Personal contract and tort liability of trustee.


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SERVICE 520-405-168
“5810.10 Personal contract and tort liability of trustee.
(A) Except as otherwise provided in the contract, for contracts entered into on or after March 22, 1984, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity. The words “trustee,” “as trustee,” “fiduciary,” or “as fiduciary,” or other words that indicate one’s trustee capacity, following the name or signature of a trustee are sufficient disclosure for purposes of this division.
(B) A trustee is personally liable for torts committed in the course of administering a trust or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is personally at fault.
(C) A claim based on a contract entered into by a trustee in the trustee’s fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust may be asserted in a judicial proceeding against the trustee in the trustee’s fiduciary capacity, whether or not the trustee is personally liable for the claim.” [Emphasis added]
It follows as a matter of logic that for there to be a trustee eligible for the special statutory privilege of immunity described below, and cited by the purported Attorney for defendant in the Motion to Dismiss, there must have been formed in fact a legal trust, ab initio. The following authorities refute that claim on the facts of this case as set out in the attached affidavit.
The Ohio codification draws upon the UNIFORM TRUST CODE (Last Revised or Amended in 2010), drafted by the NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS,
“Report on HB 416: The Ohio Trust Code
As Enacted
Prepared for the Joint Committee on the Ohio Trust Code of the Legal, Legislative, and Regulatory Committee of the Ohio Bankers League and the Estate Planning, Trust, and Probate Law Section of the Ohio State Bar Association
Alan Newman, Reporter for the Joint Committee
The University of Akron School of Law

“…Policy considerations.
Much of the OTC is a codification of the existing common law of trusts, the adoption of which will not change Ohio law. Pre-OTC Ohio trust law, however, is relatively sparse and is found in scattered statutes and sometimes difficult to locate case law. Further, on some issues of trust law there is not well defined and accepted common law.“

The prefatory statements to the Uniform Trust provisions note:

“The Code is supplemented by the common law of trusts, including principles of equity. To determine the common law and principles of equity in a particular state, a court should look first to prior case law in the state and then to more general sources, such as the Restatement of Trusts, … The common law of trusts is not static but includes the contemporary and evolving rules of decision developed by the courts in exercise of their power to adapt the law to new situations and changing conditions. It also includes the traditional and broad equitable jurisdiction of the court, which the Code in no way restricts.”

Later under the model trust law is:

The meaning and effect of the terms of a trust are determined by:
(1) the law of the jurisdiction designated in the terms unless the designation of that jurisdiction’s law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue; or
(2) in the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue.” [Emphasis added.]

Per the comments to the Uniform Act; “the location of the trust property” is relevant in establishing the requisite “significant relationship”. Consequently, a review of Ohio law as already cited by the defendant’s purported counsel is pertinent. Ohio law as noted above draws upon the uniform trust law.

A trust may be created by:
(1) transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death;
(2) declaration by the owner of property that the owner holds identifiable property as trustee; or
(3) exercise of a power of appointment in favor of a trustee.

Comment: [in the model act]
This section is based on Restatement (Third) of Trusts Section 10 (Tentative Draft No. 1, approved 1996), and Restatement (Second) of Trusts Section 17 (1959). Under the methods specified for creating a trust in this section, a trust is not created until it receives property. For what constitutes an adequate property interest, see Restatement (Third) of Trusts Sections 40-41 (Tentative Draft No. 2, approved 1999); Restatement (Second) of Trusts Sections 74-86 (1959)…”

A general power of appointment is one which allows the holder of the power to appoint to himself, his estate, his creditors, or the creditors of his or her estate the right to have the beneficial use and enjoyment of certain property covered by the power of appointment. In this case the trust failed under any of the three conditions by want of any reasonable description of the property to have been the trust property.

If the settlor had followed the prescription set out in the Indenture and Servicing Agreements as filed with SEC, the issue would not arise, the trust would survive as an enfranchised entity under state law and that trust would have met the requirements for tax-exempt treatment as a REMIC. However, the settlor-depositor failed to follow its own representations and warrantees as set out in the securitization documentation.

The Model law Comment adds, ironically;
“A declaration of trust can be funded merely by attaching a schedule listing the assets that are to be subject to the trust without executing separate instruments of transfer. But such practice can make it difficult to later confirm title with third party transferees and for this reason is not recommended.”
[Emphasis added.]

The foregoing described mechanism, a loan “schedule,” was exactly that contemplated by the securitization documents.

As stated in the affidavit of______, the purported trustee was not entrusted with the homeowner promissory notes by the purported settlor-“depositor” pursuant to the Indenture and Pooling and Servicing Agreement. There was no appointment of power over specified assets nor transfer of those assets. There was no appointment by a filing of a loan schedule with SEC as represented in the SEC filing. There was a mere blank page where the list was to have been appended. There was no transfer of intangible property by way of a specifically described detailed listing of loans, with the Delaware Secretary of State –UCC division. There was again a mere blank page. The assets were not even described in the most general sense. These blank filings were represented by the SEC filer, bankrupt American Home Mortgage, as the triggering events for the establishment of the trust. Hence no trust was actually created.

Thus the role of the purported trustee must be re-construed in terms consistent with the actual facts. The failed trust defaults to existence as a mere joint venture. The purported trustee is in fact the Operator of the joint venture at best. A mere operator of a failed or defunct estate of assets, however accumulated, is not entitled to the privilege of immunity granted a true trustee with property or appointed to exercise power over specified property.



18 Responses

  1. Katherine – and that’s weird, too. To service fha loans, a company must be an approved fha mortgagee and they all must undergo a (private) audit annually with the results including net worth and compliance (review of trust accounts and spot audit of loans) sent to fha. Don’t know if that encompasses any servicing activity.

  2. @ Enraged

    I get exactly what you are saying. Boy, think about this stuff another few years down the road. They have already cooked the books and created illusions to cause confusion, then add in the mistakes because they can’t handle the massive load of everyday accounting along with employees that are clueless and then compound that with trying to keep straight what they hide off the books and then reverse it to add it back on the books when they need to “puff” the books and there is no possibility that any of the accounts/accounting could be correct. There is no “sorta right” in accounting, at least that was how it was when I took accounting 101. All monies must be accounted for to the penny. These jokers couldn’t balance a simple account much less those that are truly complex. It is all just one giant joke on us and the government agencies are sitting back going WTF now; the indians are getting restless!!

  3. My PSA has NO Mortgage Loan Purchase Agreement, and NO Mortgage Loan Schedule in it…so—what do I do with that info?

  4. So the title insurers like stewart handle the title insurance but they also manage the whole settlement via their agents.

    They also set up scam captive reinsurance purchase plans behind the scenes (hmmm sounds like mortg loan purchase agreements) without disclosure to the borrower. The captive reinsurance plan is only a cover to continue to split fees which is a RESPA violation and not disclosed on the HUD.

    See this in California. CALI in 2006 goes for $41 million fine and accepts $1 million… mmm sounds like AG deal today.

    In normal case for $1000 premium the Stewarts pay the agent 80% and 20% goes to fund the insurance. In reinsurance kickback scheme it goes like 40% agent 40% Wells Fargo hidden commission 20% premium. WF owns 23% of Stewart anyhow.

    I am starting to get it now. In my case they said hmmm. Lets just keep the $1200 premium and not insure the policy at all and split up the premium.

    Hmmm. Atleast now I have figured out HOW they did it. I can see the mechanism. And you know they did it multiple times.

    So when the lady at Stewart emailed me to say I cant find the policy but I am SURE your lender has it don’t worry about it… what she meant was “dummy homeowner peon. we at stewart are owned 23% by WF and we had a hidden captive reinsurance/kickback scheme set in place with WF before you signed the HUD/RESPA and we decided to keep the $1200 and not fund the policy bec we got away with it in CALI and paid $1 million plus all the other states”.

    Well I am going to hammer away on the fact that there was either a policy funded with my premium on the HUD or there was not. It is insurance fraud.

    I am also going to demand that the insurance dept provide me with a copy of the ENTIRE settlement file (and wire instructions) of the defunct title agent. Then the fun begins!

  5. @Katheryn,

    I have been thinking about that: anytime the “loan” became transfered/sold/assigned, it was at the value it now had, at the time of the transfer, including interest and principal payments made and minus the years into it already paid. Meaning that, in essence, this is no longer the same contract AT ALL. Yet, transfer was made “as is” and kept on reflecting the original numbers. My problem is: what would stop the last servicer, to whom transfer was made 5 years before the loan was paid off, to claim that what was transfered to him was a 30-year loan? And that, therefore, the borrower owes an addition 25 years of payment? Especially in the absence of any decent accounting (we all know that there are accounting mistakes everywhere) and half the documents missing.

    I know it sounds very, very farfetched but keep in mind that things much worse than that have been allowed to fly in court, including known, demonstrated and admitted forgeries. Why not something like that?



  7. I don’t know where the best place to post this, so this is as good as any because it would seem to me this is another TILA violation. Please correct me as I really am curious why this theory would not be applicable.

    Here is another example of what seems so simple yet I haven’t seen anyone mention this. The TILA Disclosure shows the IR as well as the APR rate. In addition that TILDS also must disclose the total amount of $ paid over the amoritization period. Mine was 30 years. First, if the loan was sold forward, and we know it was, would immediately render that figure incorrect. (that figure was for a period of 30 years) Then you take the same note based on the same loan document and sell the note again one or many times; renders that total $ figure disclosed completely bogus. The borrowers have been shown by the disclosure statement exactly what the pretend lender is earning by their signature(s) on the agreement. Am I missing something here? Just another avenue where the TBTF’s deceived the unsuspecting borrower(s)?

  8. This is a great angle. So where are the fearless leaders at the IRS who say you can’t collect on the whistle blower law because it is already public knowledge – yet, do not go in and seize the assets of these partnerships until they are paid the tax at the partnership level. No loans means no pass-through accounting, means no Remic and may actually mean that all these alleged trusts take the shape of a REIT where folks simply purchased cash flow from a tranch of loans.

    Make them pay the tax on the default insurance as well, they are no longer defaults and no offset should be applied.

    The US Government,in the interest of its people should seize all loans and start over. At the very least, the banks they suggest are just mere collectors for Fannie and Freddie should be stripped of servicing rights. We may as well take the good loans with the bad. lord knows, the banks have been socializing the losses through fannie and freddie for years now.

  9. Well, now, Mr. G, that’s pretty darn intense. All I can glean is this is part recitation of law and part from a case. Hope it is part from a case because that will say someone is finally not only looking at some very core issues, but able to articulate the so whats about them, right?
    Have to read it five more times of course.
    Btw, from the hip, I don’t think that the principle espoused in the Model law Comment is the only controlling issue. I could be wrong. (Just like banksters, for instance and certainly no parallel intended, like to cite to x as if x makes the fat lady sing when nothing could be futher from the truth. Cripes. Now I may have to spend 6 mos. finding out and Ih jez dont wants to. Other than that little bitty gives one a headache thing, was really interesting and informative.
    Now I’m wondering if it’s something you’re involved in. Hmmmmm…..

  10. Yeah We use to get a payment plan, have we lost credibilty with ya?

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    Something to think about in FL the title insurance company is liable for theft of funds etc via their defunct title agents. I wonder if you could argue that I believe that in my case Stewart was contracted to handle ALL the settlement not just the title insurance. Stewart offers these services to the Wells Fargos etc.

    Might be a way to go after the surviving bigger insurance company for all the overcharges like Kathryn posted below. Seems easier than going after XYZ trust that we have no idea who they are.


  13. Just heard from state investigator of insurance department. Per my request they are indeed investigating hard (finally) into local title agency that handled my settlement in 2005. Agency is now to their surprise defunct/gone. I had figured out in reviewing my docs that said title agent received $1200 for Lender Title Insurance and never funded a policy with Stewart Title (owned 22% by my servicer Wells Fargo).

    Stewart and Wells had told me to pound sand. I look forward to pursuing this.

    I plan to ask for the entire file of the title agency given this rather large discrepancy/theft.

    How can the loan have been securitized if the main actor Stewart never had title insurance on the refi?????? hmmmm.

  14. […] Link: Personal contract and tort liability of trustee. […]

  15. I didn’t mean trial (it’s always on my mind) I meant trail. I’m tired and my brain doesn’t wish to think anymore tonight!

  16. I haven’t been able to get to all the travels my note/notes took. They have, to date, refused to provide this information through discovery. After reading Neil’s post above, I see where it might be completely necessary to get the securitization analysis, but so far, it would have been of no use. I paid $1,500 for the loan analysis through who I thought was a partner of Neils but it did not provide much. Actually, the company found the disclosed figures to be in tolerance, although I disagreed. Low and behold months later I received a refund for overages charged at closing which meant, as I thought, the figures were not correct from the start. They are still incorrect but the refund they sent months after the commencement of litigation just proved I was correct. They scew the figures, like they do everything else, so to confuse even the best of analysts. Reading Neil’s post above reinforces my belief that I will eventually have to get one. It will also help me to understand the trial/trials my note/notes followed. Neil – some of us need a payment plan??

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