IMPEACH THE MINNESOTA DISTRICT COURT BENCH

Impeachment is a scary word.  For those of us who lived through the impeachment and resignation of President Richard Nixon, we remember it as a very troubling and insecure time.  But impeachment should not be a scary word.  In the United States system of government, impeachment is the only way to remove public officials who have proven their unfitness for office.  And in the case of federal judges, who enjoy the privilege of lifetime appointment, impeachment should be a regular event.  At least according to the low bar of the “good behaviour” standard contained in Article III, Section 1 of the United States Constitution.

Like any job that offers guaranteed income, lifetime appointment is a curse on federal judges.  In the free market, when Butler Liberty Law fails to serve its clients, it must immediately confess any error and work diligently to repair any damage done.   Errors cost money and money is the tool we use to serve others and do our jobs efficiently and effectively.  Mistakes set us back in terms of time and money and our reputation.  But in a way that is often difficult to accept, mistakes can be a blessing.  That’s because, in the free market, mistakes, properly addressed, discipline us, cause us to get better and ultimately make the bond with our clients stronger.

Because federal judges enjoy lifetime appointment, they never have the opportunity to meaningfully address their mistakes.  That is sad because it leads to hubris and hubris is invariably followed by a fall.  The worst thing that can happen to a federal judge is that a court of appeals reverses his decision.  Reversal may be the subject of some gentle jibing in the country club locker room, but it does not affect the judge’s bottom line.  The judge will still enjoy a lifetime salary and a palatial, 2000 square foot office complete with private library, private bath and a full staff.   Losing money has a way of focusing the mind unlike any other chastening.  The only meaningful way of focusing the mind of a federal judge is therefore through impeachment.  It shouldn’t be a big deal.  Like getting fired from a job, it is usually a blessing for everyone involved.

ARTICLE III STANDARD

Article III, Section 1 of the United States Constitution sets a low bar for removing a federal judge.   Section 1 states that judges shall be entitled to retain their privileged position “during good behaviour”:

The judicial power of the United States shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish. The judges, both of the supreme and inferior courts, shall hold their offices during good behaviour, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.

The Constitution does not define “good behaviour.” But the Federal Code of Judicial Conduct does.   Canon 2 of the Code demands that federal judges have “respect for law” and “professional competence in the law.”  The Code requires that federal judges “act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary,” and that they be “patient, dignified and respectful” to litigants, jurors and lawyers.   Finally, the Code requires that federal judges refrain from all ex parte (outside of court) communication regarding cases in front of them.

POST-BAILOUT, FEDERAL COURTS DISMISS 92 PERCENT OF ALL “FINANCIAL INSTRUMENT” CLAIMS

The Federal Judicial Center, a government entity, in March of 2011, performed an analysis of federal court behavior before and after a case called Ashcroft v. Iqbal.  The report analyzes how Iqbal has affected federal judges’ employment of a powerful docket-clearing federal procedural rule, Rule 12(b)(6), both before and after the Iqbal decision.

At page 14 of the report, the FJC found that before Iqbal, in 2006, federal courts dismissed an already very high 47 percent of all “financial instrument” (e.g., promissory note) claims.  But after Iqbal, and after the October 2008 bailouts that operated as a back-door satisfaction of $16 trillion of consumer “financial instruments, the federal courts have dismissed an astonishing 91.2 percent of all financial instruments claims.

The only real significance of the Iqbal case is that Supreme Court held that an accused terrorist will have a very tough time asserting a claim against Ivory Tower Washington D.C. bureaucrats for the brutal and unlawful actions of their remote minions where the accused terrorist brings an action in federal court asserting violations of federal Constitutional law. Nothing about “financial instruments” or “notes” or “show me the note” in Iqbal.

In sum, since the Supreme Court decided Iqbal, federal courts have dismissed financial instrument claims at a rate of 92 percent.   So for every 100 financial instrument claims (e.g. promissory note and credit card), most brought by professional lawyers after investing significant time and capital in researching the merits of their claims, federal courts deny 92 of these plaintiffs the right to even get to first base in their lawsuit.  The judges employ Rule 12(b)(6), Iqbal and simply state that the plaintiff’s complaint “does not state a claim upon which relief may be granted.”

THE PROBLEM WITH ALL THOSE FINANCIAL INSTRUMENTS  

The reality of the October 2008 Bank Bailouts is that the United States government, with the necessary help of the Federal Reserve, printed at least $16 trillion dollars and gave it to undeserving Wall Street creditors.  This money satisfied, that is, paid off, often multiple times, the funny-money creditors (some real and some just derivatives gamblers who bet that Average Joe would default on his note) who caused the financial crisis by abusing their license to print money from 2001 to 2008.

Republican David Stockman acknowledges this fact.  So do Democrat Senator Elizabeth Warren, Democrat Representative Bernie Sanders, and Neil Barofsky, the former prosecutor and head of the Troubled Asset Relief Program (TARP).

The 2008 Bailouts are an ongoing economic crime.   They are a bipartisan economic crime.  Treasury Secretary Hank Paulsen and Federal Reserve Chairman Ben Bernanke promoted it.  Head of the New York Fed Timothy Geithner approved it.  Senators Obama and McCain voted for it.  President George W. Bush signed it into law.

If most, if not all, the creditors who caused the 2008 financial meltdown have been paid off with newly printed bailout money, what should a Bailout Bank do about the 62 million recorded mortgages that provide security for this bailout satisfied debt?  The answer should be:  walk away, execute a satisfaction of mortgage and do not compound the crime.  Jubilee.  If the Bailout Banks were bailed out, why not Average Joe?  It is the only way to bring about economic recovery.  And while we are at it, we might as well forgive all the bogus and ill-advised student loans.

Instead, after accepting $16 trillion in bailout loot, the Bailout Banks have added insult to injury by trying to take Average Joe’s home.  The Bailout Banks have hired out of state third party “robo signers” to sign documents that the signers know nothing about.  They have conned courts into believing that Joe is a deadbeat, that JPMorgan Chase is George Bailey Savings & Loan and that the Bailout Banks have somehow been harmed by Joe’s failure to pay his “mortgage.”  Then when it’s all done they may hand Joe’s home to Fannie Mae or Freddie Mac for $10.

The Bailout Banks have admitted to the fraud.  They have confessed, in “Consent Decrees” with the Office of the Comptroller of the Currency and the Office of Thrift Supervision, to “unsafe and unsound” banking practices, including recording fraudulent foreclosure documents.  Here are their confessions: Bank of America, Citibank, JP Morgan Chase, US Bank, Wells Fargo, HSBC Bank, Aurora Bank, Everbank and Everbank Financial Corp., PNC Bank, MetLife Bank, One West Bank, IMB HoldCo. LLC, and Sovereign Bank.  The OCC also sanctioned the Banks’ fraudulent foreclosure abettors:  Mortgage Electronic Registration Systems, Inc., MERSCORP, LPS, DOCX, LLC and LPD Default Solutions.

So if the Bailout Banks have admitted to the fraud, and Republicans and Democrats have both come to Jesus, then why are federal courts dismissing 92 percent of plaintiffs’ claims related to financial instruments? 

I wish I knew, but it doesn’t sound like “good behaviour” to me.

MINNESOTA QUIET TITLE LAW

What I do know is that, applying the rule of law to Minnesota quiet title law, no quiet title case against a Bailout Bank could ever be dismissed “for failure to state a claim” according to Rule 12(b)(6).  At least not theoretically.  That is because in a quiet title action, according to 150 years of Minnesota law and the current version of West’s Minnesota Practice, the burden of proof is on the bank/mortgage holder:

The first Minnesota legislature enacted Minnesota’s quiet title statute, chapter 559, in 1858.  The mechanics of quieting adverse title interests has remained virtually unchanged in Minnesota since that time.

To state a claim to quiet title, a plaintiff alleges (i) possession (ii) of real property and (iii) that the defendant claims some adverse interest therein.  Barber v. Evans, 27 Minn. 92, 93, 6 N.W. 445, 446 (1880). Once a claim is stated, the burden of proof shifts to the defendant.  Id.

The object of this statute is:

to force one claiming an adverse claim or lien to establish or abandon his claim; that with respect to the claim of the defendant the position of the parties is the reverse of that occupied by the parties to an ordinary action; that the defendant becomes practically plaintiff; and takes the affirmative in pleading and proof, while the plaintiff becomes practically the defendant, and defends against the claim.

Alt v. Groff, 65 Minn. 191, 192, 68 N.W. 9, 10 (1896) (emphasis added).

The elements of the claim and the shifting of the burden of proof have remained unchanged since the statute was enacted.  A quiet title action under the statute is specifically reserved for those situations where the invalidity of the interest is NOT APPARENT on its face.  New England Mut. Life Ins. v. Capehart, 65 N.W. 258, 259 (1895) (emphasis added).

It is well-settled Minnesota law that a quiet title action may be brought by one in possession of real property against an entity claiming a lien or mortgage on the property.  Donahue v. Stearns, 31 Minn. 244, 245 (1883).  A quiet title action is appropriate where a lien or claim appears apparently good against the title for which the relief is sought.  Maloney v. Finnigan, 38 Minn. 70, 71 (1887) (emphasis added).  The only facts necessary to set up a claim under the statute are possession by the plaintiff and a claim adverse to him by the defendant.  Steele v. Fish, 2 Minn. 153 (1858).  All the plaintiff need show is possession; the burden is then on the defendant to prove the validity of his claim.  Walton v. Perkins, 28 Minn. 413 (1881).

The current version of West’s Minnesota Practice, the Minnesota practitioner’s guide, confirms the foregoing and adds:

“It is not necessary for the plaintiff to allege his title in detail, nor to state or exhibit the nature of the defendant’s adverse claim.”  6A Minn. Prac. § 54.12 (3d ed.) (internal cites omitted).  “It is for an answering defendant to disclose the nature of his adverse claim in his answer.”  6A Minn. Prac. § 54.15 (3d ed.)

As part of drafting and adopting the Minnesota Rules of Civil Procedure, in 1951 the Minnesota Supreme Court reviewed chapter 559 and the burden-shifting case law above.  In 1952 the Minnesota Supreme Court carved out a very specific exception to the normal procedural rules for quiet title actions brought under chapter 559.   Rule 81.01 of the Minnesota Rules of Civil Procedure Provides:

The rules do not govern pleadings, practice and procedure in the statutory and other proceedings listed in Appendix A insofar as they are inconsistent or in conflict with the rules.

Minn. R. Civ. P. 81.01.   From 1952 to the present, Appendix A has listed quiet title actions brought under chapter 559:

Chapter 559….Action to determine adverse claims.

Minn. R. Civ P. App. A.   The Minnesota Supreme Court has reviewed, revised and amended the Rules in 1959, 1968, 1975, 1985, 1998, 2000, 2005, 2006, 2007 and 2010.  Each time it had the opportunity to review Rule 81.01 and its exclusion of Chapter 559 quiet title claims from the normal rules.  Chapter 559’s express exclusion, including necessarily the quiet title burden-shifting case law above, has been in Appendix A every year since 1952.

All of the above means, in a quiet title action, the bank must “prove” that its mortgage is valid and enforceable.  In the context of a securitized mortgage, that is a very difficult burden.  Read this piece to understand why.  Add the fact that bailout payments have paid off most of the original creditors and the Federal Reserve is paying off the remainder at a $40 billion a month clip, and in a fair fight, the Bailout Banks’ burden is impossible.

THE MINNESOTA DISTRICT COURT’S RECORD

Unfortunately, in spite of the Bailout Banks’ receipt of $16 trillion in bailouts, in spite of their confessions to “unsafe and unsound” (that is, fraudulent) foreclosure practices, in spite of the views of the estimable David Stockman, Elizabeth Warren, Neil Barofsky and Bernie Sanders, and in spite of 150 years of quiet title law squarely placing the burden of proof on the banks, Minnesota District judges have dismissed a higher percentage of quiet title claims than even the obscene national average of 92 percent of “financial instrument” claims.

Of the 42 Butler Liberty Law cases that Minnesota Courts have decided, the federal courts have employed Rule 12(b)(6) and Iqbal to dismiss 38 of these cases.   Thus far, only 4 quiet titles have run the Iqbal gauntlet.

This means that only 4 out of 311 plaintiffs have gotten to first base in their Minnesota quiet title actions.  This is 1.29 percent.

Not one of these decisions, even the 4 favorable decisions denying Rule 12 dismissal, has acknowledged the 150 years of burden-shifting quiet title law cited above.

Instead of applying 150 years of quiet title law, many of these courts have labeled the cases “show me the note” cases and sanctioned yours truly more than $350,000 for asserting these “frivolous” claims.  Maybe we should have said “show me the financial instrument” instead of asserting burden-shifting quiet title actions.

At least then we may have increased our chances of getting to first base from 1.29 percent to 8 percent.

The sad totals are:

Chief Judge Michael Davis.  53 of 53 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge John Tunheim.  61 of 61 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge Donovan Frank.  54 of 54 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge Susan Richard Nelson.  49 of 49 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge Ann Montgomery.  19 of 20 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge Patrick Schiltz.  17 of 19 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Senior Judge David Doty.  19 of 19 plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

Judge Joan Erickson.  1 of 3 of plaintiffs’ claims dismissed for failure to state a claim with no order citing 150 years of Minnesota quiet title law or the burden of proof.

 

JUST A FEW EXAMPLES FROM THE BUTLER LIBERTY LAW FILES

We do our homework at Butler Liberty Law.  Even though quiet title law does not require it, we provide the federal courts with specific detail regarding why we believe the Bailout Banks’ mortgages are unenforceable.  73 of our clients received “Independent Foreclosure Review” letters from the Federal Reserve telling them they were victims of a fraudulent and/or erroneous foreclosure.  50 of our clients received “National Mortgage Settlement” letters from the Minnesota Attorney General informing them of the same thing.  These people generally received between $300 and $1,500 but were never informed about what the error or fraud was in their foreclosure.

The numbers above speak for themselves, but the real issue here is innocent people losing their homes.  And when I say innocent, I mean innocent.  If your creditor has a money printer behind him and uses his printer to satisfy/pay off your debt and then tries to also take your home, you are innocent and your creditor is a crook.  It goes without saying that all of my clients have done everything they can to negotiate with their bank.  You can’t negotiate with crooks.

First, the foreclosure of virtually every securitized mortgage begins with a flawed assignment of mortgage, signed by someone who has no idea what they are signing and with no knowledge of whether the loan was properly securitized and whether ultimately anyone is entitle to enforce the original note.  In addition to showing the federal courts that the Massachusetts Register of Deeds has identified about 80 percent of the people who signed documents in our cases as “robo signers,” we also hire private investigators who identify the signers’ actual employer when they signed the fraudulent foreclosure document.

The following examples are just handy at 8:45 pm in my office – they are not our best cases:

Cory and Laura Stilp.  Beautiful family fraudulently foreclosed on by HSBC bank, a Bailout Bank.  The Stilps borrowed $543,000 from Central Bank in 2006.  Central Bank sold the loan into a securitization.  On November 13, 2006, a “China Brown,” alleging that she was a MERs “Assistant Secretary,” executed an assignment of mortgage from MERs to HSBC, as Trustee for a Well Fargo securitization.  Ms. Brown was in fact an employee of America’s Servicing Company at the time she executed the assignment.   The Stilps foreclosure involved three robo signers from the list above:  China Brown (2 documents), Nikki Cureton, and Yolanda Williams.  Xee Moua also signed one of the Stilp foreclosure documents.  In spite of this fact and many, many more contained in the Stilp Complaint, Judge Ann Montgomery, employing the Iqbal docket-clearing hammer, dismissed the Stilp Complaint “for failure to state a claim.”  No discussion of burden of proof.  Without ever meeting the Stilps or even letting them get to first base in their meritorious lawsuit, she said the Stilp’s had “unclean hands.”

Zaw Mine.  Zaw is a hard-working Burmese immigrant.  Zaw borrowed $203,000 from First Republic in 2005.   First Republic assigned the mortgage to ABN AMRO, a quasi-criminal operation taken over by CitiMortgage.  Citi conducts the foreclosure and bids in $125,000 in “debt” at the July 16, 2009 Sheriff’s Sale.  Zaw doesn’t know Citi from Adam.  Five months after the Sheriff’s Sale, Citi assigns the Sheriff’s Certificate to Freddie Mac for $10.  We provide Federal District Court Judge Ann Montgomery with a Freddie Mac website screenshot stating:

“Our records show that Freddie Mac is the owner of your mortgage and it was acquired on December 22, 2005.  This date is also referred to the Freddie Mac settlement date.”

This was four years prior to the Sheriff’s sale.  If Jackson v. MERs stands for anything, it stands for the proposition that failure to record an assignment of mortgage prior to a foreclosure results in a void foreclosure.  This is affirmed by section 580.02(3) of the Minnesota Statutes and a case called Hathorn v. Butler, 75 N.W.2d 743 (Minn. 1898).

On June 5, Judge Montgomery dismissed Zaw’s quiet title claim.

Every Freddie Mac case is identical to Zaw Mine.  Freddie publishes the date it acquired the mortgage.  The date is always shortly after the origination and always before the foreclosure.  This is an admission against interest according to Federal Rule of Evidence 804 and 801(d)(2).  Freddie never records its mortgage in violation of Minn. Stat 580.02(3).

This is the “rule of law” federal judges must follow.   We have presented this identical fact and argument perhaps 30 times in federal court.  Always ignored along with the banks’ burden of proof.

These are just two isolated examples, there are more than 300 just like them, many much more compelling.

THE ERIE DOCTRINE

You may be thinking, so what?   We all know that the feds are the 800-pound gorilla and no one can mess with them.  They get to make up the rules of the game as it goes, right?  No.  At least not historically and not constitutionally.  There is a federal court doctrine called the Erie Doctrine.  It holds that federal courts cannot employ federal procedural rules (for example, Rule 12(b)(6) of the Federal Rules of Civil Procedure) in a manner that denies a litigant substantive state law rights.

Burden of proof in a lawsuit is a substantive state law right:

Federal Rules of Civil Procedure Rule 12(b)(6) “does not determine which party bears the burden of proof in a state-law created cause of action.” Godin v. Schencks, 629 F.3d 79, 89 (1st Cir. 2010), citing Coll v. PB Diagnostic Syst., Inc., 50 F.3d 1115, 1121 (1st Cir.1995). “And it is long settled that the allocation of burden of proof is substantive in nature and controlled by state law.” Id. citing Palmer v. Hoffman, 318 U.S. 109, 117 (1943); Am. Title Ins. Co. v. E.W. Fin. Corp., 959 F.2d 345, 348 (1st Cir.1992).

 

So if a Court applies Federal Rule 12(b)(6) in a manner that denies the plaintiff’s right to require that the defendant “prove” its case, then that court violates the Erie Doctrine.  As noted above, the Bailout Banks are not George Bailey Savings & Loan.  They have bailout blood on their hands and they are often front running fraudulent foreclosures for Fannie Mae and Freddie Mac.  They have a very difficult burden.

Butler Liberty Law has petitioned the United States Supreme Court for review on this issue in Karnatcheva v. JPMorgan Chase.

THE JACKSON V. MERS CANARD

Although the federal courts are no longer employing Jackson v. MERs as a weapon against my clients, they did initially and so it is necessary to explain why they were wrong and why they likely have seen the light turned away from relying on it.  First and foremost, Jackson was not a quiet title action.   As such, the plaintiffs, not the defendants, bore the burden of proof.  This is a very big distinction.  It is a dispositive distinction; that is, comparing Jackson to a quiet title is like comparing an apple to a skateboard.  Second, the Jackson plaintiffs alleged only violations of the Minnesota Recording Act.  The plaintiffs alleged that MERs could not foreclose unless it first recorded the transfers of the securitized notes.  The Minnesota Supreme Court held that they didn’t.  Ultimately, as a result of the OCC enforcement actions above, the banks no longer follow Jackson.  As of June 22, 2011 MERs amended its Rules, specifically Rule 8.  Banks no longer foreclose in MERs’ name and specifically require foreclosure in the name of or on behalf of, a “note owner.”  Show MERs the note I guess.  Jackson, a case that will go down as one of the worst and most distinguished decisions in American jurisprudence, is mostly a dead letter.

But lest anyone accept the fallacy that Jackson somehow makes a quiet title “frivolous,” here is the actual holding in Jackson:

First, we conclude that the plain language of sections 580.02 and 580.04 of the foreclosure by advertisement statutes use the term mortgage to refer to security instrument assignments and not to promissory note assignments.   Second, this interpretation is consistent with our longstanding principles of real property law which establish that while a promissory note assignment does constitute an equitable assignment of the security instrument, a promissory note assignment is not an assignment affecting legal title, and only assignments of legal title of the security instrument must be recorded in order to commence a foreclosure by advertisement.   Thus, on the facts before us, the term mortgage as used in the foreclosure by advertisement statutes does not appear to require MERS members to record promissory note assignments before foreclosure by advertisement.

IS THIS “GOOD BEHAVIOR”?    

You be the judge.

APPENDIX

COURTS AND JUDGES THAT GET IT (AND ARE WILLING TO SANCTION THE REAL BAD GUYS). 

On June 5, 2013, Federal Bankruptcy Judge Marvin Isgur decided Saldivar v. JPMorgan Chase, 2013 WL 2452699 (Bky. S.D. Texas 6/5/13).   In this case Judge Isgur allowed Saldivar’s claims against JPMorgan in a federal bankruptcy adversary proceeding to go forward.  The case is significant because Judge Isgur found that JPMorgan’s securitized mortgage claim against Saldivar may be void if the evidence shows that JPMorgan did not dot its I’s and cross its T’s in the original securitization of the Saldivar loan.  Most specifically, Judge Isgur found that, if JPMorgan fails to show that the securitization trustee Deutsche Bank (the legal owner of the Saldivar loan) actually physically received the Saldivar note and mortgage within 90 days of the closing of the securitization, then the mortgage will be void according the New York trust law.  This is what I informed Judge Schiltz of in the hearing after which he sanctioned me $50,000.

Judge Isgur’s decision relied on Judge Wayne Saitta’s decision and analysis of New York Trust Law in Wells Fargo v. Erobobo, 2013 WL 1831799, 2013 N.Y. Slip. Op. 50675(U) (NY Supreme Court, Kings County, 4/29/13).

See also, In Re Aagard, No. 810-77338-reg (Bankr. E.D.N.Y., Feb. 10, 2011) (Judge Grossman slams MERS as lacking standing, working as both principal and agent in same transaction, and exposes MERS’ alleged principal US Bank as unable to produce or provide evidence that it is in fact the holder of the note); In Re Vargas, No. 08-17036SB (Bankr. C.D. Cal., Sept. 30, 2008) (Judge Bufford correctly applied rules of evidence and held that MERS could not establish right to possession of the 83-year old Mr. Vargas’ home through the testimony of a low-level employee who had no foundation to testify about the legal title to the original note); In Re Walker, Bankr. E.D. Cal. No. 10-21656-E-11 (May 20, 2010) (holding that neither MERS nor its alleged principal could show that they were “real parties in interest” because neither could provide any evidence of the whereabouts of, much less legal title to, the original note); Landmark v.Kesler, 216 P.2d 158 (Kan. 2009) (in this case the Kansas Supreme Court provides the most cogent state court analysis of the problem created by securitization — the “splitting” of the note and the mortgage and the real party in interest and standing problems that the holder of the mortgage has when it cannot also show that it has clean and clear legal title to the note); U.S. Bank Nat’l Ass’n v. Ibanez, 941 NE 40 (Mass. 2011), (the Massachusetts Supreme Court denied two banks’ attempts to “quiet title” following foreclosure because the banks’ proffered evidence did not show ownership of the mortgages — or for that matter, the notes — prior to the Sheriff’s sale).