Court Denies Bank of Americaâ€™s Petition for Re-hearing in Glaski Decision
Late last week, Bank of America petitioned the California Court of Appeals for a re-hearing of the Glaski case, which the court had recently decided, subsequently publishing its written opinion.
The filing for petition for re-hearing should not have been surprising, as it was based in large part on several fairly obvious flaws related to the written decision, not the least of which was the fact that the trust in question was not one governed by New Yorkâ€™s Estates Powers and Trust Law (â€śEPTLâ€ť), as the court was told and assumed to be the case, but rather was a Delaware trust presumably subject to Delawareâ€™s laws.
Fundamentally, the bankâ€™s petition attempted to make the point that the Uniform Commercial Code (â€śUCCâ€ť) governs the assignment of a mortgage note, but then stating that if state trust law did apply, it would be that of the State of Delaware and not the State of New York.
Bank of America, who inherited this problem when it acquired La Salle Bank, filed a petition claiming that, â€śGlaskiâ€™s entire theory â€“ that his mortgage was belatedly assigned to the trust is wrong.Â The stated basis for this claim by the bank as trustee is found in Section 2:04 of the Pooling & Servicing Agreement (â€śPSAâ€ť), which Bank of America says a more thorough reading of the PSA shows that Mr. Glaskiâ€™s loan was transferred into the trust before the trustâ€™s closing date.”
As stated in the bankâ€™s petitionâ€¦
Section 2.04 of the PSA states that WaMu “does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Trust, without recourse, all the Company’s right, title and interest in and to the Mortgage Pool Assets. It further states that “it is the express intent of the parties that the conveyance of the Mortgage Pool Assets to the Trust by the Company as provided in this Section 2.04 be, and be construed as, an absolute sale of the Mortgage Pool Assets.”
The remainder of the bankâ€™s petition appears to focus on making the argument that the court should reconsider its holding that â€śan obligor has standingâ€ť to challenge such a breach of assignment, and the bank attempts to support this argument by saying that the courtâ€™s decision conflicts with other â€śwell-established California common law rules,â€ť and that it somehow â€śundermines Californiaâ€™s comprehensive statutory framework for non-judicial foreclosures.â€ť
So, what does all of this, and the fact that the bankâ€™s petition was denied, really mean?
Well, it means several things.Â For one thing, it means that, just as was the case before Bank of Americaâ€™s filing of its petition for re-hearing, Mr. Glaski can now return to the lower court where he now will be allowed to challenge the validity of the transfer of his loan into the securitized trust.
As I explained in my article covering the recently published written opinion by the California Court of Appeal in the Glaski case, the decision by the court was in point of fact, a â€śpleading decision,â€ť rendered in response to a demurrerâ€¦ no more, no less.Â Itâ€™s a decision that will allow Mr. Glaskiâ€™s journey to continue, and not in itself, a â€świnâ€ť in the big picture sense of the word.
That is not to say that homeowners facing foreclosure and the lawyers that represent them do not have reason to be quite pleased with the courtâ€™s decisionâ€¦ and the fact that it was published and therefore may be cited in the complaints filed by others… and further that the bankâ€™s petition for re-hearing was denied.Â All of those things should be considered positive developments for those fighting foreclosure based on similar facts in California, and perhaps even elsewhere.
However, as I wrote previously, and as numerous lawyers around the country have explained to me in great detail, including Richard Antognini, Mr. Glaskiâ€™s appellate lawyer who successfully argued this case in front of the California Court of Appeal, Mr. Glaski has a long way to go and many potential and substantial hurdles most assuredly remain ahead.
As can be seen in Bank of Americaâ€™s petition for re-hearing (and assuming more is not added), the bank will be arguing the applicability of the UCC first (presumably Article 3, which has to do with transferring negotiable instruments), and Delaware trust law second, which is much less stringent than that found in New Yorkâ€™s EPTL.
And, along with those two very technical, complicated and hotly debated subjects as the applicability of the UCCâ€™s articles and the trust law of New York v. Delaware, the bank will also argue, among other things, that Mr. Glaskiâ€™s loan was in fact assigned to the trust in compliance with the language contained in the PSA and was therefore not â€śvoid,â€ť as a result of being a â€ślate transfer.â€ť
Will the California courts view any or all of those arguments as valid?Â
I really have no ideaâ€¦ and neither does anyone else for that matter.Â But, the consensus among many of the leading foreclosure defense lawyers in the country appears to be that itâ€™s not going to be easy for either side of this fight.
Iâ€™m told that Bank of America could decide to appeal the matter to Californiaâ€™s Supreme Court, which means we could still be talking about this two years from now. Â And even if Mr. Glaski were to prevail, what would be the result of that? Â No one is certain.
Why the denial of the bankâ€™s petition…
And, as to the question of why the court denied Bank of Americaâ€™s petition for a re-hearingâ€¦ the court didnâ€™t offer any written explanation of its thinking behind its denialâ€¦ so, we simply do not know.Â I realize that for some it may be both easy and tempting to read more into it, but It could be that, since the courtâ€™s role in Mr. Glaskiâ€™s appeal of the bankâ€™s demurrer was not to question the facts presented, but rather to rule based on the assumption that the facts presented were correct, thereâ€™s simply no reason to re-hear the matter.
And as I said, that would seem positive news for those in California and perhaps elsewhere, who are alleging similar facts in their own lawsuits, regardless of what happens going forward in Mr. Glaskiâ€™s case.Â In my mind, the various Glaski pleadings and filings offer other lawyers representing homeowners in foreclosure cases a â€śroad map,â€ť if you will, that may lead to more favorable decisions for homeowners in California and perhaps elsewhere.
But, it should go without saying that whatâ€™s in my mind in this regard, plus $1.95â€¦ will get you a tall, skinny latte at Starbucks and nothing more.Â I am not, thank God, a lawyer, and if one thing about all this seems abundantly clear to me, itâ€™s that this case will involve highly technical and fact specific legal arguments that will require the best and brightest in order to prevail.
Regardless of what happens going forward, perhaps this case and related decisions will lead to an increased willingness by state courts to take more care to examine the issues presented by homeowners and their lawyers, and lessen their tendency to dismiss them without thorough consideration based solely on the borrower being delinquent on his or her loan.
Everyone deserves his or her day in court and I think it can only be a good thing for our society as a whole that judges give proper consideration to every case in which someoneâ€™s home is on the line.
Many experts on both sides of this fight have told me on numerous occasions that many, if not most of the flaws in the foreclosure process CAN be correctedâ€¦ although it would Â be costly and time-consuming.
But, in response to this I would like to offer that when I consider the millions of borrowers who end up in some stage of the foreclosure process for yearsâ€¦ the time it now takes to foreclose in many states even when nothing is being litigatedâ€¦ the untold billions in losses that have accrued to-date to investors and others, to say nothing about whatâ€™s to comeâ€¦
Well, it just seems abundantly clear that at this point in time, whatever can be modifiedâ€¦ should be modifiedâ€¦ whatever can be otherwise resolvedâ€¦ should be resolvedâ€¦ and whatever can be fixedâ€¦ should be fixedâ€¦ because itâ€™s become entirely inconceivable that doing those things in earnest could possibly be more costly or inconvenient to all involved than whatâ€™s gone onâ€¦ is going on todayâ€¦ and as things stand, appears will continue to go on for years to come.
I think we need better answers and fairer programsâ€¦ nowâ€¦ before we lose another million homes to foreclosureâ€¦ and then another million after that. Is that too much for which to ask?
Itâ€™s been six years since our foreclosure crisis beganâ€¦ and our national denial of the origins and growing problem began.Â And we did little right addressing it so farâ€¦ but at this pointâ€¦ so what?Â Surely, weâ€™ve learned something over the last six years, havenâ€™t we?Â Then why have so many, so well-funded, brought so little change to how itâ€™s being handled?
Itâ€™s long since started to look like we are employing the very definition of insanityâ€¦ doing the same thing over and overâ€¦ and expecting a different result.
Unless, of course, weâ€™re notâ€¦
Expecting a different result, that is.Â Unless whatâ€™s really playing out is a plan to extend and pretend on a scale never before contemplated.Â Donâ€™t sell the homes means not recognizing the losses.Â And if we stretch things out long enough, the sands of timeâ€¦ and inflationâ€¦ will wash away many sins.
After all, just like credit default swaps (which are most commonly five-year contracts, by the way) eventually all mortgage-backed securities do reach their end.Â And if thatâ€™s our true planâ€¦ if thatâ€™s what explains the otherwise inexplicable all around us related to foreclosuresâ€¦ let me suggest again that instead of trying to outrun this tsunamiâ€¦ we get smarterâ€¦ become willing to do, not whatâ€™s politically expedient, but whatâ€™s politically excellent.
We are, after all, the United States of Americaâ€¦ a $14 trillion economy even when things are badâ€¦ still the worldâ€™s only true â€śsuper-power,â€ť in every sense of that term.
And yet, we continue to allow our nation to be held hostage to a wave of debt that began to default in the form of foreclosures when a mega-earthquake hit our credit markets in July of 2007.Â And all weâ€™ve done since is suspend accounting rules in order to extendâ€¦ pretendâ€¦ prop upâ€¦ and quantitatively ease our way from stimulus program to stimulus program.
But weâ€™ve done all of this while weâ€™ve ignored the potential contribution of our immensely powerful middle class that has historically pulled this country out of the deepest of economic ravines.Â Weâ€™ve allowed tens of millions to wallow in the weeds of declining incomes and debt that cannot be repaid.Â Weâ€™re sacrificing an entire generation because seemingly, we simply donâ€™t know what else to do.
One glance at the balances in our hardest hit funds, or how little of what was budgeted for HAMP was spent, will show that to be the cold, hard truth of the matter.Â States have been sitting on literally hundreds of millions of federal fundsâ€¦ in California that number is measured in the billionsâ€¦ while increasingly our cities are becoming insolvent and the only jobs we create in any number pay minimum wage and donâ€™t offer health benefits.
Am I to believe that not only are we helpless to solve any of this, but that we canâ€™t even try? Â That so much of our collective hope is tied to how a court in California will rule on whether there was or wasn’t a late transfer into a trust? Â Because in that decision will be the answer to our problems?
There are plenty of other answers available. Â Weâ€™re not dealing with a disease that cannot be cured or a natural disaster that cannot be understood. Â They require courage and leadership, but at the end of the day… the answer is money.Â What was your question?
Of course, thatâ€™s just one manâ€™s opinion.
A copy of the Bank of America petition for re-hearing recently denied by the court is belowâ€¦