FYI: Ill App Ct Rejects Foreclosure Challenge Based on Alleged Impropriety with Clerk of Court's Signature on Summons

The Illinois Appellate Court, Second District, recently held that a summons issued in a foreclosure case was valid, even though the handwritten signature appearing in the area for the court clerk's signature did not closely resemble the actual signature of the clerk of the court. 

 

A copy of the opinion is available at http://www.state.il.us/court/Opinions/AppellateCourt/2012/2ndDistrict/2111015.pdf.

 

A bank instituted foreclosure proceedings against a borrower.  On the summons to the borrower, the name of the clerk of the court appeared in handwritten cursive script.  The signature did not closely resemble the signature registered as that of the clerk with the Secretary of State. 

 

The borrower did not appear in court, and the court entered a judgment of foreclosure.  The borrower then filed a motion to quash service, arguing that the only methods by which a clerk can properly sign a summons are by his or her own hand, or by a facsimile signature.  The lower court denied the motion, and the borrower appealed. 

 

The Illinois Clerks of Courts Act provides that clerks may, "after filing with the Secretary of State his or her manual signature...execute or cause to be executed with a facsimile signature...all forms of process and notices..."   705 ILCS 105/8. 

 

The Court was guided in its decision here by precedent concerning what constitutes a valid signature for the purposes of the duties of a clerk of court.  It cited a case providing that "signing a document is the act of putting down a person's name to attest to the validity of an instrument and that signature may be stamped, printed or made legible by using any other device."  National City Bank v. Majercyk, 2011 IL App (1st) 110640, para. 3. 

 

Because "the Majercyzk court clearly accepted that a signature can be in any form that can act as a person's mark," the Court held that the clerk's signature on the summons in question was valid. 

 

The Court did acknowledge that the borrower's objection to the signature had some force as a policy matter, observing that the signature method used here "is potentially misleading," and that a mode of signing that permits the identification of the individual who actually signed the document is "much the better policy."  Nevertheless, the Court did not find anything in "either [the borrower's] brief or our examination of relevant authority [to] suggest[] that the law requires some specific format when a deputy signs a summons or anything else for the clerk." 

 

Accordingly, the Court affirmed the judgment of the lower court. 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
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FYI: 10th Cir Sanctions BK Trustee's Counsel In Unsuccessful Challenge to Foreclosure Standing

The U.S. Court of Appeals for the Tenth Circuit recently sanctioned an attorney for arguing that a note holder's loan servicer lacked standing to foreclose under a deed of trust that named MERS as beneficiary as the lender's nominee, where the attorney unsuccessfully asserted identical arguments in four prior cases in which he participated and ignored appellate decisions rejecting his "split-note" arguments.

 

A copy of the opinion is available at:  http://www.ca10.uscourts.gov/opinions/11/11-4131.pdf.

 

A borrower ("Borrower") obtained a home mortgage loan (the "First Mortgage") from a mortgage lender ("Lender") that was secured by a deed of trust against Borrower's property in Utah.  The trust deed designated Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary of the trust deed as nominee for Lender and Lender's successors and assigns.  The First Mortgage was later securitized and sold on the secondary mortgage market, and MERS ultimately assigned its interest in the trust deed to the loan owner's loan servicer ("Servicer").

 

Borrower also had obtained a second mortgage from a bank ("Second Mortgage Lender") that was junior to the First Mortgage and secured by a deed of trust against the same property.  Second Mortgage Lender never transferred or sold the second mortgage note or deed of trust.     

 

Borrower subsequently defaulted on the First Mortgage, and Servicer commenced a foreclosure action against Borrower.  In an attempt to thwart the foreclosure, Borrower filed suit against both the Second Mortgage Lender and Servicer, asserting in part that they each lacked any enforceable interests in their respective trust deeds because the  "investors were not assigned the trust deeds and 'the obligations of the Notes  . . . have become unsecured."  Among other things, Borrower also alleged that he was unable to discharge his obligations on the notes because both Servicer and Second Mortgage Lender had failed to provide him with information about the interests of "persons to whom the Notes and/or Trust Deeds may be assigned."

 

The district court granted summary judgment in favor of Servicer and Second Mortgage Lender.  Borrower appealed, but filed for bankruptcy protection during the pendency of the appeal.  Consequently, a bankruptcy trustee ("Trustee") was substituted as appellant. 

 

On appeal, Trustee's attorney asserted that Servicer and Second Mortgage Lender lacked standing to foreclose, arguments which the Tenth Circuit and the Utah Court of Appeals had rejected in cases in which the attorney himself had participated.  Servicer moved for sanctions against Trustee's attorney under 28 U.S.C. § 1927 for unreasonably prolonging the foreclosure proceedings.

 

The Tenth Circuit affirmed the grant of summary judgment in favor of Servicer and Second Mortgage Lender, and imposed sanctions on Trustee's attorney, as Servicer had requested.

 

Noting, first, that Second Mortgage Lender never transferred the note or deed of trust related to the second mortgage, the court ruled that, since Trustee never provided any explanation as to why summary judgment was improper in this case, Trustee had waived any arguments of error as to Second Mortgage Lender.   

 

Next, pointing out that Trustee's attorney repeatedly raised the identical standing arguments in other foreclosure cases and lost, the court noted that, like the trust deeds in those cases, the deed of trust in this case expressly named MERS as the beneficiary of the trust deed as nominee for Lender and Lender's successors and assigns.  Thus, as in the previous cases, the Court ruled that the trust deed granted Servicer the right to foreclose, that Servicer therefore had standing to foreclose, and that the transfer and securitization of the note did not deprive Servicer of its authority to do so.  See, e.g., Commonwealth Prop. Advocates, LLC v. Mortg. Elec. Registration Sys., Inc., 680 F.3d 1194, 1202 (10th Cir. 2011).

 

Turning to Servicer's motion for sanctions against Trustee's attorney, the Court noted that Trustee's attorney had made the same arguments in four prior appeals involving identical issues and claims and that he ignored Tenth Circuit and Utah Court of Appeals' decisions rejecting his arguments.   See, e.g., Scarborough v. LaSalle Bank, N.A., 460 F. App'x 743 (10th Cir. 2012); Commonwealth Prop. Advocates v. U.S. Bank, N.A., 459 F. App'x 770 (10th Cir. 2012).

 

Expressing annoyance with Trustee's attorney, the court awarded sanctions against him, stating "[w]e . . . cannot find a single, cogent argument to justify his pursuit of this appeal in the face of our previous decisions, particularly in light of the fact that he represented the appellants in those cases."  

 

Accordingly, the Court affirmed summary judgment and remanded for a determination of the amount of costs, expenses and attorneys' fees incurred by Servicer to be paid by Trustee's attorney.

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: NY Ct of Appeals Rules Mortgage Loans Extended by Federal Credit Unions Are Subject to State Mortgage Recording Tax

The New York Court of Appeals recently affirmed that mortgage loans extended by federal credit unions are subject to the New York State mortgage recording tax, even though federal credit unions themselves are not subject to taxation. 

 

A copy of the opinion is available at http://www.nycourts.gov/ctapps/Decisions/2012/Oct12/154opn12.pdf. 

 

A federal credit union filed a declaratory judgment action against the New York State Department of Taxation and Finance (the "Department"), arguing that (1) it was exempt from paying New York's mortgage recording tax under the Federal Credit Union Act ("FCUA") and (2) that federal credit unions are immune from state taxation as federal instrumentalities, under the Supremacy Clause. 

 

The lower court granted the Department's motion to dismiss, and the lower appellate court affirmed.  The credit union appealed again, by leave of the Court. 

 

As you may recall, New York's Tax Law Sec. 253 imposes a mortgage recording tax of 50 cents per $100 of principal debt on each mortgage of real property located in New York.

 

Further, the FCUA provides that "Federal credit unions organized hereunder...shall be exempt from all taxation now or hereafter imposed by the United States or by any State..."   12 U.S.C. Sec. 1768. 

 

The Court began its analysis by examining the credit union's FCUA argument.  It recited the "general rule" that "courts strictly construe federal tax exemptions in derogation of state taxing authority and decline to extend such exemptions beyond their express provisions."  Accordingly, the Court observed that when Congress intends to "immunize 'mortgages' of federally chartered lending entities from state taxation, it is has done so explicitly."

 

With that standard in place, the Court noted that although the FCUA contains an "extensive list" of exemptions, it does not mention mortgage or loans - an omission which "weighs heavily against [the credit union's] argument." 

 

Although the credit union attempted to argue that a reference to "property" within the FCUA could be construed broadly to include mortgage loans, the Court found this argument unpersuasive.  It noted that when the FCUA was enacted and amended, federal credit unions could not issue mortgage loans to their members.  Accordingly, the Court held that "Congress could not have intended...to exempt from state taxation the particular lending activity at issue here..." 

 

The Court also rejected the credit union's argument that it was immune from state taxation as a federal instrumentality, under the Supremacy Clause.  The Court cited precedent establishing that tax immunity is appropriate only where the tax falls on the U.S. government itself, or on "an instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities..."  United States v. New Mexico, 455 US 720, 735 (1982). 

 

Because "Federal credit unions are private associations chartered under federal law," the Court held that federal credit union mortgages are not exempt from the mortgage recording tax. 

 

Accordingly, the Court affirmed the lower court's decision. 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: 9th Cir Rules Against Retailer in TCPA Putative Class Action, Involving Customer Service/Information Call w/ Alleged Marketing Component

The U.S. Court of Appeals for the Ninth Circuit recently held that a retailer violated the Telephone Consumer Protection Act, and the Washington Automatic Dialing and Announcing Device Act, when it called a consumer to provide information regarding its rewards program, after the retailer had agreed to cease calling the consumer. 

 

A copy of the opinion is available at http://www.ca9.uscourts.gov/datastore/opinions/2012/10/17/11-35784.pdf.

 

A consumer signed up for a payment plan to finance his purchase of a computer from an electronics retailer.  The parties dispute whether the consumer also signed up for the retailer's rewards program at the time of that purchase.  The retailer contacted the consumer on several occasions via automated telephone calls.  The consumer complained to the Washington Attorney General's office after one such automated call, and the retailer agreed to cease calling the consumer.  Several months later, the consumer received another automated call from the retailer, in which the retailer advised the consumer of changes to the rewards program. 

 

The consumer then filed a class-action complaint, alleging violations of the Telephone Consumer Protection Act ("TCPA"), as well as the Washington Automatic Dialing and Announcing Device Act ("WADAD").  The lower court granted summary judgment in the retailer's favor, and the consumer appealed. 

 

As you may recall, the TCPA makes it unlawful "to initiate any telephone call to any residential telephone line using an artificial voice...without the prior express consent of the called party, unless the call is...exempted by rule or order by the Commission..."  47 U.S.C. Sec. 227(b)(1)(B).  Although the FCC exempted from that prohibition calls that do not "include or introduce an unsolicited advertisement...", calls that that have both a customer service/informational component and a marketing component remain prohibited.  See 47 C.F.R. Sec. 64.1200(a)(2)(iii) (2011); In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, 18 FCC Rcd. 14014, 14097-14098 para. 140-142. 

 

On appeal, the retailer argued that the calls were made for informational purposes only, and did not encourage the consumer to buy any specific goods or servicers. 

 

The Ninth Circuit rejected the retailer's argument, finding that the calls made by the retailer encouraged the consumer to redeem his rewards points, which would involve making a purchase.  Further, the calls directed the consumer to a website where he could make purchases, and thanked him for shopping with the retailer. 

 

Based on the contents of the calls, the Ninth Circuit concluded that "the calls encouraged the listener to make future purchases at [the retailer]."  Because neither the statute nor the regulations "require an explicit mention of a good, product or service where the implication is clear from the context," the Court held that the calls were prohibited under the TCPA. 

 

The Ninth Circuit also considered whether the consumer might have consented to receive the telephone calls.  The Court found little merit to this suggestion, however, finding that the consumer "repeatedly and expressly asked not to be contacted." 

 

Finally, the Ninth Circuit examined the consumer's claims under the WADAD.  It found that requirements under the WADAD were largely similar to those of the TCPA, and so reached the same conclusion as to both statutes. 

 

Accordingly, the Ninth Circuit reversed the lower court's decision, and remanded the matter for further proceedings consistent with its opinion. 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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