IMPORTANT NOTE/DISCLAIMER: The following article is not and should not be construed as legal advice and was not written by an attorney. It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense. It is recommended that you consult with an attorney for any and all legal advice and/or action.
You know what pisses me off? When courts don’t follow the law. Also when they not only don’t follow the clear precedent of the United States Supreme Court, they don’t follow their own precedent! This is exactly what has happened in the case of Martins v. Bank of America Home Loans Servicing, LP, a case recently decided by the 5th Circuit under Texas law.
In Martins, the court said that assignments of deeds of trust only are A-OK, even when done by MERS, which as we all know is merely a computer database that purports to record which entity supposedly owns which property yet which itself, by its own admission, does not hold or own promissory notes Here’s a quote from the Martins decision:
“Martins contends that BAC also cannot foreclose because it was only assigned the mortgage, and not the note itself, by MERS.”
The court goes on to disparage this argument, but they should not have. Why? Because of the case of Kirby Lumber Corp. v. Williams (5th Cir., 1956). What did Kirby say? Well, Kirby favorably quoted from West v. First Baptist Church, a 1934 Texas case which said the following:
“The rule is fully recognized in this state that a mortgage to secure a negotiable promissory note is merely an incident to the debt, and passes by assignment or transfer of the note.”
The Kirby court then cited two other Texas cases (the first from 1896 and the second from 1939), both of which quoted the now well-known words of the U.S. Supreme Court in the 1872 decision in Carpenter v. Longan:
“The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”
The Mortgage follows the note, not the other way around
Back to the Martins case–in it, the court completely reverses itself from Kirby. That is, Kirby stands for a number of principles, most importantly: 1) an assignment or transfer of the note carries the mortgage with it and not the other way around; 2) an assignment of the mortgage alone is a nullity; and 3) these principles are well-settled in Texas law. The Martins court completely disregards all of these principles and indeed pretends that these principles were never articulated by them!
How does the Martins court disregard these principles and ignore its own (as well as the U.S. Supreme Court’s) longstanding precedent? Consider this quote from Martins:
“Numerous district courts have addressed this question [of the validity of a MERS assignment of only the mortgage], and each one to analyze Texas law has concluded that Texas recognizes assignment of mortgages through MERS and its equivalents as valid and enforceable. ”
Whoa! See what just happened? They said that assignment of just mortgages were okay and that Texas law is OK with that. Kirby tells us the exact opposite, as we have seen above. But the Martins court was sneaky–they said that assignments of only mortgages are OK as long as they’re done “through MERS and its equivalents.”
There is no exception for MERS
Well, nice try geniuses, but the wording of Kirby and all the cases it cites do not have an exception for MERS. In other words, Kirby and Carpenter do not say that mortgages can be assigned separate from the note under certain circumstances. They say that assignments of mortgages separate from the note are a nullity, end of story. Period. No exceptions.
And why do they say that? Because the note and mortgage are inseparable, but even though that is the case, the mortgage is only an afterthought to the note and the note is to be considered superior to the mortgage. That is, the mortgage is not the issue, the note is.
And I should point out that the 5th Circuit cites to some recent Texas cases which incredibly say that the note and the mortgage are separate obligations. However, this misguided notion obviously flies in the face of what earlier Texas courts (as discussed above) have said, and when this misguided notion is brought before the 5th Circuit, it is the duty and obligation of the 5th Circuit to refute such nonsense, particularly when the 5th Circuit itself has already ruled–i.e. established binding precedent–that the note and mortgage are inseparable. In fact, the 5th Circuit has tied its own hands regarding matters such as these, particularly in the case of FDIC v. Abraham (5th Cir., 1998).
5th Circuit’s Schizophrenia
The 5th Circuit said the following of itself in the 1998 case of FDIC v. Abraham:
“We are of course, a strict stare decisis court. One aspect of that doctrine to which we adhere without exception is the rule that one panel of this court cannot disregard, much less overrule, the decision of a prior panel.”
If this is true, how can the 5th Circuit justify the 2013 ruling in the Martins case given the 5th Circuit’s ruling in the 1956 Kirby case? Seems to me that the 5th Circuit is full of it–the 5th Circuit apparently is obviously not a “strict stare decisis court” and it does not adhere to the stare decisis doctrine “without exception.”
Indeed, the 5th Circuit’s statement quoted above from FDIC v. Abraham is about following precedent, and the 5th Circuit would have us believe that it follows its own precedents “without exception.” Why in God’s name didn’t the court do that in Martins? The Martins court was surely aware of the ruling of the Kirby court. What changed in the 57 years between Kirby and Martins–the law or the biases of the court? Obviously the latter. And even though the Martins case is not to be used as precedent (except under the limited circumstances spelled out in Rule 47.5.4 in the 5th Circuit’s rules) and the Martins court didn’t overrule the Kirby court, the Martins court certainly disregarded the decision of the “prior panel,” i.e., the Kirby panel which the 5th Circuit itself said it cannot do.
Courts, not litigants, make bad law
Some have said that Ashley Martins made bad law by bringing this suit before the appeals court. I don’t see it that way. Martins made the right arguments, but the court ignored both Martins and itself. Is that Martins’ fault? Of course not. It is now well-established that modern courts do not follow precedent or even black-letter, statutory law, as discussed above. So why don’t they? Why the vastly different results over basically the same issues in both Kirby and Martins?
What is obviously happening is that the courts have bought into the crazy–yet mainstream–idea that all will return to normal once the “backlog” of foreclosures is “cleared.” So their goal is to “clear” the foreclosures without bringing the banks to their knees, because they have bought into the idea that the country would fall into ruin if the big banks were held accountable. Because, this meme goes, once the foreclosures–although unfortunate and maybe even mistaken and/or fraudulent as they may be–are all concluded and the banks are still intact, we’ll all be better off. They think they know what’s best for us.
Another way to look at it is this: the courts are mindlessly following a trend of displacing homeowners, just you know, because it’s cool. It’s trendy. Kind of like the trendy clothes people wear and then are horrified 20 years later when they see pictures of themselves wearing the once-trendy outfits. They think “How could I ever have let myself wear that?” And so it will be in 20 years or so that the law reviews and the blogs (or whatever media outlets exist by 2033) will lament the current smackdown of homeowners–“How could the courts have ever ruled this way? How could we have ever let the courts rule that way? How could we let the courts justify MERS?” As if we don’t know, right now as it’s happening, that the courts are not following the law.
5th Circuit Doesn’t Understand Basic Legal Definitions
But wait, there’s more! It seems, given the Martins decision, that the 5th Circuit doesn’t understand basic legal terminology or have very good reading comprehension skills. I say this because the court also justified the MERS assignment by saying that the deed of trust gave MERS the right to foreclose. Here’s the quote:
“Where a deed of trust confers such a power, a trustee may sell a debtor’s property…Here, the mortgage was assigned by MERS, which had been given such power, including the power to foreclose, by the deed of trust.”
First things first–MERS is not the trustee. MERS never acts as a trustee. In the standard MERS deed of trust, MERS is listed as two things: 1) the beneficiary and 2) the “nominee” of the lender and the lender’s successors/assigns. MERS, is of course, never the beneficiary, despite the language of the deed of trust. So it is irrelevant to the matter of MERS what any deed of trust says about a trustee.
Secondly, the standard MERS deed of trust only gives MERS power to foreclose if such power is required by “custom.” The custom in Texas is not for MERS to foreclose, the custom is for the trustee to foreclose. Furthermore, in a situation like this one, MERS is not actually the foreclosing entity–the entity to whom MERS made its fraudulent, null assignment typically appoints a substitute trustee who is the official foreclosing entity. So the 5th Circuit is incorrect–MERS is not granted the right to foreclose in the four corners of the deed of trust.
Thirdly, the deed of trust is silent on the power of MERS to assign the deed of trust. I don’t even know where the 5th Circuit came up with that. And the court of course doesn’t cite the provision of the deed of trust that supposedly grants MERS the right to assign the deed of trust. And the reason that the deed of trust is silent on whether or not MERS can assign the deed of trust is because even the bastards who invented MERS and wrote the MERS deed of trust know that an assignment of mortgage/deed of trust alone is a nullity.
So there you have it
In conclusion, I would just like to reiterate that, for all the foregoing reasons, the 5th Circuit has made a mockery not only of justice, but also of itself. Why do I care, aside from the fact that I’m an American citizen who wants to see the law followed? Because I’ve lived in every state that the 5th Circuit oversees–Texas, Louisiana, Mississippi. Born in Texas, lived there through the end of kindergarten. Finished elementary school in Louisiana. Graduated from college in Mississippi. And because of that, all of my friends and family are directly affected by what this court does. So they need to get it right. And they didn’t. That’s all.
IMPORTANT NOTE/DISCLAIMER: The above article is not and should not be construed as legal advice and was not written by an attorney. It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense. It is recommended that you consult with an attorney for any and all legal advice and/or action.