The issue is one of First Impression because the supreme Court of the United States has never decided either a federally chartered bank corporation created under an act of Congress to furnish an leading communal and national purpose could use a non- judicial policy that allows the taking of a property interest without a hearing thus violating the 5th Amendment. The Court, however, has made numerous decisions which would have been relevant in determining either non-judicial procedures were applicable given the nature of these corporations. Though some appellate courts have had occasion to rule the constitutionality of non-judicial procedures in the form of a trustee sale provision, none have vetted the corporations seeking this remedy. The issue goes to the core of the nature of federally chartered corporations created under extra law for communal and national purposes. This issue deals with the right of these corporations to put such a provision in a contract and rests on either the act of foreclosure is a governmental act or a ownership act. It is an issue which, in the context of the current economic urgency and massive foreclosures, sweeps the breadth of this nation like a plague destroying families and communities as it spreads, swelling the homeless people in its wake. This issue involves a constitutional right affecting the lives of millions of families over this nation.
It would allow homeowner a level playing field with the banks to negotiate loan modification. If the bank had to take them to court, the homeowner could raise affirmative defenses and a right to a jury trial. I ask that you look at the arguments proffered in this letter to make your decision and that you act quickly.
Argument
I. Bank'S Use Of Non-Judicial Foreclosures
Is Not Within The Scope Of A Law Of Congress
To rule the issue of the constitutionality of a trustee sale by National banks and federal savings associations, we must first identify the nature of the corporations. National Banks And Federal Savings Associations are federally chartered corporations created under acts of Congress (The Homeowner Loan Act (Hola) and the National Bank Act(Nba) for a communal and national purposes. In seminar of Federal Savings and Loan Associations et al v. Alan L. Stein et al. 604 F.2d 1256 (9th Circuit) (1979) the court linked the history of Hola and the reason for its' creation:
The Home Owners' Loan Act of 1933, 12 U.S.C. §§ 1461 Et seq. (Hola), was the supervene of congressional frustration with state law and practice in the financing of home construction.
..... The Federal Home Loan Bank Board (the Bank Board) was created with highly broad powers to promulgate rules and regulations. 12 U.S.C. § 1464(a) provides in part:
...[T]he Board is authorized, under such rules and regulations as it may prescribe, to furnish for the organization, incorporation, examination, operation, and regulation of associations to be known as 'Federal Savings and Loan Associations' * * * and to issue charters therefore, giving traditional observation to the best practices of local mutual thrift and home-financing institutions in the United States." [bold added]
A. Banks Can Be A Governmental
Actor In Violation Of The 5Th Amendment
National banks and federal savings associations are agencies of the United States created to promote its fiscal policies. National banks and federal savings associations benefit by not paying state taxes, avoiding state predatory lending laws straight through the view of Federal preemption, allowing them to export high interest for the credit card thus avoiding the state usury laws. Federal Savings associations also have the same benefits and are no less instrumentalities of the federal government than national banks whose purpose is to promote its fiscal policies. Alexander Hamilton argued that the Central Bank was needful to the nation in cases of urgency such as the financing of war... Hamilton believed that there was a symbiotic relationship between agriculture, commerce, and manufacturing, and that advance in each of these sectors was needful for America's economic development. (In the article of credit Ii, Dec. 1790)
B. A Party Must State Facts
Sufficient To State A either A
5th or 14th Amendment Due Process Claim
Non-judicial foreclosures have been the subject of a flurry of cases along with the most current Apao v. San Diego Home Loans, Inc.,324 F3d 1091, Ninth Circuit (2002) a California corporation. Margaret Apao lost her home to a foreclosure and sale under Hawaii's non-judicial foreclosure statute. The federal district court dismissed the complaint for failure to state a claim and that the sale was a purely inexpressive remedy. Apao appealed to the Ninth Circuit. The Ninth Circuit affirmed the district court's decision on the grounds that previous decisions of appellate courts upheld the constitutionality of similar non-judicial procedures. The Ninth Circuit held in Apao that the case of Charmicor v. Deaner, 572 F2nd 694 "was controlling" although the consumers in Apao attempted to distinguish it. In Charmicor, the consumers claimed that the statute offended due process by failing to furnish a pre-sale hearing and that it offends civil ownership statutes and the equal protection clause by discriminating against appellant's shareholders, who are black. The court in Charmicor noted that the "complaint failed to state a claim for relief under the civil ownership statutes, because the article was utterly barren of any facts or allegations that could keep a claim under the equal protection clause", the Ninth Circuit affirmed. The court in these cases made no reference to some supreme Court decisions which examined the nature of corporations created under an act of Congress and were article with the view that Congress could adopt the local customs on debtor creditor relations without supplementary analysis. The fact of the matter is that the issue should be determined under federal law.
C. National Banks Are Public
Not inexpressive Corporations
In Easton v. Iowa,188 U.S.220 (1903) the Court said of national banks:
...[W]e cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for inexpressive gain.
The Court in Easton went on to say at 188 U.S. 220 at p. 230 that the law enunciated in McCullough v Maryland, 17 U.S. 316(1819), and in Osborn v Bank of United States, 22 U.S.738 (1824), though expressed in respect to banks incorporated directly by acts of Congress, were still applicable to the later and present law of national banks. The Court cited with approval the holding of the latter as expressed by Chief Justice Marshall which held that banks were communal and not inexpressive corporations and that they were federal instrumentalities created for communal and national purposes. The court in Osborn made it quite clear that everthing that the corporations assumed to do must be done even under its contracts must be done under the authority of the federal rent and the law that created that corporation. In other words under "color of federal law". It was a theme recurring in other supreme Court decision.
In view of the holding in Osborn which Justice Marshall held that banks were communal and not inexpressive bank corporations because they were created for communal and national purposes, which was stylish and held applicable to later national bank corporations not directly created by Congress by the supreme Court in Easton, why should we now think national banks inexpressive corporations? And why not consider
them "agencies of the Federal government" as referred to in Easton? And why should the same reasoning not apply to Federal Savings Associations.
In Runyan v. Lessee of Coster, 39 U.S. 122, p. 129 (1840) the court Said:
... The corporation must show that the law of its creation gave it authority to make such contracts.".
Did the law of its creation (Home Owner Loan Act or National Bank Act ) give National banks and federal savings associations the right to make this contract with this provision?
Can it then be said that the provision in a mortgage contract requiring a mortgagor to exchange his ownership to a trustee with a power of sale for the non-payment of a mortgage is authorized by the federal charter? Is this not the right to foreclose on an owner without resort to judicial process and a hearing? Is this not the right to deprive a someone of procedural due process? We must then ask the question: Is the act of the national or federal savings associations in foreclosing non-judicially within the scope of a law of Congress? Can the government by way of a federal rent authorize a right to a bank to do what it is forbidden to do itself? It is fundamentally clear that the government can present no greater power straight through a rent than they possess themselves. The power to deny a someone of procedural due process is denied to the government under the 5th Amendment and is equally denied to the banks. As John Locke said nearly 300 years ago: "...Nobody can exchange to other more power than he has in himself " [John Locke, Two Treatise Of Government, Book Ii] The supreme Court decisions show us that the escort of banks in pursuance of non-judicial foreclosures must be done under the authority of the federal rent which is a "law of the United States" and therefore "under color of federal law". Thus National banks and federal savings associations Mortgage fsb could be determined a "governmental actor" like the assumption made by the First Circuit in Gerena v Puerto Rico Legal Services, Inc., 697 F. 2d 447(1st Cir. 1983)
D. Congress Cannot Authorize Or
Delegate A Right Or Power That
It Cannot practice Itself
If all the acts, ownership and obligations of corporations with federal charters must be done under the authority of the federal rent and a law of the United States, along with ownership created in contract, how can Congress authorize a provision that it could not practice itself? The provision can only be validated by what it represents and the constitutional implications it may give rise to.
In United States v Grimaud, 220 U.S. 506 (1911) the supreme Court decided that very issue and the court citing Justice Marshall at 220 Us pg. 517 said.
The court held that Congress can only delegate those powers, or ownership that they could practice themselves.
The powers of a corporation are express and incidental. Runyan at p. 129 supra. If Congress cannot confer the power to foreclose non judicially to National banks and federal savings associations then the provision is ultra vires and void.
Ii. The Lending Functions Of
Of National Banks And Federal Savings Associations Are Governmental
In Federal Land Bank v. Bismarck Co. Of St. Paul, 314
U. S. 95 (1941) the court was faced with determining
whether the lending functions were ownership or governmental. The court held that the lending functions of the land bank were governmental and not ownership because it was created under an act of Congress in which the government lawfully acted. It included foreclosure as part of the normal lending functions. As part of their normal lending functions, the land banks are authorized to foreclose their mortgages and to buy the real estate at the resulting sale. They are "instrumentalities of the federal government, engaged in the operation of an leading governmental function."(cites)
A.Government Cannot Evade Its Most Solemn Constitutional Obligations By simply Resorting To The Corporate Form
Can Congress divest itself of its identity with a corporation created and participated in for a communal purpose sufficiently to allow the corporation to use a policy that does not allow a hearing? That request was asked and answered in Lebron v National hasten Passenger Corporation. 513 U.S. Pgs 374, 375 when the court held that amtrak was created under an act of Congress to perform government objectives and that although Amtrak's authorizing statute provides that it "will not be an group or making ready of the United States Government," it was still held as an group or instrumentality for the purpose of determining ownership of it citizens affected by it's actions. Thus amtrak was held to have violated Lebron 1st Amendment Constitutional rights. Justice Scalia thus established that not only the priveleges of government are created in favor of the corporation but also the obligations of government.
Like Amtrak, national banks and federal savings associations are federal instrumentalities and members in banking systems created for a communal purposes and controlled by the director of The Office of Thrift administration and the director of the Comptroller of the currency. Like Amtrak it is not for Congress to make the final estimation of the status of these corporations as government entities for purposes of determining the constitutional ownership of citizens affected by its actions. Consumers are citizens whose constitutional ownership are affected when non- judicial foreclosures are exercised by federally chartered corporations like National banks and federal savings associations.
B. The Power To Foreclose Is An
Incidental Power Of The National Banks
As Well As Federal Savings Banks
The history of national banking legislation has been "one of interpreting grants of both enumerated and incidental `powers' to national banks" as well as federal savings associations[which comprise savings banks]. Bank of America et al v City of San Francisco et al 309 F.3d 551 (Ninth Circuit) (2002) think this hypothetical. The California legislature would makes a law that as a matter of communal policy foreclosures of any kind will not be permitted on a homeowner's traditional residence. The Ots is charged with the administration of the Home Owner Loan Act like the Office of the Controller of Currency is "charged with administration of the National Bank Act" NationsBank of N.C.N.A. V variable Annuity Life Ins. Co. 513 U.S. 252, 256(1995) The Ots and the Occ would promulgate rules allowing the banks to foreclose on the homes that have defaulted and in concert with the banks claim that the power to foreclose was an incidental power of national banks and also federal savings banks and therefore would preempt state law. The State would challenge that decision in court. Both Acts are silent on the necessity of banks foreclosures to collect the residential property in the event of default. The Acts, however, do confer upon banks the authority to practice by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as needful to carry on the firm of banking..."12 U.S.C.§24(Seventh). The Ots authority to preempt state laws affecting its lending practices lies in 12 cfr §560.2. Because these sections are not explicit on the limits of "incidental powers", an inquiry as to either the Nba or Hola would keep the use of either one or both methods of foreclosures (Judicial foreclosures and/or non-judicial foreclosure) would be necessary. The holding in United States v. Grimaud, 220 U.S. 506(1911) would apply. The Nba or Hola could authorize the previous but not the latter because the government could not practice the power to foreclose non-judicially itself.
C. National Banks And Federal Savings Associations Mortgage Fsb Can Be
Considered "Agencies" Of The Government
In Acron Investments, Inc. Et al v Federal Savings and Loan insurance Corporation, 363 F.2nd 236 (9th Circuit, 1966) the court was given the task of determining if the Federal Savings & Loan insurance Corporation (Fslic) was an "agency". After reviewing all the relevant code sections the court complete that the corporation was an "agency" under 28 Usc 451 because the control of the government over the corporation was more than custodial or incidental.
Under the Ninth Circuit's own test national banks and federal savings associations are "agencies". Any doubt as to government's control over the "operations" as being "custodial or incidental" is dispelled in Fidelity Fed. S. & L. V. De la Cuesta, 458 U.S. 141 (1982) at p. 161 when the court held that "Congress' explicit delegation of jurisdiction over the "operation" of these institutions must empower the Board to issue regulations governing mortgage loan instruments
With respect to National Banks the holding in Easton would apply as the court held that Congress has the sole power to regulate and control the practice of their operations.
Conclusion
The subject corporations cited share a base heritage with National banks and federal savings associations. They are corporations federally chartered and created under acts of Congress for leading communal and national purposes for which the supreme Court has ruled on that facility in a amount of cases that their activities were governmental. Thus in Bismarck the Court ruled that the lending functions were governmental not proprietary; and that foreclosure was part of the normal lending functions. In Lebron, the Court ruled that the corporation was part of the government for the purpose of determining its constitutional obligations toward the ownership of citizens affected by its actions.
The Ninth Circuit and other appellate courts have yet to apply the placed law enunciated by these supreme Court cases which lead to one conclusion--- that National banks and federal savings associations' use of a Trustee Sales(non-judicial foreclosures) must be a governmental acts and a 5th amendment violation of due process.
Constitutional powers conferred on a corporation should not be used to produce an unconstitutional result. The fallacy is that state law cannot rule the manner of foreclosure, but federal law with respect to the corporations created under acts of Congress. And federal law cannot authorize a non-judicial foreclosure, nor can the Constitution allow it.
The Myth That All Foreclosures By Power Of Sale Provisions Are Constitutional