At Howard Law, P.C., our Moreno Valley foreclosure defense attorneys have written plenty about "show me the note" cases. In these cases, plaintiffs whose homes are on the verge of foreclosure argue that the foreclosure should be stopped because it's not clear that the foreclosing entity actually has the right to foreclose. We believe it ought to be an easy to decide not to permit a foreclosure without proof of ownership, but in Minnesota, the state Supreme Court and the Eighth U.S. Circuit Court of Appeals have consistently rejected such cases. That's how it was with Karnatcheva v. JP Morgan Chase et al., in which Natalia Karnatcheva and Kevin Gurule sued two arms of Chase, MERS and a law firm. They alleged deficiencies in the foreclosures and the assignments of their mortgages, and later quiet title and slander of title claims. The federal court declined to remand the case to state court and dismissed it, and the Eighth Circuit upheld those decisions.
The Eighth Circuit's opinion does not go into the underlying facts, but says the lawsuit was originally filed in state court alleging deficiencies in the assignments of the plaintiffs' mortgages. The defendants removed the case to federal court, alleging that the plaintiffs fraudulently included a Minnesota law firm to keep the case in state court. After a motion to remand, the plaintiffs filed an amended complaint adding causes of action to quiet title, for slander of title, and requesting a declaratory judgment as to whether the defendants had the right to foreclose on their properties. In response, the defendants moved to dismiss for failure to state a claim. The district court granted this and denied the motion to remand.
Karnatcheva and Gurule appealed the dismissal, the denial of remand, and the district court's reliance on Jackson v. MERS, a 2009 Minnesota Supreme Court case that rejected "show me the note" theories. The Eighth Circuit first rejected the remand request. Relying on a recent case with nearly identical claims against a law firm, the Eighth found that the joinder of the law firm was indeed fraudulent, and dismissing it creates diversity. Similarly, a recent case's logic was the basis for the court's dismissal of the slander of title claim. It also rejected the declaratory judgment request, saying Minnesota federal courts have uniformly held that mortgagors were not a party to the security agreements at issue. Finally, their declaratory judgment requests to determine ownership, and their quiet title claims, failed because the plaintiffs didn't allege enough specific facts. Thus, the appeals court upheld all the district court's rulings.
Vincent Howard and our Orange foreclosure defense lawyers are disappointed to see so many rejections for plaintiffs who may have genuine underlying concerns about the ownership of their mortgages. During the housing bubble, loans were swapped so often that the purported owners frequently didn't have access to documentation showing proof of ownership. This came back to haunt them during the crash, because courts often do require the note, or at least some clear chain of title. In fact, the mechanism for tracking who owns what loan had broken down so much that one or two lenders actually attempted to foreclose on loans that were owned by another entity, or loans that didn't exist. That's why Vincent Howard and our Claremont foreclosure defense attorneys prefer that courts preserve the right to challenge ownership of the loan.
If you believe you're the subject of a wrongful foreclosure proceeding, or one that could easily have been avoided, you should call Vincent Howard and the team at Howard Law for help. You can reach us toll-free at 1-800-872-5925 or send us a message online.