneral business activities with the \Hillen COllselH of l.esSllr. which ~haU not be unrca.'i,mabl) withheld and for no other busines~ or purpose. without thl: written consent o( Lessor.

3. TER". Th e t.~rnl oflhis Lease sh ed l be f ()I' __ ... _...s~~ (7} y t: a r s U11d 7erj) 0_ (0) months, [md 3hall commence on the full day 01 ' 1lJ.b::-.., :l008, and

I:nd on the 30th. dayof .-Jl .uK _, 2il1.2.-.indusiyc. SLAhjt:ctto extl'nsionor rc-cilll.:tionthcn;uCdependent upon deliveryof possession ofthc Premises asprmided in Section 13 of this Lea..


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which is k\ jed on Lessor, or any other tit\" or fee on rcnls hO\\"('\ cr categorized. shall be paid as

additional rent, except thar no under 00 circllmstances shall] .essec he requin:d to PflYany stnh:or r..:deml income tax Il f"L,"ssor. or any inheritance t;'1Xt'S of L(~ssor.

6. RErAIH~. Lessee sh;llJ t(l~e good can: ofthc Premises and. ut I.C'iscc':,cost anJC':xp~ns.;.sfwl1 maKeall repairs and n:plac..::mcnls, slrucLUmlan d olhcmise. as and \vhen I.essor deems necc~~ury to presern: the Pr


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11. UEj\"S A :S1> t\SOLVENCY. Lessee shall Kl:ep the kasl.:d Premises and the property in which the ll:.bl'd Pn.:rnises are situatd free from any Ikm arising out of sor's~\;pellse by an appraisal conducted by un appraiser selected by Lessor.

16. S('UROGATlO;S WAIVER. 'I he Lessor :1nd lhe l.essee. respectfully. contract

to wa;\e and re1case any right ofrecov.::ry againsl each other or against an)


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17. ~OIICES. /\11)' nOlic.::rcqttircd to be sl'f\t;:d in acwrdance w!rh the lcrm~ or this l.ease shall be s~nt by maiL the uotie:: from tbe I.css~c 10 he sent 10 the Lessor or Lessor'sagent:;. wxl the nnlicl.' li'om the Lessor to be Sent to Lessee at thc' l.::ascdPremist:s.

Lessor's address:

\lark Leonard PC, Bux 1249Kalamn. \VA9R615

I.cssee's address:

J~J4n Jnt\;;rnmjorwl1m;5::;5 \leckrr nrj\.~

Kalama. \VA 986li_lknb.Qlls,'.:.L3..6..Q).61l1 278

18. GOVERNMENTAl. FEES. All [eo=:; paynble 10 the City. Count) or Stale duringIhl: Iii';;: of' this Lease shflll be paid by Le;;s~::: 1'01' the business conducted by lessee on said

property und for any of Lessee's pcrsonai propt'rty maintained lhereon.

19. SIGNS All si!lns, marquees. or symbols placed on the Premises. or UjX\11any of the h~a~ed property shall be subject to the appro\ al d' \h~ T.~ssm. Any sign fixtures or marquci.:sso placed on the Premists shall be so placed with the understanding and agrc~mcnt that theLessee \\ ill nol rerml\e samt: at the t~m)ination of the tcmmc~.

20. \LTER.\IIONS. l.essee shaH not ma\.;eany alterations, additionsor impr(m:m ....msin SHielPn:mi~e~ \\ !Ihou; lill' I:on:,.. ('nt o r Lc.:::;:-;0r ill "riling. lir~t had and obtained. and allalterations, auditions and impro\l:mCnlS which shall \x; made. shall he al the sole cost and c:xp-.-nsc of Lcssc,:. and shall occome the property of th" L...::ssor.and shall remain Oil and besurrendered with the Pr\?mises m; a PUl1 thereof t~1 Ihe termination of [hb Lease, withoutdisturhance. molestation or injury. If the I.c.SSCC shaH perform "ork with the cons(-m of theLessor. as afoi'\;'&"'lid.Lessec- agree:: to ct1mply \\ith ail laws, ordinances. rlIf.es and r-eguiatinns \)1'the County of Cowlitz or any other authorized public authority.

21. IU:FALL'I ANI> HIWNTBY, If ,my relH~ abo\'c r~~scf\'ed. or ~m) pan [hereof shall remain unpaid \\ht:T Ih~ same $ha11 beo'lm: d\lc. or !r I esse\: shall violate or deHltlh in ilnyof the covenants and agreements her::in contained. thi:ll the Lessor mllY c


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n COSTS ANn ATToRrsrys' fEES. !r o yrC:.lSUllo ran~ default onthe par t o f the: l,cSSL'cor in th e - eYellt th(lt an\' m;tion. su it . o r other proceeding is instituted concerning or arising from this Lease. thepre\'ailing party shall rcl;'O\..:r aU of such part)'~ costs. and attol'lley:;fees incurred in each and every such ,Klion. ;;ui\. or other proceeding. including all) and allappeals or petitions therefrom from th ~ non-prevailing pany. As used herein. Attorneys fi:essl1,ti I rm:an tlll: fun and adual costs of any legal st:n'k~'s unuall) n::ndl.'rcd inconncc:ion \\ith themaner:-- involved, calculated on the basis of the usual fce charg~d by the aftorneys ~rtormingsuch services. Any such action shall be C(Hillf\l::nced and maintained in Cowlitz County.

\\ushington. r~garJless o r Lcsste's rc:;id;;m'~ or pla~,,' of business.

23. ~QN.WAJVER Of BREACH. The lll ilmc of the Lcs:"or to insist upon str ict pcrfi.mmmce of any of the covenants and agrcCIlli:llls of this I.easc. or to ext'n;is~ any optionherein confc:rrc.d ill anyone or more inslam;..:s, shall not be construtd to be a "ai\cr or relinquishment of a:1) such. or any Ot!lcr. cC'\enanh or ;',gn:ell1~ms. hill the same shall be and

remain in full force and dfcct.

24. RE:\lOVAI. OF pROpERTY. 1n the ~\'ent of any emr)' in. Of taking possessionof. the leased Premises as aforesuld_ the 1. ..:sSOI' s!1all have the right. but not the obligation. toremove !"nnn the leased Premi


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damage and expe;:nse including. wilhout limitation, penal1i~s, fines and reas.onahle attorney fc('s.incuIT-cd in conm:ction with or ari:iing Ji'om any cauS(:',\hatsoc\cr in, on or about the Premises.including. without limiting the generality of the foregoing (a) an) dd "'LeaSt.::on l.essee's part to be observed or pc6mm:d, or (b) the use or occupancy or manner of usc 01' occupancy (If the Premises h: L::ssce or any person claiming througb or under Lessee. or II,;) thc condition orthe Premises or an} occuccncc or l1app(.:ning on the PrcnJiscs :roma l l! cUU:>C\\hab~)C\Cr: or (d)any aC1 :" omissions o r negligence of Lessee or any per sonchiming through or under I.. C:-;:-;CC,or of The contractors, agents, servants, employees, \ 'is1tor5 or license('s of Lessee or any :mch person, in, on or about the Pn.:rnisc:" or lht: buiklin~, cittH .'l"prior to. during. or ark!" the expirationof, tbe tem1 of this Ll~asc, including withoutlimitation, (tlly acb, ombsiol1~ or n~gligenee in themaking or pcrl~)fning of an:- alteration. Lessee further agrcc5 to indemnif) and save harmlessl.essor. l.essor's agents. ,n othe I,essor or Lessors UndtT all ground or underlying leases. fromand against an) and an loss. cost. liabilit), damage and 0."pense int:luding. without limitation,reosonable attorney fees. incurred in connection with or ariging from an; claim::'> by any p.;rsons

hy reason of injury w persons or dam(\ge to property occasioned by any us.:. occupancy.condition. occurrence. h,"PPt":ning.tKl. ornlssion, or negligence Tcfencd to in the precedingsentence. Lessor shall not be responsible lo r or liable to L\.'ssc'cfor arty loss or dmnage that may be ol:casiom:d b~ or through the acts ur omissions of ~rsons occupying adjoining Premises or any part of the: Prcmi:-c:, ;.wja.eentto or connected \\ ith lhe Premis;;s or any purt of the building or for any loss or damage resulting to Lessee or its property froll! burst stopped or leaking \\ater.gus. sewer or steam pipes or ii'om any damage or loss ol'propeny \\ithin the Premises from anycauses whatsoC\CL includmg then.

J 1.6 E~Ci\..illlQ. F.x~::!.. If Lessee sball dd1mlt in the perfmmunce or its obligationsunder this Lease, L6S0f, at any lime thereafter and withom notice, may remedy such ddttu1L !()f Le:'isee's account and at Lessee's expense. \\ithOl\I thereby waiving any other rights or remedies

of lessor with r~3pecl to ~.uch default.

32, S17BORDINATION. Without till' nel'es$it~ oj'


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agrees to execute and ddiwl', upon demand b~ L~ssor and in lhe l~lrm reqw.:'slcd b) LCSSUJ, allYadditional documents. inc,uding ,illY cSloppel ccni ticalC:; as rnay hi.:n:quired. c\ idcnci ng the priority or subordination of this Lease "iIh respt:1.:tt\) an~ such ~round l..:ascs or unckdy iIlglc[lse~ or the lien (If


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11\ Wll:--'ESS WlILRi:.Ol. the parti~s hereto h a Y C ' executed this Lcusc the day lind ~e;lr iirsl

above written.

1.ESSOR:

\1nrk A Leonard

B Y ; . . _

Personal

LESSEE:

l~lUn Inkrnn\iollal Inc

" ,

)

,.. ,.r'"

lTS:, > ' , ' _ : _ I.

,," ~ t'. \:... -l~l~:;.Z.~.~~::...;~~--

Exhibit EPage 9 of 9Case 13-43836-PBS Doc 50 Filed 09/26/13 Ent. 09/26/13 16:04:05 Pg. 16 of 28


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