Source: https://www.scribd.com/document/86101355/Jenkins-ReconTrust-Decision
Timestamp: 2019-04-23 11:16:27+00:00

Document:
U.S. District Judge Bruce Jenkin's March 15, 2012, ruling that Bank of America foreclosure unit ReconTrust must comply with Utah laws when conducting foreclosures in that state.
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(See Pls. Third Am. Compl., filed Sept. 15, 2011 (dkt. no. 68) (Pls. Compl.), at Ex.
(See Defs. Mem. Supp. Mot. Dismiss Pls. Third Am. Compl. (dkt. no. 71) (Defs. Mem.), at 2.) Subsection (2)(a) states that [a]n authorized person who conducts an unauthorized sale is liable to the trustor for the actual damages suffered by the trustor as a result of the unauthorized sale or $2,000, whichever is greater.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotations omitted).
grounded in the idea that federal courts only decide actual, ongoing cases or controversies,18 and that a case or controversy no longer exists when it is impossible to grant any effectual relief.19 However, a case is not moot if it falls within a special category of disputes that are capable of repetition while evading review.20 Two elements must be present for a case to fall within this exception: (1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there was a reasonable expectation that the same complaining party would be subjected to the same action again.21 The Supreme Court has stated that a federal courts concern in these cases, as in all others involving potentially moot claims, [is] whether the controversy [is] capable of repetition and not . . . whether the claimant ha[s] demonstrated that a recurrence of the dispute was more probable than not.22 Indeed, the possibility of recurrence need not be established with mathematical precision, but rather the court need only find a reasonable expectation of repetition.23 Certainly, the bar is not high for a party to withstand a challenge for mootness.
Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1242 (10th Cir. 2011) (quoting Building & Constr. Dept v. Rockwell Intl Corp., 7 F.3d 1487, 1491 (10th Cir. 1993)); see also Matthew I. Hall, The Partially Prudential Doctrine of Mootness, 77 Geo. Wash. L. Rev. 562, 571 (2009).
Chihuahuan Grasslands Alliance v. Kempthorne, 545 F.3d 884, 891 (10th Cir. 2008).
Turner v. Rogers, 131 S. Ct. 2507, 251415 (2011) (quoting S. Pac. Terminal Co. v. ICC, 219 U.S. 498, 515 (1911)).
When presented with a question of mootness the court also has an interest in preventing litigants from attempting to manipulate the Courts jurisdiction.24 The concern is that a partys change in position may be temporary and thus abandoned once the litigation ends.25 Therefore, it is well settled that a defendants voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.26 In cases where the court is concerned with a partys potential manipulation of the courts jurisdiction, the Tenth Circuit looks at two additional factors: (1) whether it is not absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur[,]27 and (2) whether the litigant is attempting to seal a favorable decision from review.28 Additionally, there are certain matters that come before a court that are too important to be denied effective review; for example, when the nature of the issue is sufficiently compelling in relation to the enforcement of the laws and the private rights involved.29 Wyoming v. U.S. Dept of Agric., 414 F.3d 1207, 1212 (10th Cir. 2005) (quoting City of Erie v. PAPS A.M., 529 U.S. 277, 288 (2000)).
City of Mesquite v. Alladins Castle, Inc., 455 U.S. 283, 289 (1982). In Alladins Castle, a city exempted a business from a city ordinance in response to the business challenge that the ordinance was unconstitutional. However, after a state court decision was issued regarding the matter, the city adopted a new ordinance which repealed the business exemption. See id. at 28687, 289. Seneca-Cayuga Tribe of Okla. v. Natl Indian Gaming Commn, 327 F.3d 1019, 1028 (10th Cir. 2003) (quoting S. Utah Wilderness Alliance v. Norton, 301 F.3d 1217, 1236 n.17 (10th Cir. 2002)). See Seneca-Cayuga Tribe, 327 F.3d at 1029 (We, however, read City of Erie as expressing a generalized concern about manipulation of an appellate courts jurisdiction to seal a favorable decision from review. Here, appellees conduct, while presumably not in bad faith, nonetheless implicates the concern over post-trial manipulation.).
(Id.) Utah Code Ann. 57-1-22(1)(a) (2010) (emphasis added).
Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Opinion & Order, dkt. no. 48); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9). Just as there are two District of Utah cases that apply Texas law to ReconTrusts foreclosure operations in Utah, see cases cited supra note 34, there are also two District of Utah cases that apply Utah law on the same issue. See Cox v. ReconTrust Co., No. 2:10-CV-492-CW, 2011 WL 835893, at *6 (D. Utah March 3, 2011) (holding that Utah law applies to ReconTrusts foreclosure activities within the State of Utah); see also Coleman v. ReconTrust Co., No. 2:10CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) (same). See Cox v. ReconTrust Co., No. 2:10-CV-492-CW (D. Utah June 25, 2010) (Notice of Appeal of Interlocutory Decision, dkt. no. 47).
issuedefendants did not notify the court of the substitution until the November 10, 2011 hearing was well underway and 24538 days after the case was commenced.39 The parties have raised a compelling question. Further, the private rights of many Utah citizens are potentially involved. The matter is too important to be denied effective review. B. ReconTrust is not authorized to exercise a power of sale in a non-judicial foreclosure action within the State of Utah Utah statutes require banksincluding Utah-chartered banksto foreclose trust deeds only through identified trustees. The question for decision is direct: Does ReconTrust, a Texas corporation, and by definition a national bankalthough it neither takes deposits nor makes loanshave the power to conduct non-judicial foreclosures in Utah of trust deeds on real property located in Utah without complying with Utah statutes? The direct answer is no. It does not have such power.
Plaintiffs filed their complaint in Third District Court, Salt Lake County, Utah on March 11, 2011.
Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Opinion & Order, dkt. no. 48); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9). Both the preceding cases held that Texas law applies to ReconTrusts foreclosure activities in Utah. But see Cox v. ReconTrust Co., No. 2:10-CV-492-CW, 2011 WL 835893, at *6 (D. Utah March 3, 2011) (holding that Utah law applies to ReconTrusts foreclosure activities within the State of Utah); see also Coleman v. ReconTrust Co., No. 2:10CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) (same).
Defendants assert that when read in conjunction with 12 C.F.R. 9.7(d), the State or local law referred to in 12 U.S.C. 92a(a) is clearly Texas lawas opposed to Utah lawbecause ReconTrust accepts fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets in Texas. Defendants have called the courts attention to two recent decisionsboth within the District of Utahwhich arrive at this conclusion, relying on 12 C.F.R. 9.7(d).46 Although aware of these decisions, this court sees the issue differently. Texas law allows national banks to act as trustee under deeds of trust, and to exercise the power of sale with regard to such deeds of trust in Texas.47 Utah law does not.48 Because Texas law allows its own state-chartered banks to exercise the power of sale in foreclosure actions in Texas, pursuant to 12 U.S.C. 92a, national banks are also allowed to exercise the power of sale within Texas. However, because Utah law does not allow Utah state-chartered banks to exercise the power of sale in foreclosure actions, plaintiffs argue that 92as contravention clause (when not in contravention of State or local law) also prohibits national banks from exercising the power of sale in Utah. The threshold issue is whether the court should give credence to 12 C.F.R. 9.7(d)s reading of 12 U.S.C. 92a, as the defendants insist.
Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) (Our first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. Our inquiry must cease if the statutory language is unambiguous and the statutory scheme is coherent and consistent. (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240 (1989))).
See Interpretive Letter No. 866, 1999 WL 983923, at Part II.B. (October 8, 1999).
ReconTrusts argument that 92a(b) dictates that the court look to some state law other than Utah state law to evaluate ReconTrusts foreclosure activities in Utah. . . . Here, . . . ReconTrust is conducting foreclosure activities on behalf of Bank of America in several states, including Utah. . . . Under a straight forward reading of 92a(b), this court must look to Utah law in its analysis of whether ReconTrusts activities in Utah exceed ReconTrusts trustee powers. The powers granted to ReconTrust under federal law in this case are limited by the powers granted by Utah state law to ReconTrusts competitors. Accordingly, the extent of ReconTrusts federal powers must be determined by reference to the laws of Utah, not by reference to the laws of some other state. Under Utah law, the power to conduct non-judicial foreclosure is limited to attorneys and title companies. The scope of the powers granted by federal law is limited to the same power Utah statute confers on ReconTrusts Utah competitors. . . .56 The legislative history of 12 U.S.C. 92a demonstrates that Utah law should apply. The phrase, when not in contravention of State or local law originated with 11(k) of the Federal Reserve Act of 1913.57 Although legislative history does not exist as to the precise meaning of the phrase in 11(k), a nearly identical phrase was used in 8 of the same Act. Section 8 provided a means by which state banks could convert to national banks. However, the section placed a condition on state banks that desired to convert to national banks: Provided, however, That said conversion shall not be in contravention of the State law.58 When the bill which eventually became the Federal Reserve Act of 1913 was introduced on the floor of the Senate on December 1, 1913, 8 also contained the word local so as to read, Provided, Id.; see also Coleman v. ReconTrust Co., No. 2:10-CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) ([T]he court agrees with the reasoning applied in Cox v. ReconTrust Company, N.A., 2011 WL 835893 (March 3, 2011 D. Utah).). Federal Reserve Act of 1913, Dec. 23, 1913, ch. 6 11(k), 38 Stat. 262. At the time of its passage, section 11(k) stated that [t]he Federal Reserve Board shall be authorized and empowered To grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.
51 Cong. Rec. S23 (December 1, 1913) (statement of Sen. Owen).
51 Cong. Rec. S879 (December 15, 1913) (statements of Sens. Owen & Burton) (emphasis added).
Act of Sept. 26, 1918, ch. 177, 40 Stat. 967, 96869 (1918). H.R. Rep. No. 65-479, reprinted in U.S. Serial Set vol. 7307 (1918). National Bank Act of 1962, Pub. L. No. 87-722, 76 Stat. 668 (enacting H.R.12577).
passage of the National Bank Act of 1962.70 Therein, the committee included a General Statement which made abundantly clear that this bill will result in no change in the present distribution of power between Federal and State Governments, nor will it cause any weakening of the principles underlying the dual banking system. . . . It would not give authority to the Comptroller of the Currency to exercise any supervisory functions over State banks.71 The Office of the Comptroller of the Currency defines dual banking system as parallel state and federal banking systems that co-exist in the United States. The federal system is based on a federal bank charter, powers defined under federal law, operation under federal standards, and oversight by a federal supervisor. The state system is characterized by state chartering, bank powers established under state law, and operation under state standards, including oversight by state supervisors.72 Therefore, when the plain language of 92a is read in conjunction with the legislative history of the contravention clause, it is certain that Congress did not intend the laws of one State to pre-empt the laws of another State in dealing with a national bank. Rather, Congress made abundantly clear that there was no purpose on the part of Congress to disregard the local State law, but merely to give its assent provided the State law permitted it to be done.73 In light of the foregoing, this court determines that Congress has spoken to the precise question at issue, and has determined that the law that shall apply to a national bank acting as trustee under a trust deed is the local State law, which in this instance is Utah law.
S. Rep. No. 87-2039, reprinted in 1962 U.S.C.C.A.N. 273536; see also H.R. Rep. No. 87-2255, reprinted in U.S. Serial Set vol. 12433 (1962) (adopted in substance by S. Rep. No. 872039 and referenced in 1962 U.S.C.C.A.N. 273536).
Office of the Comptroller of the Currency, National Banks and the Dual Banking System 1 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf.
Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 34 (1996).
Interpretive Letter No. 866, 1999 WL 983923 (October 8, 1999); Interpretive Letter No. 872, 1999 WL 1251391 (October 28, 1999).
Id. at *12 (emphasis added).
See supra note 75. Twenty days subsequent to the issuance of Letter No. 866, the Comptroller issued Letter No. 872. The pertinent portion of the Comptrollers analysis in Letter No. 872 is taken verbatim from Letter No. 866, and as such, the court need not separately discuss the substance of Letter No. 872. See 66 Fed. Reg. 34,792-01, 2001 WL 731641, at *34795 (July 2, 2001) (These conclusions are consistent with the conclusions set out in IL 866 and IL 872.).
John D. Hawke, Jr., Melanie L. Fein & David F. Freeman, Jr., The Authority of National Banks to Invest Trust Assets in Bank-advised Mutual Funds, 10 Ann. Rev. Banking L. 131 (1991). According to the Comptrollers website, Mr. Hawke served as the Comptroller of the Currency from 1998 to 2004, which encompasses the October 1999 publication of Letter Nos. 866 and 872, see http://www.occ.treas.gov/about/who-we-are/leadership/past-comptrollers/comptroller-john-hawk e.html (last visited Mar. 13, 2012).
Office of the Comptroller of the Currency, National Banks and the Dual Banking System 26 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf.
Natl Bank v. Commonwealth, 76 U.S. 353 (1869) (emphasis added).
Id. at 362; see also Office of the Comptroller of the Currency, National Banks and the Dual Banking System 27 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf (quoting Bank of Am. v. City & County of San Francisco, 309 F.3d 551, 559 (9th Cir. 2002)).
[w]henever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this section.95 The Supreme Court had an opportunity to examine the statute in Burnes Natl Bank v. Duncan,96 wherein Justice Holmes opined that the foregoing passages state in a roundabout and polite but unmistakable way that whatever may be the State law, national banks having the permit of the Federal Reserve Board may act as executors if trust companies competing with them have that power.97 The holding in Burnes Natl Bank also applies to national banks who wish to act as trustees so long as competing State institutions also act as trustees. This is of no help to ReconTrust, a subsidiary of a national bank. It is not in competition with a bar member. It is not in competition with a title insurance company. Indeed, the statutes prohibit a bank from engaging in title insurance activity.98 Utah Code Ann. 57-1-21, 57-1-23.5 were both drafted so that the fiduciaries contemplated in 12 U.S.C. 92a (including both state banks and national banks acting as trustees) would have to work in concert withnot in competition withtitle insurance companies and active members of the State bar. Indeed, a state or national bank, acting as trustee, must procure the services of either an active member of the State bar or title insurance company in order to comply with the Utah law.
12 U.S.C. 92a(b) (emphasis added). 265 U.S. 17 (1924). Id. at 23.
Banks compete with banks. Indeed, ReconTrust's status is by definition that ofa national bank, and in this specialized and limited area of trust activity, it, like all banks must comply with local1aw. III. CONCLUSION In light of the foregoing, plaintiffs' claim for declaratory relief under Utah Code Ann. 57-1-23.5 satisfies the standards set forth in Twombly and Iqbal. Because ofReconTrust's lack of authority to exercise the power of sale in a non-judicial foreclosure action within Utah, IT IS ORDERED that defendants' motion to dismiss is hereby DENIED .
FELONY LAW SOON TO PASS MAKING 90%+ of the recent bank foreclosures a felony!
U.S. Attorney's Office responds to Rep. Phil Lyman over proposed increase to monthly restitution payments.

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