mers and securitization in contested foreclosure litigation

Presenting a live 90‐minute webinar with interactive Q&A

MERS and Securitization in MERS and Securitization in Contested Foreclosure LitigationOvercoming Challenges to MERS, Standing and "Show Me the Note" Attacks

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1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JANUARY 24, 2013

Today’s faculty features:

Andrew K. Stutzman, Partner, Stradley Ronon Stevens & Young, Philadelphia

Joseph J. Patry, Attorney, Blank Rome, Washington, D.C.

Gregory S. Korman, Partner, Katten Muchin Rosenman, Los AngelesGregory S. Korman, Partner, Katten Muchin Rosenman, Los Angeles

John R. Chiles, Partner, Burr & Forman, Ft. Lauderdale, Fla.

Katrina Christakis, Partner, Grady Pilgrim Christakis Bell, Chicago

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MERS AND SECURITIZATION IN CONTESTED FORECLOSURE LITIGATION

Overcoming Challenges to MERS, Standing and “Show Me the Note” Attacks

ANDREW K. STUTZMANSponsored by the Legal Webinar Group of Strafford PublicationsPublicationsThursday, January 24, 20131:00 p.m. Eastern Time / 12:00 p.m. Central Time /11:00 a.m. Mountain Time / 10:00 a.m. Pacific Time

THREE WAYS IN WHICH A PERSON MAY QUALIFY AS THE “PERSON TO ENFORCE THE NOTE” UNDER THE UCC

1 b b i it h ld (i i i f th t h th t i1, by being its holder (i.e., in possession of the note where the note is payable to the person or is payable to bearer); See UCC § 1201 (definition of “holder”), § 3201 (manner of negotiation). This determination requires physical examination not only of the face of the note but also of any p y y yindorsements.2, by being a nonholder in possession who has the rights of a holder. SeeUCC §§ 3203, 3301(2). This method of becoming a person with a right to enforce a note arises when a party obtains possession of a note by means of a “transfer,” rather than a “negotiation.” See In re Veal, 450 B.R. 897, 911 (9th Cir. BAP 2011) (comparing UCC § 3-201 (definition of negotiation) with UCC § 3-203(a) (definition of transfer))UCC § 3 203(a) (definition of transfer)).3, if the note has been destroyed or is lost or is in the wrongful possession of an unknown person or a person that cannot be found, by establishing that the person was formerly in possession of the note with the right to enforce

Stradley Ronon Stevens & Young, LLP 6

p y p gwhen the loss of possession occurred (and the loss was not a result of a transfer of lawful seizure). See UCC § 3309.

ARGUMENT: NON-MONETARY OBLIGATIONS VOID NEGOTIABLE INSTRUMENT STATUS NEGOTIABLE INSTRUMENT STATUS

AND THEREFORE DISPLACE UCC HOLDER STATUS

D bt t th t h t bli ti t i th t h ldDebtor asserts that her non-monetary obligation to give the note holder notice of a prepayment of principal strips the Note of its status as a negotiable instrument:(1) the requirement in UCC § 3104(a)(3) that the Note impose no obligation(1) the requirement in UCC § 3104(a)(3) that the Note impose no obligation or undertaking on the Debtor other than the payment of money, and(2) Paragraph 4 of the Note, which provides that in the event the Debtor makes a prepayment of principal (which is authorized by the Note), themakes a prepayment of principal (which is authorized by the Note), the Debtor must “tell the Note Holder in writing that [she is] doing so.”In re Walker, 466 B.R. 271 (E.D. of Pa., Bky. 2012)


ARGUMENT REJECTED:THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT

TO UCC ENFORCEMENT BY ITS HOLDER

“Th i ht f t i l t ti th t [D bt ] l t t“The right of prepayment is a voluntary option that [Debtors] may elect to exercise solely at their discretion. Indeed, such an allowance confers a benefit, not a burden, upon [Debtors], who can freely choose to decline the opportunitywho can freely choose to decline the opportunity. The fact that [Debtors] must notify the lender in the event they opt for prepayment imposes no additional liability on them and is not a condition placed on defendants' promise to pay.placed on defendants promise to pay. Rather, notification is simply a requirement of the exercise of the right of prepayment which, as noted, defendants are free to reject.This requirement does not render the note in issue non-negotiable ”This requirement does not render the note in issue non-negotiable.In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012). See also Summers v. Pennymac Corp., 2012 WL 5944943 (N.D. TX).


ARGUMENT: TRUST LAW OVERRIDES UCC AND PSA WAS BREACHED AND PSA WAS BREACHED

THEREBY RENDERING ASSIGNMENT VOID

R dl f th UCC th P li d S i i A t (PSA) dRegardless of the UCC, the Pooling and Servicing Agreement (PSA) and New York trust law govern the holder’s rights in the note.Application of the PSA and New York trust law compels the conclusion that the holder has no rights in the notethe holder has no rights in the note.In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)




“B d th f d ti l i th t th PSA d N Y k l th“Based on the foundational premise that the PSA and New York law, rather than the UCC, control, the Debtor then asserts that the transfer of the Note to BNYM was not carried out in conformity with the requirements of the PSA, and that the lack of compliance with the PSA requires the disallowance of p qthe Proof of Claim. Stated concisely, the Debtor contends that the Trust “never has, and never can own [the Note and that] ... [by] violating its own Pooling and Service Agreement, [the Trust] has prevented itself from ever having an enforceable right to [the Note and the Mortgage].’”In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)




1 th PSA i th d t th t t bli h d th T t1, the PSA is the document that established the Trust;2, the Trust is governed by New York law; 3, for an asset to become an asset of the Trust it must have been transferred to the Trust in conformity with the requirements of the PSA;4, the PSA provides the only manner in which assets may be transferred to the Trust;5, the Trust received possession of the indorsed Note no earlier January 6, 2009, thirty-seven (37) days after the Trust's “closing date;”6, due to the tardy delivery of the Note to the Trust, the Note was not t f d t th T t i li ith th PSA d i th t dtransferred to the Trust in compliance with the PSA, rendering the purported transfer ineffective under applicable New York law.In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)


ARGUMENT REJECTED:NOTE IS NEGOTIABLE INSTRUMENT AND UCC APPLIES ANDNOTE IS NEGOTIABLE INSTRUMENT AND UCC APPLIES ANDBORROWER LACKS STANDING TO ASSERT PSA VIOLATIONS

1 th N t i ti bl i t t iti ti th D bt ' i iti l d1, the Note is a negotiable instrument, vitiating the Debtor's initial and essential premise (i.e., that the UCC does not control);2, the Debtor has presented no evidence supporting her theory that the parties to the PSA intended the PSA to supplant entirely the UCC;parties to the PSA intended the PSA to supplant entirely the UCC;3, under the UCC, the Debtor's payment to BNYM as the holder of the Note satisfies the Debtor's obligations under the Note;4 it is therefore irrelevant to the Debtor whether the parties to the PSA4, it is therefore, irrelevant to the Debtor whether the parties to the PSA complied with its requirements in connection with the assignment of the Note to the Trust, as a result of which, the Debtor lacks standing to question the validity of the transfer of the Note to the Trust under the PSA.yIn re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)


ARGUMENT REJECTED (ALTERNATIVE):THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT

TO UCC ENFORCEMENT BY ITS HOLDER

“Th D bt l k th f t th t th N t ' t t ti bl“The Debtor overlooks the fact that the Note's status as a negotiable instrument was established at the outset of the transaction—when the Debtor executed the Note in favor of Allied—long before the assignment of the Note to the Trust. It therefore is difficult to understand how a later agreement (the PSA)—to which the Debtor is not a party—could alter the nature of the contract and instrument she executed years earlier.”In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)


ARGUMENT REJECTED:BORROWER LACKS STANDING TO ASSERT PSA VIOLATIONS

“A j di i l h d l d h ldi th t b l k t di“A judicial consensus has developed holding that a borrower lacks standing to 1, challenge the validity of a mortgage securitization or 2, request a judicial determination that a loan assignment is invalid due to noncompliance with a pooling and servicing agreement, when the borrower is neither a party to nor a third party beneficiary of the securitization agreement, i.e., the PSA.”agreement, i.e., the PSA.In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012). See also In re Sandford, 2012 WL 6012785 (Bkrtcy. D.N.M.).


ARGUMENT REJECTED:BORROWER LACKS STANDING TO ASSERT PSA VIOLATIONS

Th th h ld i i i l i t ' t di i t l t h thThe threshold inquiry in analyzing a party's standing is to evaluate whether the party can demonstrate that the party has suffered or will suffer “injury in fact.”If a borrower cannot demonstrate potential injury from the enforcement ofIf a borrower cannot demonstrate potential injury from the enforcement of the note and mortgage by a party acting under a defective assignment, the borrower lacks standing to raise the issue.“Here, the element of ‘injury in fact’ is lacking because the Note is aHere, the element of injury in fact is lacking because the Note is a negotiable instrument and BNYM is the holder. As a result, even if the assignment to BNYM were defective and the original assignor retains ownership rights in the Note, any payments the Debtor makes to BNYM will di h h li bilit d th N t S UCC § 3602( ) ”discharge her liability under the Note. See UCC § 3602(a).”In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012). See also In re Sandford, 2012 WL 6012785 (Bkrtcy. D.N.M.).


ARGUMENT REJECTED: A “NEGOTIABLE INSTRUMENT” REMAINS CONTROLLED BY THE UCC

“Whil th i i f th UCC i l “d f lt l ” hi h“While the provisions of the UCC simply serve as “default rules” which may be varied by contract, see UCC § 1102(c), there are limits to this principle. In particular, the UCC does not permit contracting parties to “vary” the provision governing the definition of negotiable instruments and theirprovision governing the definition of negotiable instruments and their negotiation.”In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012)


ARGUMENT: THE MORTGAGE “SPLIT” FROM THE NOTE BECAUSE MERS IS THE MORTGAGEE AND NOMINEE

“Th T t th t lit b t th N t d M t h“The Trustee argues that a split between the Note and Mortgage has occurred, nullifying the Mortgage and rendering the Note unsecured, because on the Petition Date, Fannie Mae held the Note, while MERS held the Mortgage. g gThe Trustee also appears to argue, under the split-note theory, that the Mortgage was invalid ab initio because MERS was the Mortgagee and FIB was the noteholder.In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))


ARGUMENT REJECTED: MERS MAY BE A NOMINEE UNDER STATE LAW AND THE MERS MAY BE A NOMINEE UNDER STATE LAW AND THE HOLDER AT THE TIME OF FORECLOSURE MAY ENFORCE

“The Trustee has pointed to no Wyoming authority that prohibits the loan originator from agreeing to have someone other than the beneficial owner of the debt hold the mortgage and enforce the debt as its agent. We note that Wyoming has a statute that contemplates conveying real

t t t t i t ti it hi h t th testate to a mortgagee in a representative capacity, which suggests that Wyoming allows original parties to a note and mortgage to name someone other than the noteholder as the mortgagee.”In re Trierweiler 2012 WL 6725589 (10th Cir BAP (Wyo ))In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))“The Debtors argue that the Creditor must demonstrate that it is the owner of the mortgage through establishing a valid transfer at each step in the securitization processsecuritization process. Bank of New York v. Raftogianis, 13 A. 3d 435 ( N.J.Super.Ct. Ch. Div. 2010) … merely required the lender to prove that it had the right to enforce the note when it commenced the foreclosure action. This court adopts the


psame approach.”Mesina v. Citibank, N.A., 2012 WL 2501123 (Bkrtcy.D.N.J.)

ARGUMENT: THE MORTGAGE “SPLIT” FROM THE NOTE BECAUSE MERS IS BOTH MORTGAGEE AND NOMINEE

Th T t th l t d th t h id th M t dThe Trustee nevertheless contends that he can avoid the Mortgage under the theory that there is no named mortgagee since the Mortgage impermissibly denotes MERS as both Mortgagee and as nominee for the Lender and its successors and assigns.gThe Trustee is in effect contending that MERS is granted two independent and conflicting roles - mortgagee and nominee.”In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))


ARGUMENT REJECTED: MERS IS THE PERMISSIBLE NOMINEE OF LENDER (AND ITS SUCCESSORS AND ASSIGNS)

Under the Mortgage, Borrowers conveyed an interest in their property to g g , y p p y“MERS (solely as nominee for Lender and Lender’s successors and assigns).”Nominee is defined in Blacks Law Dictionary as “[a] person designated to act in place of another, usually in a very limited way [or a] party who holds bare legal title for the benefit of others[.]”ln other words, as nominee for the lender and its successors and assigns, MERS i li it d tMERS is a limited agent. That agency relationship is addressed in the MERS membership rules which require MERS to comply with the instructions of the holder of the Note. MERS’ actions were subject to the direction of either FIB as the servicer orMERS actions were subject to the direction of either FIB, as the servicer, or Fannie Mae, as the note holder.There is no split between the Note and Mortgage arising from MERS being named as Mortgagee on behalf of the original lender and its successors and


named as Mortgagee on behalf of the original lender and its successors and assigns. At all times, the Note and the Mortgage were united.In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))

ARGUMENT: THE MORTGAGE “SPLIT” FROM THE NOTE BECAUSE IT WAS NOT RECORDED BECAUSE IT WAS NOT RECORDED

CONSISTENT WITH THE STATE RECORDING STATUTE

Th T t th t b th M t f il d t d fi th “ thThe Trustee argues that because the Mortgage failed to define the “other agreement” as required by Wyo. Stat. Ann. § 34-2-122, MERS alone must be treated as the mortgagee, thereby splitting the Note from the Mortgage when the loan was made by FIB and when the Note was transferred to yFannie Mae. Therefore, since MERS was the Mortgagee but not the Noteholder, the Mortgage cannot be enforced by MERS, the bankruptcy court erred in finding MERS was acting on behalf of the lender.In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))


ARGUMENT REJECTED: THE STATUTE IS A NOTICE STATUTE NONCOMPLIANCE WITH WHICH DOES NOT STATUTE, NONCOMPLIANCE WITH WHICH DOES NOT

INVALIDATE EQUITABLE INTERESTS IN THE MORTGAGE

Th t t t i ti t t t d d t l d th L d FIB dThe statute is a notice statute and does not preclude the Lender, FIB, and its assignee, Fannie Mae, from having acquired equitable interests in Debtors’ Property under the Mortgage. Even if the requirements of [the statute] were not satisfied the Note andEven if the requirements of [the statute] were not satisfied, the Note and Mortgage were not split, resulting in an unenforceable mortgage. The cited statute is a notice statute. If MERS had transferred its interest to a good faith purchaser, [the statute] would preclude Lender and its assignsgood faith purchaser, [the statute] would preclude Lender and its assigns from asserting their interests against MERS’ transferee. But that is not the situation before the Court. MERS did not make such a transfer; Fannie Mae acquired its equitable interest in the Mortgage from FIB knowing MERS

ld ti th M t it b h lfwould continue as the Mortgagee on its behalf.A similar Ohio statute has been construed not to invalidate equitable interests held by the grantee for the benefit of third parties. The Trustee is attempting to use a notice statute for an unintended purpose


attempting to use a notice statute for an unintended purpose.In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))

ARGUMENT: THE MORTGAGE IS UNENFORCEABLE BECAUSE AN ASSIGNMENT WAS NOT RECORDED

The Note and Mortgage are split because of failure to record the assignmentThe Note and Mortgage are split because of failure to record the assignment of the Mortgage to Fannie Mae.In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))


ARGUMENT REJECTED: THE MORTGAGE FOLLOWS THE NOTE WHICH TRANSFER INCLUDED AN EQUITABLE NOTE, WHICH TRANSFER INCLUDED AN EQUITABLE

ASSIGNMENT OF THE MORTGAGE

“Th t f ll th t l F i M it bl“The mortgage-follows-the-note rule gave Fannie Mae an equitable assignment of the Mortgage, not an equitable mortgage. While a mortgage’s enforceability is based on it being recorded, an assignment’s enforceability is tied to the assigned mortgage’s recordationassignment s enforceability is tied to the assigned mortgage s recordation. Even if there was a requirement to record assignments …, failing to record an assignment would not have the effect of invalidating the underlying mortgage because statutes that require recording assignments of mortgagesmortgage because statutes that require recording assignments of mortgages are intended to govern priorities between lenders, not the validity of liens.”In re Trierweiler, 2012 WL 6725589 (10th Cir.BAP (Wyo.))


Andrew K. Stutzmanwww.stradley.com


Standing to Foreclose & Impact on MBS

Joe PatryBlank Rome, LLP

[email protected], 202‐772‐5940

Owner v. Holder

• UCC recognizes difference between “note holder” and “note owner”

“N h ld ” UCC 3 301– “Note holder” – UCC 3‐301• Holder of the note • A nonholder in possession of the instrument who has the rights ofA nonholder in possession of the instrument who has the rights of the holder,

• A person not in possession of the instrument who is entitled to enforce the instrument

• A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument

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Owning a Note

• What does it mean to “own” the instrument?– Owning means that the entity owns the underlying debt obligation

– Entitled to an income stream from the borrower’s payments

– Example: Fannie Mae

• Seller Servicer Guide: https://www.fanniemae.com/content/guide/svc031412.pdf

– “Fannie Mae is at all times the owner of the mortgage note, whether the mortgage loan is in Fannie Mae’s portfolio or part of the MBS pool. In addition, Fannie Mae at all times p p p ,has possession of and is the holder of the mortgage note, except in the limited circumstances expressly described below. Fannie Mae may have direct possession of the note or a custodian may have custody of the note. If Fannie Mae possesses the note through a document custodian, the document custodian has custody of the note for Fannie Mae’s exclusive use and benefit ”Fannie Mae s exclusive use and benefit.

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Servicer’s Role

• Servicer’s duties– Collect payments from borrowers and remits to investors– Deals with taxes, insurance, and foreclosures if the borrower is delinquent

– Investor pays servicer a certain fee for administering the– Investor pays servicer a certain fee for administering the loan

– Servicer also has the responsibility of initiating foreclosure if th l i t d f ltif the loan goes into default

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Fannie Mae Servicers

• How does servicer of a Fannie Mae loan show that it has the right to enforce the note?

f• Fannie Mae transfers note to servicer

– “In order to ensure that a servicer is able to perform the services and duties incident to the servicing of the mortgage loan, Fannie Mae temporarily gives the g g g p y gservicer possession of the mortgage note whenever the servicer, acting in its own name, represents the interests of Fannie Mae in foreclosure actions, bankruptcy cases, probate proceedings, or other legal proceedings. This temporary transfer of possession occurs automatically and immediately upon the commencement of the servicer’s representation, in its name, of Fannie Mae’s interests in the foreclosure, bankruptcy, probate,or other legal proceeding.”

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In re Veal

– Relationship of note owner status to note enforceability• In re Veal, 450 B.R. 897 (9th Cir. BAP 2011)W ll F t t f iti d t t d ht li f f• Wells Fargo was trustee for securitized trust and sought relief from stay

– Similar concept to judicial foreclosure because plaintiff has to show standing– Wells did not show that it was entitled to enforce the note Veal at 917Wells did not show that it was entitled to enforce the note, Veal at 917– Did not show that it was a holder or a non‐holder in possession. Id.– Did not show that it was entitled to obtain relief from stay. Id.

• For standing note owner is “irrelevant ” what matters is who can• For standing, note owner is irrelevant, what matters is who can enforce. Id. at 912

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Gregory S. Kormang yKatten Muchin Rosenman LLP

Century City

The Western states have unique qualities with respect to MERS litigationrespect to MERS litigation◦ Primarily non-judicial foreclosure states Much of the pro-borrower MERS and MBS jurisprudence arises in

judicial foreclosure statesjudicial foreclosure states◦ “Adventurous” judges and plaintiff’s lawyers Even though theories derived from judicial foreclosure

requirements should not apply in non-judicial states, that does b f i d f l inot stop borrowers from trying and courts from applying

◦ Volume Lots and lots of houses, loans, foreclosures, and lawyers means

lots and lots of caseslots and lots of cases Variations among judges and the quality of borrower’s counsel

can lead to contradictory decisions, fomenting litigation

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“Split the Note” “Failed Securitization” MERS Officers Lack Authority Swinging for the Fences◦ “MERS is completely invalid”

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The theory is the MERS system “splits” the note and security instrumentnote and security instrument.◦ Borrowers say MERS does this “by facilitating the

transfer of the beneficial interest in the loan among members while maintaining MERS as theamong members while maintaining MERS as the nominal holder of the deed.” Cervantes v. Countrywide Home Loans Inc., 656 F.3d

1034 (9th Cir. 2011)( )◦ MERS critics say this is bad because the note and

the security instrument are supposed to be inseparable See Christopher L. Peterson, Two Faces: Demystifying the

Mortgage Electronic Registration System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111 (2011)

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The Ninth Circuit’s view in Cervantes:f l “ h d d [ f ] d◦ To foreclose, “the deed [of trust] and note must

be held together….”◦ Why?y “[B]ecause the holder of the note is only entitled to

repayment, and does not have the right under the deed to use the property as a means of satisfying repayment”“C l h h ld f h d d l d h “Conversely, the holder of the deed alone does not have a right to repayment and, thus, does not have an interest in foreclosing on the property to satisfy repayment.”

◦ Mortgage becomes unenforceable only if the note◦ Mortgage becomes unenforceable only if the note and deed of trust become “irreparably split.”

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◦ Cervantes rejected Plaintiffs’ argument that foreclosure is barred. “Even if we were to accept the plaintiffs’ premise that … the

note is split from the deed, we would reject the plaintiffs’ conclusion that, as a necessary consequence, no party has the power to foreclose.”

“Even if MERS were a sham beneficiary, the lenders would still be entitled to repayment of the loans and would be the proper parties to initiate foreclosure after the plaintiffs defaulted on their loans.”“[T]h i bl li h li l d h “[T]he notes are not irreparably split: the split only renders the mortgage unenforceable if MERS or the trustee, as nominal holders of the deeds, are not the agents of the lenders.

B h d l f k d f l i h◦ But the door was left cracked open for claims where: MERS initiates foreclosure in its own name; or Plaintiffs allege a violation of state recording and foreclosure

statutes based on the designation of MERS as nomineeg

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The Nevada Supreme Court thoroughly analyzed the split the note theory in aanalyzed the split the note theory in a recent decision.◦ Holding: “We conclude that when MERS is the named beneficiary

d d ff h hy

and a different entity owns the promissory note, the note and the deed of trust are split, making nonjudicial foreclosure by either improper”

“However, any split is cured when the promissory note and deed of trust are reunified ”and deed of trust are reunified. Edelson v. Bank of New York Mellon, 286 P.3d 249 (Nev.

2012)◦ Lesson:

If MERS assigns out its beneficial interest to the If MERS assigns out its beneficial interest to the foreclosing lender, then foreclosure is proper because there is no “split”

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This theory asserts that the loan never was properly assigned to the securitized trust, usually because of the presence of , y pMERS in the transaction or the timing of the assignment under the PSA, so the trustee cannot foreclose.◦ Largely rejected in Western states on standing grounds, i.e., the

borrower is neither a party to or third party beneficiary of the PSA.p y p y y Bernardi v. Deutsche Bank Nat’l Trust Co. Am., 2013 WL 163285 (N.D.

Cal. Jan. 15, 2013) Gilmore v. Am. Mortg. Network, 2012 WL 6193843 (C.D. Cal. 2012) Sami v. Wells Fargo Bank, 2012 U.S. Dist. LEXIS 38466 (N.D. Cal. 2012) Tall v. Mortg. Electronic Registration Systems, Inc., 2012 WL 6680183

(N.D.Cal 2012)◦ Though some courts have put the burden on the trustee to show

why the borrower does not have standing.S Wi W ll F B k N A 2012 U S Di t LEXIS 53387 (C D See Wise v. Wells Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 53387 (C.D. Cal. 2012) Holding that the servicer had not “sufficiently demonstrated that violations of

law associated with the loan’s securitization can go unchecked because Plaintiff is not a party to the PSA.”

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A variant on the failed securitization i h “ i ”argument is the “secret assignment”

argument.◦ Investors or assignees are “undisclosed.”Investors or assignees are undisclosed.◦ These claims are usually rejected for lack of

injury and/or standing: “[Borrower] fails to show how the undisclosed identity of [Borrower] fails to show how the undisclosed identity of

beneficial owner(s) of the Mortgage caused her any injury, by, for example, affecting the terms of her loan, her ability to repay the loan, and her obligations as a b ”borrower.” Almaden v. Peninsula Mortg., Inc., 2012 WL 6738512 (D.

Haw. 2012)

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The MERS officer executing the assignment h i i ll lor other instrument is actually an employee

of the lender/servicer.◦ As such, the MERS signer lacks authority toAs such, the MERS signer lacks authority to

execute documents for MERS◦ Any instrument executed by the MERS officer is

void for lack of authorityvoid for lack of authority This is a variation on the ordinary robo-

signer allegation◦ This claim is not about personal knowledge, it is

about the power to act

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The Ninth Circuit casually mentioned this aspect of MERS’s structure in Cervantes, giving no indication that it raised any issues:

◦ “MERS relies on its members to have someone on their own staff become a MERS officer with the authority to sign documents on behalf of MERS. [] As a result, most of the actions taken in MERS’s own name are carried out by the staff at companies that sell and buy the beneficial interest in the loans.”loans.

But the theory is getting some traction in the lower courts

◦ On motions to dismiss, courts find Twombly plausibility where plaintiff alleges that the MERS signer was an employee of the lender/serviceralleges that the MERS signer was an employee of the lender/servicer. Bernardi v. Deutsche Bank Nat’l Trust Co. Am., 2013 WL 163285 (N.D. Cal. 2013) Tang v. Bank of Am., N.A., 2012 U.S. Dist. LEXIS 38642 (C.D. Cal. 2012)

◦ Those courts require evidence that the MERS member employee has agency authority to sign for MERS or that MERS itself is an agent of theagency authority to sign for MERS, or that MERS itself is an agent of the lender. In practice this means cases drag to summary judgment or impose greater

settlement pressure

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Essentially arguing that the entire MERS system is invalidinvalid. ◦ The borrower reasons: All MERS loans are defective My loan is a MERS loan My loan is a MERS loan Ergo, my loan is defective.

◦ This is more of a class action-type argument, but individual borrowers continue to make it.

◦ Most courts reject wholesale attacks. “The Court need not cover the same ground, except to note

again that there is no ‘legal support for the proposition that the MERS system of securitization is so inherently defective as toMERS system of securitization is so inherently defective as to render every MERS deed of trust completely unenforceable and unassignable” Bergdale v. Countrywide Bank, FSB, 2013 WL 105295 (D. Ariz 2013)

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But the Supreme Court of Washington held that MERS cannot be a “beneficiary” as a matter of lawMERS cannot be a beneficiary as a matter of law.◦ By Washington statute, a “beneficiary” must actually hold

the note or instrument evidencing the obligation.◦ “Simply put if MERS does not hold the note it is not a◦ Simply put, if MERS does not hold the note, it is not a

lawful beneficiary.” Bain v. Metropolitan Mortg. Grp., Inc., 175 Wash. 2d 83 (2012)

◦ The court also shot down MERS’s argument that it may g ysimply assign out its interest to the lender. Chain of title would have to be established, and having MERS

convey its interests would not accomplish that.If MERS is not a beneficiary under Washington law “it is unclear If MERS is not a beneficiary under Washington law, it is unclear what rights, if any, it has to convey.”

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Bain cont’d.But if MERS can identify an actual principal for◦ But, if MERS can identify an actual principal for which it serves as agent, then the court suggested its role may be validated. In Bain MERS was unable to identify an agent In Bain, MERS was unable to identify an agent The traditional “MERS as nominee” language was

insufficient to establish agency.◦ It seems like the court is erecting obstacles to

fg

nonjudicial foreclosure. Heavy focus on proving up the chain of title and on

establishing “agency,” things that pop up in litigation The court expressly stated “nothing herein should be The court expressly stated nothing herein should be

interpreted as preventing the parties to proceed with judicial foreclosures.”

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Aftermath of Bain? Not as dire as it seemed, at least not in federal court.◦ Lynott v. Mortgage Electronic Registration Systems, Inc., 2012 WL

5995053 (W.D.Wash. 2012). “Plaintiff relies heavily on Bain in arguing that MERS's assignment renders U.S.

Bank incapable of foreclosing. In Bain, the court held that MERS could not act as a beneficiary unless it actually held a borrower's note. Id. at 110. Bain did not, y yhowever, create a per se cause-of-action based solely on MERS's involvement. …. In this case, Plaintiff has alleged no injury arising from MERS's actions, and she cannot therefore sustain a CPA claim.

◦ Kullman v. Northwest Trustee Services, Inc., 2012 WL 5922166 (W.D.Wash. 2012). Plaintiffs' claims fail as a matter of law. Although the Washington State Supreme

Court has ruled that MERS cannot serve as beneficiary (unless, of course, it actually holds a promissory note), the court did not rule that MERS's involvement renders a foreclosure per se invalid. See Bain v. Metropolitan Mortg. Group., Inc., 175 Wash.2d 83, 285 P.3d 34 (2012). Further, Plaintiffs have failed to allege any prejudice arising from MERS's role in the foreclosure Plaintiffs admit default andprejudice arising from MERS s role in the foreclosure. Plaintiffs admit default and seek to generate controversy where none exists.

◦ Zamzow v. Homeward Residential, Inc., 2012 WL 6615931 (W.D.Wash.,2012) “[I]t is not a violation in Washington to split the note from the deed.”

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Some legislatures have enacted statutory h d l i d h ffi ischemes to delay or impede the efficiency

of non-judicial foreclosure in Western states, ostensibly to stabilize the housingstates, ostensibly to stabilize the housing market.◦ Hawai’i legislature has made non-judicial

foreclosure almost impossibleforeclosure almost impossible◦ Nevada imposed onerous mediation program◦ California enacted Homeowners Bill of Rights

Now like-minded courts are using MERS and MBS-loans to do the same thing.

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Relationship Between UCC Articles 3 & 9 and Foreclosure Rights

JOHN R CHILESJOHN R. CHILESBURR & FORMAN LLPFort Lauderdale, Florida

[email protected]

5151

Report of the Permanent Editorial Board of the UCC:Board of the UCC:

• “Issues related to the transfer, ownership, and enforcement of mortgage notes are primarily governedenforcement of mortgage notes are primarily governed by two Articles of the UCC:”– “In cases in which the mortgage note is a negotiable instrument, g g g

Article 3 of the UCC provides rules governing the obligations of parties on the note and the enforcement of those obligations.”

– “In cases involving either negotiable or non-negotiable notes, g g gArticle 9 of the UCC contains important rules governing how ownership of those notes may be transferred, the effect of the transfer of ownership of the notes on the ownership of the mortgages securing those notes, and the right of the transferee, under certain circumstances, to record its interest in the mortgage in the applicable real estate recording office.”

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Article 3 – Negotiability of Notet c e 3 egot ab ty o ote

• Debtors often attach notes and their negotiability because of conditions and undertakings contained in thebecause of conditions and undertakings contained in the mortgage instrument. This defense invariably fails because of definition of negotiability.

• UCC Section 3-104 defines negotiable instrument as unconditional promise to pay fixed amount of money if– (1) payable to bearer or to order at time it is issued or first comes

into possession of a holder;– (2) payable on demand or at definite time;– (3) does not state any undertaking or instruction to do any act in

addition to paying the money, but the promise may contain an undertaking or power to "give , maintain, or protect collateral to

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secure payment,” among other things.

Negotiability Casesegot ab ty Cases

• Courts typically recognize that the terms and provisions of mortgage securing the note are contained within themortgage securing the note are contained within the Section 3-104(3) with regard to the permitting an undertaking to “give, maintain or protect collateral.”– See In re APPONLINE.COM, INC. v. Matrix Capital Bank, 321 B.R. 614,

(E.D. NY, 2003) (note can reference underlying mortgage without affecting negotiability); Perry v. Fairbanks Capital Corp., 888 So. 2d 725, 727 (Fl 5th DCA 2004)727 (Fla. 5th DCA 2004).

– Thomas v. Wells Fargo Bank, NA, 2012 WL 3764729 (Ala. Civ. App. 2012)(requirement to send notice with prepayment of principal did not affect negotiability)affect negotiability).

– But see Holly Hill Acres, Ltd. v. Charter Bank of Gainesville, 314 So. 2d209 ( Fla. 2nd DCA 1975) (note that incorporates mortgage by reference is not an unconditional promise to pay, and thus NOT negotiable).

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Article 3 ‐Who has standing to enforce a note as a negotiable instrument?note as a negotiable instrument?

• Many decisions adverse to rights of mortgagee to foreclose are based on the absence of standing to enforce at the time ofbased on the absence of standing to enforce at the time of filing and the principle that standing cannot be created after the action is begun.

• The focus in modern litigation has become who had the right to enforce the note at the inception of the action, which is dictated by Section 3-301 "Person entitled to enforce instrument," which is defined as – "the holder of the instrument, … – a nonholder in possession of the instrument who has the rights of a p g

holder, or … – a person not in possession of the instrument who is entitled to

enforce the instrument pursuant to Section 3-309 [(lost, destroyed, or

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stolen instruments)] or 3-418(d) [(dishonored instruments)]

Proof of standing (continued)g ( )

• To establish standing, the party seeking to foreclose must h th t it titl d t f th i t t ith tshow that it was entitled to enforce the instrument either at

the time of filing the foreclosure action (in a judicial foreclosure state) or at the time of the initial notice of default (in a non-judicial state).– See U.S. Bank, N.A. v. Knight, 90 So. 3d 824 (Fla. 4th DCA 2012)

(“to have standing, an owner or holder of a note, indorsed in blank, need only show that he possessed the note at the institution of a foreclosure suit; the mortgage necessarily and equitable follows the note.”)

• In judicial state, standing is relatively simple to establish for a note indorsed by original payee, because those rights of enforcement are clear on the face of the instrument

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enforcement are clear on the face of the instrument.

Proof of standing (continued)

• When the right to enforce is based on an indorsement, th l i tiff h t h th t it th h ld i

g ( )

the plaintiff may have to show that it was the holder, or in possession with rights of holder, at time of filing of action.– See McLean v. JPMorgan Chase, 79 So. 3d 170 (Fla. 4th DCA

2012) (where Plaintiff's original complaint alleged lost note and did not attach copy of the indorsed note, court held that when Plaintiff later produced the original note with indorsement,Plaintiff later produced the original note with indorsement, Plaintiff also had to prove that it had the right to enforce the note at the time of filing because the indorsement is not dated)dated).

57

Proof of standing (continued)

• This proof can be surprisingly difficult to obtain. Indicia of h i ht b f d i b il l tt t bli hi

g ( )

such rights may be found in: bailee letters establishing possession of original note by attorney or vendor as of certain date; welcome letters indicating transfer of servicing, exhibits to pooling and servicing agreements demonstrating transfer of notes or rights to enforce, or assignments of mortgage.g g g

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Establishing authority of indorser and authenticity of indorsementauthenticity of indorsement

• Frequently, borrowers will challenge the authenticity of i d t k i th t l ti th t dan indorsement, knowing that locating the purported

indorser may be practically impossible and that proof of the execution will be at least costly and time-consuming.y g

• A corollary claim is that the indorser was not authorized to execute the indorsement, lacked the corporate status to do so, or failed to comply with statutes limiting the power to transfer interests in real estate to corporate officersofficers.

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Proof of indorsement authenticity and authorityand authority

• Section 3-308 provides the vehicle by which such proof of the indorsement can be obviated. Under this section "the authenticity of,indorsement can be obviated. Under this section the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings.” Section 3-308(a)

• And merely lodging a denial does not get the borrower far either. "If the f fvalidity of a signature is denied in the pleadings, the burden of

establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or y p p g gincompetent at the time of trial … .“ Id. This shift of the burden of proof will allow the contesting party latitude to disprove either authenticity or authority but the inherent difficulties of doing so are visited on the borrower not the mortgageeborrower, not the mortgagee.

• Further, the borrower may even lack standing to challenge the indorsement at all. See Harvey v. Deutsche Bank Nat. Trust Co., 69 So. 3d 300, 304 (Fla. 4th DCA 2011).

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( )

Mechanics of Indorsement

• Indorsement is defined as a signature that is made on i t t f f ti ti th i t tan instrument for purpose of negotiating the instrument.

§ 3-204. For purposes of determining whether a signature is made on an instrument, a paper affixed to g p pthe instrument (an allonge) is part of the instrument. §3-204 cmt. 1.

• The indorsement may be a special indorsementidentifying the person to whom the instrument becomes payable § 3-205(a) or may be a "blank indorsement "payable, § 3 205(a), or may be a blank indorsement, § 3-205(b), by which the instrument becomes enforceable by transfer of possession alone.

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Establishing standing independently of assignment of mortgageassignment of mortgage

• Where an assignment of the mortgage itself did not occur until after the filing of the action the party enforcing the mortgageafter the filing of the action, the party enforcing the mortgage may still establish standing by demonstrating that the note secured by the mortgage was indorsed prior to the filing. This may done in different ways: the note or allonge may reflect on its face a special indorsement made before suit; or the note or allonge may reflect a blank indorsement made before suit and proof could be made that the party was the holder of the note on the date of suit E G McLean v JPMorgan Chase 79 Soon the date of suit. E.G. McLean v. JPMorgan Chase, 79 So. 3d 170 (Fla. 4th DCA 2012). "Mere delivery of a note and mortgage, with intention to pass the title . . . will vest the equitable interest in the person to whom it is so delivered". q pGMAC Mortg. LLC v. Choengkroy, 98 So. 3d 781 (Fla. 4th DCA 2012); see also Coleman v. BAC Servicing, 2100453, 2012 WL 2362617 (Ala. Civ. App. June 22, 2012).

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Establishing standing (continued) g g ( )

• Similar principles pertain in nonjudicial states. Supra.

• A party is often deemed to have initiated foreclosure proceedings for purpose of gauging standing when it accelerates the maturity date and publishes notice of a foreclosure sale. Perry v. Federal National Mortgage Assoc., 100 So. 3d 1090, 1094 (June 29, 2012) (findingAssoc., 100 So. 3d 1090, 1094 (June 29, 2012) (finding that the holder of note was the entity entitled to exercise power of sale, even though not the assignee of the mortgage at the time foreclosure was initiated)mortgage at the time foreclosure was initiated).

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Holder in Due Course

• A “holder in due course” means the holder of an instrument if the authenticity of the instrument is not in question and the holder took the instrument for value, in good faith, and without notice of 1) an uncured default 2) an unauthorizedwithout notice of 1) an uncured default, 2) an unauthorized or altered signature, 3) claims to the instrument, or 4) defenses or claims in recoupment. UCC § 3-302(a).

• An obligor may not raise ordinary contract defenses -- such as failure of consideration, negligent misrepresentation, fraudulent misrepresentation or failure of a condition --fraudulent misrepresentation, or failure of a condition against a holder in due course, even if the obligor has such a defense available against a prior holder. UCC § 3-305(a).

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Holder in Due Course (continued)( )

• The only defenses that an obligor may assert against a y g y gholder in due course are infancy, duress, lack of legal capacity, illegality of the transaction, fraud in the factum, and discharge in bankruptcy UCC § 3-305(a)and discharge in bankruptcy. UCC § 3 305(a).

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Enforcing rights under mortgage relative to other creditorsrelative to other creditors

• Because a mortgage interest securing a note is not an interest in real estate it is not subject to levy and execution by judgmentin real estate, it is not subject to levy and execution by judgment creditors of prior holders and mortgagees. Litigated cases have contended that the original mortgage broker, in whose name the mortgage was closed and which was listed as "nominee" on themortgage was closed and which was listed as nominee on the mortgage recorded under MERS name, still retained its record interest in the realty and was subject to levy and execution of a judgment lien relying on non-compliance with recordingjudgment lien, relying on non-compliance with recording statutes. However, a mortgage interest, even in title states, is an interest in personalty not subject to levy and execution. SeeMustique v Suntrust Mortgage (Cir Ct Baldwin County AlaMustique v. Suntrust Mortgage (Cir. Ct. Baldwin County, Ala. 2012), relying on Morris v. Barker, 2 So. 335 (Ala. 1887). This appears to be the law in all states.

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Article 9 ‐ Expanded Role in Real Estate SecurityEstate Security

• Revised Article 9 provides that “this Article applies to … l f i t ” § 9 109( )(3)a sale of … promissory notes.” § 9-109(a)(3).

• Specifically, rather than include two parallel sets of rules one for transactions in which promissory notes are-- one for transactions in which promissory notes are

collateral and another for sales of promissory notes --Article 9 adopted nomenclature conventions to apply

t f l t b th t f t ti Thione set of rules to both types of transactions. This was accomplished primarily by defining the term “security interest” to include not only an interest in property that secures an obligation but also the right of a buyer of a payment right in a transaction governed by Article 9.

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Revised Article 9 Controls the Transfer of Notes and Mortgagesof Notes and Mortgages.

• While it is generally true that Revised Article 9 “does not l t th ti t f f i t t i liapply to … the creation or transfer of an interest in or lien

on real estate,” Revised Article 9 explicitly makes an exception for, among other things, liens on real property p g g p p ysecuring promissory notes. § 9-109(d)(11).

• Revised Article 9 provides that the mortgage automatically follows the note, “codif[ying] the common-law rule.” § 9-203, Cmt. 9; see also § 9-203(g); § 9-308(e); Coleman v BAC Servicing 2100453 2012 WL308(e); Coleman v. BAC Servicing, 2100453, 2012 WL 2362617 (Ala. Civ. App. June 22, 2012).

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Continued…

• “[I] if the security interest in the note is perfected, the it i t t i th t li lik i isecurity interest in the mortgage lien likewise is

perfected.” § 9-109, Cmt. 7.

• Because the mortgage must follow the note, “an attempt to obtain or perfect a security interest in [the mortgage] by complying with non-Article 9 law, as by anby complying with non Article 9 law, as by an assignment of record of [the] mortgage, would be ineffective.” Id.

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Priority in the Notes and Mortgages Under Revised Article 9Under Revised Article 9

• Revised Article 9 has specific rules regarding priority which turn on when the note-buyer’s interest “attached” and was “perfected.”

• A security interest is said to have “attached” when the promissory note is validly transferred to (and enforceable by) the note buyer § 9 203(b)enforceable by) the note-buyer. § 9-203(b)

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Revised Article 9 ‐ Attachment

(1) the buyer must give value;

(2) the seller must have rights in the promissory note or the power to transfer rights in the promissory note to the buyer; and

(3) either a written transfer agreement or transfer of(3) either a written transfer agreement or transfer of possession of the promissory note pursuant to an oral agreement.

§ 9-203(b)

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Revised Article 9 ‐ Perfection

• “Perfection” determines the priority of a party’s rights hi d i U d R i d A i l 9as to third parties. Under Revised Article 9 a note-

buyer’s security interest is perfected automatically as soon as it attaches. § 9-309(4).soon as it attaches. § 9 309(4).

• No filing or other conduct is required to perfect the transfer of a promissory notetransfer of a promissory note.

• Similarly, the note-buyer’s security interest in the t i t ti ll f t d itmortgage is automatically perfected as soon as its

interest in the promissory note is perfected. See § 9-308(e).

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( )

Revised Article 9 – Priority Ordery

• Having established attachment and perfection, the i i h d f i inext issue is the order of priority.

• For a lien creditor to obtain priority under Section 9-317, it must have established a lien on the collateral before the note-buyer’s security interest was perfected See § 9-317(a)(2)was perfected. See § 9-317(a)(2).

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Agency Relationships, such as with MERS, are compatible with Article 9are compatible with Article 9

• The UCC makes clear that it does not displace traditional rules of agency law UCC § 1 103(b) (“Unless displaced byrules of agency law. UCC § 1-103(b) (“Unless displaced by the particular provisions of [the UCC], the principles of law … relative to … principal and agent[] … supplement its

i i ”)provisions.”)

• Under general agency law, an agent has authority to act on behalf of its principal where the principal “manifests assent” tobehalf of its principal where the principal manifests assent to the agent “that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act ” “Transfer and Assignment ofassent or otherwise consents so to act. Transfer and Assignment of Residential Mortgage Loans in the Secondary Mortgage Market,” ASF White Paper Series, American Securitization Forum, at 5 (Nov. 16, 2010).

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Resources

• American Securitization White Paper -http://www.americansecuritization.com/uploadedFiles/ASF_White_Paper_11_16_10.pdf

• Report of the Permanent Editorial Board for the UCC -http://www.ali.org/00021333/PEB%20Report%20-%20November%202011.pdf

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U d C R d Update on County Recorder Litigation Against MERS

K A T R I N A C H R I S T A K I S

Litigation Against MERS

K A T R I N A C H R I S T A K I SG R A D Y P I L G R I M C H R I S T A K I S B E L L L L P

C H I C A G O , I L

“OH, THE RECORDERS.”

Hamlet Act III Scene 2Hamlet, Act III, Scene 2

77

Filed Cases

Bates v. MERS (10-cv-11429, E.D.Cal.)h i i l k ( ) Christian Co. Clerk v. MERS (11-cv-0072, W.D.Ky)

Brown v. MERS (11-cv-6070, W.D.Ark.) Montgomery Co. v. MERS (11-cv-6968, E.D.Penn.)Montgomery Co. v. MERS (11 cv 6968, E.D.Penn.) Dallas Co. v. MERS (11-CV-02733, N.D.Tex) Fuller v. MERS (11-cv-1153, M.D.Fla.)

Bd f C MERS (CJ Cl l d C Ok ) Bd. of Comm. v. MERS (CJ2011-1727, Cleveland Co., Ok.) Plymouth Co. v. MERS (12-cv-4022, N.D.Iowa) Welborn v. MERS (12-cv-220, M.D.La.)( , ) Union County v. MERS (12-L-6, Union Co., Ill.) St. Clair Co. v. MERS (12-L-267, St. Clair Co., Ill.) Daniels v MERS (13 cv 00186 N D Ill ) Daniels v. MERS (13-cv-00186, N.D.Ill.)

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Claims Asserted

Violation of State False Claims Act Violation of state recording statutes Unjust enrichment Civil conspiracy Injunctive and/or declaratory relief Violation of State UDAP statutes Fraudulent/negligent misrepresentation RICO via violation of Trust Indenture Act of 1939 Public nuisance Breach of statutory and fiduciary duties

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Common Attacks

Public disclosure bars qui tam actionq No Article III standing No private right of actionp g No duty to record mortgage assignments

80

Public Disclosure Bars Qui Tam—Successful

False Claims Act erects jurisdictional bar to qui tam j qactions that do not assist government in ferreting out fraud because the alleged fraudulent

ll ti /t ti l d i bli allegations/transactions are already in public domain

Bates 694 F 3d 1076 (9th Cir 2012)Bates, 694 F.3d 1076 (9 Cir. 2012)

81

No Article III Standing—Unsuccessful

Alleged loss of recording fees and usurpation of g g pcounty’s land recordation system sufficient “injury” for purposes of Article III

Christian County, 2012 WL 566807 (W.D.Ky. 2/21/12)Fuller, 2012 WL 3733869 (M.D.Fla. 6/27/12)

82

No Private Right of Action—Successful

Recording statute does not authorize private right of action

Christian County, 2012 WL 566807 (W.D.Ky. 2/21/12) Clerks cannot maintain private right of action Clerks cannot maintain private right of action

because recording statute was designed to protect BFPs, not county clerks

Fuller, 2012 WL 3733869 (M.D.Fla. 6/27/12) Congress did not intend private enforcement of Trust

Indenture Act (and did not intend RICO to supplant Indenture Act (and did not intend RICO to supplant this scheme)

Welborn, 2013 WL 149707 (M.D.La. 1/14/13), 3 497 7 ( / 4/ 3)

83

No Duty to Record—Successful

Statute does not require recording of assignmentsq g gBrown, 2012 WL 5416922 (W.D.Ark. 9/17/12)Plymouth Co, 2012 WL 4903099 (N.D.Iowa 10/16/12)

Statute does not impose an obligation to record truthfully that is enforceable by plaintiff

Brown If no duty to record—truthfully or untruthfully—then

remaining claims (i e unjust enrichment remaining claims (i.e., unjust enrichment, conspiracy, injunction, etc.) necessarily fail

84

No Duty to Record—Unsuccessful

Statute requires compulsory recording of all conveyances of land

Montgomery Co., 2012 WL 5199361 (E.D.Pa. 10/19/12)

N d d id h h i i h f i No need to decide whether private right of action exists under statute, as quiet title rule permits any person in any manner interested in a conveyance “to person in any manner interested in a conveyance to compel the person with the appropriate documents in his or her possession to record them”

Montgomery County Plaintiff may therefore also pursue unjust enrichment

and injunctive relief (but not conspiracy)85

The Morale of the Story

“The Court is confronted with an old problem: the difficulty

“I reiterate that what the County seeks, on its own behalf an old problem: the difficulty

of reconciling new technology with old law, thus raising the centuries old separation of

County seeks, on its own behalf and on behalf of the putative Class of Iowa Counties, under the guise of ‘unjust enrichment’ centuries old separation of

powers controversy. Technology moves rapidly whereas the law moves at

g jand related claims, is a remedy only available from the legislature.”

glacial pace, and as custodians –not promulgators—of the law, courts frequently lack the

• Plymouth County

power to rein in practices that comply with its letter, but perhaps not its spirit”

F ll• Fuller

86

“Your proposal is innovative. Unfortunately, we won’t be able to use it because we’ve never tried something like this before.”

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mers and securitization in contested foreclosure litigation

Documents