Global Literary Marketplace Foreclosure Fraud Defense by Grace Adams

1. October 2013

Transfers of mortgages and notes‏

Charles Cox 11:18 AM
To: Charles Cox

By:

Dale A. Whitman

Professor of Law Emeritus

University of Missouri-Columbia

A good deal has been written on DIRT recently about transferring to a securitized trust the right to foreclose. Unfortunately, a lot of the commentary has disregarded the relevance of UCC Article 3. I’m going to try to shed some light on it with this post. Those who want to know more can read the famous PEB report of Nov. 2011, officially entitled REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE: APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES. It’s readily available on line, and really should be read by everyone with an interest in the legal aspects of the secondary mortgage market.

1. Why is the UCC Article 3 relevant?
A mortgage note may be negotiable or nonnegotiable. The definition of negotiability, found in UCC 3-104(a), is complex, and this isn’t the place to go over it in detail. Suffice to say that now about a dozen cases have held that the Fannie-Freddie uniform residential note is negotiable, and not a single case has held the contrary. Commercial mortgage notes are a very different matter. A reasonable rule of thumb (subject, of course, to an analysis of each individual document) is that commercial mortgage notes are usually nonnegotiable and residential notes on the GSE form are negotiable.

Article 3 governs only negotiable notes, but if the note in question is negotiable, Art. 3 in effect preempts the field and supersedes the common law to the extent of any conflict. For purposes of analysis of residential mortgage-backed securitization, Article 3 is the relevant body of law.

2.What is being transferred?
There are two very distinct aspects of a note that can be transferred, and one can’t write or speak intelligibly about “transferring” a note without making clear which aspect one has in mind. The two aspects are (a) the right to enforce the note (often called PETE status, where PETE means the “person entitled to enforce”); and (b) ownership, which refers to the party with the ultimate right to the economic benefits of the note — the proceeds of payment, prepayment, foreclosure, etc. Transferring PETE status is governed by Article 3 if the note is negotiable; transferring ownership is governed by Article 9 (whether the note is negotiable or not).

For purposes of mortgage foreclosure, it is PETE status that is relevant. This fact has become increasingly clear in the past few years; older cases usually betrayed no understanding of the difference between PETE status and ownership, but many recent cases have clarified it, and virtually without exception, they have held that PETE status (and not ownership per se) confers the right to foreclose. The mortgage, of course, follows the note, so that the same party (the PETE) has the right to sue on the note and foreclose the mortgage. It is common for the owner and the PETE to be the same party, but that isn’t necessarily the case. For example, a securitized trustee may deliver the note to its servicer to foreclose; the servicer thus becomes the PETE, while the trustee remains the owner.

For all purposes related the borrower, it is PETE status that counts. If the borrower pays the PETE, the note is discharged. The PETE is the party who can modify or compromise the note, agree to a short sale, take a deed in lieu, or do any other act that affects the borrower’s rights. The borrower, on the other hand, has no legitimate interest in who owns the note. That’s a matter for the secondary market parties — transferors, transferees, and servicers — to work out among themselves. The borrower need only be concerned with identifying the PETE.

3. How is PETE status transferred?
If the note is negotiable, PETE status is transferred by delivery of the original instrument to the transferee. No separate document of assignment of the note is relevant or required. Hence, it’s confusing to refer to such a transfer as an assignment, since that terms seems to suggest a separate piece of paper.

Delivery is the key. The note need not be endorsed, and no allonge is needed. The ultimate question is whether the party trying to enforce the mortgage has possession of the note or not. An endorsement is helpful, but only in an evidentiary sense; if there’s no endorsement, the party in possession of the note may be required to prove that it was delivered for the purpose of transferring the right of enforcement (while, if there is an appropriate endorsement, no such proof is required). But that sort of proof should not be very difficult to adduce. (A party with possession, but without an endorsement, is called “a nonholder with the rights of a holder.”)

There’s only one exception to the requirement of possession of the note. Under UCC 3-309, if the note has been lost or destroyed, a lost note affidavit may be substituted for possession of the note (though the party filing the affidavit may be required to post a bond, give an indemnity, or provide other security against the possibility of double-enforcement of the note). There are many unresolved questions about lost note affidavits, but in an appropriate situation, such an affidavit can provide an alternative to a missing note.

Because of the UCC’s governance of the process of transferring PETE status, discussions about the common law of assignments simply aren’t relevant or helpful in this area. On the other hand, ownership of notes can be transferred, under Article 9, either by a separate document of assignment or by delivery of the notes. Hence, it’s appropriate to talk about assignments with respect to ownership. But as I’ve indicated above, ownership is of no importance to borrowers.

For New York lawyers, it’s significant that NY has not adopted the current version of Article 3. (It’s the only state not to do so.) However, it probably makes little or no difference for purposes of the points I have made here. For an excellent exposition of NY’s version of Art. 3 in this context, reaching essentially the same results as outlined above, see Bank of New York Mellon v. Deane, 2013 WL 3480255 (N.Y.Supreme Ct., July 11, 2013). (The court does such a nice job that I won’t try to embellish it. It takes the Appellate Division to task because of a number of App.Div. opinions that seem to say that the right to enforce a negotiable note can be transferred either by delivery or by a document of assignment. But even under the old version of Article 3, this is wrong, as the Deane opinion points out very effectively.) And NY has adopted the current version of Article 9.

4. How do Articles 3 and 9 interact?

Operationally, Articles 3 and 9 are not difficult to reconcile. They simply deal with different issues. Here’s a simple, straightforward way to think about it:

Article 3 governs transfers of the right to enforce the note; the common law “mortgage follows the note” rule means that, in effect, Article 3 governs transfers of the right to enforce the mortgage as well. (Incidentally, there are a large number of recent cases — cases that do recognize the difference between ownership and the right to enforce — that agree with this statement.)

Article 9 governs transfers of ownership of the note; the common law “mortgage follows the note” rule, which is embodied in 9-203(g), means that, in effect, Article 9 governs transfers of ownership of the mortgage as well.

5. The role of mortgage assignments.
It is crucial to understand that, for purposes of having the right to foreclose, mortgage assignments are completely irrelevant. A mortgage assignment, particularly if it’s recorded, may be beneficial in other ways. For example, it may ensure that the holder of the mortgage will get notice of litigation filed that affects the property or the mortgage. It will also effectively prevent the assignor from illegally discharging or subordinating the mortgage after assigning it, thus preventing a subsequent BFP from taking free of (or gaining priority over) the mortgage. For these reasons, recording a mortgage assignment may be a good idea. But for purposes of foreclosing, a mortgage assignment is entirely unnecessary.

6. Variations in nonjudicial foreclosure states.
The material above is virtually universally followed in judicial foreclosure proceedings in every state. (Maine is arguably an exception, in the sense that its statutes can be read to require a recorded chain of mortgage assignments as a prerequisite to a nonjudicial foreclosure.)

But nonjudicial foreclosures are another matter. There is a sharp split of authority as to whether PETE status is necessary to conduct a nonjudicial foreclosure. California, Arizona, Idaho, Texas, Minnesota, Michigan, and Georgia have held that it is not, based on their interpretation of their nonjudicial foreclosure statutes. On the other hand, the courts in Nevada, Washington, Maryland, North Carolina, and Massachusetts have disagreed, reading their statutes to require PETE status (essentially possession of the note) as a requirement to foreclose. I think the former group of states are wrong, because they fail to read the UCC in pari materia with foreclosure statutes, but there they are. Most of the states in the former group would say that the foreclosing party must have a recorded chain of mortgage (or deed of trust) assignments in order to foreclose, but in some of them it simply isn’t clear what the documentary requirements to foreclose are. Frankly, the nonjudicial foreclosure statutes generally don’t handle this issue well; they were drafted at a time when secondary market sales of mortgages were rare, and their drafters didn’t think this issue through very carefully. Remember, this is exclusively an issue with nonjudicial foreclosure; even in the states where nonjudicial is the predominant mode of foreclosure, one can always qualify to foreclose judicially under the principles outlines in sections 1-4 above.

7. Transfers to securitized trustees.
By now it is clear that in many thousands of cases involving RMBS, notes were not transferred to securitized trustees within the 90-day REMIC window. Failure to do so was an obvious violation of the Pooling and Servicing Agreements, which universally required such transfers. But let’s be more specific: was it PETE status or ownership that was to be required within the 90-day window? In most cases, the PSA spelled out exactly what was to be transferred: usually possession of the notes, often combined with the original mortgages, mortgage assignments, and appropriate endorsements.

As I’ve already pointed out, failure to comply with most of these PSA requirements is irrelevant to the trust’s power to foreclose. It doesn’t matter whether the trust got endorsements or mortgage assignments. But it must get the notes in order foreclose the corresponding mortgages. Must it do so within the 90-day window? There’s no legal reason that it must, provided it gets them before it institutes foreclosure. Yes, a late delivery of the notes is doubtless a violation of the PSA, and that may make the transferor and its predecessors (the sponsor and the depositor) liable to the trust for damages. But if the trust gets the notes before instituting foreclosure, it has the right to foreclose. From the viewpoint of PETE status, the fact that the notes were transferred late is completely irrelevant.

8. The relevance of New York trust law.
Much has been made of the provision of New York Estates, Powers and Trusts Law § 7-2.4, which provides that acts of the trustee not authorized by the terms of the trust (here, the PSA, which is the only trust instrument) are void. Supposedly, this means that if the notes are not delivered within the 90-day window, acceptance of them by the trustee at a later time is unauthorized, the transfers are void, and the trustee can’t foreclose.

On its face, this argument strikes me as absurd. The “void” language of the statute was designed to protect the trust beneficiaries (here, the bond-holders) against unauthorized acts of the trustee. But in the present context, the result of the argument would be to deprive the bond-holders of the power to foreclose the mortgages that their trust has purchased and paid for — a disastrous result for the bond-holders. This has the effect turning the statute on its head, changing it from a protection for the beneficiaries to a weapon used against the beneficiaries. Isn’t it obvious that the courts will ultimately rule that the bond-holders should be deemed to have ratified the trustee’s action (even though performed late)?

I’m suggesting that recent contrary cases, like Erobobo (NY Supreme Court) and Glaski (Cal. Ct. of App.) will not survive. Their conclusion is nonsensical. The likely logic of the contrary viewpoint, which I believe will survive, is found in Calderon v. Bank of America , 2013 WL 1741951 (W.D.Tex. 2013), which adopts the “beneficiary ratification” approach.

9. The REMIC rules.
Int. Rev. Code 860G requires transfer of the loans to the trust within 90 days of the Start Date. The purpose, as everyone agrees, is to ensure that the REMIC is a “static” investment vehicle; that it won’t engage in active trading of its assets once it has gotten started. The actual language, which defines “qualified mortgage,” is that the mortgage must be “transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC, [or] (ii) … purchased by the REMIC within the 3-month period beginning on the startup day.”

Fine, but the language leaves a fundamental question unanswered: which aspect of the mortgage notes, ownership or PETE status, must be transferred during the three-month period? (Pretty obviously, Congress had no idea of the difference when it passed the statute in 1986, but it’s still necessary to impute some intent to Congress.) The more plausible interpretation, I would suggest, is that ownership must be transferred. That view of the statute would allow the establishment of the “static pool” that Congress had in mind. Whether the REMIC got the right to enforce or foreclose the mortgages during the 90-day window would be irrelevant; it would have fixed its right to the economic benefits of the pool by getting ownership.

As I mentioned above, ownership is governed by Article 9, which allows transfers either by delivery of the notes or by a separate document of assignment. Moreover, the description of the notes in a document of assignment can be fairly general — no legal descriptions of the land covered by the mortgages would be necessary, for example. Hence, if the executed PSA included an appendix listing the loans to be transferred by the depositor, in all probability Article 9′s requirements (and hence, the REMIC rules) would be satisfied.

I’m not at all sure that this was done in all cases; during the heyday of RMBS securitization, people got very sloppy indeed. But if it was done, I think the IRS would find it to comply with the Code.

Note that we’re talking here only about satisfying the IRS. The REMIC rules are tax rules; if they are not satisfied, the REMIC becomes a taxable entity, with extremely harsh results to the bond-holders (though not as harsh as the nutty argument that the trust can’t enforce the mortgages, of course). Noncompliance with the REMIC rules has no direct relevance at all to the enforceability of the notes or mortgages.

One last observation. The argument that many REMICs violated the REMIC rules has been floating around for at least two or three years now, and yet the IRS has not shown the slightest inclination to pursue it. Why not? One reason is doubtless a desire to avoid the enormous financial impact on the bond-holders that would result from making all non-complying REMICs into tax-paying entities. Another is the fact that the Federal Reserve Board has bought more than a billion dollars (I wasn’t able to find the exact amout) of private-label RMBS. Does anyone think the IRS (which is part of the Treasury) is going to take an action that will destroy a large part of the value of an asset that the Fed has purchased? The idea is nonsensical. No one should spend much energy on the expectation that the IRS is going to start attacking REMICs; it isn’t going to happen.

10. Can we stop the nonsense?
The extent of outrageous misinformation that exists on the internet about this issue is frightening. As lawyers, we need to be more careful. In particular, let’s try harder to make it clear what we mean when we take about “transferring” or “assigning” a note or a mortgage. If we disregard the difference between transferring ownership and transferring PETE status, we run a real risk of writing gibberish.

Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: www.BayLiving.com; www.FdnPro.com and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

Paralegal; Litigation Support and Expert Witness Services; Forensic Loan Analyst; CA Licensed Real Estate Broker.
________________________________________________________________________

4. September 2013

Two NY Supreme Court Cases Filed‏

Phoenix Light v. JPMorgan (1)

ROYAL-PARK-INVESTMENTS-SA-NV-vs-DEUTSCHE-BANK-AG

See ¶ 1002 and 1003 on p.419 Phoenix Light:

1002. The need to fabricate or fraudulently alter mortgage assignment documentation

provides compelling evidence that, in many cases, title to the mortgages backing the certificates

plaintiffs purchased was never properly or timely transferred. This fact is confirmed by an

investigation conducted by plaintiffs concerning one of the specific offerings at issue herein, which

revealed that the vast majority of loans underlying the offering were not properly or timely

transferred to the trust.

1003. Specifically, plaintiffs performed an investigation concerning the mortgage loans

purportedly transferred to the trust for the JPMorgan Defendants’ JPMAC 2006-WMC4 offering.

The closing date for this offering was on or about December 20, 2006. Plaintiffs reviewed the

transfer history for 274 loans that were supposed to be timely transferred to this trust. Sixty-six (66)

of the loans were not and have never been transferred to the trust. In addition, several other loans

that were supposed to be transferred to the trust were transferred to entities other than the trust, but

not to the trust. The remainder of the loans (approximately 140) were eventually transferred to the

trust, but all such transfers occurred between 2008 and the present, well beyond the three-month time

period required by the trust documents and far after the three-month period for the trust to maintain

its tax-free REMIC status. In other words, none of the reviewed mortgage loans were timely

transferred to the trust, a 100% failure rate.

(emphasis in the complaint)

Also see excerpts posted below from Royal Park:

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

ROYAL PARK INVESTMENTS SA/NV,
Plaintiff,

vs.

DEUTSCHE BANK AG, DEUTSCHE BANK
SECURITIES, INC., DB STRUCTURED
PRODUCTS, INC., DEUTSCHE ALT-A
SECURITIES, INC. and ACE SECURITIES
CORP.,
Defendants.

EXCERPT:

439. Further confirming the endemic problems of defective transfers in the defendants’
RMBS, servicers that act on behalf of trustees have also been unable to properly foreclose on
mortgaged properties serving as collateral for plaintiff’s investments. For example, sworn
deposition testimony from a longtime Countrywide employee (Countrywide is one of the key
originators at issue in this case) regarding Countrywide-originated loans demonstrates that
Countrywide systematically failed to properly transfer or assign the mortgage documents. In Kemp
v. Countrywide Home Loans, et al., No. 08-02448-JHW (Bankr. D.N.J.), Linda DeMartini, a ten-year
employee of Countrywide’s servicing division, testified that not delivering the original note to
the trustee was standard Countrywide practice, stating that the “normal course of business . . . would
include retaining the documents,” and that Countrywide “transferred the rights . . . not the physical
documents.” Based on this testimony, Chief Bankruptcy Judge Judith Wizmur held that the fact that
the issuing trustee “never had possession of the note[] is fatal to its enforcement” and, thus, that the
trustee could not enforce the mortgage loan. Kemp v. Countrywide Home Loans, Inc., No. 08-
02448-JHW, slip op. at *10-*11 (Bankr. D.N.J. Nov. 16, 2010). Countrywide originated loans in
many of the offerings at issue herein.

440. The need to fabricate or fraudulently alter mortgage assignment documentation
provides compelling evidence that, in many cases, title to the mortgages backing the certificates
plaintiff purchased was never properly or timely transferred. In fact, plaintiff has conducted
investigations on the loans underlying several of the offerings at issue herein to determine whether
the loans were properly transferred to the trusts. In each case investigated, the vast majority of loans
underlying the offerings were not properly or timely transferred to the trusts.

441. For example, plaintiff performed an investigation concerning the mortgage loans
purportedly transferred to the trust for the Deutsche Bank Defendants’ DBALT 2006-AR6 offering.
The closing date for this offering was on or about December 15, 2006. Plaintiff reviewed the
transfer history for 310 loans that were supposed to be timely transferred to this trust. Only two (2)
loans were timely transferred to the trust. Thirty-five (35) other loans were not and have never been
transferred to the trust. Thirty-seven (37) additional loans were never assigned to the trust, and were
paid in full in the name of the originator (or a third party). In addition, thirty-nine (39) other loans
that were supposed to be transferred to the trust were transferred to entities other than the trust, but
not to the trust. Five (5) deeds of trust were foreclosed in the name of a party other than the trust,
without an assignment of record of the note and mortgage (deed of trust) to that party or the trust.
The remainder of the loans (192) were eventually transferred to the trust, but all such transfers
occurred between mid-2007 and the present, well beyond the three-month time period required by
the trust documents. In other words, only 2 of the 310 reviewed loans were timely transferred to
the trust, a failure rate of 99.4%.

442. The foregoing example, coupled with the public news, lawsuits and settlements
discussed above, establish that defendants failed to properly and timely transfer title to the mortgage
loans to the trusts. Moreover, they show that defendants’ failure to do so was widespread and
pervasive. In fact, the specific examples discussed above show that defendants utterly and
completely failed to properly and timely transfer title. Defendants’ failure has caused plaintiff (and
other RMBS investors) massive damages. As noted by law professor Adam Levitin of Georgetown
University Law Center on November 18, 2010, in testimony he provided to the a U.S. House
Subcommittee investigating the mortgage crisis, “[i]f the notes and mortgages were not properly
transferred to the trusts, then the mortgage-backed securities that the investors[] purchased were in
fact non-mortgaged-backed securities” (emphasis in original), and defendants’ failure “ha[d]
profound implications for [R]MBS investors” like plaintiff. Indeed, Professor Levitin noted in his
testimony that widespread failures to properly transfer title would appear to provide investors with
claims for rescission that could amount to trillions of dollars in claims.

[...]

428. Moreover, the PSAs generally require the transfer of the mortgage loans to the trusts
to be completed within a strict time limit – three months – after formation of the trusts in order to
ensure that the trusts qualify as tax-free real estate mortgage investment conduits (“REMICs”). In
order for the trust to maintain its tax free status, the loans must have been transferred to the trust no
later than three months after the “startup day,” i.e., the day interests in the trust are issued. See
Internal Revenue Code §860D(a)(4). That is, the loans must generally have been transferred to the
trusts within at least three months of the “closing” dates of the offerings. In this action, all of the
closing dates occurred in 2005, 2006 or 2007, as the offerings were sold to the public. If loans are
transferred into the trust after the three-month period has elapsed, investors are injured, as the trusts
lose their tax-free REMIC status and investors like plaintiff face several adverse draconian tax
consequences: (1) the trust’s income is subject to corporate “double taxation”; (2) the income from
the late-transferred mortgages is subject to a 100% tax; and (3) if late-transferred mortgages are
received through contribution, the value of the mortgages is subject to a 100% tax. See Internal
Revenue Code §§860D, 860F(a), 860G(d).

429. In addition, applicable state trust law generally requires strict compliance with the
trust documents, including the PSAs, so that failure to strictly comply with the timeliness,
endorsement, physical delivery, and other requirements of the PSAs with respect to the transfers of
the notes and security instruments means the transfers would be void and the trust would not have
good title to the mortgage loans.

Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: www.BayLiving.com; www.FdnPro.com and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

Paralegal; Litigation Support and Expert Witness Services; Forensic Loan Analyst; CA Licensed Real Estate Broker.

23. August 2013

Glaski PSA-Problem‏

Filed under: Appeal,PSA,Standing,Trust — Tags: , — admin @ 18:52

From: charles@bayliving.com
To: charles@bayliving.com
Subject: Glaski PSA-Problem
Date: Thu, 22 Aug 2013 15:44:44 -0700

Glaski PSA is attached. PSA

The Glaski Trust is a Delaware Trust, not New York. Governing law is spelled out in section 10.05 of the PSA as Delaware too.

This could be a problem.
Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: www.BayLiving.com; www.FdnPro.com and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

24. December 2012

MO US Dist Ct: Ball v. DBNTC – mtd denied – borrower right to claim no owner of loan under PSA‏

 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI, CENTRAL DIVISION

 2012 U.S. Dist. LEXIS 179878

 December 20, 2012, Decided 

December 20, 2012, Filed

CORE TERMS: foreclosure, mortgage, securitization, foreclosure sale, mortgage notes, foreclose, mortgagee, deed of trust, noncompliance, beneficiary’s, declaratory judgment, unfair practice, successor trustee, securitize, appointed, resident, purports, Missouri Merchandising Practices Act, right to foreclose, standing to challenge, power of sale, merchandise, possessed, stranger, invalid, Martin Leigh Laws Fritzlen’s, Practices Act, sales transaction, standing to raise, en banc

COUNSEL:  [*1] For Charles Ball, on behalf of himself and all others similarly situated, Nicole Ball, on behalf of herself and all others similarly situated, Plaintiffs: Gregory A. Leyh, LEAD ATTORNEY, Gregory Leyh, PC, Gladstone, MO; Kenneth B. McClain, LEAD ATTORNEY, Humphrey, Farrington, & McClain, PC, Independence, MO; Susan Ford Robertson, LEAD ATTORNEY, Jonathan Z. Bickel, Robertson Law Group, LLC, Kansas City, MO; Andrew Schermerhorn, Klamann & Hubbard, PA, Kansas City, MO.

For Mary Hillebert, Ruth A. Bates, Michael D. Bates, Edward Kidd, Individually and on behalf of all other persons similarly situated, Gloria Kidd, Individually and on behalf of all other persons similarly situated, Plaintiffs: Gregory A. Leyh, LEAD ATTORNEY, Gregory Leyh, PC, Gladstone, MO; John M. Klamann, LEAD ATTORNEY, Klamann & Hubbard, PA, Kansas City, MO; Kenneth B. McClain, LEAD ATTORNEY, Humphrey, Farrington, & McClain, PC, Independence, MO; Susan Ford Robertson, LEAD ATTORNEY, Jonathan Z. Bickel, Robertson Law Group, LLC, Kansas City, MO.

For The Bank of New York Mellon, as Trustee for CWALT, Inc., formerly known as The Bank of New York, Defendant: John Polhemus, LEAD ATTORNEY, Bryan Cave, LLP-KCMO, Kansas City,  [*2] MO; Robert J Hoffman, LEAD ATTORNEY, Bryan Cave LLP, Kansas City, MO; Sabrina Rose-Smith, PRO HAC VICE, Goodwin Procter, LLC, Washington, DC; Thomas M. Hefferon, PRO HAC VICE, Goodwin Procter LLP, Washington, DC.

For Deutsche Bank National Trust Company, as Trustee for Argent Securities Inc., Defendant: J. Loyd Gattis, III, Kersten Holzhueter, Leslie A. Greathouse, LEAD ATTORNEYS, Spencer Fane Britt & Browne LLP-KCMO, Kansas City, MO; Bernard J. Garbutt, III, PRO HAC VICE, Morgan Lewis & Bockius, LLP, New York, NY.

For Wells Fargo Bank, N.A., as Trustee for the Certificate holders of the MLMI Trust Complaint, Defendant: John Polhemus, LEAD ATTORNEY, Bryan Cave, LLP-KCMO, Kansas City, MO; Robert J Hoffman, LEAD ATTORNEY, Bryan Cave LLP, Kansas City, MO.

JUDGES: NANETTE K. LAUGHREY Click for Enhanced Coverage Linking Searches, United States District Judge.

OPINION BY: NANETTE K. LAUGHREY Click for Enhanced Coverage Linking Searches

OPINION

 

ORDER


Pending before the Court in this consolidated action is Defendant Bank of New York’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss the claims of Plaintiffs Charles and Nicole Ball [Doc. # 12] 1
; Defendant Wells Fargo Bank’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss the claims of Plaintiffs Gloria and Edward Kidd [Doc. # 50]; Defendant Deutsche Bank  Click for Enhanced Coverage Linking SearchesNational Trust Company’s motion to dismiss the claims of Plaintiffs  [*3] Ruth and Michael Bates [Doc. # 65]; and Defendant Bank of New York Mellon’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss the claims of Plaintiff Mary Hillebert [Doc. # 73].

FOOTNOTES

1 Defendant Martin, Leigh, Laws & Fritzlen’s Click for Enhanced Coverage Linking Searches motion to dismiss [Doc. # 10] is denied as moot because that party is no longer a Defendant in this suit. [Doc. # 43].

I. Background


Plaintiffs Charles and Nicole Ball are Missouri residents who received a loan from Decision One 
Mortgage Company in June 2006. Ball secured this loan through a deed of trust on his property, which named the Mortgage Electronic Registration Systems as the beneficiary. Decision One later attempted to sell and securitize the Ball note. As a result, Defendant Bank of New York,  Click for Enhanced Coverage Linking Searchesa New York corporation, as trustee for a securitization trust, purports to own that note. In July 2008, Mortgage Electronic Registration Systems appointed as successor trustee former-Defendant Martin, Leigh, Laws & Fritzlen.  Click for Enhanced Coverage Linking SearchesMartin Leigh conducted a foreclosure of the property at the direction of Bank of New York  Click for Enhanced Coverage Linking Searchesin September 2008. Ball alleges that he was not indefault at the time of foreclosure. In addition, Ball alleges that “[t]he  [*4] Ball Note never was purchased or owned by [the securitization trust],” [Doc. # 1-4 at 9] and that the Bank of New York  Click for Enhanced Coverage Linking Searches“never had a right or interest in or to the Note.” [Doc. # 1-4 at 7].

Plaintiffs Gloria and Edward Kidd are Missouri residents who received a loan from Novastar Mortgage in July 2005. Kidd secured this loan through a deed of trust on her property, which named the Mortgage Electronic Registration Systems as the beneficiary. Novastar later attempted to sell and securitize the Kidd note. As a result, Defendant Wells Fargo,  Click for Enhanced Coverage Linking Searchesas trustee-owner of that note, purports to own the note. Mortgage Electronic Registration Systems appointed as successor trustee Kozeny & McCubbin, L.C. Kozeny scheduled a foreclosure sale of the property in March 2012. Kidd alleges that neither Wells Fargo  Click for Enhanced Coverage Linking Searchesnor the securitization trust for which it is trustee held “legal title to the plaintiff’s Note at the time of authorization of the non-judicial foreclosure sale of plaintiffs’ property.” [Case No. 4:12-CV-00322-NKL, Doc. # 1 at 4].

Plaintiffs Ruth and Michael Bates are Missouri residents who received a loan from Argent Mortgage Company in March 2006. Bates secured this loan through a deed of trust  [*5] on her property. Argent Mortgage Company later attempted to sell and securitize the Bates note. As a result, Defendant Deutsche Bank  Click for Enhanced Coverage Linking SearchesNational Trust Company, as trustee for a securitization trust, purports to own the note. Argent Mortgage Company appointed as successor trustee Centre Trustee Corp. Centre took action to foreclose on the property in July 2007. That foreclosure sale was voided in November 2007, and Bates still resides at the property. Bates alleges that “Deutsche Bank,  Click for Enhanced Coverage Linking Searchesas Trustee, was never the ‘owner of the said Note’ or ‘the legal holder’ of the note ‘secured by said Deed of Trust.’” [Case No. 4:12-CV-00318-NKL, Doc. # 1 at 6].

Plaintiff Mary Hillebert, a Missouri resident, received a loan from Countrywide Home Loans in June 2006. Hillebert secured this loan through a deed of trust on her property, which named Mortgage Electronic Registration Systems as the beneficiary. As a result, Countrywide later attempted to sell and securitize the Hillebert note. Defendant Bank of New York Mellon,  Click for Enhanced Coverage Linking Searchesas trustee for a securitization trust, purports to own that note. Mortgage Electronic Registration Systems appointed as successor trustee several law firms, most recently the current trustee,  [*6] Kozeny & McCubbin, L.C. Kozeny scheduled a foreclosure of the property in January 2012, which was postponed to March 2012. Hillebert alleges that both Bank of New York  Click for Enhanced Coverage Linking Searchesand the securitization trust for which it is trustee “did not hold legal title to plaintiff’s Note at the time of non-judicial foreclosure sale of plaintiff’s property.” [Case No. 4:12-CV-00316-NKL, Doc. # 1 at 4].

Ball asserts a claim of wrongful foreclosure, claiming that the Bank of New York  Click for Enhanced Coverage Linking Searchesdid not have a right to foreclose because it did not own or possess Ball’s mortgage at the time of foreclosure and he was not in default at the time of foreclosure. Ball and the three other Plaintiffs each assert a claim for declaratory judgment that the Defendants do not own or possess any of the Plaintiffs’ mortgage notes and that foreclosure would therefore be wrongful under Missouri law. In addition, the Plaintiffs allege that the Defendant in each case violated the Missouri Merchandising Practices Act by concealing information from the Plaintiffs about the true owner of their mortgage notes and the authority of the Defendants to enforce their notes through foreclosure.

II. Discussion

 

A. The Plaintiffs’ Claims for Wrongful Foreclosure  [*7] and Declaratory Judgment that Foreclosure Would Be Wrongful

 

1. Bates’ Standing to Bring an Action for Declaratory Judgment


Deutsche Bank  Click for Enhanced Coverage Linking Searchesargues that Bates does not have standing to pursue a claim for declaratory judgment because Bates was not foreclosed on and because Bates cannot point to any action by Deutsche Bank  Click for Enhanced Coverage Linking Searchessuggesting that foreclosure is imminent. Deutsche Bank  Click for Enhanced Coverage Linking Searchesthus appears to argue that Bates is asking the Court for an advisory opinion, which is prohibited by Article III of the U.S. Constitution. Bates points out that he has alleged both: (1) that Deutsche Bank  Click for Enhanced Coverage Linking Searches“has taken action to enforce plaintiffs’ note and to foreclose upon plaintiffs’ property;” and (2) that “[i]t is anticipated that defendant . . . will continue to take such unlawful action.” [Case No. 4:12-CV-00318-NKL, Doc. # 1 at 10-11]. These allegations are especially plausible in light of Bates’ allegation that there has already been a foreclosure but that the foreclosure was voided. Thus, Bates has adequately pled an actual controversy between the parties, and dismissal on Article III grounds is not appropriate.

2. The Plaintiffs’ Claims that the Defendants Did Not Own or Hold Their Mortgage Notes at the Time of  [*8] Foreclosure or Threatened Foreclosure

 

a. Whether the Plaintiffs Alleged Sufficient Facts to State a Claim for Wrongful Foreclosure


The Defendants claim that the Plaintiffs have not stated sufficient facts to support a claim for wrongful foreclosure. The Court disagrees.

The Plaintiffs clearly allege that no Defendant owned or possessed their individual mortgage notes at the time there was a foreclosure or threatened foreclosure of the Plaintiffs’ property. Under Missouri law, a foreclosure is invalid “when a circumstance denies the mortgagee the right to cause the power of sale to be exercised.” Graham v. Oliver, 659 S.W.2d 601, 603 (Mo. Ct. App. 1983). One circumstance “that may render a foreclosure sale void” arises when “the foreclosing party does not hold title to the secured note.”Williams v. Kimes, 996 S.W.2d 43, 45(Mo. 1999) (en banc);see also, Morris v. Wells Fargo Home Mortg., No. 4:11CV1452 CEJ, 2011 U.S. Dist. LEXIS 93729, 2011 WL 3665150, at *2 (E.D. Mo. Aug. 22, 2011) (“A court may set aside a foreclosure sale as invalid when a circumstance denies the mortgagee the right to cause the power of sale to be exercised, such as when the person causing the foreclosure does not actually hold title to the note  [*9] . . . .”). Another is when the foreclosing party lacks possession of the note. In re Washington, 468 B.R. 846, 853 (Bankr. W.D. Mo. 2011). Whether possession or title is required depends on whether the note is negotiable or non-negotiable. SeeMo. Rev. Stat. §§400.3-301400.3-309,400.1-201(20); Dale Whitman, How Negotiability Has Fouled Up the Secondary Market, and What to Do About It,37 Pepp. L. Rev. 737, 748 (2010).

Defendants argue that ownership is a question of law, not fact, and therefore these allegations by Plaintiffs do not satisfy the pleading standards of Federal Rule of Civil Procedure 8. First, this argument fails to take into account that the Plaintiffs allege that the Defendants do not possess the notes on which they seek to foreclose. Possession is clearly a question of fact. Further, the Plaintiffs allege that the Defendants failed to adhere to the Pooling and Service Agreements, which required actual delivery of the originalmortgage documents. See, e.g., [Doc. # 1-4 at 9]. These documents presumably included the promissory note, giving rise to the inference that the note was not delivered to the trust and was thus never in the individual Defendant’s possession.  [*10] See [Doc. # 1-4, at 9-10].

Second, Plaintiffs have stated facts which plausibly suggest that the Defendants did not have title to the notes at the time of foreclosure or threatened foreclosure. The Plaintiffs allege that certain acts were not taken during the securitization process that were necessary to pass title to the Defendants. See, e.g., [Doc. # 1-4, at 9-10]. Ball’s complaint, for example, sets forth several, plausible scenarios that support this allegation. See [Doc. # 1- 4, at 7-10]. These allegations alone provide Defendants with adequate notice of Plaintiffs’ claim for wrongful foreclosure, as required by federal pleading standards. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).

Nonetheless, Defendants contend that Plaintiffs lack standing to challenge any defect in the securitization of theirmortgages because they were not parties to the Pooling and Servicing Agreements implemented as part of the securitization process. Therefore, the Court will address whether the Plaintiffs have standing to plead alleged noncompliance with the Pooling and Servicing Agreements during the securitization process.

3. The Plaintiffs’ Standing to Plead Alleged Noncompliance with  [*11] the Terms of the Pooling and Service Agreements


A number of cases have held that defects in the securitization process cannot be raised by a mortgagee to support a wrongful foreclosure claim. These courts seem to reason that, because the mortgagees are not parties to any of the securitization contracts, they have no standing to claim noncompliance with these agreements. See, e.g., In re Cook, 457 F.3d 561, 567-68 (6th Cir. 2006) (ruling that the failure to record an assignment of a 
mortgage as required by contract impacted the relationship of the parties to the contract, but did not impede the ability to enforce themortgage against third parties); In re Correia, 452 B.R. 319, 324 (1st Cir. B.A.P. 2011) (“[T]he Debtors lacked standing to challenge the mortgage’s chain of title under the PSA . . . . The Debtors cannot show they were a party to the contract . . . .”); Bittinger v. Wells Fargo Bank N.A., 744 F. Supp. 2d 619, 625-26 (S.D. Tex 2010) (rejecting mortgagor’s claim of wrongful foreclosure because mortgagor was not a party or beneficiary under the Pooling and Servicing Agreement and thus had “no ability under Texas law to sue for breach of contract.”). At least one court applying  [*12] Missouri law has followed this trend. In re Washington, 2011 Bankr. LEXIS 4705, 2011 WL 6010247, at *5 (Bankr. W.D. Mo. 2011).

But the Plaintiffs do not seek to enforce the contracts or affect the relationship between the parties to the contracts. Rather, the Plaintiffs point to defects in the securitization process as evidence that neither title nor possession of the note passed to the trustee who sought to foreclose theirmortgages. Thus, the Plaintiffs seek only to use the breaches as evidence that the party seeking to foreclose is not the owner of their note. Missouri law is clear that a court may set aside a foreclosure sale as invalid when a circumstance denies the mortgagee the right to cause the power of sale to be exercised, Morris v. Wells Fargo Home Mortg., No. 4:11CV1452 CEJ, 2011 U.S. Dist. LEXIS 93729, 2011 WL 3665150, at *2 (E.D. Mo. Aug. 22, 2011), and ownership of the note is a prerequisite to foreclosure in Missouri, Williams v. Kimes, 996 S.W.2d 43, 45 (Mo. 1999)(en banc); In re Washington, 468 B.R. 846, 853 (Bankr. W.D. Mo. 2011).

While the Defendants rely on In re Washington, 468 B.R. 846 (Bankr. W.D. Mo. 2011), to claim that the Plaintiffs lack standing to raise breaches of the Pooling and Service Agreements, that  [*13] case is distinguishable because theWashington court found that the note was a negotiable instrument and it was undisputed that the party enforcing the note possessed it at all times relevant to the note’s enforcement. Id. at 853-54. Consequently, the debtor could not have been injured by any improper assignment of the note. The analysis is necessarily different where, as here, the debtor claims that the party enforcing the note never possessed or had title to the note due to noncompliance with the Pooling and Service Agreement. Defendants certainly have the right to show that the breaches of the Pooling and Service Agreements alleged by the Plaintiffs did not affect either title or possession, but they have not done so in their Motions to Dismiss.

The Court’s conclusion is supported by Barker v. Danner, 903 S.W.2d 950, 955 (Mo. Ct. App. 1995), which held that a debtor generally lacks standing to contest the validity of an assignment of debt, except if the debtor will be prejudiced. One form of prejudice is the potential that the debtor will be exposed to multiple judgments. See, e.g., id. at 955 (“[T]he only interest of the obligor being that he shall be required to pay his debt to  [*14] but one person.” (quotation omitted));State ex rel. Williams v. Williams, 647 S.W.2d 590, 593 (Mo. Ct. App. 1983) (“The legitimate interest of a judgment debtor is to secure of record all proper credits on the judgment, the consequence of which is that the debt may be enforced only once.”); Livonia Props. Holdings, LLC v. 12840-12976 Farmington Rd. Holdings, 399 Fed App’x 97, 102 (6th Cir. 2010) (“Obligors have standing to raise these claims because they cannot otherwise protect themselves from having to pay the same debt twice.” (quotation omitted)). In fact, this is the very possibility that possession of the note is meant to prevent. See Washington, 468 B.R. at 853 (“Possession of the note insures that this creditor, and not an unknown one, is the one entitled to exercise rights under the deed of trust, and that the debtor will not be obligated to pay twice.”).

Thus, the Plaintiffs have standing to challenge the Defendants’ compliance with the Pooling and Service Agreements insofar as the alleged noncompliance impacted the Defendants’ possession of the note, because if the Defendants did not possess the note, this could expose the Plaintiffs to multiple enforcements of the note.  [*15] This reasoning compels the same result if the note is nonnegotiable and the Defendants did not hold title to the note, as the Plaintiffs claim, due to defects in the securitization process. Thus, the Defendants’ Motions to Dismiss the Plaintiffs’ wrongful foreclosure claims and claims for declaratory judgment that Defendants have no right to foreclose are denied.

B. The Plaintiffs’ Claims Under the Missouri Merchandising Practices Act


The Plaintiffs also claim that the Defendants violated the Missouri Merchandising Practices Act (“the Act”). The Act prohibits “unfair practice[s] . . . in connection with the sale or advertisement of any merchandise in trade or commerce.” Mo. Rev. Stat. § 407.020.1. An “unfair practice” is one that:

(1) offends any public policy as it has been established by the Constitution, statutes, or common law of this state, or by the Federal Trade Commission, or its interpretive decisions or

(2) is unethical, oppressive, or unscrupulous; and

(3) presents a risk of, or causes, substantial injury to consumers.”

Schuchman v. Air Servs. Heating & Air Cond’g, Inc., 199 S.W.3d 228, 233 (Mo. Ct. App. 2006) (emphasis in original). The Plaintiffs allege that the Defendants violated  [*16] the Act by concealing: (a) the mortgage trust beneficiary’s lack of authority to transfer its interests; (b) the Defendants’ lack of legal right to foreclose on Plaintiffs’ property; and (c) the true identity of the mortgagee and the party in interest who would ultimately seek to foreclose. The Plaintiffs claim that because of these actions they were injured.

The Plaintiffs’ claims fail because the Defendants’ actions, as alleged, are not sufficiently “in connection with” any sale or advertisement to support a claim under the Act. The primary case cited by the Plaintiffs to the contrary isHuffman v. Credit Union of Texas, 2011 U.S. Dist. LEXIS 121493, 2011 WL 5008309 (W.D. Mo. 2011). There, the court held that a defendant’s alleged withholding of important information when providing finances after an automobile sale could support a claim under the Act. 2011 U.S. Dist. LEXIS 121493, [WL] at *6. Assuming without deciding that this conclusion is correct, the Court still holds that the present case is distinguishable from Huffman. TheHuffman court noted that the defendant in that case was a party, through its agent, to the provision of financing for the sale of the car in question, and that this fact distinguished that case from “cases involving  [*17] strangers to the original transaction.” Id. (citing State ex rel. Koster v. Portfolio Recovery Assocs., LLC, 251 S.W.3d 661, 668 (Mo. Ct. App. 2011), which dismissed claims against a third-party debt collector for actions taken after the sale of merchandise because “[plaintiff] does not allege that [defendant] sold any merchandise or service, or was a party to the initial sales transaction. [Plaintiff] does not allege that any deceptive or unfair practice occurred either before or at the time the initial sales transaction was concluded.”). Here, there is no allegation suggesting that the Defendants are anything but a stranger to the original transaction or that any unfair practice occurred at or before the time of sale. Thus, Huffman does not apply, and Plaintiffs have failed to state a claim under the Act.

To the extent that the Plaintiffs argue that payments on theirmortgage note, presumably made to a Defendant or a Defendant’s predecessor in interest, are themselves transactions under the Act between the Plaintiffs and the Defendants, this claim also fails. Such payments cannot reasonably be viewed as separate transactions under the Act because they are conditions bargained for  [*18] in the Plaintiffs’ original creation of the mortgage note — a transaction to which these Defendants were strangers. For these reasons, all four Plaintiffs’ claims under the Missouri Merchandising and Practices Act fail as a matter of law and must be dismissed.

III. Conclusion


For the foregoing reasons, it is ORDERED that DefendantMartin, Leigh, Laws &
Fritzlen’s Click for Enhanced Coverage Linking Searches motion to dismiss [Doc. # 10] is DENIED as moot; Defendant Bank of New York’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss [Doc. # 12] is DENIED as to Ball’s claim that foreclosure was and would be wrongful and GRANTED as to the Missouri Merchandising and Practices Act claim; Defendant Wells Fargo Bank’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss [Doc. # 50] is DENIED as to Kidd’s claim that foreclosure would be wrongful and GRANTED as to the Missouri Merchandising and Practices Act claim; Defendant Deutsche Bank  Click for Enhanced Coverage Linking SearchesNational Trust Company’s motion to dismiss [Doc. # 65] is DENIED as to Bates’ claim that foreclosure would be wrongful and GRANTED as to the Missouri Merchandising and Practices Act claim; and Defendant Bank of New York Mellon’s  Click for Enhanced Coverage Linking Searchesmotion to dismiss [Doc. # 73] is DENIED as to Hillebert’s claim that foreclosure would be wrongful and GRANTED as to the Missouri Merchandising  [*19] and Practices Act claim. In all other regards, if any, the Motions to Dismiss are DENIED.

/s/ Nanette K. Laughrey Click for Enhanced Coverage Linking Searches

NANETTE K. LAUGHREY Click for Enhanced Coverage Linking Searches

United States District Judge

Dated: December 20, 2012
Jefferson City, Missouri

12. June 2012

KEEP YOUR HOUSE STOP FORECLOSURE

KEEP YOUR HOUSE STOP FORECLOSURE THIS CAME THROUGH THE ROD CLASS GROUP and they are now wining case after case. its simple; there is no case to start with.

MEMORANDUM OF LAW – BANK FRAUD

I have, through research, learned the following to be true and most likely applies to me, which is the reason I have requested and demanded “the bank” to validate their claims and produce pursuant to applicable law. This MEMORANDUM serves to support my suspicions and identify criminal facts. The “bank” allegedly “loaned me their money” when in reality they deposited (credited) my promissory note and used that deposit to “pay my seller”. Source and reasoning after reviewing the original file clearly shows this fact, which is the reason for the “bank” refusing and failing to validate and to produce as stipulated by law. However, the truth is out and there is plenty of law backing up the fact that the bank is criminal.

FORECLOSURE ACTIONS AND CASES LAWFULLY DISMISSED (NOT LETTING BANK FORECLOSE WITHOUT LAWFUL VALIDATION AND PRODUCTION) BY THE COURTS DUE TO BANK’S FAILURE TO VALIDATE & PRODUCE AS STIPULATED BY LAW AND COMMITTED “BANK FRAUD” AGAINST THE BORROWER FROM THE BAR ASSOCIATION’S OFFICIAL WEB SITE :… ”this Court has the responsibility to assure itself that the foreclosure plaintiffs have standing and that subject matter jurisdiction requirements are met at the time the complaint is filed. Even without the concerns raised by the documents the plaintiffs have filed, there is reason to question the existence of standing and the jurisdictional amount”. Over 30 cases are covered by the BAR at: http://www.abanet.org/rpte/publications/ereport/2008/3/Ohioforeclosures.pdf

1. “A national bank has no power to lend its credit to any person or corporation . . . Bowen v. Needles Nat. Bank, 94 F 925 36 CCA 553, certiorari denied in 20 S.Ct 1024, 176 US 682, 44 LED 637.

2. Countrywide Home Loans, Inc. v Taylor – Mayer, J., Supreme Court, Suffolk County / 9/07

3. American Brokers Conduit v. ZAMALLOA – Judge SCHACK 28Jan2008 Aurora Loan Services v. MACPHERSON – Judge FARNETI 1 1Mar2008

4. “A bank may not lend its credit to another even though such a transaction turns out to have been of benefit to the bank, and in support of this a list of cases might be cited, which-would look like a catalog of ships.” [Emphasis added] Norton Grocery Co. v. Peoples Nat. Bank, 144 SE 505. 151 Va 195.

5. “In the federal courts, it is well established that a national bank has not power to lend its credit to another by becoming surety, indorser, or guarantor for him.”’ Farmers and Miners Bank v. Bluefield Nat ‘l Bank, 11 F 2d 83, 271 U.S. 669.

6. Bank of New York v. SINGH – Judge KURTZ 14Dec2007

7. Bank of New York v. TORRES – Judge COSTELLO 11Mar2008

8. Bank of New York v. OROSCO – Judge SCHACK 19Nov2007 Citi Mortgage Inc. v. BROWN – Judge FARNETI 13Mar2008

9. “The doctrine of ultra vires is a most powerful weapon to keep private corporations within their legitimate spheres and to punish them for violations of their corporate charters, and it probably is not invoked too often…. Zinc Carbonate Co. v. First National Bank, 103 Wis 125, 79 NW 229. American Express Co. v. Citizens State Bank, 194 NW 430. “It has been settled beyond controversy that a national bank, under federal Law being limited in its powers and capacity, cannot lend its credit by guaranteeing the debts of another. All such contracts entered into by its officers are ultra vires . . .” Howard & Foster Co. v. Citizens Nat’l Bank of Union, 133 SC 202, 130 SE 759(1926).

10. “. . . checks, drafts, money orders, and bank notes are not lawful money of the United States …” State v. Neilon, 73 Pac 324, 43 Ore 168.

11. American Brokers Conduit v. ZAMALLOA – Judge SCHACK 11 Sep2007 Countrywide Mortgage v. BERLIUK – Judge COSTELLO 1 3Mar2008

12. Deutsche Bank v. Barnes-Judgment Entry

13. Deutsche Bank v. Barnes-Withdrawal of Objections and Motion to Dismiss Deutsche Bank v. ALEMANY Judge COSTELLO 07Jan2008 Deutsche Bank v. Benjamin CRUZ – Judge KURTZ 21May2008 Deutsche Bank v. Yobanna CRUZ – Judge KURTZ 21May2008 Deutsche Bank v. CABAROY – Judge COSTELLO 02Apr2008 Deutsche Bank v. CASTELLANOS / 2007NYSlipOp50978U/- Judge SCHACK 11May2007

14. Deutsche Bank v. CASTELLANOS/ 2008NYSlipOp50033U/ – Judge SCHACK 14Jan 2008

15. HSBC v. Valentin – Judge SCHACK calls them liars and dismisses WITH prejudice **

16. Deutsche Bank v. CLOUDEN / 2007NYSlipOp5 1 767U/ Judge SCHACK 1 8Sep2007

17. Deutsche Bank v. EZAGUI – Judge SCHACK 21Dec2007 Deutsche Bank v. GRANT – Judge SCHACK 25Apr2008 Deutsche Bank v. HARRIS – Judge SCHACK 05Feb2008

18. Deutsche Bank v. LaCrosse, Cede, DTC Complaint

19. Deutsche Bank v. NICHOLLS – Judge KURTZ 21May2008 Deutsche Bank v. RYAN – Judge KURTZ 29Jan2008 Deutsche Bank v. SAMPSON – Judge KURTZ 16Jan2008

20. Deutsche v. Marche – Order to Show Cause to VACATE Judgment of Foreclosure – 11 June2009

21. GMAC Mortgage LLC v. MATTHEWS – Judge KURTZ 10Jan2008 GMAC Mortgage LLC v. SERAFINE – Judge COSTELLO 08Jan2008 HSBC Bank USA NA v. CIPRIANI Judge COSTELLO 08Jan2008 HSBC Bank USA NA v. JACK – Judge COSTELLO 02Apr2008 IndyMac Bank FSB v. RODNEY-ROSS – Judge KURTZ 15Jan2008 LaSalleBank NA v. CHARLEUS – Judge KURTZ 03Jan2008 LaSalleBank NA v. SMALLS – Judge KURTZ 03Jan2008 PHH Mortgage Corp v. BARBER – Judge KURTZ 15Jan2008 Property Asset Management v. HUAYTA 05Dec2007

22. Rivera, In Re Services LLC v. SATTAR / 2007NYSlipOp5 1 895U/ – Judge SCHACK 09Oct2007

23. USBank NA v. AUGUSTE – Judge KURTZ 27Nov2007 USBank NA v. GRANT – Judge KURTZ 14Dec2007 USBank NA v. ROUNDTREE – Judge BURKE 11Oct2007 USBank NA v. VILLARUEL – Judge KURTZ 01Feb2008 24. Wells Fargo Bank NA v. HAMPTON – Judge KURTZ 03 Jan2008

25. Wells Fargo, Litton Loan v. Farmer WITH PREJUDICE Judge Schack June2008

26. Wells Fargo v. Reyes WITH PREJUDICE, Fraud on Court & Sanctions Judge Schack June2008

27. Deutsche Bank v. Peabody Judge Nolan (Regulation Z) Indymac Bank,FSB v. Boyd – Schack J. January 2009

28. Indymac Bank, FSB v. Bethley – Schack, J. February 2009 ( The tale of many hats)

29. LaSalle Bank Natl. Assn. v Ahearn – Appellate Division, Third Department (Pro Se)

30. NEW JERSEY COURT DISMISSES FORECLOSURE FILED BY DEUTSCHE BANK FOR FAILURE TO PRODUCE THE NOTE 31. Whittiker v. Deutsche (MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTIONS TO DISMISS) Whittiker (PLAINTIFFS’ OBJECTIONS TO REPORT AND RECOMMENDATION) Whittiker (DEFENDANT WELTMAN, WEINBERG & REIS CO., LPA’S RESPONSE TO PLAINTIFFS’ OBJECTIONS TO REPORT AND RECOMMENDATION) Whittiker (RESPONSE TO PLAINTIFFS’ OBJECTIONS TO MAGISTRATE JUDGE PEARSON’S REPORT AND RECOMMENDATION TO GRANT ITS MOTION TO DISMISS)

32. Novastar v. Snyder * (lack of standing) Snyder (motion to amend w/prejudice) Snyder (response to amend)

33. Washington Mutual v. City of Cleveland (WAMU’s motion to dismiss)

34. 2008-Ohio-1177; DLJ Mtge. Capital, Inc. v. Parsons (SJ Reversed for lack of standing)

35. Everhome v. Rowland

36. Deutsche – Class Action (RICO) Bank of New York v. TORRES – Judge COSTELLO 1 1Mar2008

37. Deutsche Bank Answer Whittiker

38. Manley Answer Whittiker

39. Justice Arthur M. Schack

40. Judge Holschuh- Show cause

41. Judge Holschuh- Dismissals 42. Judge Boyko’s Deutsche Bank Foreclosures

43. Rose Complaint for Foreclosure | Rose Dismissals

44. O’Malley Dismissals 45. City Of Cleveland v. Banks 46. Dowd Dismissal 47. EMC can’t find the note 48. Ocwen can’t find the note 49. US Bank can’t find the Note

50. US Bank – No Note 51. Key Bank – No Note

52. Wells Fargo – Defective pleading 53. Complaint in Jack v. MERS, Citi, Deutsche

54. GMAC v. Marsh 55. Massachusetts : Robin Hayes v. Deutsche Bank 56. Florida: Deutsche Bank’s Summary Judgment Denied 57. Texas: MERS v. Young / 2nd Circuit Court of Appeals – PANEL: LIVINGSTON, DAUPHINOT, and MCCOY, JJ.

58. Nevada: MERS crushed: In re Mitchell

59. “Neither, as included in its powers not incidental to them, is it a part of a bank’s business to lend its credit. If a bank could lend its credit as well as its money, it might, if it received compensation and was careful to put its name only to solid paper, make a great deal more than any lawful interest on its money would amount to. If not careful, the power would be the mother of panics, . . . Indeed, lending credit is the exact opposite of lending money, which is the real business of a bank, for while the latter creates a liability in favor of the bank, the former gives rise to a liability of the bank to another. I Morse. Banks and Banking 5th Ed. Sec 65; Magee, Banks and Banking, 3rd Ed. Sec 248.” American Express Co. v. Citizens State Bank, 194 NW 429.

60. “It is not within those statutory powers for a national bank, even though solvent, to lend its credit to another in any of the various ways in which that might be done.” Federal Intermediate Credit Bank v. L ‘Herrison, 33 F 2d 841, 842 (1929). 61. “There is no doubt but what the law is that a national bank cannot lend its credit or become an accommodation endorser.” National Bank of Commerce v. Atkinson, 55 E 471. 62. “A bank can lend its money, but not its credit.” First Nat’l Bank of Tallapoosa v. Monroe . 135 Ga 614, 69 SE 1124, 32 LRA (NS) 550. 63. “.. . the bank is allowed to hold money upon personal security; but it must be money that it loans, not its credit.” Seligman v. Charlottesville Nat. Bank, 3 Hughes 647, Fed Case No.12, 642, 1039. 64. “A loan may be defined as the delivery by one party to, and the receipt by another party of, a sum of money upon an agreement, express or implied, to repay the sum with or without interest.” Parsons v. Fox 179 Ga 605, 176 SE 644. Also see Kirkland v. Bailey, 155 SE 2d 701 and United States v. Neifert White Co., 247 Fed Supp 878, 879. 65. “The word ‘money’ in its usual and ordinary acceptation means gold, silver, or paper money used as a circulating medium of exchange . . .” Lane v. Railey 280 Ky 319, 133 SW 2d 75. 66. “A promise to pay cannot, by argument, however ingenious, be made the equivalent of actual payment …” Christensen v. Beebe, 91 P 133, 32 Utah 406. 67. “A bank is not the holder in due course upon merely crediting the depositors account.” Bankers Trust v. Nagler, 229 NYS 2d 142, 143. 68. “A check is merely an order on a bank to pay money.” Young v. Hembree, 73 P2d 393 69. “Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.” Barnsdall Refining Corn. v. Birnam Wood Oil Co. 92 F 26 817. 70. “Any conduct capable of being turned into a statement of fact is representation. There is no distinction between misrepresentations effected by words and misrepresentations effected by other acts.” Leonard v. Springer 197 Ill 532. 64 NE 301. 71. “If any part of the consideration for a promise be illegal, or if there are several considerations for an unseverable promise one of which is illegal, the promise, whether written or oral, is wholly void, as it is impossible to say what part or which one of the considerations induced the promise.” Menominee River Co. v. Augustus Spies L & C Co.,147 Wis 559-572; 132 NW 1122. 72. “The contract is void if it is only in part connected with the illegal transaction and the promise single or entire.” Guardian Agency v. Guardian Mut. Savings Bank, 227 Wis 550, 279 NW 83. 73. “It is not necessary for recision of a contract that the party making the misrepresentation should have known that it was false, but recovery is allowed even though misrepresentation is innocently made, because it would be unjust to allow one who made false representations, even innocently, to retain the fruits of a bargain induced by such representations.” Whipp v. Iverson, 43 Wis 2d 166. 74. “Each Federal Reserve bank is a separate corporation owned by commercial banks in its region …” Lewis v. United States, 680 F 20 1239 (1982).

HOW AND WHY THE BANKS SECRETLY AND QUICKLY “SWITCH CURRENCY” NOT FULFILL THE “LOAN AGREEMENT “(THE CONTRACT) OBTAIN YOUR MORTGAGE NOTE WITHOUT INVESTING ONE CENT TO FORCE YOU TO LABOR TO PAY INTEREST ON “THE CONTRACT “ TO REFUSE TO FULFILL “THE CONTRACT “ TO MAKE YOU A DEPOSITOR (NOT A BORROWER)

The oldest scheme throughout History is the changing of currency. Remember the moneychangers in the temple (BIBLE)? “If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest” Exodus 22:25. They changed currency as a business. You would have to convert to Temple currency in order to buy an animal for sacrifice. The Temple Merchants made money by the exchange. The Bible calls it unjust weights and measures, and judges it to be an abomination. Jesus cleared the Temple of these abominations. Our Christian Founding Fathers did the same. Ben Franklin said in his autobiography, “… the inability of the colonists to get the power to issue their own money permanently out of the hands of King George III and the international bankers was the prime reason for the revolutionary war.” The year 1913 was the third attempt by the European bankers to get their system back in place within the United States of America. President Andrew Jackson ended the second attempt in 1836. What they could not win militarily in the Revolutionary War they attempted to accomplish by a banking money scheme which allowed the European Banks to own the mortgages on nearly every home, car, farm, ranch, and business at no cost to the bank. Requiring “We the People” to pay interest on the equity we lost and the bank got free.

Today people believe that cash and coins back up the all checks. If you deposit $100 of cash, the bank records the cash as a bank asset (debit) and credits a Demand Deposit Account (DDA), saying that the bank owes you $100. For the $100 liability the bank owes you, you may receive cash or write a check. If you write a $100 check, the $100 liability your bank owes you is transferred to another bank and that bank owes $100 to the person you wrote the check to. That person can write a $100 check or receive cash. So far there is no problem. Remember one thing however, for the check to be valid there must first be a deposit of money to the banks ASSETS, to make the check (liability) good. The liability is like a HOLDING ACCOUNT claiming that money was deposited to make the check good. Here then, is how the switch in currency takes place The bank advertises it loans’ money. The bank says, “sign here”. However the bank never signs because they know they are not going to lend you theirs, or other depositor’s money.

Under the law of bankruptcy of a nation, the mortgage note acts like money. The bank makes it look like a loan but it is not. It is an exchange. The bank receives the equity in the home you are buying, for free, in exchange for an unpaid bank liability that the bank cannot pay, without returning the mortgage note. If the bank had fulfilled its end of the contract, the bank could not have received the equity in your home for free. The bank receives your mortgage note without investing or risking one-cent. The bank sells the mortgage note, receives cash or an asset that can then be converted to cash and still refuses to loan you their or other depositors’ money or pay the liability it owes you. On a $100,000 loan the bank does not give up $100,000. The bank receives $100,000 in cash or an asset and issues a $100,000 liability (check) the bank has no intention of paying. The $100,000 the bank received in the alleged loan is the equity (lien on property) the bank received without investment, and it is the $100,000 the individual lost in equity to the bank. The $100,000 equity the individual lost to the bank, which demands he/she repay plus interest. The loan agreement the bank told you to sign said LOAN. The bank broke that agreement. The bank now owns the mortgage note without loaning anything. The bank then deposited the mortgage note in an account they opened under your name without your authorization or knowledge. The bank withdrew the money without your authorization or knowledge using a forged signature. The bank then claimed the money was the banks’ property, which is a fraudulent conversion. The mortgage note was deposited or debited (asset) and credited to a Direct Deposit Account, (DDA) (liability). The credit to Direct Deposit Account (liability) was used from which to issue the check. The bank just switched the currency. The bank demands that you cannot use the same currency, which the bank deposited (promissory notes or mortgage notes) to discharge your mortgage note. The bank refuses to loan you other depositors’ money, or pay the liability it owes you for having deposited your mortgage note. To pay this liability the bank must return the mortgage note to you.

However instead of the bank paying the liability it owes you, the bank demands you use these unpaid bank liabilities, created in the alleged loan process, as the new currency. Now you must labor to earn the bank currency (unpaid liabilities created in the alleged loan process) to pay back the bank. What the bank received for free, the individual lost in equity. If you tried to repay the bank in like kind currency, (which the bank deposited without your authorization to create the check they issued you), then the bank claims the promissory note is not money. They want payment to be in legal tender (check book money). The mortgage note is the money the bank uses to buy your property in the foreclosure. They get your real property at no cost. If they accept your promissory note to discharge the mortgage note, the bank can use the promissory note to buy your home if you sell it. Their problem is, the promissory note stops the interest and there is no lien on the property.

If you sell the home before the bank can find out and use the promissory note to buy the home, the bank lost. The bank claims they have not bought the home at no cost. Question is, what right does the bank have to receive the mortgage note at no cost in direct violation of the contract they wrote and refused to sign or fulfill. By demanding that the bank fulfill the contract and not change the currency, the bank must deposit your second promissory note to create check book money to end the fraud, putting everyone back in the same position they where, prior to the fraud, in the first place. Then all the homes, farms, ranches, cars and businesses in this country would be redeemed and the equity returned to the rightful owners (the people). If not, every time the homes are refinanced the banks get the equity for free. You and I must labor 20 to 30 years full time as the bankers sit behind their desks, laughing at us because we are too stupid to figure it out or to force them to fulfill their contract. The $100,000 created inflation and this increases the equity value of the homes.

On an average homes are refinanced every 7 1/2 years. When the home is refinanced the bank again receives the equity for free. What the bank receives for free the alleged borrower loses to the bank. According to the Federal Reserve Banks’ own book of Richmond, Va. titled “YOUR MONEY” page seven, “…demand deposit accounts are not legal tender…” If a promissory note is legal tender, the bank must accept it to discharge the mortgage note. The bank changed the currency from the money deposited, (mortgage note) to check book money (liability the bank owes for the mortgage note deposited) forcing us to labor to pay interest on the equity, in real property (real estate) the bank received for free.

This cost was not disclosed in NOTICE TO CUSTOMER REQUIRED BY FEDERAL LAW, Federal Reserve Regulation Z. When a bank says they gave you credit, they mean they credited your transaction account, leaving you with the presumption that they deposited other depositors money in the account. The fact is they deposited your money (mortgage note). The bank cannot claim they own the mortgage note until they loan you their money. If bank deposits your money, they are to credit a Demand Deposit Account under your name, so you can write checks and spend your money. In this case they claim your money is their money.

Ask a criminal attorney what happens in a fraudulent conversion of your funds to the bank’s use and benefit, without your signature or authorization. What the banks could not win voluntarily, through deception they received for free. Several presidents, John Adams, Thomas Jefferson, and Abraham Lincoln believed that banker capitalism was more dangerous to our liberties than standing armies. U.S. President James A. Garfield said, “Whoever controls the money in any country is absolute master of industry and commerce.” The Chicago Federal Reserve Bank’s book,” “Modern Money Mechanics”, explains exactly how the banks expand and contract the checkbook money supply forcing people into foreclosure. This could never happen if contracts were not violated and if we received equal protection under the law of Contract.

HOW THE BANK SWITCHES THE CURRENCY

This is a repeat worded differently to be sure you understand it. You must understand the currency switch. The bank does not loan money. The bank merely switches the currency. The alleged borrower created money or currency by simply signing the mortgage note. The bank does not sign the mortgage note because they know they will not loan you their money. The mortgage note acts like money. To make it look like the bank loaned you money the bank deposits your mortgage note (lien on property) as money from which to issue a check. No money was loaned to legally fulfill the contract for the bank to own the mortgage note. By doing this, the bank received the lien on the property without risking or using one cent. The people lost the equity in their homes and farms to the bank and now they must labor to pay interest on the property, which the bank got for free and they lost. The check is not money, the check merely transfers money and by transferring money the check acts LIKE money. The money deposited is the mortgage note. If the bank never fulfills the contract to loan money, then the bank does not own the mortgage note.

The deposited mortgage note is still your money and the checking account they set up in your name, which they credited, from which to issue the check, is still your money. They only returned your money in the form of a check. Why do you have to fulfill your end of the agreement if the bank refuses to fulfill their end of the agreement? If the bank does not loan you their money they have not fulfilled the agreement, the contract is void. You created currency by simply signing the mortgage note. The mortgage note has value because of the lien on the property and because of the fact that you are to repay the loan.

The bank deposits the mortgage note (currency) to create a check (currency, bank money). Both currencies cost nothing to create. By law the bank cannot create currency (bank money, a check) without first depositing currency, (mortgage note) or legal tender. For the check to be valid there must be mortgage note or bank money as legal tender, but the bank accepted currency (mortgage note) as a deposit without telling you and without your authorization. The bank withdrew your money, which they deposited without telling you and withdrew it without your signature, in a fraudulent conversion scheme, which can land the bankers in jail but is played out in every City and Town in this nation on a daily basis. Without loaning you money, the bank deposits your money (mortgage note), withdraws it and claims it is the bank’s money and that it is their money they loaned you. It is not a loan, it is merely an exchange of one currency for another, they’ll owe you the money, which they claimed they were to loan you. If they do not loan the money and merely exchange one currency for another, the bank receives the lien on your property for free. What they get for free you lost and must labor to pay back at interest. If the banks loaned you legal tender, they could not receive the liens on nearly every home, car, farm, and business for free. The people would still own the value of their homes. The bank must sell your currency (mortgage note) for legal tender so if you use the bank’s currency (bank money), and want to convert currency (bank money) to legal tender they will be able to make it appear that the currency (bank money) is backed by legal tender. The bank’s currency (bank money) has no value without your currency (mortgage note). The bank cannot sell your currency (mortgage note) without fulfilling the contract by loaning you their money. They never loaned money, they merely exchanged one currency for another. The bank received your currency for free, without making any loan or fulfilling the contract, changing the cost and the risk of the contract wherein they refused to sign, knowing that it is a change of currency and not a loan.

If you use currency (mortgage note), the same currency the bank deposited to create currency (bank money), to pay the loan, the bank rejects it and says you must use currency (bank money) or legal tender. The bank received your currency (mortgage note) and the bank’s currency (bank money) for free without using legal tender and without loaning money thereby refusing to fulfill the contract. Now the bank switches the currency without loaning money and demands to receive your labor to pay what was not loaned or the bank will use your currency (mortgage note) to buy your home in foreclosure, The Revolutionary war was fought to stop these bank schemes. The bank has a written policy to expand and contract the currency (bank money), creating recessions, forcing people out of work, allowing the banks to obtain your property for free. If the banks loaned legal tender, this would never happen and the home would cost much less. If you allow someone to obtain liens for free and create a new currency, which is not legal tender and you must use legal tender to repay. This changes the cost and the risk. Under this bank scheme, even if everyone in the nation owned their homes and farms debt free, the banks would soon receive the liens on the property in the loan process. The liens the banks receive for free, are what the people lost in property, and now must labor to pay interest on. The interest would not be paid if the banks fulfilled the contract they wrote. If there is equal protection under the law and contract, you could get the mortgage note back without further labor. Why should the bank get your mortgage note and your labor for free when they refuse to fulfill the contract they wrote and told you to sign? Sorry for the redundancy, but it is important for you to know by heart their “shell game”, I will continue in that redundancy as it is imperative that you understand the principle. The following material is case law on the subject and other related legal issues as well as a summary.

LOGIC AS EVIDENCE

 The check was written without deducting funds from Savings Account or Certificate of Deposit allowing the mortgage note to become the new pool of money owed to Demand Deposit Account, Savings Account, Certificate of Deposit with Demand Deposit, Savings Account, and/or Certificate of Deposit increasing by the amount of the mortgage note. In this case the bankers sell the mortgage note for Federal Reserve Bank Notes or other assets while still owing the liability for the mortgage note sold and without the bank giving up any- Federal Reserve Bank Notes. If the bank had to part with Federal Reserve Bank Notes, and without the benefit of checks to hide the fraudulent conversion of the mortgage note from which it issues the check, the bank fraud would be exposed. Federal Reserve Bank Notes are the only money called legal tender. If only Federal Reserve Bank Notes are deposited for the credit to Demand Deposit Account- Savings Account, Certificate of Deposit, and if the bank wrote a check for the mortgage note, the check then transfers Federal Reserve Bank Notes and the bank gives the borrower a bank asset. There is no increase in the check book money supply that exists in the loan process. The bank policy is to increase bank liabilities; Demand Deposit Account, Savings Account, Certificate of Deposit, by the mortgage note. If the mortgage note is money, then the bank never gave up a bank asset. The bank simply used fraudulent conversion of ownership of the mortgage note.

The bank cannot own the mortgage note until the bank fulfills the contract. The check is not the money; the money is the deposit that makes the check good. In this case, the mortgage note is the money from which the check is issued. Who owns the mortgage note when the mortgage note is deposited? The borrower owns the mortgage note because the bank never paid money for the mortgage note and never loaned money (bank asset). The bank simply claimed the bank owned the mortgage note without paying for it and deposited the mortgage note from which the check was issued. This is fraudulent conversion. The bank risked nothing! Not even one penny was invested. They never took money out of any account, in order to own the mortgage note, as proven by the bookkeeping entries, financial ratios, the balance sheet, and of course the bank’s literature. The bank simply never complied with the contract. If the mortgage note is not money, then the check is check kiting and the bank is insolvent and the bank still never paid. If the mortgage note is money, the bank took our money without showing the deposit, and without paying for it, which is fraudulent conversion. The bank claimed it owned the mortgage note without paying for it, then sold the mortgage note, took the cash and never used the cash to pay the liability it owed for the check the bank issued. The liability means that the bank still owes the money. The bank must return the mortgage note or the cash it received in the sale, in order to pay the liability. Even if the bank did this, the bank still never loaned us the bank’s money, which is what ‘loan’ means. The check is not money but merely an order to pay money. If the mortgage note is money then the bank must pay the check by returning the mortgage note.

The only way the bank can pay Federal Reserve Bank Notes for the check issued is to sell the mortgage note for Federal Reserve Bank Notes. Federal Reserve Bank Notes are non-redeemable in violation of the UCC. The bank forces us to trade in non-redeemable private bank notes of which the bank refuses to pay the liability owed. When we present the Federal Reserve Bank Notes for payment the bank just gives us back another Federal Reserve Bank Note which the bank paid 2 1/2 cents for per bill regardless of denomination. What a profit for the bank! The check issued can only be redeemed in Federal Reserve Bank Notes, which the bank obtained by selling the mortgage note that they paid nothing for. The bank forces us to trade in bank liabilities, which they never redeem in an asset. We the people are forced to give up our assets to the bank for free, and without cost to the bank. This is fraudulent conversion making the contract, which the bank created with their policy of bookkeeping entries, illegal and the alleged contract null and void. The bank has no right to the mortgage note or to a lien on the property, until the bank performs under the contract. The bank had less than ten percent of Federal Reserve Bank Notes to back up the bank liabilities in Demand Deposit Account, Savings Account, or Certificate of Deposit’s. A bank liability to pay money is not money. When we try and repay the bank in like funds (such as is the banks policy to deposit from which to issue checks) they claim it is not money. The bank’s confusing and deceptive trade practices and their alleged contracts are unconscionable.

SUMMARY OF DAMAGES

The bank made the alleged borrower a depositor by depositing a $100,000 negotiable instrument, which the bank sold or had available to sell for approximately $100,000 in legal tender. The bank did not credit the borrower’s transaction account showing that the bank owed the borrower the $100,000. Rather the bank claimed that the alleged borrower owed the bank the $100,000, then placed a lien on the borrower’s real property for $100,000 and demanded loan payments or the bank would foreclose. The bank deposited a non-legal tender negotiable instrument and exchanged it for another non legal tender check, which traded like money, using the deposited negotiable instrument as the money deposited. The bank changed the currency without the borrower’s authorization. First by depositing non legal tender from which to issue a check (which is non-legal tender) and using the negotiable instrument (your mortgage note), to exchange for legal tender, the bank needed to make the check appear to be backed by legal tender. No loan ever took place. Which shell hides the little pea? The transaction that took place was merely a change of currency (without authorization), a negotiable instrument for a check. The negotiable instrument is the money, which can be exchanged for legal tender to make the check good. An exchange is not a loan. The bank exchanged $100,000 for $100,000. There was no need to go to the bank for any money. The customer (alleged borrower) did not receive a loan, the alleged borrower lost $100,000 in value to the bank, which the bank kept and recorded as a bank asset and never loaned any of the bank’s money. In this example, the damages are $100,000 plus interest payments, which the bank demanded by mail. The bank illegally placed a lien on the property and then threatened to foreclose, further damaging the alleged borrower, if the payments were not made.

A depositor is owed money for the deposit and the alleged borrower is owed money for the loan the bank never made and yet placed a lien on the real property demanding payment. Damages exist in that the bank refuses to loan their money. The bank denies the alleged borrower equal protection under the law and contract, by merely exchanging one currency for another and refusing repayment in the same type of currency deposited. The bank refused to fulfill the contract by not loaning the money, and by the bank refusing to be repaid in the same currency, which they deposited as an exchange for another currency. A debt tender offered and refused is a debt paid to the extent of the offer. The bank has no authorization to alter the alleged contract and to refuse to perform by not loaning money, by changing the currency and then refusing repayment in what the bank has a written policy to deposit. The seller of the home received a check. The money deposited for the check issued came from the borrower not the bank. The bank has no right to the mortgage note until the bank performs by loaning the money. In the transaction the bank was to loan legal tender to the borrower, in order for the bank to secure a lien. The bank never made the loan, but kept the mortgage note the alleged borrower signed. This allowed the bank to obtain the equity in the property (by a lien) and transfer the wealth of the property to the bank without the bank’s investment, loan, or risk of money. Then the bank receives the alleged borrower’s labor to pay principal and Usury interest.

What the people owned or should have owned debt free, the bank obtained ownership in, and for free, in exchange for the people receiving a debt, paying interest to the bank, all because the bank refused to loan money and merely exchanged one currency for another. This places you in perpetual slavery to the bank because the bank refuses to perform under the contract. The lien forces payment by threat of foreclosure. The mail is used to extort payment on a contract the bank never fulfilled. If the bank refuses to perform, then they must return the mortgage note. If the bank wishes to perform, then they must make the loan. The past payments must be returned because the bank had no right to lien the property and extort interest payments.

The bank has no right to sell a mortgage note for two reasons. The mortgage note was deposited and the money withdrawn without authorization by using a forged signature and; two, the contract was never fulfilled. The bank acted without authorization and is involved in a fraud thereby damaging the alleged borrower.

Excerpts From “Modem Money Mechanics” Pages 3 & 6.

What Makes Money Valuable? In the United States neither paper currency nor deposits have value as commodities. Intrinsically, a dollar bill is just a piece of paper, deposits merely book entries. Coins do have some intrinsic value as metal, but generally far less than face value. Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers, in this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment. Transaction deposits are the modem counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could “spend” by writing checks, thereby “printing” their own money. Notes, exchange just like checks.

How do open market purchases add to bank reserves and deposits? Suppose the Federal Reserve System, through its trading desk at the Federal Reserve Bank of New York, buys $10,000 of Treasury bills from a dealer in U.S. government securities. In today’s world of Computer financial transactions, the Federal Reserve Bank pays for the securities with an “electronic” check drawn on itself. Via its “Fedwire” transfer network, the Federal Reserve notifies the dealer’s designated bank (Bank A) that payment for the securities should be credited to (deposited in) the dealer’s account at Bank A. At the same time, Bank A’s reserve account at the Federal Reserve is credited for the amount of the securities purchased. The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank A’s books are matched by $10,000 of the dealer’s deposits that did not exist before. If business is active, the banks with excess reserves probably will have opportunities to loan the $9,000. Of course, they do not really pay out loans from money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to tile borrower’s transaction accounts. Loans (assets) and deposits (liabilities) both rise by $9,000. Reserves are unchanged by the loan transactions. But the deposit credits constitute new additions to the total deposits of the banking system.

PROOF BANKS DEPOSIT NOTES AND ISSUE BANK CHECKS. THE CHECKS ARE ONLY AS GOOD AS THE PROMISSORY NOTE. NEARLY ALL BANK CHECKS ARE CREATED FROM PRIVATE NOTES. FEDERAL RESERVE BANK NOTES ARE A PRIVATE CORPORATE NOTE (Chapter 48, 48 Stat 112)

WE USE NOTES TO DISCHARGE NOTES.

Excerpt from booklet Your Money, page 7: Other M1 Money While demand deposits, traveler’s checks, and interest-bearing accounts with unlimited checking authority are not legal tender, they are usually acceptable in payment for purchases of goods and services. The booklet, “Your Money”, is distributed free of charge. Additional copies may be obtained by writing to: Federal Reserve Bank of Richmond Public Services Department P.O. Box 27622 Richmond, Virginia 23261

CREDIT LOANS AND VOID CONTRACTS: CASE LAW

75. “In the federal courts, it is well established that a national bank has not power to lend its credit to another by becoming surety, indorser, or guarantor for him.”’ Farmers and Miners Bank v. Bluefield Nat ‘l Bank, 11 F 2d 83, 271 U.S. 669.

76. “A national bank has no power to lend its credit to any person or corporation . . . Bowen v. Needles Nat. Bank, 94 F 925 36 CCA 553, certiorari denied in 20 S.Ct 1024, 176 US 682, 44 LED 637.

77. “The doctrine of ultra vires is a most powerful weapon to keep private corporations within their legitimate spheres and to punish them for violations of their corporate charters, and it probably is not invoked too often .. .” Zinc Carbonate Co. v. First National Bank, 103 Wis 125, 79 NW 229. American Express Co. v. Citizens State Bank, 194 NW 430.

78. “A bank may not lend its credit to another even though such a transaction turns out to have been of benefit to the bank, and in support of this a list of cases might be cited, which-would look like a catalog of ships.” [Emphasis added] Norton Grocery Co. v. Peoples Nat. Bank, 144 SE 505. 151 Va 195.

79. “It has been settled beyond controversy that a national bank, under federal Law being limited in its powers and capacity, cannot lend its credit by guaranteeing the debts of another. All such contracts entered into by its officers are ultra vires . . .” Howard & Foster Co. v. Citizens Nat’l Bank of Union, 133 SC 202, 130 SE 759(1926).

80. “. . . checks, drafts, money orders, and bank notes are not lawful money of the United States …” State v. Neilon, 73 Pac 324, 43 Ore 168.

81. “Neither, as included in its powers not incidental to them, is it a part of a bank’s business to lend its credit. If a bank could lend its credit as well as its money, it might, if it received compensation and was careful to put its name only to solid paper, make a great deal more than any lawful interest on its money would amount to. If not careful, the power would be the mother of panics . . . Indeed, lending credit is the exact opposite of lending money, which is the real business of a bank, for while the latter creates a liability in favor of the bank, the former gives rise to a liability of the bank to another. I Morse. Banks and Banking 5th Ed. Sec 65; Magee, Banks and Banking, 3rd Ed. Sec 248.” American Express Co. v. Citizens State Bank, 194 NW 429.

82. “It is not within those statutory powers for a national bank, even though solvent, to lend its credit to another in any of the various ways in which that might be done.” Federal Intermediate Credit Bank v. L ‘Herrison, 33 F 2d 841, 842 (1929).

83. “There is no doubt but what the law is that a national bank cannot lend its credit or become an accommodation endorser.” National Bank of Commerce v. Atkinson, 55 E 471. 84. “A bank can lend its money, but not its credit.” First Nat’l Bank of Tallapoosa v. Monroe . 135 Ga 614, 69 SE 1124, 32 LRA (NS) 550.

85. “.. . the bank is allowed to hold money upon personal security; but it must be money that it loans, not its credit.” Seligman v. Charlottesville Nat. Bank, 3 Hughes 647, Fed Case No.12, 642, 1039. 86. “A loan may be defined as the delivery by one party to, and the receipt by another party of, a sum of money upon an agreement, express or implied, to repay the sum with or without interest.” Parsons v. Fox 179 Ga 605, 176 SE 644. Also see Kirkland v. Bailey, 155 SE 2d 701 and United States v. Neifert White Co., 247 Fed Supp 878, 879.

87. “The word ‘money’ in its usual and ordinary acceptation means gold, silver, or paper money used as a circulating medium of exchange . . .” Lane v. Railey 280 Ky 319, 133 SW 2d 75.

88. “A promise to pay cannot, by argument, however ingenious, be made the equivalent of actual payment …” Christensen v. Beebe, 91 P 133, 32 Utah 406.

89. “A bank is not the holder in due course upon merely crediting the depositors account.” Bankers Trust v. Nagler, 229 NYS 2d 142, 143.

90. “A check is merely an order on a bank to pay money.” Young v. Hembree, 73 P2d 393. 91. “Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.” Barnsdall Refining Corn. v. Birnam Wood Oil Co.. 92 F 26 817. 92. “Any conduct capable of being turned into a statement of fact is representation. There is no distinction between misrepresentations effected by words and misrepresentations effected by other acts.” Leonard v. Springer 197 Ill 532. 64 NE 301.

93. “If any part of the consideration for a promise be illegal, or if there are several considerations for an unseverable promise one of which is illegal, the promise, whether written or oral, is wholly void, as it is impossible to say what part or which one of the considerations induced the promise.” Menominee River Co. v. Augustus Spies L & C Co., 147 Wis 559. 572; 132 NW 1122.

94. “The contract is void if it is only in part connected with the illegal transaction and the promise single or entire.” Guardian Agency v. Guardian Mut. Savings Bank, 227 Wis 550, 279 NW 83.

95. “It is not necessary for rescission of a contract that the party making the misrepresentation should have known that it was false, but recovery is allowed even though misrepresentation is innocently made, because it would be unjust to allow one who made false representations, even innocently, to retain the fruits of a bargain induced by such representations.” Whipp v. Iverson, 43 Wis 2d 166.

96. “Each Federal Reserve bank is a separate corporation owned by commercial banks in its region …” Lewis v. United States, 680 F 20 1239 (1982).

97. In a Debtor’s RICO action against its creditor, alleging that the creditor had collected an unlawful debt, an interest rate (where all loan charges were added together) that exceeded, in the language of the RICO Statute, “twice the enforceable rate.” The Court found no reason to impose a requirement that the Plaintiff show that the Defendant had been convicted of collecting an unlawful debt, running a “loan sharking” operation. The debt included the fact that exaction of a usurious interest rate rendered the debt unlawful and that is all that is necessary to support the Civil RICO action. Durante Bros. & Sons, Inc. v. Flushing Nat ‘l Bank. 755 F2d 239, Cert. denied, 473 US 906 (1985).

98. The Supreme Court found that the Plaintiff in a civil RICO action need establish only a criminal “violation” and not a criminal conviction. Further, the Court held that the Defendant need only have caused harm to the Plaintiff by the commission of a predicate offense in such a way as to constitute a “pattern of Racketeering activity.” That is, the Plaintiff need not demonstrate that the Defendant is an organized crime figure, a mobster in the popular sense, or that the Plaintiff has suffered some type of special Racketeering injury; all that the Plaintiff must show is what the Statute specifically requires. The RICO Statute and the civil remedies for its violation are to be liberally construed to effect the congressional purpose as broadly formulated in the Statute. Sedima, SPRL v. Imrex Co., 473 US 479 (1985).

DEFINITIONS TO KNOW WHEN EXAMINING A BANK CONTRACT BANK ACCOUNT:

A sum of money placed with a bank or banker, on deposit, by a customer, and subject to be drawn out on the latter’s check.

BANK: whose business it is to receive money on deposit, cash checks or drafts, discount commercial paper, make loans and issue promissory notes payable to bearer, known as bank notes.

BANK CREDIT: A credit with a bank by which, on proper credit rating or proper security given to the bank, a person receives liberty to draw to a certain extent agreed upon.

BANK DEPOSIT: Cash, checks or drafts placed with the bank for credit to depositor’s account. Placement of money in bank, thereby, creating contract between bank and depositors. DEMAND DEPOSIT: The right to withdraw deposit at any time. BANK DEPOSITOR: One who delivers to, or leaves with a bank a sum of money subject to his order.

BANK DRAFT: A check, draft or other form of payment.

BANK OF ISSUE: Bank with the authority to issue notes which are intended to circulate as currency. LOAN: Delivery by one party to, and receipt by another party, a sum of money upon agreement, express or implied, to repay it with or without interest.

CONSIDERATION: The inducement to a contract. The cause, motive, price or impelling influences, which induces a contracting, party to enter into a contract. The reason, or material cause of a contract.

CHECK: A draft drawn upon a bank and payable on demand, signed by the maker or drawer, containing an unconditional promise to pay a certain sum in money to the order of the payee. The Federal Reserve Board defines a check as, “…a draft or order upon a bank or banking house purporting to be drawn upon a deposit of funds for the payment at all events of, a certain sum of money to a certain person therein named, or to him or his order, or to bearer and payable instantly on demand of.”

QUESTIONS ONE MIGHT ASK THE BANK IN AN INTERROGATORY

Did the bank loan gold or silver to the alleged borrower?

Did the bank loan credit to the alleged borrower?

 Did the borrower sign any agreement with the bank, which prevents the borrower from repaying the bank in credit?

Is it true that your bank creates check book money when the bank grants loans, simply by adding deposit dollars to accounts on the bank’s books, in exchange, for the borrower’s mortgage note? Has your bank, at any time, used the borrower’s mortgage note, “promise to pay”, as a deposit on the bank’s books from which to issue bank checks to the borrower?

At the time of the loan to the alleged borrower, was there one dollar of Federal Reserve Bank Notes in the bank’s possession for every dollar owed in Savings Accounts, Certificates of Deposits and check Accounts (Demand Deposit Accounts) for every dollar of the loan?

According to the bank’s policy, is a promise to pay money the equivalent of money?

Does the bank have a policy to prevent the borrower from discharging the mortgage note in “like kind funds” which the bank deposited from which to issue the check? Does the bank have a policy of violating the Deceptive Trade Practices Act?

When the bank loan officer talks to the borrower, does the bank inform the borrower that the bank uses the borrowers mortgage note to create the very money the bank loans out to the borrower?

Does the bank have a policy to show the same money in two separate places at the same time?

Does the bank claim to loan out money or credit from savings and certificates of deposits while never reducing the amount of money or credit from savings accounts or certificates of deposits, which customers can withdraw from?

 Using the banking practice in place at the time the loan was made, is it theoretically possible for the bank to have loaned out a percentage of the Savings Accounts and Certificates of Deposits?

If the answer is “no” to question #13, explain why the answer is no.

In regards to question #13, at the time the loan was made, were there enough Federal Reserve Bank Notes on hand at the bank to match the figures represented by every Savings Account and Certificate of Deposit and checking Account (Demand Deposit Account)?

Does the bank have to obey, the laws concerning, Commercial Paper; Commercial Transactions, Commercial Instruments, and Negotiable Instruments? Did the bank lend the borrower the bank’s assets, or the bank’s liabilities?

What is the complete name of the banking entity, which employs you, and in what jurisdiction is the bank chartered?

What is the bank’s definition of “Loan Credit”? Did the bank use the borrowers assumed mortgage note to create new bank money, which did not exist before the assumed mortgage note was signed?

Did the bank take money from any Demand Deposit Account (DDA), Savings Account (SA), or a Certificate of Deposit (CD), or any combination of any Demand Deposit Account, Savings Account or Certificate of Deposit, and loan this money to the borrower?

Did the bank replace the money or credit, which it loaned to the borrower with the borrower’s assumed mortgage note?

Did the bank take a bank asset called money, or the credit used as collateral for customers’ bank deposits, to loan this money to the borrower, and/or did the bank use the borrower’s note to replace the asset it loaned to the borrower?

Did the money or credit, which the bank claims to have loaned to the borrower, come from deposits of money or credit made by the bank’s customers, excluding the borrower’s assumed mortgage note? Considering the balance sheet entries of the bank’s loan of money or credit to the borrower, did the bank directly decrease the customer deposit accounts (i.e. Demand Deposit Account, Savings Account, and Certificate of Deposit) for the amount of the loan?

Describe the bookkeeping entries referred to in question #13. Did the bank’s bookkeeping entries to record the loan and the borrower’s assumed mortgage note ever, at any time, directly decrease the amount of money or credit from any specific bank customer’s deposit account?

Does the bank have a policy or practice to work in cooperation with other banks or financial institutions use borrower’s mortgage note as collateral to create an offsetting amount of new bank money or credit or check book money or Demand Deposit Account generally to equal the amount of the alleged loan?

Regarding the borrowers assumed mortgage loan, give the name of the account which was debited to record the mortgage.

Regarding the bookkeeping entry referred to in Interrogatory #17, state the name and purpose of the account, which was credited. When the borrower’s assumed mortgage note was debited as a bookkeeping entry, was the offsetting entry a credit account? Regarding the initial bookkeeping entry to record the borrower’s assumed mortgage note and the assumed loan to the borrower, was the bookkeeping entry credited for the money loaned to the borrower, and was this credit offset by a debit to record the borrower’s assumed mortgage note?

Does the bank currently or has it ever at anytime used the borrower’s assumed mortgage note as money to cover the bank’s liabilities referred to above, i.e. Demand Deposit Account, Savings Account and Certificate of Deposit? When the assumed loan was made to the borrower, did the bank have every Demand Deposit Account, Savings Account, and Certificate of Deposit backed up by Federal Reserve Bank Notes on hand at the bank? Does the bank have an established policy and practice to emit bills of credit which it creates upon its books at the time of making a loan agreement and issuing money or socalled money of credit, to its borrowers?

SUMMARY

The bank advertised it would loan money, which is backed by legal tender. Is not that what the symbol $ means? Is that not what the contract said? Do you not know there is no agreement or contract in the absence of mutual consent? The bank may say that they gave you a check, you owe the bank money. This information shows you that the check came from the money the alleged borrower provided and the bank never loaned any money from other depositors. I’ve shown you the law and the bank’s own literature to prove my case. All the bank did was trick you. They get your mortgage note without investing one cent, by making you a depositor and not a borrower. The key to the puzzle is, the bank did not sign the contract. If they did they must loan you the money. If they did not sign it, chances are, they deposited the mortgage note in a checking account and used it to issue a check without ever loaning you money or the bank investing one cent.

Our Nation, along with every State of the Union, entered into Bankruptcy, in 1933. This changes the law from “gold and silver” legal money and “common law” to the law of bankruptcy. Under Bankruptcy law the mortgage note acts like money. Once you sign the mortgage note it acts like money. The bankers now trick you into thinking they loaned you legal tender, when they never loaned you any of their money. The trick is they made you a depositor instead of a borrower.

They deposited your mortgage note and issued a bank check. Neither the mortgage note nor the check is legal tender. The mortgage note and the check are now money created that never existed, prior. The bank got your mortgage note for free without loaning you money, and sold the mortgage note to make the bank check appear legal. The borrower provided the legal tender, which the bank gave back in the form of a check. If the bank loaned legal tender, as the contract says, for the bank to legally own the mortgage note, then the people would still own the homes, farms, businesses and cars, nearly debt free and pay little, if any interest. By the banks not fulfilling the contract by loaning legal tender, they make the alleged borrower, a depositor. This is a fraudulent conversion of the mortgage note. A Fraud is a felony. The bank had no intent to loan, making it promissory fraud, mail fraud, wire fraud, and a list of other crimes a mile long. How can they make a felony, legal? They cannot! Fraud is fraud!

The banks deposit your mortgage note in a checking account. The deposit becomes the bank’s property. They withdraw money without your signature, and call the money, the banks money that they loaned to you. The bank forgot one thing. If the bank deposits your mortgage note, then the bank must credit your checking account claiming the bank owes you $100,000 for the $100,000 mortgage note deposited. The credit of $100,000 the bank owes you for the deposit allows you to write a check or receive cash. They did not tell you they deposited the money, and they forget to tell you that the $100,000 is money the banks owe you, not what you owe the bank. You lost $100,000 and the bank gained $100,000. For the $100,000 the bank gained, the bank received government bonds or cash of $100,000 by selling the mortgage note. For the loan, the bank received $100,000 cash, the bank did not give up $100,000.

Anytime the bank receives a deposit, the bank owes you the money. You do not owe the bank the money. If you or I deposit anyone’s negotiable instrument without a contract authorizing it, and withdraw the money claiming it is our money, we would go to jail. If it was our policy to violate a contract, we could go to jail for a very long time. You agreed to receive a loan, not to be a depositor and have the bank receive the deposit for free. What the bank got for free (lien on real property) you lost and now must pay with interest. If the bank loaned us legal tender (other depositors’ money) to obtain the mortgage note the bank could never obtain the lien on the property for free. By not loaning their money, but instead depositing the mortgage note the bank creates inflation, which costs the consumer money. Plus the economic loss of the asset, which the bank received for free, in direct violation of any signed agreement.

We want equal protection under the law and contract, and to have the bank fulfill the contract or return the mortgage note. We want the judges, sheriffs, and lawmakers to uphold their oath of office and to honor and uphold the founding fathers U.S. Constitution. Is this too much to ask?

What is the mortgage note? The mortgage note represents your future loan payments. A promise to pay the money the bank loaned you. What is a lien? The lien is a security on the property for the money loaned.

How can the bank promise to pay money and then not pay? How can they take a promise to pay and call it money and then use it as money to purchase the future payments of money at interest. Interest is the compensation allowed by law or fixed by the parties for the use or forbearance of borrowed money. The bank never invested any money to receive your mortgage note. What is it they are charging interest on?

The bank received an asset. They never gave up an asset. Did they pay interest on the money they received as a deposit? A check issued on a deposit received from the borrower cost the bank nothing? Where did the money come from that the bank invested to charge interest on?

The bank may say we received a benefit. What benefit? Without their benefit we would receive equal protection under the law, which would mean we did not need to give up an asset or pay interest on our own money! Without their benefit we would be free and not enslaved. We would have little debt and interest instead of being enslaved in debt and interest. The banks broke the contract, which they never intended to fulfill in the first place. We got a check and a house, while they received a lien and interest for free, through a broken contract, while we got a debt and lost our assets and our country.

The benefit is the banks, who have placed liens on nearly every asset in the nation, without costing the bank one cent. Inflation and working to pay the bank interest on our own money is the benefit. Some benefit!

What a Shell Game. The Following case was an actual trial concerning the issues we have covered. The Judge was extraordinary in-that he had a grasp of the Constitution that I haven’t seen often enough in our courts. This is the real thing, absolutely true. This case was reviewed by the Minnesota Supreme Court on their own motion. The last thing in the world that the Bankers and the Judges wanted was case law against the Bankers. However, this case law is real. http://scariestbookofalltime.blogspot.com/2012/06/keep-your-house-stop-foreclosure.html  

 _______________________________________________________________________

STATE OF MINNESOTA IN JUSTICE COURT COUNTY OF SCOTT TOWNSHIP OF CREDIT RIVER ) MARTIN V. MAHONEY, JUSTICE FIRST BANK OF MONTGOMERY, Plaintiff, ) CASE NO: 19144 Vs. )

 JUDGMENT AND DECREE Jerome Daly, Defendant. )

The above entitled action came on before the court and a jury of 12 on December 7, 1968 at 10:00 a.m. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel Theodore R. Mellby, Defendant appeared on his own behalf.

A jury of Talesmen were called, impaneled and sworn to try the issues in this case. Lawrence V. Morgan was the only witness called for plaintiff and defendant testified as the only witness in his own behalf.

Plaintiff brought this as a Common Law action for the recovery of the possession of lot 19, Fairview Beach, Scott County, Minn. Plaintiff claimed titled to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which plaintiff claimed was in default at the time foreclosure proceedings were started. Defendant appeared and answered that the plaintiff created the money and credit upon its own books by bookkeeping entry as the legal failure of consideration for the Mortgage Deed and alleged that the Sheriff’s sale passed no title to plaintiff. The issues tried to the jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the note for almost 3 years. Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private bank, further that he knew of no United States Statute of Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the consideration and that Defendant was estopped from doing so. At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant. Now therefore by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1787, the Constitution of the United States and the Constitution and laws of the State Minnesota not inconsistent therewith. http://scariestbookofalltime.blogspot.com/2012/06/keep-your-house-stop-foreclosure.html

IT IS HEREBY ORDERED, ADJUDGED AND DECREED

That Plaintiff is not entitled to recover the possession of lot 19, Fairview Beach, Scott County, Minnesota according to the plat thereof on file in the Register of Deeds office. That because of failure of a lawful consideration the note and Mortgage dated May 8, 1964 are null and void. That the Sheriffs sale of the above described premises held on June 26, 1967 is null and void, of no effect. That Plaintiff has no right, title or interest in said premises or lien thereon, as is above described. That any provision in the Minnesota Constitution and any Minnesota Statute limiting the Jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has Jurisdiction to render complete Justice in this cause. That Defendant is awarded costs in the sum of $75.00 and execution is hereby issued therefore. A 10 day stay is granted. The following memorandum and any supplemental memorandum made and filed by this Court in support of this judgment is hereby made a part hereof by reference.

BY THE COURT Dated December 9, 1969 MARTIN V. MAHONEY Justice of the Peace Credit River Township Scott County, Minnesota

MEMORANDUM

The issues in this case were simple. There was no material dispute on the facts for the jury to resolve. Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes because of their interlocking activity and practices, and both being Banking Institutions Incorporated under the laws of the United States, are in the Law to be treated as one and the same Bank, did create the entire $14,000.00 in money or credit upon its…

From the Phil Daniels proposed Foundation to Prevent Fraudulent Foreclosures or F.P.F.F

 http://scariestbookofalltime.blogspot.com/2012/06/keep-your-house-stop-foreclosure.html

Grace

Blog http://s355160796.onlinehome.us

Blog: http://gracco.wordpress.com

11. June 2012

Naked Capitalism: Alabama Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges

FRIDAY, JUNE 8, 2012

Alabama Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges

In a unanimous decision, the Alabama Court of Civil Appeals reversed a lower court decision on a foreclosure case, U.S. Bank v. Congress and remanded the case to trial court.

We’d flagged this case as important because to our knowledge, it was the first to argue what we call the New York trust theory, namely, that the election to use New York law in the overwhelming majority of mortgage securitizations meant that the parties to the securitization could operate only as stipulated in the pooling and servicing agreement that created that particular deal. Over 100 years of precedents in New York have produced well settled case law that deems actions outside what the trustee is specifically authorized to do as “void acts” having no legal force. The rigidity of New York trust has serious implications for mortgage securitizations. The PSAs required that the notes (the borrower IOUs) be transferred to the trust in a very specific fashion (endorsed with wet ink signatures through a particular set of parties) before a cut-off date, which typically was no later than 90 days after the trust closing. The problem is, as we’ve described in numerous posts, that there appears to have been massive disregard in the securitization for complying with the contractual requirements that they established and appear to have complied with, at least in the early years of the securitization industry. It’s difficult to know when the breakdown occurred, but it appears that well before 2004-2005, many subprime originators quit bothering with the nerdy task of endorsing notes and completing assignments as the PSAs required; they seemed to take the position they could do that right before foreclosure. Indeed, that’s kosher if the note has not been securitized, but as indicated above, it is a no-go with a New York trust. There is no legal way to remedy the problem after the fact.

The solution in the Congress case appears to have been a practice that has since become troublingly become common: a fabricated allonge. An allonge is an attachment to a note that is so firmly affixed that it can’t travel separately. The fact that a note was submitted to the court in the Congress case and an allonge that fixed all the problems appeared magically, on the eve of trial, looked highly sus. The allonge also contained signatures that looked less than legitimate: they were digitized (remember, signatures as supposed to be wet ink) and some were shrunk to fit signature lines. These issues were raised at trial by Congress’s attorneys, but the fact that the magic allonge appeared the Thursday evening before Memorial Day weekend 2011 when the trial was set for Tuesday morning meant, among other things, that defense counsel was put on the back foot (for instance, how do you find and engage a signature expert on such short notice? Answer, you can’t).

The case was ruled in favor of the US Bank, in a narrow and strained opinion (which was touted as significant by reliable securitization industry booster Paul Jackson). It argued that the case was an ejectment action (the final step to get the borrower out after the foreclosure was final) so that, per securitization expert, Georgetown law professor Adam Levitin,

..the question of ownership of the note was not an issue of standing, but an affirmative defense for which the homeowner had the burden of proof…Crazy or not, however, this meant that the homeowner wasn’t actually challenging the trust’s standing. From there it was a small step for the court to say that the homeowner couldn’t invoke the terms of the PSA because she wasn’t a party to it…..

The case has been remanded back to trial court, and the judges put the issue of the allonge front and center

The court found that the judge put an improperly high burden of proof on Congress, applying a “clear and convincing evidence” standard. The court said that was a misapplication of precedent based on cases dealing with recorded deeds. The document under dispute was an allonge to an unrecorded note. The appeals court found the evidentiary hurdle should instead be that of a preponderance of evidence. In addition, the court also found that the lower court incorrectly focused on the issue of the validity of the signatures. The appeals court found that even though Congress seemed to be contesting the validity of the signatures (the appeals court notes the argument at points seemed to be a bit confused), her real bone of contention was that the allonge was bogus (emphasis original):

Congress appears to be arguing not that signatures on the allonge are forged or otherwise invalid to prevent enforcement of the note, but that the allonge was fabricated or, essentially, created after the first trial in order to remedy the apparent defect in the chain of indorsements.

Keep in mind that Alabama is hardly a consumer friendly jurisdiction; it’s former status as one of the preferred states for launching class action suits, thanks to favorable state statutes and easily riled juries, has led to a concerted effort to elect and place business friendly judges on the bench (Alabama has far and away the most costly Supreme Court elections in the entire nation). The fact that a higher court has finally decided to place the question of the legitimacy of suddenly-appearing allonges at the heart of a ruling is a welcome development. alabama-appeals-court-ruling-u-s-bank-v-congress-june-8-20111.pdf



MONDAY, MARCH 7, 2011

Adam Levitin: Alabama Mortgage Ruling “doesn’t have precedential value anywhere“

Georgetown law professor and securitization expert Adam Levitin has weighed in on the ruling in an Alabama case, U.S. Bank v. Congress, in which a state court judge ruled against what we have called the New York trust theory. For readers new to this terrain, the short form is that the parties to mortgage securitizations are governed by a so-called pooling and servicing agreement. The PSA, among many other things, described how the notes (the borrower IOU) were to be conveyed to a trust that would hold them for the benefit of investors. The trust was almost without exception a New York trust. New York was chosen because its trust law is both very well settled and very rigid. New York trusts have no discretion in how they operate. Any measure undertaken that is inconsistent with explicit instructions is deemed to be a “void act”.

Now it appears that the notes were not conveyed to the trusts as stipulated in the PSAs on a widespread basis. (You can read the details here). Because the trusts are New York trusts, that means you have a really big mess. You can’t convey the notes in now, that’s not permitted because the trust had specific dates for accepting the assets that have long passed. The party that has the note (someone earlier in the securitization chain) can foreclose, but no one wants to do that. It isn’t just that this would be an admission that that parties to the agreement didn’t fulfill their contractual obligations; there is no way to get the money from the party that foreclosed to the trust and then to the investors.

Since the securitization industry has had so little good news of late, and this New York trust issue has the potential to make the chain of title problems that banks are facing in courtrooms all over the US even more acute, Paul Jackson of Housing Wire was quick to jump on this pro-bank decision as a major victory. We argued that it was probably not a significant precedent, and that some of the legal reasoning looked like a stretch, other parts were at odds with decisions in other states (meaning those states were unlikely to change course based on a lower-court decision in Alabama). But we acknowledged that parts of the decision were hard to parse and over our pay grade.

Levitin has taken an even more dismissive view of the decision (although since his writing style is more measured than ours, you need to read for substance, not tone). As he reads it, the judge rejected the borrower’s case on procedural grounds. That means it cannot be seen as a ruling against the New York trust theory. So effectively, the New York trust theory remains untested rather than defeated on its initial outing. As Levitin wrote:

Perhaps the most important thing to note about the opinion is what isn’t there. There was no consideration of the chain-of-title issue in the opinion. Let me repeat, the court said nothing about whether there was proper chain-of-title in the securitization. Instead, the court avoided dealing with it. That means that this ruling isn’t grounds for sounding the “all clear” on chain-of-title. At best, it is grounds for arguing that homeowners won’t be able to raise chain-of-title problems…

The court played on the procedural posture of the case to reject this argument. First, the court explained that because this was an ejectment action, not a foreclosure, the question of ownership of the note was not an issue of standing, but an affirmative defense for which the homeowner had the burden of proof. The trial court here was citing to a recent Alabama appellate court decision (reversing a previous Alabama appellate decision) that concluded that standing is satisfied by virtue of the bank being named party on the foreclosure deed. That’s just crazy given that the foreclosure deed is a nonjudicial sale. [G.S.—maybe this explains why your shop saw your notaries' seal forged on those foreclosure deeds.]

Crazy or not, however, this meant that the homeowner wasn’t actually challenging the trust’s standing. From there it was a small step for the court to say that the homeowner couldn’t invoke the terms of the PSA because she wasn’t a party to it…..

I don’t think there’s much to get excited about with Congress. If the homeowner had prevailed, the banks would have been saying “it’s just an Alabama state trial court,” and it might well have been overturned on appeal. But that doesn’t mean that the chain-of-title issue isn’t real. It just means that there’s still a search for the proper channel on which to advance the argument.

There’s more to his post, and I suggest legal types read it in full. There is an important discussion in it about the differing considerations regarding legal action on the note (the IOU) versus the lien (which is what allows the bank to make the foreclosure) that I want to address that in a separate post. It warrants some unpacking and further discussion.

Finally, he points out that investors have been getting their own reading on these legal issues and see them as valid, hence serious, concerns:

….numerous buy-side people (read MBS investors) have told me that they think there’s a serious problem with the securitization documentation. The problem that they have is that they don’t know what to do about it—they are trying to figure out a way that this can be used to put the mortgages back to the banks without it tanking the entire financial system. In other words, the banks are being protected by the too-big-to-fail problem. That’s letting them externalize their violations of their securitization contracts on MBS investors.

That suggests that investors are looking for the right leverage point on this matter but have yet to find one that is sufficiently surgical. Given how much they have at stake, I would bet they find it sooner rather than later.alabama-appeals-court-ruling-u-s-bank-v-congress-june-8-20111.pdf

30. April 2012

MERS, Sued by Louisiana Counties, and NOW PRESENTING KENTUCY v. MERS!

 ky-usdc-complaint-ky-v-mers1.pdf

April 28th, 2012 | Author: Matthew D. Weidner, Esq.

The list of lawsuits against MERS just keeps on growing and growing and growing.  Attached below is the latest attempt by 14 counties in Texas to recover monies they claim are due from MERS.

For all of you new to the whole MERS as the villain game, I encourage you to Google MERS v. Azize and read what a good judge from right here in Pinellas County had to say about the whole MERS thing.  I encourage everyone in this country, especially all those elected officials that remain content to continue accepting the lies and the catastrophe presented to us by the banking sector and their attorneys to ask  yourselves,

What if the world had listened to Judge Walt Logan in his 2004 opinion, MERS v. Azize?

And now from the complaint itself:

For hundreds of years, the combination of recorded deeds, recorded mortgages and recorded mortgage assignments have provided the public in Kentucky with the tools necessary to effectuate real estate transactions with the knowledge that all potential interests in the property have been addressed with legal finality. The county recording system in Kentucky has been in place since the Commonwealth joined the United States.

Defendants have failed to record mortgage assignments in contravention of Kentucky law depriving Kentucky counties of millions of dollars in unpaid fees for mortgage assignments. The Defendants have taken advantage of the protections afforded by Kentucky’s laws by recording mortgages in land records maintained by Kentucky’s counties while at the same time they have failed to comply with Kentucky’s laws requiring accurate information.

Kentucky counties are charged with maintaining a property records system that provides Kentucky citizens with accurate notice of property interests in land. Kentucky specifically requires that all mortgages be recorded in the county clerk’s office: “All deeds, mortgages and other instruments required by law to be recorded to be effectual against purchasers without notice, or creditors, shall be recorded in the county clerk’s office…” KRS382.110(1). After the initial recording of a mortgage, Kentucky law requires that all assignments of a mortgage be recorded in the county clerk’s office, KRS 382.360(3), and that a fee be paid for each assignment by the assignee. KRS 64.012(1)(a)

ky-usdc-complaint-ky-v-mers1.pdf


Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com

27. April 2012

Abeel v. Bank of America Complaint | The Laundering of Trillions of Dollars of U.S. Taxpayer Money

(copy of the complaint attached)    ny-complaint-abeel-v-bofa1.pdf

In a lawsuit alleged to involve the largest money laundering network in United States history, Spire Law Group, LLP — on behalf of home owners across the Country — has filed a mass tort action in the Supreme Court of New York, County of Kings. Home owners across the country have sued every major bank servicer and their subsidiaries — formed in countries known as havens for money laundering such as the Cayman Islands, the Isle of Man, Luxembourg and Malaysia — alleging that while the Obama Administration was publicly encouraging loan modifications for home owners, it was privately ratifying the formation of these shell companies in violation of the United States Patriot Act, and State and Federal law. The case further alleges that through these obscure foreign companies, Bank of America, J.P. Morgan, Wells Fargo Bank, Citibank, Citigroup, One West Bank, and numerous other federally chartered banks stole hundreds of millions of dollars of home owners’ money during the last decade and then laundered it through offshore companies. The complaint, Index No. 500827, was filed by Spire Law Group, LLP, and several of the Firm’s affiliates and partners across the United States.

Far from being ambiguous, this is a complaint that “names.” Indeed, the lawsuit identifies specific companies and the offshore countries used in this enormous money laundering scheme. Federally Chartered Banks’ theft of money and their utilization of offshore tax haven subsidiaries represent potential FDIC violations, violations of New York law, and countless other legal wrongdoings under state and federal law.

“The laundering of trillions of dollars of U.S. taxpayer money — and the wrongful taking of the homes of those taxpayers — was known by the Administration and expressly supported by it. Evidence uncovered by the plaintiffs revealed that the Administration ignored its own agencies’ reports — and reports from the Department of Homeland Security — about this situation, dating as far back as 2010. Worse, the Administration purported to endorse a ‘national bank settlement’ without disclosing or having any public discourse whatsoever about the thousands of foreign tax havens now wholly owned by our nation’s banks. Fortunately, no home owner is bound to enter into this fraudulent bank settlement,” stated Eric J. Wittenberg of Columbus, Ohio — a noted trial lawyer, author and student of US history — on behalf of plaintiffs in the case.

The suing home owners reveal how deeply they were defrauded by bank and governmental corruption — and are suing for conversion, larceny, fraud, and for violations of other provisions of New York state law committed by these financial institutions and their offshore counterparts.

This lawsuit explains why loans were, in general, rarely modified after 2009. It explains why the entire bank crisis worsened, crippling the economy of the United States and stripping countless home owners of their piece of the American dream. It is indeed a fact that the Administration has spent far more money stopping bank investigations, than they have investigating them. When the Administration’s agencies (like the FDIC) blew the whistle, their reports were ignored.

The case is styled Abeel v. Bank of America, etc., et al. — and includes such entities as ML Banderia Cayman BRL Inc., ML Whitby Luxembourg S.A.R.L. and J.P Morgan Asset Management Luxembourg S.A. — as well as hundreds of other obscure offshore entities somehow “owned” by federally chartered banks and formed “under the nose” of the Administration and the FDIC.

Commenting further on the case, Mr. Wittenberg stated: “As if it is not bad enough that banks collect money and do not credit it to homeowners’ accounts, and as if it is not bad enough that those banks then foreclose when they know they do not have a legally enforceable interest in the realty, we now learn that they have been operating under unbridled free reign given by the Administration and some states’ Attorneys General in formulating this international money laundering network. Now that the light of day has been shined on it, I believe we can all rest assured that the beginning of the end of the bank crisis has arrived.”

All United States home owners may have the right to bring a lawsuit of this kind if they paid money to a national bank servicer during the years 2003 through 2009.

One lawyer impacted by the corruption — Mitchell J. Stein, who formerly represented the FDIC, the RTC and the FSLIC during the Savings and Loan scandal of the 1990s, and who predicted all of the foregoing in open court two years ago — commented: “Two years ago, I remarked in open court to a Los Angeles Superior Court Judge, as well as to legislators including Senator Dianne Feinstein’s office during a multitude of in-person meetings, that the ongoing violations of the Patriot Act by these financial institutions was outrageous and a breach of the public trust of unprecedented proportions,” said Stein.

“The size and scope of this misconduct — stretching to far-away islands never before having standing as approved United States Bank affiliates — is remarkable and emblematic of what we have seen,” he continued. “The bank crisis represents the height of corruption and brazen behavior where our historically trusted financial institutions have no qualms about breaking the law, because they have the Administration behind them. Banks do well enough when they operate lawfully without needing to be permitted to operate as criminal enterprises that steal money from United States citizens.”

Additional plaintiffs’ counsel Nicholas M. Moccia commented: “Having been in the trenches of the bank crisis for years, I always knew that the misconduct was being conducted by a network. When I started litigating against banks, however, I could have never imagined that it would be this extensive. I look forward to taking discovery of these thousands of obscure foreign entities and to obtaining for homeowners their constitutionally entitled injuries for this international ring of theft and deception.”

Comments were requested from the Attorney Generals’ offices in NY, CA, NV, and MA and the White House, but no comment was provided.

About Spire Law Group

Spire Law Group, LLP is a national law firm whose motto is “the public should be protected — at all costs — from corruption in whatever form it presents itself.” The Firm is comprised of lawyers nationally with more than 250-years of experience in a span of matters ranging from representing large corporations and wealthy individuals, to also representing the masses. The Firm is at the front lines litigating against government officials, banks, defunct loan pools, and now the very offshore entities where the corruption was enabled and perpetrated.


 

Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

Paralegal; CA Licensed Real Estate Broker; Forensic Loan Analyst.  Litigation Support and Expert Witness Services.

26. April 2012

In re Citigroup Inc., Securities Litigation. Blue print for fraud…tobacco litigation.‏

In re Citigroup Inc., Securities Litigation.  Blue print for fraud…tobacco litigation.

 Via Nye Lavalle.

citi-fcs-complaint1.pdf

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Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

Paralegal; CA Licensed Real Estate Broker; Forensic Loan Analyst.  Litigation Support and Expert Witness Services.

25. April 2012

Mortgage Defense and the Law of Restitution

Posted by April Charney: mortgage-defense-and-the-law-of-restitution1.pdf


Wanton and willful financial misconduct in the origination, securitization, servicing and foreclosure of a mortgage debt will not bar collection and enforcement of the debt.

Notwithstanding the creditor’s misconduct, the sanctity of debt is the controlling and paramount variable. Judges believe that absent strict enforcement of the obligation to repay debt, the engine of commerce will grind to a halt without lubrication of the gears with commercial credit.

Courts throughout the country faced with the choice of enforcing rules or protecting the flow of commercial credit have overwhelmingly found it in the public interest to enforce debt.

Accordingly the courts have accorded judicial license for continued egregious and demonstrable financial misconduct by banks engaged in single family residential mortgage lending.

Robosigning, forged signatures, fraudulent documents, non-compliance with the requirements prescribed by Chapter III and Chapter IX of the UCC, payment by a third party of debt installments, lack of possession of the original mortgage note endorsed in blank have all been disregarded or disallowed by courts as defenses to the enforcement of a mortgage debt.

What price has this expedient accommodation of commerce exacted? By overlooking wanton and willful financial misconduct, we have sacrificed transparency, accountability, regulatory oversight judicial integrity, objectivity and neutrality and due process. The foray into judicial activism and realism has preferred the certainty of an outcome favorable to the creditor banks over disinterested adherence to legal authorities.

Unarticulated has been the rationale which underpins the legal outcomes. Often, it seems as if the judge knows the destination to be reached without being able to explain how the court got there. The substructure is predicated upon the law of restitution. Judges realize that current statutory and case law are woefully behind the curve when it comes to the technological transformation of the business landscape.

The courts have still not caught up with the changes wrought in the secondary mortgage market by the impact of digital technology upon the origination, securitization, servicing and foreclosure of mortgages.

Courts have had great difficulty reconciling digitized transactions customarily used in mortgage based transactions and the legal requirements for paper records, signatures, precisely defined legal instruments.

Business practices have changed while legal requirements have not.

Accordingly, the courts have felt themselves constrained to fight a vanguard action to buy time for legislative changes to be made. In the meantime, business must continue to be conducted.

There is no timeout or half time interval in commerce.

Instinctively, because most judges appear to be unaware of this, the courts have created a new rule of restitution. Restitution is a claim by a person to recover property which belongs to the person from another person to whom the property does not belong. It is based upon the theory of :”unjust enrichment”. To allow the other person to keep property which does not belong to the person thereby working its deprivation upon the person to whom it does belong creates a windfall of unearned enrichment and justifies restoring the property to its rightful owner. The bottom line is the bottom line: so long as a debtor is in default, the debtor has suffered no harm as a result of creditor’s enforcement of the mortgage agreed to by both parties.

In a nutshell, the law of restitution has been relied upon in foreclosure. Acting under equity, courts have determined that, notwithstanding the misconduct of the creditor and its agents, to disallow the debt works a greater injustice. Enforcing the debt to prevent unjust enrichment of the debtor is the paramount and controlling variable. Courts have used a variety to legal constructs to implement this rule including theories of equitable assignment, restitution, equitable subrogation and constructive trust. To reach the desired outcome, courts have barred procedural and substantive foreclosure defenses. For example courts have ruled:

            • that affirmative defenses are “outside the four corners” of the document,

• the Master Pooling and Servicing Agreement is a contract of sale and assignment of the mortgage portfolio, and

• a copy of a note endorsed in blank suffices for a claim of payment and foreclosure in the event of default.

To prevent unjust enrichment, courts have, for example:

            • overlooked forged documents,

• disregarded noncompliance with notice and service requirements,

• ignored robosigning,

• relied upon meretricious documents,

• waived lack of standing,

• disregarded Chapter III of the UCC, Negotiable Instruments,

• disregarded Chapter IX of the UCC, Secured Transactions,

• circumvented the law of contracts,

• refused to apply the “unclean hands” doctrine in an equity proceeding.

The outcome is always the same. The right guy got paid. The wrong guy was not unjustly enriched. Consequently, wanton and willful financial misconduct in the origination, securitization, servicing and foreclosure of a mortgage debt will not bar collection and enforcement of the debt.

This still leaves the question precisely what must the creditor show. A court may require a showing that the creditor is the right guy to get paid as well as the debtor is the wrong guy to be enriched. Alternatively, the court could simply require a showing that the debtor is in default to enforce the mortgage. In this event, there would be no requirement of evidence that the debtor is legally entitled to collect the debt. The law of restitution would allow the right creditor to file suit to collect from the wrong creditor. However, the debtor could not raise a defense that the creditor was not legally entitled to receive payment. In the latter case, so long as there is evidence that the debtor is in default, even a ham sandwich can foreclose. The latter rule invites thieves and miscreants to attempt to collect and foreclose in the event of default a loan owned by another party. Nevertheless, courts routinely disregard evidence that the plaintiff seeking to enforce the loan does not own the loan.

What does all this mean for mortgage defense. It means the tactics used have implemented an incorrect strategy. The arguments typically made result s in a defense which will be ignored by the court. Defense counsel is unable to make an argument that can convince the court, namely that curing the default by foreclosure works a greater harm than forgiveness of the debt. When it comes to foreclosure, restitution talks; every other defense walks.

What problems are created by reflexive use of the restitution rationale?

1. It rewards creditor misconduct and noncompliance with legal authorities, enacted, decisional and regulatory. When it comes to blanket use of the restitution rule, as one notorious foreclosure mill operator phrased it: “Su casa es mi casa.” It does not matter what a creditor does to a debtor, it still remains “Give me my money or I take your house.” The restitution doctrine is a license for predatory banking and investment practices.

2. If the putative creditor does not have to submit evidence showing ownership of the debt, anyone-including a thief in the night-can foreclose on a home in default.

3. The rule as applied flouts federal and state efforts to regulate loan origination, securitization, servicing and foreclosure.

4. It invites the court to ignore the substantive and procedural due process rights of the means that unless the pleading is made, it is waived and cannot be raised in subsequent litigation.

What I am suggesting is a revision of defense strategy as follows:

            (a) Where possible, argue that the creditor is not a holder in due course.

(b) For every affirmative defense, raise a setoff or counterclaim for monetary damages.

(c) Demonstrate that each counterclaim is mandatory and must be pled in the foreclosure proceeding. Otherwise, it is waived.

(d) Raise claims related to origination, securitization, servicing including unfair debt collection practices and foreclosure.

(e) Oppose creditor’s motion to set off the counterclaim with the mortgage debt or a deficiency judgment because:

(i) Such a set off is premature prior to conduct of the foreclosure auction.

(ii) The remedy of damages is inadequate and inequitable if set of against the mortgage debt given creditor misconduct.

(iii) The set off is against public policy because it would not deter the misconduct in the future since the set off makes the award of damages for mortgage based misconduct pointless.

(f) Request the court to stay the foreclosure (preempting creditor’s Motion for Partial Summary Judgment to allow the foreclosure to proceed) pending a completion of the proceeding to allow the court to determine and debtor to argue that monetary compensation for creditor misconduct will be inadequate restitution to debtor.

The use of the counterclaim strategy promotes the use of alternate dispute resolutions instead of foreclosure. When it comes to the business of banking, it is all about the money. When a home is foreclosed, the lender usually realizes less than 50% of the amount of indebtedness. If added to this discount is a sizeable counterclaim which must be paid to the debtor and which cannot be set off against the debt, the net amount recoverable by foreclosure significantly exceeds the cost of the outcome of an alternate dispute resolution. In short, implementation of the counterclaim strategy will allow the courts to continue to collect filing fees for foreclosure cases which nevertheless are likely to be more expeditiously resolved with extra-judicial settlements.

The counterclaim strategy is not a “slam dunk” for mortgage defense. It takes time and money to discover and produce the evidence needed to support each counterclaim. In other words, the counterclaim strategy imposes time and expense costs upon debtor and creditor. For the debtor, winning a case is not cheap. For the creditor having to pay a counterclaim can become expensive. Business common sense should motivate each side to reach a compromise and accommodation. The whole point to drive home to the creditor is that successful foreclosure may become counterproductive for debt recovery. The creditor may win the battle, i.e. the foreclosure will take place but make an improvident recovery where the light cast is not worth the price of the candle debtor. It makes default the necessary and sufficient condition for foreclosure.

What is missing from this picture? Defense counsel must recognize not ignore the restitution rationale. If allowing the debtor to avoid repayment of the debt is wrong, overlooking misconduct by the creditor is also wrong even if the lesser wrong. The new rule of the case appears to be that unjust enrichment by disallowing the debt is an inequitable remedy for creditor misbehavior. Nevertheless, this rule does not hold that every remedy against the misbehavior of the creditor is inequitable. Restitution is a two edged sword.

If it is wrong to enrich the debtor by allowing the claim, it is also wrong to enrich the creditor for its misconduct. Equity should never tolerate such asymmetric, invidious imbalance. There is no reason in law or in equity to require the creditor not to be held accountable for proven misconduct. Typically, court rules have sanctions for misbehavior in court proceedings by counsel or counsel’s client. Similarly, most state court rules of civil procedure provide for setoff and counterclaim, in many cases making such pleadings mandatory.

Mandatory pleading means that unless the pleading is made, it is waived and cannot be raised in subsequent litigation.

What I am suggesting is a revision of defense strategy as follows:

(a) Where possible, argue that the creditor is not a holder in due course.

(b) For every affirmative defense, raise a setoff or counterclaim for monetary damages.

(c) Demonstrate that each counterclaim is mandatory and must be pled in the foreclosure proceeding. Otherwise, it is waived.

(d) Raise claims related to origination, securitization, servicing including unfair debt collection practices and foreclosure.

(e) Oppose creditor’s motion to set off the counterclaim with the mortgage debt or a deficiency judgment because:

(i) Such a set off is premature prior to conduct of the foreclosure auction.

(ii) The remedy of damages is inadequate and inequitable if set of against the mortgage debt given creditor misconduct.

(iii) The set off is against public policy because it would not deter the misconduct in the future since the set off makes the award of damages for mortgage based misconduct pointless.

(f) Request the court to stay the foreclosure (preempting creditor’s Motion for Partial Summary Judgment to allow the foreclosure to proceed) pending a completion of the proceeding to allow the court to determine and debtor to argue that monetary compensation for creditor misconduct will be inadequate restitution to debtor.

The use of the counterclaim strategy promotes the use of alternate dispute resolutions instead of foreclosure. When it comes to the business of banking, it is all about the money. When a home is foreclosed, the lender usually realizes less than 50% of the amount of indebtedness. If added to this discount is a sizeable counterclaim which must be paid to the debtor and which cannot be set off against the debt, the net amount recoverable by foreclosure significantly exceeds the cost of the outcome of an alternate dispute resolution. In short, implementation of the counterclaim strategy will allow the courts to continue to collect filing fees for foreclosure cases which nevertheless are likely to be more expeditiously resolved with extra-judicial settlements.

The counterclaim strategy is not a “slam dunk” for mortgage defense. It takes time and money to discover and produce the evidence needed to support each counterclaim. In other words, the counterclaim strategy imposes time and expense costs upon debtor and creditor. For the debtor, winning a case is not cheap. For the creditor having to pay a counterclaim can become expensive. Business common sense should motivate each side to reach a compromise and accommodation. The whole point to drive home to the creditor is that successful foreclosure may become counterproductive for debt recovery. The creditor may win the battle, i.e. the foreclosure will take place but make an improvident recovery where the light cast is not worth the price of the candle.

Just because a court determines that the remedy of judicial cancellation of the debt is not warranted does not mean that willful mortgage related misconduct does not result in liability compensable by monetary damages.

mortgage-defense-and-the-law-of-restitution1.pdf


Charles
Charles Wayne Cox
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

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