Wednesday, October 23, 2013

FL 3rd DCA reversed foreclosure because bank flouted 5-yr Statute of limitations.

Court reluctantly reverses foreclosure because plaintiff ignored Florida 5-year Statute of limitations.

"As someone - probably either St. Thomas More or George Costanza - must have said, the law is the law.  Notwithstanding the distasteful consequences of applying it in this case, it must be served."  Elizabeth Spencer v EMC Mortgage Corporation, 3D11-136, Fla 3rd DCA, 29 August 2012.

Did the court attribute that axiom (the law is the law) to George Costanza, from Seinfeld?

Let's get real, folks.  As Rich Cantwell of Jubilee recently pointed out when he sent me this opinion, many foreclosure victims might have the right to escape foreclosure because the bank has played musical chairs with the note for so long that it has neglected to act within the 5-year statute of limitations on foreclosures.

Florida Statute 95.11 Limitations other than for the recovery of real property.—Actions other than for recovery of real property shall be commenced as follows:
(c)An action to foreclose a mortgage.
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Bob Hurt         Blog 1 2 3   f  t  
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On 10/23/2013 5:54 PM, Rich Cantwell wrote:


Saturday, October 19, 2013

Charleston Judge in Heinrich Foreclosure Dismissal Misconstrues Carpenter v Longan

Foreclosure defender Jeff Barns, Esq posted this article on his web site:


September 20, 2013

In a stunning ruling from the Ninth Judicial Circuit Court of Common Pleas of Charleston, South Carolina, a Judge has issued a detailed, 4-page written opinion dismissing a foreclosure action filed by Deutsche Bank National Trust Company as the claimed trustee of an IndyMac securitization, holding that DB failed to show that it was the owner and holder of the original Note and Mortgage at the time the Complaint was filed. FDN South Carolina network counsel Bill Sloan, Esq. represents the homeowner and prepared and argued the homeowner's Motion to Dismiss.

Counsel for DB made the familiar argument that it had possession of the original Note endorsed in blank, that the Note was a negotiable instrument under the UCC, that the Mortgage follows the Note, and that thus DB had established its right to foreclose. The Court disagreed, citing precedent from the United States Supreme Court's decision in Carpenter v. Longan, 83 U.S. 271, 16 Wall. 271, 21 L.Ed. 313 (1872) which the Court found "clearly supports the notion that the Plaintiff must own the Note and the Mortgage to foreclose on the property (emphasis in the opinion)." The Court determined that "Plaintiff failed to show that it owned the Mortgage at the time the Complaint was filed", and also noted that the Mortgage shows MERS to be the mortgagee but that "MERS is never mentioned in the Note."

The Court stated: "It is clear that to have standing in this foreclosure case, Plaintiff must not only be the holder and owner of the original Note, but also the Mortgage as well. Plaintiff's Complaint in this case fails to meet this criteria. Plaintiff lacks standing to initiate and prosecute the foreclosure, and dismissal pursuant to Rule 17(a) and Rule 12(b)(6) SCRCP is appropriate."

This ruling is based on foreclosure law from the United States Supreme Court, which trumps any contrary state law which does not require the foreclosing Plaintiff to own both the Note and the Mortgage at the time that the foreclosure Complaint is filed. This ruling demonstrates the essential fallacy in the "UCC, I have the Note, mortgage follows the Note" theory espoused by every attorney for the banks and servicers. What remains to be seen is whether the judiciary handling foreclosure cases will follow the law of the U.S. Supreme Court or not.

A copy of the Order is available upon e-mail request.

I asked Jeff for a copy of the order, and Jeff emailed it to me.  I uploaded it to Deutsche_Bank_Trust_v_Heinrich-Charleston_SC_Opinion.pdf .  The Heinrichs filed a motion to dismiss the foreclosure complaint in Charleston SC 9th Judicial Circuit Court pursuant to rules 12 (b)(6) and (7).  Nicholson dismissed pursuant to 12(b)(6) only, on the basis of lack of standing because of bifurcation of the note and mortgage. In his opinion Presiding Judge J. C. Nicholson wrote this:

Plaintiff claims that the note is a negotiable instrument under the South Carolina Uniform Commercial Code, S.C. Code §36-3 et seq. which would entitle them certainly to sue on the note in this action. However, Plaintiff is seeking to foreclose on the mortgage that is attached to the real property as opposed to simply suing on the promissory note.

The idea that the Mortgage follows the Note is one which has been repeatedly confirmed by our courts: "South Carolina recognizes the 'familiar and uncontroverted proposition' that 'the assignment of a note secured by a mortgage carries with it an assignment of mortgage. However, Carpenter v. Longan, 83 U.S. 271, 16 Wall. 271, 21 L.Ed. 313 (1872), quoted by Plaintiffs counsel in this oral argument and brief, clearly supports the notion that the Plaintiff must clearly own the Note and the Mortgage to foreclose on the property. Plaintiff failed to show that it owned the Mortgage at the time the Complaint was filed.  In its complaint, Plaintiff merely contends in §3 of its Complaint that is a holder and has the right to enforce.  Further, the mortgage of this case shows Mortgage Electronic Registration Systems, Inc. (MERS) to be the mortgagee. This was confirmed by Plaintiffs counsel in oral argument. MERS is never mentioned on the Note.

Let us remember that this opinion comes from a state trial court, and that the judge admits going against established South Carolina's traditional adherence to the Carpenter v Longan ideal that one cannot bifurcate (separate) the note from the mortgage, no matter how hard one tries.  The Owner of Beneficial Interest (OOBI) in the note has the right to enforce both the note and the mortgage through foreclosure and sale of the mortgaged property.  The U.S. Supreme Court wrote this suporting text in its Carpenter v Longan opinion:

"The question presented for our determination is, whether an assignee, under the circumstances of this case, takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortgagee. We hold the affirmative….The mortgaged premises are pledged as security for the debt. In proportion as a remedy is denied the contract is violated, and the rights of the assignee are set at naught. In other words, the mortgage ceases to be security for a part or the whole of the debt, its express provisions to the contrary notwithstanding. The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity."

Get it? If remedy (mortgagee taking the mortgaged collateral) is denied (such as by whining about broken chain of ownership of the note), the contract (note and mortgage) is violated.  The court should not force a violation of a valid contract.  Thus, assignment of the mortgage (to a party other than OOBI) becomes a nullity. The owner of beneficial interest in the note ALWAYS HAS THE RIGHT both to enforce the note and to benefit from the remedy in the mortgage security instrument.  And a party with corresponding power under contract to the owner of beneficial interest in the note (like MERS) may enforce the note by using the court to force sale of the mortgaged property in the event the mortgagor breaches the note.  Let us remind ourselves that the OOBI set up MERS as the mortgagee upon execution of the note and mortgage by the maker-mortgagor.  MERS operates as an agent of the OOBI.

Thus, "inseparable" means INSEPARABLE: CANNOT be separated, even if they appear separate or have different beneficiaries on them.

You see, the UCC in Article III Part 3 makes short shrift of many of these concerns by allowing enforceability of the note in spite of OOBI-related confusion. Read this from the Florida Statutes UCC:

673.3011 Person entitled to enforce instrument. — The term "person entitled to enforce" an instrument means:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s.673.3091 or s. 673.4181(4).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

You see, while I have used the term OOBI for simplicity, the UCC uses the term "HOLDER" because it does not matter who OWNS the note, because
  1. the HOLDER can enforce it, and

  2. so can a nonholder possessor, and

  3. so can a nonholder nonpossessor, and

  4. so can a non-OOBI, and

  5. so can a possessor finder or thief.

As to a note indorsed in blank, that made it a bearer instrument enforceable by the possessor or possessor's agent.

I maintain that an assignment or indorsement in blank of the note to the trustee, if invalid/void as an operation of law with respect to limitations in the PSA becomes an assignment or indorsement to the entity identified as trustee in that entity's individual capacity, and not as the trustee. That's how the Glaski court erred in its opinion. A legislative act cannot impair the obligations of contracts, especially the note and mortgage. That would violate the State and US Constitutions. Thus, an assignment of a negotiable instrument under the terms of the note and mortgage cannot be undone by the legislature. Your mortgage or note clearly states the owner of beneficial interest may sell the note, and both custom and the UCC stand in accord with that principle.

You bark up the wrong tree when you take up a position in opposition to those principles I inscribed above. NOTHING can substitute for knowing the law. It means what the highest courts of jurisdiction say it means, not what you or I think it means. And you MUST learn how to read and comprehend the law and its interpretations of meaning by those courts.

When you think no due process exists, you should first of all contemplate HOW YOU MISUNDERSTOOD the law or rules and WHY the court ruled as it did. For one reason, you usually opine wrongly if you disagree with the court. For another, only a higher appeal court can unravel your dispute with the lower court. For yet another, appeals courts sometimes get it wrong, and later panels in the same court reverse earlier rulings by that court.

That's what happened in Carpenter v Longan, and it will happen in the Heinrich opinion if the bank appeals it.  In my opinion, Presiding Judge Nicholson dies not understand the Supreme Court's crystal clear opinion.

As for Jeff, Esq.,'s laud of Nicholson's opinion, I can only conclude that the lawyer doesn't understand the SCOTUS in Carpenter v Longan any better than the judge does.  In due course I shall present supporting case law that shows how most courts around the US view note-mortgage bifurcation as a bogus and failing legal theory. Meanwhile, these articles should satisfy your craving for fairness.  As you read them, ask yourself WHY a lender should have to slog through endless litigation mud to take the collateral for a loan the borrower failed to pay.

In Martins v. BAC Home Loans Servicing, LP, Judges Jerry E. Smith, Edward C. Prado and Priscilla R. Owen dismissed the plaintiff's "show-me-the-note" theory alleging that the defendant lacked standing to foreclose because the assignment of the mortgage by MERS to BAC separated the note from the deed of trust, rendering the mortgage unenforceable and invalid. "Numerous district courts have addressed this question, and each one to analyze Texas law has concluded that Texas recognizes assignment of mortgages through MERS and its equivalents as valid and enforceable," Judge Smith wrote on behalf of the panel. The Court further held that Texas differentiates between enforcement of a note and foreclosure, with the latter enforcing a deed of trust, and can be accomplished without judicial supervision. Importantly, the Court noted that "the mortgage was assigned by MERS, which had been given such power, including the power to foreclose, by the deed of trust."

Judge Thomas Rice of the U.S. District Court, Eastern District of Washington, has ruled in favor of Mortgage Eectronic Registration Systems, Inc. (MERS) and its co-defendant members, denying a nine-count complaint alleging wrongful foreclosure and violations of Washington's Consumer Protection Act (CPA).

MERS has been sued numerous times, with plaintiffs commonly citing the Washington Supreme Court's decision in Bain v. Metropolitan Mortgage Group, Inc. wherein a judge ruled a beneficiary cannot foreclose on a property under Washington state law, and regardless of what cases are cited, MERS continues to argue in court the legitimacy of its role in foreclosures as plaintiffs continue to come forward saying their foreclosures should be voided.

Judge Thomas Rice of the U.S. District Court for the Eastern District of Washington denied a nine-count complaint filed by plaintiff Angela Ukpoma.

Rice, in his May 9 order, found that the defendants are entitled to summary judgment on all of the plaintiff's claims.
In particular, the judge found no merit to Ukpoma's reliance on Bain in support of a wrongful foreclosure count against MERS.
"Contrary to Plaintiff's assertions, the fact that MERS is listed as a beneficiary of the deed of trust is not relevant to the outcome of this case," Rice wrote in his 15-page order.

The highest court in Alabama upheld a lower court opinion that previously validated the ability of Mortgage Electronic Registration Systems to legally assign a mortgage. The decision creates precedent in Alabama, giving MERS a strong legal buffer in the state when similar challenges arise in foreclosure disputes.

In the original case, the homeowners challenged MERS ability 'to assign a mortgage or take other actions as the nominee for a lender and the lenders' assigns.'
The court rejected those claims, with the Alabama Supreme Court affirming its decision without challenging the initial analysis supplied by the lower court.
The original decision concluded that a previous appellate court case in Alabama — Crum v. LaSalle — established that MERS has the ability to assign or take actions in regards to a mortgage as a nominee for a lender and the lender's assigns.

In the Edwards v. MERS case, the homeowner pushed back after Pioneer Lender Trustee Services launched foreclosure proceedings.

The homeowner suggested that listing MERS as beneficiary of the trust was not enough to give MERS the authority to appoint Pioneer as a successor trustee with foreclosure rights.
The Idaho Supreme Court disagreed holding that "the beneficiary has the authority to appoint a successor trustee and MERS, as nominee of the lender, had the authority to appoint Pioneer as successor trustee."

The United States Court of Appeals for the Sixth Circuit affirmed a lower court's decision dismissing plaintiff's action to set aside a foreclosure sale based on alleged violations of the non-judicial foreclosure process in Michigan. After plaintiff defaulted on his mortgage loan,his property was foreclosed upon and sold at a sheriff's sale through Michigan's non-judicial foreclosure process, which provides for a six-month redemption period. Plaintiff subsequently initiated an action seeking to set aside the non-judicial foreclosure asserting that the mortgagee could not foreclose on him because the mortgagee was not the note-holder, mortgage holder, or servicer as required by Michigan law. Plaintiff's claim was based on the assertions that the mortgage assignment was either forged or "robo-signed" and MERS had no authority to assign the mortgage to the foreclosing mortgagee.

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Why the Glaski Foreclosure Reversal Means NOTHING and Charles Cox Got It Wrong
Law Strategist Proves Glaski Panel & Charles Cox Wrong
19 October 2013 by Bob Hurt. Distribute freely.
Last week published the comments and letter from California paralegal Charles Cox to the California Supreme Court asking it to publish the Glaski opinion which banks don't want published. In Glaski, the CA 5th District Court overturned a foreclosure because the plaintiff lacked standing because the Depositor indorsed the note in blank to the Trustee of AFTER the closing date of the trust in violation of the Pooling and Servicing agreement. The court claimed the assignment lacked validity under New York trust law, apparently ignoring the PSA's establishment under Delaware trust law. Banks want the opinion depublished because it could motivate lower courts to halt foreclosures because of violations of the PSA under trust law in other states. See the Court's Glaski opinion here:

I have argued that the Plaintiff had these practical choices:
  1. appeal the obviously bad decision, or
  2. correct the standing problem and redo the foreclosure.
I figure choice 2 would cost less, but the appeal would do the legal community more good by using the California Supreme Court to clear up this nonsense. Either way, Glaski gets to keep the house a while longer, eventually losing it to foreclosure sale. I wrote to Glaski, suggesting Glaski get the mortgage examined comprehensively by a competent professional so as to find proof that the lender cheated Glaski from the beginning. I received no reply to my letter. Clearly, Glaski has drunk the Kool-Aid of useless foreclosure-defenses and securitization-audits that merely postpone the inevitable.

I present below the text from DeadlyClear including Charles Cox's letter, and follow it with a commentary by premier litigation strategist Storm Bradford which proves the nonsense of Cox's position.

Why Charles Cox Agrees with the Glaski Panel
The GLASKI opinion has made the Wall Street banking industry crazy. There was an outcry for publication of this case as it allowed homeowners to challenge fabricated assignments. The Court agreed to publish the opinion.
The securitization case was briefed and argued as a New York law trust case when in fact it was actually a Delaware trust. While the outcome may have likely been the same, the Court’s opinion was based upon New York Trust Law. Thereafter, the banks (that it appears failed to raise these issues during or after the hearings) wanted the opinion to be de-certified for publication.
Apparently, no one realized that the WaMu Mortgage Pass-­Through Certificates Series 2005-­AR17 Trust was a Delaware trust. Frankly, it is hard to believe that anybody even bothered to read the PSA. As a seasoned researcher, right after you verify the Closing Date, the next stop is usually Article II – Conveyances of Mortgages and then you go to Governing Law. The first full paragraph of Section 2.01. Creation of the Trust reads:
LaSalle Bank National Association is hereby appointed as the trustee of the Trust, to have all the rights, duties and obligations of the Trustee with respect to the Trust expressly set forth hereunder, and LaSalle Bank National Association hereby accepts such appointment and the trust created hereby. Christiana Bank & Trust Company is hereby appointed as the Delaware trustee of the Trust, to have all the rights, duties and obligations of theDelaware Trustee with respect to the Trust hereunder, and Christiana Bank & Trust Company hereby accepts such appointment and the trust created hereby. It is the intention of the Company, the Servicer, the Trustee and theDelaware Trustee that the Trust constitute a statutory trust under the Statutory Trust Statute, that this Agreement constitute the governing instrument of the Trust, and that this Agreement amend and restate the Original Trust Agreement. The parties hereto acknowledge and agree that, prior to the execution and delivery hereof, the Delaware Trustee has filed the Certificate of Trust. [emphasis added]
C’mon guys – Delaware Trustee is mentioned 4 times in one paragraph. Nevertheless, the point that the Court was making was that challenge to the assignment by the homeowner should be permitted and even though New York Trust Law was used in the decision, had Delaware trust law been on the table the Court may have reached the same conclusion as Delaware trust law appears even more stringent.
What is amazing is that the banks attorneys tried to use correspondence to re-argue the case and made some disingenuous statements in order to ultimately request depublication of Glaski v. Bank of America, N.A. The depublication rules allow for any person to argue why an opinion should not be published.
While the banks hired their flashy high-priced attorneys to make their depublication requests, it has caused several excellent letters to be written in support of maintaining the publication that the public originally requested to be published.
Michael T. Pines’ letter can be found on Letter to CA Supreme Court from Michael T. Pines in Response and Opposition to the Requests to Depublish Glaski v. Bank of America N.A. Opinion. ”I am writing in opposition to the request by Deutsche Bank National Trust Company’s request to depublish in the above matter. I will only address one issue – the wrongful conduct of counsel seeking depublication,” writes Pines and continues, “A problem with the securitization of loans, is that the banks and their attorneys, that were, and are, involved in securitization serve no one but their own interests. They have violated countless laws. There are of course countless government and private cases pending regarding such. There are government actions, including criminal investigations against foreclosure law firms.”
Charles Cox, a California Contract Paralegal penned another brilliant letter to the Court [Click HERE for PDF version]:

October 11, 2013
Chief Justice Tani G. Cantil-Sakauye
and Associate Justices
Supreme Court of California
350 McAllister Street
San Francisco, CA 94102-4797
Re: Glaski v. Bank of America, National Association et al.
Supreme Court Case No. 5213814;
Appellate Case No. F064556, Disposition Date 07/31/2013;
Trial Court Case No. 09CECG03601
Dear Justices of the Supreme Court:
Pursuant to California Rules of Court (“CRC”), Rule 8.1125(b) et seq., the undersigned
writes to respectfully and timely oppose and object to the requests to depublish the published opinion of the appellate court for the above referenced case by providing the following corrected response.

The undersigned’s interest in this response to the depublication request, relates to clients served in the undersigned’s practice as a California Bus & Prof. Code qualified paralegal which consists of working on these types of cases with attorneys on a regular basis. We represent many clients who will be affected by this currently citable appellate court Opinion with some cases having already cited Glaski as applicable authority.
The clarity the appellate court provided in its well-reasoned Opinion was qualified for
publication, certified for publication and accordingly, was rightfully published. The undersigned respectfully requests that the
Glaski appellate court Opinion not be upset for the following additional reasons.
The depublication process should not be used as a forum to re-try the case. Supreme
Court review was an available option to the defendants but no petition was filed.
Justice Joseph R. Grodin wrote in 1984 confirming earlier explanations by the late Chief
Justice Donald R. Wright 2 and then Chief Justice Rose Elizabeth Bird,3 that depublication is only ordered because the majority of the justices consider the opinion to be wrong in some significant way, such that it would mislead the bench and bar if it remained citable as precedent.4 Such is not the case here.

The appellate court had no choice but to assume the purported “Trust” was formed under New York Trust Laws because Plaintiff claimed it was and the defendants failed to refute or object to this stated fact in the instant case. The law under which the trust was purportedly formed does not change the general concept the appellate court established, that assets are prohibited from entering a trust after the trust closing-date. This is in order to mitigate tax liability and the potential of losing the trust’s tax exempt status by utilizing the restrictive requirements required to maintain limited liability for the trust as a pass through entity.
Regardless of whether or not organized under New York Trust Laws, it was still a Real
Estate Mortgage Investment Conduit (“REMIC”) trust where I.R.S. Code § 860 et seq., and Delaware Code, Title 12, Chapters 35 and 38 et seq., each provides similar if not more comprehensive requirements related to the actual purpose of the trust; for instance:

Every direct or indirect assignment, or act having the effect of an assignment,whether voluntary or involuntary, by a beneficiary of a trust of the beneficiary’s interest in the trust or the trust property or the income or other distribution therefrom that is unassignable by the terms of the instrument that creates or defines the trust is void.”5
Statements in the requests for depublication that Delaware Statutes provide no
comparable provision that would render a belated assignment to a trust void is simply untrue.

The appellate justices’ Opinion was sound, applicable and well-reasoned. Defendants’ Petition for Rehearing was rightfully denied and the numerous requests for publication were properly considered and the case was certified for publication.
The appellate court’s Opinion met the standard for certification and publication as
authorized by Cal. Rules of Court, Rule 8.1105(c) which provides that an opinion of a court of appeal or a superior court appellate division – whether it affirms or reverses a trial court order or judgment – should be certified for publication in the Official Reports if the opinion:

(1) Establishes a new rule of law;
(2) Applies an existing rule of law to a set of facts significantly different from those stated in published opinions;
(3) Modifies, explains, or criticizes with reasons given, an existing rule of law;
(4) Advances a new interpretation, clarification, criticism, or construction of a provision of a constitution, statute, ordinance, or court rule;
(5) Addresses or creates an apparent conflict in the law;
(6) Involves a legal issue of continuing public interest;
(7) Makes a significant contribution to legal literature by reviewing either the
development of a common law rule or the legislative or judicial history of a provision
of a constitution, statute, or other written law;
(8) Invokes a previously overlooked rule of law, or reaffirms a principle of law not applied in a recently reported decision; or
(9) Is accompanied by a separate opinion concurring or dissenting on a legal issue, and
publication of the majority and separate opinions would make a significant
contribution to the development of the law.

The undersigned contends the appellate court’s well-reasoned Opinion was published on the grounds of sub-sections 2, 3, 5, 6, and 8 referenced above and more specifically related to Sections III. sub-sections A-H and Section IV. sub-section B of the appellate court’s Opinion. 6
Section III.A. The appellate court’s Opinion clarifies securitization issues related to the lack of transfer of the deed of trust into securitized trusts after the closing date, which was deemed not acceptable due to the controlling “pooling and servicing agreement” and statutory requirements applicable to REMIC trusts, which is further clarified in FN 12 of the opinion? This meets the standard for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8).
Section III.B. Clarifies previous issues and opinions related to wrongful foreclosure by a nonholder of the deed of trust; or when a party alleged not to be the true beneficiary, instructs the trustee to file a Notice of Default and initiate nonjudicial foreclosure which conflicts with other holdings; adopts more applicable holdings and further clarifies that a plaintiff must allege facts that show the defendant who invoked the power of sale was not the true beneficiary. This meets the standard for publication per CRC, Rules 8.1105(c) (3), (5), (6) and (8).
Section III. C. This is an important opinion not previously held by other courts clarifying the question of whether the purported assignment was void, not dependent on whether the borrower was a party to, or third party beneficiary of the assignment agreement. This meets the standard for publication per CRC, Rules 8.1105(c)(2), (3), (5), (6) and (8).
Section lII.E. This section distinguishes the Gomes 8 case which seems to be universally utilized by other courts and defendant attorneys in California whether the application applies to the actual facts of the case at bar or not. Of particular note is the appellate court’s interpretation allowing borrowers to pursue questions regarding the chain of ownership and consolidation with the Herrera 9 case as opposed to Gomes which applies to not only Glaski but many other cases. The Opinion of the appellate court clarifies important characteristics authorized by the standards for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8).
Section III.F. Banks raise failure to tender as a defense in virtually every case whether applicable or not. The Glaski opinion correctly holds that tender is not required where the foreclosure sale is void, rather than voidable which meets the standard for publication per CRC, Rules 8.1105(c)(3), (5), (6) and (8).
Whether Glaski was a party or third-party beneficiary to the purported securitized trust agreement or Pooling and Servicing Agreement (“PSA”) is irrelevant. The PSA itself did NOT allow transfer into the purported trust AFTER the closing-date whether the borrower invokes standing to challenge assignment into the trust or not. The same holds true whether or not the borrower was a party or third-party beneficiary of the PSA. The appellate court ruled that such a transfer after the closing-date was not allowed as it would violate the purpose of the securitized trust as a REMIC as further addressed herein.
Professor Adam Levitin 10 of Georgetown Law School states the following, regarding the view (as expressed in the requests for depublication) that a homeowner has no standing to challenge assignments into a trust because of not being a party to the PSA:
I think that view is plain wrong. It fails to understand what PSA-based foreclosure defenses are about and to recognize a pair of real and cognizable Article III interests of homeowners: the right to be protected against duplicative claims and the right to litigate against the real party in interest because of settlement incentives and abilities.
The homeowner is obviously not party to the securitization contracts like the PSA (query, though whether securitization gives rise to a tortious interference with the mortgage contract claim because of PSA modification limitations•••). This means that the homeowner can’t enforce the terms of the PSA. The homeowner can’t prosecute putbacks and the like. But there’s a major difference between claiming that sort of right under a PSA and pointing to noncompliance with the PSA as evidence that the foreclosing party doesn’t have standing (and after Ibanez, it’s just incomprehensible to me how this sort of decision could be coming out of the 1st Circuit BAP with a MA mortgage).
Let me put it another way. Homeowners are not complaining about breaches of the PSA for the purposes of enforcing the PSA contract. They are pointing to breaches of the PSA as evidence that the loan was not transferred to the securitization trust. The PSA is being invoked because it is the document that purports to transfer the mortgage to the trust. Adherence to the PSA determines whether there was a transfer effected or not because under NY trust law (which governs most PSAs), a transfer not in compliance with a trust’s documents is void. And if there isn’t a valid transfer, there’s no standing. This is simply a factual question-does the trust own the loan or not? (Or in UCC terms, is the trust a “party entitled to enforce the note”-query whether enforcement rights in the note also mean enforcement rights in the mortgage•••) If not, then it lacks standing to foreclosure.
It’s important to understand that this is not an attempt to invoke investors’ rights under a PSA. One can see this by considering the other PSA violations that homeowners are not invoking because they have no bearing whatsoever on the validity of the transfer, and thus on standing. For example, if a servicer has been violating servicing standards under the PSA, that’s not a foreclosure defense, although it’s a breach of contract with the trust (and thus the MBS investors). If the trust doesn’t own the loan because the transfer was never properly done, however, that’s a very different thing than trying to invoke rights under the PSA.
I would have thought it rather obvious that a homeowner could argue that the foreclosing party isn’t the mortgagee and that the lack of a proper transfer of the mortgage to the foreclosing party would be evidence of that point. But some courts aren’t understanding this critical distinction. Even if courts don’t buy this distinction, there are at least two good theories under which a homeowner should have the ability to challenge the foreclosing party’s standing. Both of these theories point to a cognizable interest of the homeowner that is being harmed, and thus Article III standing. First, there is the possibility of duplicative claims. This is unlikely, although with the presence of warehouse fraud (Taylor Bean and Colonial Bank, eg), it can hardly be discounted as an impossibility. The same mortgage loan might have been sold multiple times by the same lender as part of a warehouse fraud. That could conceivably result in multiple claimants. The homeowner should only have to pay once. Similarly, if the loan wasn’t properly securitized, then the depositor or seller could claim the loan as its property. Again, potentially multiple claimants, but the homeowner should only have to pay one satisfaction.
Consider a case in which Bank A securitized a bunch of loans, but did not do the transfers properly. Bank A ends up in FDIC receivership. FDIC could claim those loans as property of Bank A, leaving the securitization trust with an unsecured claim for a refund of the money it paid Bank A. Indeed, I’d urge Harvey Miller to be looking at this as a way to claw back a lot of money into the Lehman estate.
Second. the homeowner had a real interest in dealing with the right plaintiff because different plaintiffs have different incentives and ability to settle. We’d rather see negotiated outcomes than foreclosures, but servicers and trustees have very different incentives and ability to settle than banks that hold loans in portfolio. PSA terms, liquidity, capital requirements, credit risk exposure, and compensation differ between services/trustees and portfolio lenders. If the loans weren’t properly transferred via the securitization, then they are still held in portfolio by someone. This means homeowners have a strong interest in litigating against the real party in interest.11
The arguments proffered supporting depublication are nothing more than meritless
attempts to re-argue the
Glaski case. The appellate court’s Opinion was well-reasoned and correctly decided. The appellate court’s opinion promotes the requirement that in order to foreclose on an owner’s property, the foreclosing entity must have obtained standing to foreclose properly, not based on a void assignment in contravention of the foreclosing entity’s controlling documents. In this case an assignment into a securitized trust after the closing-date of the trust has been properly deemed invalid and void by the appellate court.
For the foregoing reasons and on behalf of clients and persons this case affects, the undersigned respectfully request this Honorable Court NOT depublish the above referenced appellate court Opinion due to the importance that the continued ability to cite this well reasoned Opinion has provided and will continue to provide in the future.
[Charles Cox Signature]
  1. 1 See Joseph R. Grodin, The Depublication Practice o/the California Supreme Court, 72 Cal. L. Rev. 514, 514 n.1 (1984).
  2. See Julie H. Biggs, Note 8. at 1185 n.20, Decertification of Appellate Opinions: The Need for Articulated Judicial Reasoning and Certain Precedent in California Law, 50 S. Cal. L. Rev. 1181, 1200 (1977) quoting Chief Justice Wright.
  3. In Justice Bird’s address at the State Bar Convention in San Francisco, CA Sept. 10, 1978, in Report, LA. Daily J., Oct. 6, 1978, at 4, 8, speaking of depublished opinions as ones “with which the court does not agree” and as “erroneous ruling[s]“.
  4. Grodin, supra, note 7, at 514-15.
  5. Delaware Decedents’ Estates and Fiduciary Relations, Chapter 35, Trusts, Subchapter III. General Provisions § 3536.
  6. The “Section” stated herein and below, relate to the applicable Sections of the appellate court’s Opinion.
  7. This allegation comports with the following view of pooling and servicing agreements and the federal tax code provisions applicable to REMIC trusts. “Once the bundled mortgages are given to a depositor, the [pooling and servicing agreement] and IRS tax code provisions require that the mortgages be transferred to the trust within a certain time frame, usually ninety dates from the date the trust is created. After such time, the trust closes and any subsequent transfers are invalid. The reason for this is purely economic for the trust. If the mortgages are properly transferred within the ninety-day open period, and then the trust properly closes, the trust is allowed to maintain REMIC tax status.” (Deconstrueting Securitized Trusts, supra, 41 Stetson L.Rev. at pp. 757-758.)” Glaski, supra fn 12.
  8. Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149.
  9. Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366.
  10. See:
  11. http://www.creditslips.arg/creditslips/2011/07/standing-ta-challenge-standing.html.

Why the Glaski Panel Was DEAD Wrong

Even assuming, as Glaski insisted, that New York law governs interpretation of the PSA, which it did not because the PSA was under Delaware law, and further assuming that the transfer of Glaskis’ loan to the Trust violated the terms of the PSA, that after-the-deadline transactions would merely be voidable at the election of one or more of the parties—not void as Glaski and the illiterates would have everyone believe. Consequently, Glaski, was not a party to the PSA, and did not have standing to challenge it.
This concurs with time-honored principles of contract law. A void contract is “invalid or unlawful from its inception” and therefore cannot be enforced. 17A C.J.S. Contracts § 169. Thus, a mortgagor who was not a party to an assignment between mortgagees may nevertheless challenge the enforcement of a void assignment. A voidable contract, on the other hand, “is one where one or more of the parties have the power, by the manifestation of an election to do so, to avoid the legal relations created by the contract.” Id. Therefore, only one who was a party to a voidable contract has standing to challenge it.
It is true that New York Estate Powers & Trusts Law § 7-2.4 states: “every act in contravention of the Trust is void.” New York case law, however, makes clear “that section 7-2.4 is not applied literally in New York.”Bank of Am. Nat’l Ass’n v. Bassman FBT, LLC, 366 Ill. Dec. 936, 981 N.E.2d 1 (Ill. App. Ct. 2012). Instead, New York courts have held that a beneficiary can ratify a trustee’s ultra vires act. See, e.g., Mooney v. Madden, 597 N.Y.S.2d 775 (N.Y. App. 1993) (holding that trustee may bind trust to an otherwise invalid act or agreement that is outside scope of trustee’s power when beneficiary or beneficiaries consent or ratify trustee’s ultra vires act or agreement); Matter of Estate of Janes, 630 N.Y.S.2d 472, 477 (Sur. 1995), aff’d as modified sub nom. Matter of Janes, 643 N.Y.S.2d 972 (N.Y. App. Div. 1996), aff’d sub nom. Matter of Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997)(acknowledging that a beneficiary may ratify a trustee’s ultra vires act if “the ratification was done with knowledge of material facts”); Leasing Serv. Corp. v. Vita Italian Restaurant, 566 N.Y.S.2d 796, 797-98 (N.Y. App. Div. 1991) (“It is hornbook law that a contract entered into by . . . an unauthorized agent, corporate officer, trustee or other person purporting to act in a representative capacity . . . is voidable.”); Hine v. Huntington, 103 N.Y.S. 535, 540 (1907) (“We have before this called attention to the fact that the cestui que trust is at perfect liberty to elect to approve an unauthorized investment and enjoy its profits, or to reject it at his option.”); 106 N.Y. Jur. 2d Trusts § 431 (“[T]rustee may bind trust to an otherwise invalid act or agreement which is outside the scope of the trustee’s power when beneficiary consents to or ratifies the trustee’s ultra vires act or agreement.”);see also In re Levy, 893 N.Y.S.2d 142, 144 (N.Y. App. Div. 2010) (explaining that “[t]he essence of ratification ‘is that the beneficiary unequivocally declares that he does not regard the act in question as a breach of trust but rather elects to treat it as a lawful transaction under the trust’”) (quoting Bogert, Law of Trusts and Trustees § 942).
If an act may be ratified, it is voidable rather than void. See Hacket v. Hackett, 950 N.Y.S.2d 608, 2012 WL 669525, at *20 (N.Y. Sup. Ct. Feb. 21, 2012) (“A void contract cannot be ratified; it binds no one and is a nullity.
However, an agreement that is merely voidable by one party leaves both parties at liberty to ratify the transaction and insist upon its performance.”) (quoting 27 Williston on Contracts § 70:13 [4th ed.]) (internal quotation marks omitted); 17 C.J.S. Contracts § 4 (noting that “a void contract . . . is no contract whatsoever” and “cannot be validated by ratification”) (emphasis added); id. (“A contract that is merely voidable is capable of being confirmed or ratified by the party having the right to avoid it . . . .”).
These cases above make it obvious that, under New York law, a trustee’s unauthorized transactions may be ratified; such transactions, voidable—not void.
That being the case, if the trustee of the securitized trust can’t, on its own, decide to accept these late-delivered notes, then it’s clear the beneficiaries can. They can ratify or waive anything they want. Common sense dictates that they can either, accept the notes/mortgages even though they were delivered late, giving the trust power to enforce, but theoretically putting the trust’s tax-exempt REMIC status at risk; or not allowing the trustee to accept the notes/mortgages, keeping their REMIC status alive, but denying themselves the income from the notes/mortgages they bought.
Common sense would also dictate that if there are enormous numbers of late-delivered notes/mortgages, does anyone really believe that the holders of these notes/mortgages would rather lose the tax benefits by virtue of it becoming a taxable event, which is highly unlikely because the IRS has failed to take any action so far, or lose the income from the notes/mortgages. Anyone who got out of the third grade can figure this one out.

Ideal Strategy for Glaski and ALL Mortgagors

I take this position: if you borrow money to buy a house on a valid mortgage deal, pay it back timely in accordance with your agreements or give up the house. Don't fight the foreclosure because you will lose and you might suffer Post Traumatic Brain Injury as a result. But, if the mortgage lacks validity because the lender or lender's agents cheated you, do your best to hammer the lender into a concession that leaves you with the house and compensation. To that end, I propose the following strategy:
  1. Get a comprehensive mortgage examination by a competent professional who has knowledge of all the related areas of law AND consummate litigation skill. Then,
  2. If no causes of action (reasons to sue) exist, walk from the house as you should, with a short-sale or deed-in-lieu-of-foreclosure deal to salvage as much as you can of your credit rating.
  3. Use the discovered causes of action to force a settlement for money or cram-down (reduced balance) refinance, or sue for compensatory and punitive damages and legal fees and costs.
  4. Do not EVER accept a loan modification, for all are just scams to increase your debt, increase the likelihood of foreclosure, and deprive you of the right to sue over prior predatory lending injuries.

If you
obtained a home mortgage loan in the past 10 to 15 years, you might have numerous causes of action underlying the mortgage. In that case you should demand settlement or sue, whether or not you face foreclosure. I can review your situation and introduce you to America's premier mortgage fraud examiner if circumstances warrant it.

For full details in a FREE discussion, call Mortgage Attack at 727 669 5511 now, or fill in, save, and email the Mortgage Attack Questionnaire at

Bob Hurt Blog 1 2 3 f t
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