And Here’s to You Mr. & Mrs. Robinson – Will Quiet Title Hold Up in California?
An interesting and sure to be controversial case in California has been working its way through the courts. On one side are homeowners, Daniel and Darla Robinson, and on the other, infamous with homeowners who have faced foreclosure, is Mortgage Electronic Registration Systems, otherwise known as MERS.
I’m writing this because over the last couple of days, several homeowners have asked me about this case and because I’ve seen several blogs describing it by saying things like, “Folks! This is the case we’ve been waiting for,” and by saying, “This changes the landscape for quiet title actions folks!” it was obvious that a more balanced accounting of the case and its significance was in order.
As a result, my goal is to paint the reader a clear picture of what’s gone on as related to the Robinson’s quiet title action, what may or may not go on from here… and what all of that does and doesn’t mean to other homeowners California who may be considering filing their own quiet title action as a result of this case.
In terms of background…
The Robinsons, like millions of other homeowners over the last several years, became very dissatisfied and ultimately angry over the way they were treated by their mortgage servicer as related to the loan modification process, and on that point I don’t think any further explanation is required.
Well, in January of 2012, the couple filed in the Los Angeles County Superior Court to quiet the title to their property and expunge the Deed of Trust. When you file quiet title the rule is that you have to give notice to everyone with an interest or “adverse claim” in the property. So, the couple checked with the county recorder and found that United Pacific Mortgage… their original Lender under the Deed of Trust… was the beneficiary, so they named that company as a defendant in the quiet title action.
They did not name MERS as a party to the suit, because for one thing, there was no recorded assignment to MERS on file at the county recorder, and besides that, as a “nominee,” or agent of United Pacific Mortgage, MERS had no independent interest in the property, so they also didn’t provide MERS with any notice of the suit.
Now, keep in mind there was also a servicer in the picture to whom the Robinsons were presumably paying their mortgage payments, but as a servicer, that company wouldn’t have had any beneficial interest in the Robinson’s property either, and more to the point, with no other recorded assignments, there would have been no legal reason to name the servicer in the lawsuit just as, as the Robinsons reasoned, there was no reason to notify MERS.
The thing is… the United Pacific Mortgage that had been the Robinson’s lender had ceased to exist. As I understand it, they had become one of the thousands of like companies that filed for bankruptcy following the financial crisis of 2008.
When they didn’t respond to the lawsuit or show up to face the Robinsons in court, the couple received a default judgment, expunging their Deed of Trust. They then proceeded to record the judgment in the Official Records of the Recorder’s Office of Los Angeles County.
When we say a Deed of Trust has been “expunged,” it means it’s done… destroyed… erased… no longer legally relevant. So, although the Robinson’s promissory note would still be enforceable, the aforementioned Deed of Trust would no longer secure that note.
What happened next?
Predictably, MERS’s lawyers filed a suit against the Robinsons basically for not giving notice to MERS, slandering the title by recording the judgment, cancellation of instrument, and asking that the court set aside the default judgment in the quiet title action.
The lawyers representing MERS trotted out all of California’s “usual suspects,” including decisions like Gomes v. Countrywide, Fontenot v. Wells Fargo, Calvo v. HSBC Bank, and even Glaski, among others, but all to no avail.
The court ruled in favor of the Robinsons, but in all cases, the court dismissed with “leave to amend,” meaning that the MERS lawyers would be able to fix their causes of action and return to court to try again, which they, of course, did.
This time, however, the MERS lawyers failed to comply with a local rule requiring that they hold a conference with opposing counsel 7 days before filing their motion, and as a result, the judge refused to hear anything about the merits of their case.
Finally, and most recently, the Robinsons filed a “Motion for Judgment on the Pleadings,” which is pretty much just like a Motion to Dismiss, and although there appeared to be a hearing on August 25th, I spoke with the Robinsons’ attorney, Susan Murphy of Advocate Legal, and she informed me that hearing hadn’t taken place.
At this point, apparently, we are simply waiting for the court to rule. It could happen in a matter of days, or I suppose weeks, but it’s highly unlikely to take anything close to months.
And, the day the judge rules, I’ll be bringing you coverage of the decision in the form of a Mandelman Matters Podcast with Susan Murphy, and I’ll also be talking to the lawyers at Severson & Werson, who represent MERS, and if I’m really lucky, I may even have Big Al West, who was the lawyer representing the Robinsons in the original quiet title action.
We’ll just have to see how things go, but as soon as there’s news, we’ll have it right here on Mandelman Matters from the newsmakers themselves.
Comments in Conclusion…
Just as I said when I covered the Glaski decision last August, while I understand why many homeowners would describe this case in positive terms… I’d hold off on ordering the balloons because it’s not quite time to block off the streets and hold a parade. Here’s why I say that:
1. Even if the judge rules again in favor of the Robinsons, it’s not a decision that’s likely to be all that meaningful to homeowners that are already facing foreclosure… because the Robinson’s loan was never in default… meaning they had never received a Notice a Default.
Had that not been the case… had a Notice of Default been filed… it would have been all but certain that additional assignments would have been recorded and the Robinsons would not have been able to exclusively name their now defunct original lender, United Pacific Mortgage, as a party to their quiet title action, thus making default judgment a highly unlikely outcome.
2. The lawyers representing MERS, assuming they find themselves on the wrong side of the judge’s decision yet again again, are highly likely to be appealing the case to the 9th Circuit… if not beyond. And until those appeals have been exhausted, no credible judge is going to cite this case.
Understandably, this case makes the mortgage industry insane, and you can see just how insane by reading the complaint filed by the MERS attorneys in this case. The Robinson’s loan was for just a skosh under $1 millions and the mortgage banking industry is not going to let this issue go without as big a fight as they can muster… and they can muster plenty.
3. At this point, Nationstar says they have acquired the servicing rights from Bank of America, and is now servicing the loan. Not surprisingly, they’re saying that there’s a securitized trust that owns the Robinson’s loan… so we’ll have to see how that factors into the final outcome, as well.
At this point I’m told the Robinsons have stopped making their payments so I’d imagine that Nationstar will move to foreclose at some point and let me just say that I won’t be surprised in the least to see a “Ta Da assignment” come out of nowhere. (That’s the cousin of the “Ta Da endorsement,” of course.)
4. It’s important for homeowners to remember that the Robinsons filed their quiet title action in January of 2012, so that’s coming up on three years ago… and still the lower court has yet to rule and the appeals haven’t even begun. Does that sound like its been inexpensive for the Robinsons to-date? It shouldn’t… because it hasn’t. Any litigation that lasts a long time costs a bundle, and this is no exception.
And the end is still nowhere in sight. Based on the timelines of other cases in the same space, it looks to me like it could be five or six years before it’s truly resolved, and perhaps longer than that. As Maine foreclosure defense attorney Tom Cox commented, “there may be no end to the litigation that could come out of this.”
5. There may be all sorts of other possible outcomes here. For example, there’s a entire body of law that basically says that if someone gets a loan, and all parties intended and expected that the lender would have a lien on the property in case that loan defaulted, than the court has the power to grant the lender that lien… called an “equitable lien.”
Now, this is a state law kind of issue, and I’m quite proud to say that I’M NOT A LAWYER, nor am I attempting to give any sort of legal advice, but it occurs to me that it may be possible for the securitized trust to come to court with a recorded assignment and ask the court to establish an equitable lien on the property.
That equitable lien would have to fall behind any California Homestead Exemption, and I’m told that it’s possible that such a lien could be defeated in a bankruptcy proceeding, but as you can see, like anything in law… it depends, it depends, and it depends. So, if anyone tells you that anything in this area of law is a sure thing… run the other direction.
One way or the other, it’s going to take some serious legal wrangling to legally collect on the debt in this case, and as to the potential for a future foreclosure… it could just be that it’s just not an option after the current judge rules. There are times when expunged does mean expunged, and this may prove to be one of those times.
But, then again… I’ve been around this foreclosure crisis long enough to know that it’s also possible that it won’t be one of those times.
A more balanced view…
The Robinson’s, after all, did borrow roughly $1 million dollars and they did buy a million dollar house, at least at that time that’s presumably what happened. Then, as the MERS Opposition to the Motion to Dismiss states: “After paying on the loan for several years, (the Robinsons) decided to avail themselves of a scheme that promised a mortgage-free house. They hired an attorney to file a ‘quiet title’ lawsuit.”
The motion goes on to point out: “As the attorney’s website advertises, ‘your house and or home becomes foreclosable proof and cannot be touched in order to satisfy any… Promissory Note previously secured against it. You would then be free to either sell it, transfer it, re-encumber it or just possess it free and clear of any lien.”
And then… “The secret to this kind of lawsuit: don’t give notice to parties with an interest in the lien – such as the record beneficiary.” And also… “Quiet title by default oh yeah you can.”
The MERS motion also raises the point about the Robinson’s complaint, “It does not claim that (the Robinsons) paid off the loan. The motion does not explain why (the Robinsons) should receive the windfall of a mortgage-free house when they have yet to pay back almost a million dollars borrowed just a few years ago.”
And if you don’t see any of those points as being the least bit valid, then you’re just not thinking about the issue clearly. Not that they should or will be determining factors, but its understandable that such points would be worthy of consideration at the very least.
I also completely understand the other side’s anger… and argument. I mean, it was MERS that cleverly found a way for lenders to get around the rules about recording assignments, so this is what they get. And the law… is the law, right? No ticket, no laundry, as someone once said.
Well, maybe. The court of equity concept is all about what’s fair and equitable and it remains to be seen how the courts will apply that way of thinking in this case.
So, although I do understand the impetus to proclaim, as the Certified Forensic Loan Auditors site does, that, “MERS v Robinson is a huge win for homeowners with underwater mortgages in California and paves the way for Quiet Title actions by individual homeowners to forestall illegal property foreclosure by agents of MERS,” it’s not an entirely accurate statement… or maybe I should say, it’s at least a bit of an overstatement… or… well, you know what I’m thinking, right?
I just want to point out that California homeowners should not be in any sort of hurry to follow in the footsteps of Robinson v. MERS. It’s still years of uncertainty, stress and a fair amount of unpleasantness… and I’m certain that it hasn’t been inexpensive, to say the least. Knowing all of that, if you’re still determined to enter the fray, then more power to you.
But, it might pay to wait to see how things go for the Robinsons over the next six months, just in case this case becomes another, “In re Agard.” You remember that case, right?
It was back in April of 2011, when Bankruptcy Court Judge Robert E. Grossman in In re Ferrel L. Agard, 444 B.R. 231 (Bankr.E.D.N.Y. 2011), concluded that MERS’s “nominee” status did not confirm upon it authority to assign mortgages,” and everyone started celebrating immediately… including me, by the way. Lawyers were giving seminars on the decision around the country… for a while, anyway.
But then, in 2012, on appeal by MERS, Judge Seybert observed that the bankruptcy court had lacked subject matter jurisdiction over the dispute. She determined, accordingly, that Judge Grossman’s conclusion that MERS lacked authority to assign the subject mortgage had no effect on the parties before him, and therefore she directed that his decision in Agard be vacated as to his ruling on this issue.
And that was the end of the “In re Agard” jubilee.
Now, I’m not saying it will… and I’m not saying it won’t. I really have no idea how it will go from this point forward, but my real point is that… neither does anyone else.
And now I think I’ll close with a song… tell me you didn’t see this coming. Here’s to you, Mr. & Mrs. Robinson!
But to everyone else… be careful out there.
And here’s to you Messrs Robinson,
MERS Inc. hates you; that I think you know.
Wo, Wo, Wo.
They want your keys, Messrs Robinson,
They don’t care; they’ve long since gone astray.
Hey, Hey, Hey… Hey, Hey, Hey.
They’d like to go ahead and repossess your domicile.
Records or not they’d like to help themselves.
They look at you and all they see are deadbeats telling lies.
Stay in court for years until they take your home.
And here’s to you, Messrs. Robinson,
MERS Inc. hates you; that I’m sure you know.
Wo, Wo, Wo
They want your keys, Messrs Robinson,
They don’t care of housing’s disarray.
Hey, Hey, Hey…Hey, Hey, Hey
Hide notes in a hiding place where no one ever goes.
What we’ll show the court are just good fakes.
Here’s a little secret about the Robinsons’ nightmare.
They have made it this far, ’cause they’re hard to scare.
Coo, coo, ca-choo, Messrs Robinson.
MERS Inc. hates you; that I’m sure you know.
Wo, Wo, Wo.
Courts heard your pleas, Messrs Robinson.
Heathens can’t keep up with those who pray.
(Hey, Hey, Hey…Hey, Hey, Hey)
Sitting on your sofa on a Sunday afternoon.
They they broke the rules they can’t debate.
Laugh when they are shouting loud that
You will always lose.
Just in case you’d better stock up on good booze.
Where have you gone, U.S. government?
A nation ‘s disappointment is on you.
(Woo, Woo, Woo)
You’ve truly failed, US government.
When this stops we’ll look like Zimbabwe.
(Hey, Hey, Hey…Hey, Hey, Hey)
(With sincere apologies to Simon & Garfunkel.)