I would only add that none of the Trusts actually come to own the debt, loan, note or mortgage anyway. The creation of “assignments” and “powers of attorney” merely create the illusion of a transaction that never occurred.
Rod Ciferri is licensed in New York State. I strongly recommend that lawyers read the following excerpt from Rod Ciferri carefully and incorporate it into the argument and memos.
- New York Law Prohibits Plaintiff-In-Intervention’s Late Acceptance Of The Loan And Deems The Same To Be Void Ab Initio
Estates, Powers & Trusts Law § 7-2.4 (“§ 7-2.4”) states that acts of a trustee in contravention of the trust agreement are void.[1] Here the act of Plaintiff-In-Intervention which is void is its late acceptance of the loan into the trust. Although Defendant is aware of cases holding such acts are merely voidable, such cases rest upon a misunderstanding of New York law.
First, § 7-2.4 was preceded by a statute of nearly identical language[2] – 1 R.S. 730, § 65. That statute was first considered by the highest court in New York, the Court of Appeals, in 1852. Powers v. Bergen (1852) 6 N.Y. 358, found a sale of certain real property held in trust under the direction that the real property would be a life estate for the beneficiary was void under that statute – despite the fact that the beneficiary did not object and that the legislature made a private statute specifically to facilitate such sale. The high court of New York found neither the ratification of the beneficiary, nor private statute of the legislature made the act of the trustees in contravention of the trust agreement anything less than void. Other cases of the New York Court of Appeals followed that literal interpretation of the statute.[3] Given that the statute under consideration by the New York Court of Appeals is identical to the current statute as to its terms that are material to the issues herein, these cases are mandatory authority on the meaning of § 7-2.4: “void” actually means void.
Finally, the California Supreme Court confirmed that the New York Court of Appeals ruled the predecessor statute to § 7-2.4 voided acts of the trustee in contravention of the trust agreement.[4] In fact, that case considered California’s own statute, former Civil Code § 870, that had identical language as New York’s former statute, except that it was limited to real estate, whereas, the New York statute applied to all estates. Significantly, the Firato Court acknowledged a trustee’s acts in contravention of a trust agreement are void, however, in consideration of another section of the Civil Code, it recognized that was not necessarily the case with regard to title to property thereby obtained by purchasers for value without notice. Subsequently, the California legislature repealed Civil Code § 870.[5] Therefore, the California Supreme Court has recognized that that the word “void” used in its own almost identical former statute means void, except in cases where the trustee conveys property to an innocent purchaser.[6]
However, should the Court determine that these cases are not mandatory authority herein because of differences between § 7-2.4 and the prior statutes, despite the dearth of New York Court of Appeals cases considering the legal effect of § 7-2.4, the intermediate appeals courts have established the rule of law in this regard that must be followed by trial courts. In the absence of an on point ruling by the New York Court of Appeals, it is the decisions of the intermediate appeals courts, the Appellate Divisions, which are to be followed by the trial courts. See, Mountain View Coach Lines, Inc. v. Storms (1984) 102 A.D.2d 663 (If only one Appellate Division has ruled on a point not ruled on by the Court of Appeals, that ruling is binding on trial courts). The only Appellate Division that has specifically dealt with § 7-2.4 is the Second Department. In the matter of Doman (2d Dept. 2013) 110 A.D.3d 1073 (distributions from trust not authorized by the trust agreement must be returned to the trust); Pepi v. Petrella (2d Dept. 2000) 268 A.D.2d 477 (conveyance made in contravention of the trust void). Just as a trustee’s acts in contravention of the trust were adjudged void under the old statute, the Appellate Division, Second Department, has determined the same are void under § 7-2.4.
Moreover, the lower court decisions holding that the word void actually means voidable are of little authority because none of them actually found the wording of § 7-2.4 to have been ambiguous – a prerequisite to judicial construction and interpretation – whether analyzed under California or New York law.[7]
Where a statute is unambiguous, the courts must interpret its words in accordance with their ordinary meaning and not engage in statutory construction. Kimmel v. Goland (1990) 51 Cal.3d 202, 208 (To determine the intent of legislation, courts first consult the words themselves, giving them their usual and ordinary meaning); Rojo v. Kliger (1990) 52 Cal.3d 65, 73 (When statutory language is clear and unambiguous there is no need for construction, and courts should not indulge in it); PBA v. City of New York (1976) 41 NY 2d 205, 208 (“where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used.”). Clearly the courts that have determined “void” means “voidable” did not follow these elementary rules prohibiting judicial construction absent an ambiguous statute.
Also, cases that don’t cite § 7-2.4 that find unauthorized acts of a trustee are “voidable” are of dubious authority herein for not considering that statute’s effect on such acts. Finally, none of these cases analyze the substantially similar statutes that existed in both New York and California, nor the cases decided by the high courts of those respective states correctly interpreting them.
Therefore, this Court should follow the sound mandatory authority of the plain meaning of § 7-2.4, the New York Court of Appeals decisions that considered § 7-2.4’s predecessor statute, the California Supreme Court’s interpretation of a substantially similar statute and the Appellate Division, Second Department cases that specifically considered § 7-2.4. Whether void or voidable, the issue is not an academic one. The legislature’s purpose in enacting § 7-2.4 was “to protect trust beneficiaries from unauthorized actions by the trustee.” Turano, Practice Commentaries, McKinney’s Consolidated Laws of New York, Book 17B, EPTL §7-2.4. That statutory purpose is particularly important in the instant case, since the certificate holder beneficiaries under the trust herein are prohibited by the Agreement from voting on or challenging such unauthorized actions except in certain sharply circumscribed circumstances.[9] In short, “void” means void.
[1] The verbatim language of § 7-2.4 is: “If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.”
[2] “where the trust shall be expressed in the instrument creating the estate, every sale, conveyance or other act of the trustees in contravention of the trust shall be absolutely void.” See Briggs v. Davis (1859) 20 N.Y. 15, 21.
[3] See Briggs v. Davis (1859) 20 N.Y. 15 (grantees of land in trust for the payment of debts reconveyed to the grantor, reciting that the trusts had been executed. In fact, the debts had not all been paid. The debtor then mortgaged the land to one having no actual notice of the trust. It was held that the reconveyance, being in contravention of the trust, was void, and that the legal estate remained in the trustees.); Genet et al. v. Hunt et al. (1889) 113 N.Y. 158 (“The statute makes every conveyance or other act of the trustees of an express trust in lands, in contravention of the trust, absolutely void…”); Russell v. Russell (1867) 36 N.Y. 581 (Transfer in contravention of the trust agreement void, despite mutual assent to it by the trustee and beneficiary).
[4]Firato v. Tuttle (1957) 48 Cal.2d 136 (“In 1859 it was held by a divided court in Briggs v. Davis, 20 N.Y. 15 [75 Am.Dec. 363], that this statute made a wrongful reconveyance under a deed of trust absolutely void even as to an innocent purchaser.”).
[5] For the history of Civil Code § 870, see Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374.
[6] Plaintiff-In-Intervention, as a party to the Agreement, had knowledge that its late acceptance of the instant loan into the trust res was unauthorized, and, consequently, cannot be deemed an innocent purchaser. In fact, Plaintiff-In-Intervention unequivocally covenants in the Agreement at Section 3.02, the following: “REMIC-Related Covenants. For as long as any 2007-AR4 REMIC shall exist, the Trustee shall act in accordance herewith to assure continuing treatment of such 2007-AR4 REMIC as a REMIC, and the Trustee shall comply with any directions of the Depositor or the Servicer to assure such continuing treatment.” RJN, Exh. A. See also, Section 11.01 of the Agreement: “Intent of Parties. The parties intend that each 2007-AR4 REMIC shall be treated as a REMIC for federal income tax purposes and that the provisions of this Agreement should be construed in furtherance of this intent.” Id. See also, 26 U.S.C. §§ 860A–860G; see also Real Estate Investment Trusts. Securities Law Series, Vol. 29. Thomson West (2007): 6-22 (Late transfers to the trust result in forfeiting the pass through of taxation to the investors and subjects the trust to a 100% tax of the loan amount). Plaintiff-In-Intervention certainly cannot show it was without notice that its late acceptance of the instant loan was unauthorized by its Agreement.
[7] See, e.g., the odd case of a lower court (Appellate Term) that actually considered § 7-2.4 and found that a trustee could have apparent authority to bind the trust to the trustee’s unauthorized act: Feldman v. Torres (2011) 34 Misc.3d 47.
[8]People v. Toro (1989) 47 Cal.3d 966, 978, fn. 7 (“…cases are not authority for propositions not considered therein.”).
[9] See Section 11.04 of the Agreement: “…no Certificateholders shall have any right to vote or in any manner otherwise control the operation and management of the Trust… No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon, under or with respect to this Agreement against the Depositor, the Trustee, the Servicer or any successor to any such parties…”
Mortgage Asistance 877-227-4341 
Thanks for the props, Tim.
Unfortunately, this argument lost in superior court and the client chose not to take on the expense of an appeal. It was litigated in 2012 or 2013. Litigants now using this argument face a less than receptive judiciary due mainly to Rajamin v. Deutsche Bank, 757 F.3d 79 (2nd Cir. 2014). Courts in California, all over the federal judiciary and even New York state are now accepting it as if it is mandatory authority on the issue of void vs. voidable, despite the fact that Rajamin’s holding was only on the issue of federal standing. Unfortunately, the New York state intermediate appeals courts, at least the 2nd and 3rd Appellate Divisions, have now begun citing Rajamin as authority to determine foreclosure defense litigants have no standing to make this argument – citing a case on FEDERAL standing without so much as a cursory analysis of the standing principles of New York state law – which is the applicable law.
I think the argument you posted is still accurate, yet, an attorney for a foreclosure defense client must understand the mistakes made by the Rajamins in pleading the case and the errors made by the 2nd Circuit in its void vs. voidable dictum and at the same time have a receptive trial judge who is honest and diligent enough to look at the void vs. voidable issue anew, despite the apparent authority of Rajamin.
While the Rajamin Court’s void vs. voidable analysis is dicta (because the court disposed of the appeal based on what it determined to be Rajamin’s lack of standing to even make the argument), even if it were not dicta, it is merely persuasive authority and not mandatory authority on state real property and trust estates matters, since the 2nd Circuit is a federal court deciding those non-federal issues. Mistakenly, federal courts throughout the nation are now determining that Rajamin settled the void vs. voidable issue since the 2nd Circuit covers the lower federal courts located in New York and they look at Rajamin as stare decisis on New York state law. However, that view is erroneous, since only the highest court in New York State – the Court of Appeals may have the last word on what New York State’s real property and trust estates law is. As I predicted prior to Yvanova that the California Supreme Court would find a homeowner has standing to make this argument, I also predict the New York Court of Appeals will revisit its past cases on the matter and do the same eventually.
That said, Rajamin is mistaken in its void vs. voidable dicta determination that an act in contravention of the trust may be ratified by the beneficiary. The Rajamin Court accepted cases in which the litigants did not invoke EPTL 7-2.4 or its predecessor statute as authority on the issue of whether EPTL 7-2.4 had the effect of voiding the purported transfer to the trust while not accepting cases that do analyze EPTL 7-2.4 because they did not consider the possibility of ratification! Compounding such an error, the Rajamin Court failed to engage in the rules of statutory interpretation by failing to recognize the absence of ratification in the plain wording of the statute under consideration that clearly evidences the legislature’s intent that acts in contravention of the trust be void, not voidable. If the legislature accepted that ratification could validate acts in contravention of the trust, it simply would have used the word “voidable” in place of the word it actually used: void. Finally, the Rajamin Court completed its judicial folly by indulging in statutory construction by judicially creating the ratification exception to the plain wording of the statute governing all trust estates in New York without first analyzing whether EPTL 7-2.4 is ambiguous, and, thus, in need of such judge made law.
Besides the void vs. voidable issue, the Rajamin Court also misses the mark in its standing analysis – as many courts in most jurisdictions have also – that wrongful foreclosure victims are somehow “challenging” or trying to “enforce” the PSA. However, that is a strawman argument – of course a non-party to the PSA has no standing to enforce or challenge it. Therefore, every litigant making a voidness argument in that context must be clear about what he/she is doing when seeking judicial notice of the PSA, and more importantly, when seeking to move into evidence the non-hearsay admissions of fact made therein by the parties to the PSA – the litigant is merely proffering evidence to support a wrongful foreclosure argument – nothing more and nothing less.
That said, the Rajamin Court cited portions of the PSA in which the parties acknowledge ownership of the loan being transferred concurrently with the signing of the PSA (which poses another issue – has anyone actually seen a fully executed version of the PSA signed by the parties thereto?). Having noted the language of that acknowledgment, the Rajamin Court properly inferred that ownership passed from the depositor to the trust.
However, like other courts in most jurisdictions, the court erroneously inferred the trust had the right to foreclose the security (property) due to the trust’s apparent ownership of the loan. The problem was compounded by the Rajamins, who in their third amended complaint challenged ownership of the note and challenged specifically the trust’s right to receive principal and income under the note. So, the Rajamin Court simply knocked down that argument while refusing to analyze the Rajamin’s third argument: that the trust had no right to foreclose on the property, regardless of whether it had the right to principal and income under the note. Instead of tackling this third argument – as the Yvanova Court so fundamentally did – the Rajamin Court instead only analyzed ownership of the loan.
The Rajamin Court was wrong to reach such a conclusion because only one having a UCC Article 3 interest in a loan (where the note is a negotiable one) may foreclose on the underlying real property, yet the trust had only received a UCC Article 9 interest in the note and/or deed of trust. What that means is the trust’s only recourse upon non-payment of the loan is to sue the homeowner (or the trust’s assignor) for money only. Only the holder of the note or a non-holder with the rights of a holder (who also actually possesses the original note at the time of foreclosure) may foreclose the underlying security and take the homeowner’s real property.
How do we know the trust only received an Article 9 interest in the note and/or mortgage? We know because the trust’s assignor – the depositor – only gave an Article 9 interest. It may be that an Article 9 interest is all the depositor actually possessed. It is axiomatic that the trust could not receive from the depositor more than the depositor actually gave, or could give, to it.
A careful reading of Rajamin confirms that, at most, the depositor assigned only an Article 9 interest to the trust as is apparent from this language the Court quoted from the PSA: “”The Depositor, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificate holders… all the right, title and interest of the Depositor in “the principal and interest on the mortgage loans…” Under Article 9, a person may “own” a negotiable note, even when another party is the note’s holder or is a non-holder in possession of the note with the rights of a holder. The “owner” of a negotiable note is entitled to – at most – only payment under the note, and, as evidenced by the quoted language, that is all the depositor assigned to the trust. Furthermore, notice the complete absence of any language that the trust was negotiated the note. While the trust might have still been seen as acquiring an Article 3 interest as a non-holder in possession of the note with the rights of a holder because of the “transfer” language also used in that part of Article 3, there is no language indicating the transfer of possession of the note by physical delivery. Only the delivery of the PSA is acknowledged therein. This is an important distinction because a thorough reading of the “non-judicial foreclosure” provisions of Article 9 reveals a mere Article 9 interest in a negotiable note is insufficient to force a sale of the underlying real property. Only the negotiable note (or deed of trust) itself may be foreclosed (yet another mistake courts and lawyers make is thinking one who has an Article 9 interest in a negotiable note may foreclose the underlying real property without also having the requisite Article 3 interest).
Lastly, while the Rajamin Court capitalized on the Rajamins’ confusion about “ownership” of the note by knocking down the strawman argument, it also rubbed salt into their wounds by ignoring their third argument that the trust had no right to foreclose their real property, stating it was “implausible” that the trust wasn’t “assigned” the loan. In reality, the Court recognized the conveyance of an Article 9 interest in the proceeds of the loan and confused that with the right to foreclose the underlying real property. In rejecting the contentions as “implausible,” the Rajamin Court also violated the cardinal rule of reviewing a motion to dismiss: the pleader’s factual allegations are to be taken as true. Whether the allegations can be proven or not is tested on a dispositive motion or trial – reflecting an epidemic in homeowner suits against purported lenders (but not necessarily in other types of cases) of knocking the case out at the pleading stage without accepting the homeowners’ allegations as true and giving them the opportunity to prove those allegations (raising due process problems that could be reviewed on certiorari to the US Supreme Court – but that is another discussion).
The Rajamin Court either thought Rajamins’ first two arguments being rejected meant their third argument was moot, or it purposefully used its rejection of the first two arguments as a distraction from the fact that it refused to consider the third argument while knowing that it was dispositive.
In short, I’m convinced that these “trusts” have never received more than an Article 9 interest in the note (if the Article 9 interest was purchased with value – a requirement under Article 9). The securitization documents prove that fact. A foreclosure victim is not trying to enforce or challenge any of the agreements by the “securitization” parties – he/she is only proffering them as evidence from which it can be inferred they are being foreclosed on by a party with no right to do so. Not only does a homeowner have standing to make this argument – the homeowner also has a due process right to present evidence supporting his/her claims and defenses.
Unfortunately, it would take an unbiased and fair minded judge (rare) to even allow an attorney to argue the intricacies of the UCC given how wrong other courts have been on the issue and the ease in which they can throw in the towel on doing such difficult work by relying on this purported “stare decisis.”
With regard to the “stare decisis” effect of bad case law, an advocate must soberly and pointedly ask the judge the rhetorical question: what would this country look like if the US Supreme Court merely relied upon Plessy v. Fergusson in Brown v. The Board of Education as resolving the case under the doctrine of stare decisis, instead of having the humility and courage to admit they were wrong in how they decided Plessy? Would Thurgood Marshall have even become a US Supreme Court Justice (or any African American for that matter) if he hadn’t so adamantly and tirelessly advocated on behalf of Brown against the rigid racial biases of the lower court judges who forced him to bring the case all the way to the US Supreme Court? Isn’t this similar to the struggle homeowner attorneys are having fighting against the socio-economic bias exhibited today by judges in favor of lenders and against homeowner/borrowers?
Finally, as with judges, it is a rare attorney who has deeply studied Article 3 and Article 9 of the UCC – a most disliked area of law – enough to know what rights come with an Article 9 interest and what rights come with an Article 3 interest and how the distinction is crucial in determining who has the right to foreclose and who does not.
I have an illegal Assignment of Deed of Trust from 2010…due to Robo signers and assignment to Bank of America 3+ years after Countrywide out of business. …. I have fraud in my Substitution of Trustee…
My loan from 2005 was RE-SECURITIZED in 2016. I asked “current servicer” for PROOF they own loan and right to foreclose. They just send me OLD paperwork that does not PROVE that they own loan.
The had known Document Mill, Nationwide Title Clearing do a recent “CORPORATE ASSIGNMENT OF DEED OF TRUST” in their favor in 2016. My original loan was an old Countrywide Home Loan in 2005……is this legal?
Don’t they have to show me NEW documents PROVING they own loan?