Foreclosure defender Jeff Barns, Esq posted this article on his web site:
|SOUTH CAROLINA COURT HOLDS THAT FORECLOSURE LAW OF U.S. SUPREME COURT TRUMPS EVERYTHING: FORECLOSING PARTY MUST OWN BOTH THE NOTE AND THE MORTGAGE TO FORECLOSE |
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 http://lixe.org: 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.
the HOLDER can enforce it, and
so can a nonholder possessor, and
so can a nonholder nonpossessor, and
so can a non-OOBI, and
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.