Activists Want To Start Break Dancing Over Glaski But Its Deja Vu All Over Again

Amicusman at 06:02 2014-03-04 said:

LEGAL ILLITERATES HAILING THE GLASKI DECISION HAVEN’T A CLUE Even assuming, as Glaski insisted, that New York law governs interpretation of the PSA, which it did not because the PSA was under Delaware law, and further assuming that the transfer of Glaskis' loan to the Trust violated the terms of the PSA, that after-the-deadline transactions would merely be voidable at the election of one or more of the parties—not void as Glaski and the legal illiterates would have everyone believe. Consequently, Glaski, was not a party to the PSA, and did not have standing to challenge it.

This concurs with time-honored principles of contract law. A void contract is "invalid or unlawful from its inception" and therefore cannot be enforced. 17A C.J.S. Contracts § 169. Thus, a mortgagor who was not a party to an assignment between mortgagees may nevertheless challenge the enforcement of a void assignment. A voidable contract, on the other hand, "is one where one or more of the parties have the power, by the manifestation of an election to do so, to avoid the legal relations created by the contract." Id. Therefore, only one who was a party to a voidable contract has standing to challenge it.

It is true that New York Estate Powers & Trusts Law § 7-2.4 states: "every act in contravention of the Trust is void." New York case law, however, makes clear "that section 7-2.4 is not applied literally in New York. “Bank, 981 N.E.2d 1 (Ill. App. Ct. 2012). Instead, New York courts have held that a beneficiary can ratify a trustee's ultra vires act. See, e.g., Mooney v. Madden, 597 N.Y.S.2d 775 (N.Y. App. 1993) (holding that trustee may bind trust to an otherwise invalid act or agreement that is outside scope of trustee's power when beneficiary or beneficiaries consent or ratify trustee's ultra vires act or agreement); Matter of Estate of Janes, 630 N.Y.S.2d 472, 477 (Sur. 1995), aff'd as modified sub nom. Matter of Janes, 643 N.Y.S.2d 972 (N.Y. App. Div. 1996), aff'd sub nom. Matter of Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997)(acknowledging that a beneficiary may ratify a trustee's ultra vires act if "the ratification was done with knowledge of material facts"); Leasing Serv. Corp. v. Vita Italian Restaurant, 566 N.Y.S.2d 796, 797-98 (N.Y. App. Div. 1991) ("It is hornbook law that a contract entered into by . . . an unauthorized agent, corporate officer, trustee or other person purporting to act in a representative capacity . . . is voidable."); Hine v. Huntington, 103 N.Y.S. 535, 540 (1907) ("We have before this called attention to the fact that the cestui que trust is at perfect liberty to elect to approve an unauthorized investment and enjoy its profits, or to reject it at his option."); 106 N.Y. Jur. 2d Trusts § 431 ("[T]rustee may bind trust to an otherwise invalid act or agreement which is outside the scope of the trustee's power when beneficiary consents to or ratifies the trustee's ultra vires act or agreement."); see also In re Levy, 893 N.Y.S.2d 142, 144 (N.Y. App. Div. 2010) (explaining that "[t]he essence of ratification 'is that the beneficiary unequivocally declares that he does not regard the act in question as a breach of trust but rather elects to treat it as a lawful transaction under the trust'") (quoting Bogert, Law of Trusts and Trustees § 942).

If an act may be ratified, it is voidable rather than void. See Hacket v. Hackett, 950 N.Y.S.2d 608, 2012 WL 669525, at *20 (N.Y. Sup. Ct. Feb. 21, 2012) ("A void contract cannot be ratified; it binds no one and is a nullity.

However, an agreement that is merely voidable by one party leaves both parties at liberty to ratify the transaction and insist upon its performance.") (quoting 27 Williston on Contracts § 70:13 [4th ed.]) (internal quotation marks omitted); 17 C.J.S. Contracts § 4 (noting that "a void contract . . . is no contract whatsoever" and "cannot be validated by ratification") (emphasis added); id. ("A contract that is merely voidable is capable of being confirmed or ratified by the party having the right to avoid it . . . .").

These cases above make it obvious that, under New York law, a trustee's unauthorized transactions may be ratified; such transactions, voidable—not void.

That being the case, if the trustee of the securitized trust can’t, on its own, decide to accept these late-delivered notes, then it’s clear the beneficiaries can. They can ratify or waive anything they want. Common sense dictates that they can either, accept the notes/mortgages even though they were delivered late, giving the trust power to enforce, but theoretically putting the trust's tax-exempt REMIC status at risk; or not allowing the trustee to accept the notes/mortgages, keeping their REMIC status alive, but denying themselves the income from the notes/mortgages they bought.

Common sense would also dictate that if there are enormous numbers of late-delivered notes/mortgages, does anyone really believe that the holders of these notes/mortgages would rather lose the tax benefits by virtue of it becoming a taxable event, this highly unlikely because the IRS has failed to take any action so far, or lose the income from the notes/mortgages. Anyone who got out of the third grade can figure this one out, its not quantum physics.

Moreover, this is what the courts in Ca. have to say about Glaski:

Covarrubias v. Fed. Home Loan Mortg. Corp. (S.D. Cal., 2014) ("This court is persuaded by the majority position of courts within this district, which is that Glaski is unpersuasive,…("[N]o courts have yet followed Glaski and Glaski is in a clear minority on the issue. Until either the California Supreme Court, the Ninth Circuit, or other appellate courts follow Glaski, this Court will continue to follow the majority rule.") (citations omitted).”); Scomparin v. Deutsche Bank Nat'l Trust Co. (In re Scomparin) (Bankr. N.D. Cal., 2014) (“As determined in In re Sandri, 501 B.R. 369 (Bankr. N.D. Cal. 2013), the clear weight of authority is against Glaski and its reasoning is unpersuasive. The Glaski court's interpretation of New York law is contrary to the more well-reasoned cases that have found that an act in violation of a trust agreement is voidable, not void….Consistent with Sandri and the majority of California court decisions that have addressed this issue, this court finds that Plaintiff has no standing to successfully challenge the validity or effectiveness of the transfer. Id. See also Patel v. Mortgage Electronic Registration Systems, Inc., 2013 WL 4029277 (N.D. Cal. Aug. 6, 2013); Sami v. Wells Fargo Bank, 2012 WL 967051 (N.D. Cal. Mar. 21, 2012) (collecting cases). Further, Plaintiff provides no response to Defendants' position that they are entitled to enforce the debt even if the Loan was not deposited into the PSA. Specifically, if the Loan was not placed into trust, then whomever possesses the blank-endorsed Note memorializing the Loan is entitled to enforce the debt. Cal. Comm. Code § 3301. “)[/u] Permalink