6th Edited Appellate Brief

8/3/2019 6th Edited Appellate Brief

1/39

PLAINTIFFS OPENING APPELLATE BRIEF Page 1

JURISDICTION STATEMENT AND OPINIONS BELOW

The District Court has federal question jurisdiction over Plaintiffs Mason L. Ramsey

& Judith Mae Neville's Constitutional claims pursuant to 28 U.S.C. 1331 by virtue of the

National Bank Act(NBA) and the 5th Amendment. And regulations , under Title 12,

Chapter 2NATIONAL BANKS , 24 SEVENTH.

This court of appeals has jurisdiction under 28 U.S.C. 1291.

The district court judgments under review herein was entered September 29th

, 2011.

(See APPENDIX, PT B and A) The judgments are based upon the district court order

dated September 28th, 2011 which was based on the Report and Recommendation of the

magistrate (APPENDIX, PT C) and the order pursuant to the motion to Alter and Amend

dated______, 2011 dismissing Plaintiffs First Amended Complaint for failure to state a

claim under 12(b)(6) without allowing plaintiffs to amend to correct any deficiencies. On

October 11, 2011 plaintiffs filed a rule 59e motion to Amend and alter the judgment.

(APPENDIX, PT A) On __________, 2011 the Judge entered the final appealable order

on the Rule 59e motion. The plaintiffs filed their Notice of Appeal on _____,2011.

This appeal is timely pursuant to Fed. R. App. P. 4(a) (1).

the opinions and orders are included in the separate appendix. PART(PT) A-C

CONSTITUTIONAL PROVISIONS AND STATUTES INVOLVED

The text of the following statutes relevant to the determination of the present case

are set forth in the unattached appendix: 5th

Amendment, 14th

Amendment, National Bank

Act, Home Owner Loan Act, Title 12 Chapter 2-Banks And Banking , title 12,24

SEVENTH included in the separate appendix.

STANDARDS OF REVIEW

A ruling on a motion to dismiss for failure to state a claim under 12(b)(6) presents a

question of law that the 10th

Circuit reviews de novo.Lambert v. Ritter Inaugural

Committee, Inc., 218 P.3d 1115, 1119 (Colo. App. 2009). The Court applies the same

standards as the trial court, considering only those matters the complaint raised and


2/39


accepting all allegations of material fact as true, viewing the allegations in the light most

favorable to theplaintiff.Id. The Supreme Court has further held that a motion to dismiss

under Rule 12(b)(6) will only be granted if it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle him to relief (See Gibsonv. United States, 781 F.2d 1334, 1337 (9th Cir. 1986) The court must accept as true the

plaintiff's well-pleaded factual allegations andall reasonable inferences must be indulged

in favor of the plaintiff.Swanson v. Bixler,750 F.2d 810, 813 (10th Cir.1984). The

plaintiff need not necessarily plead a particular fact if it can be reasonably inferred from

facts alleged. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) In addition Federal Rule

of Civil Procedure 8(a)(2) states that a "pleading which sets forth a claim for relief shall

contain a short and plain statement of the claim showing that the pleader is entitled to

relief." (See Fed. R. Civ. P. 8(a).) The Supreme Court has stated that" the Rule means

what it says." (SeeLeatherman v. Tarrant County Narcotics Intelligence and

Coordination Unit,507 U.S. 163, 168 (1993)) The court should apply the substantial

evidence standard to show whether plaintiffs have submitted substantial evidence in the

form of Supreme Court decisions in which a reasonable mind might accept that national

banks are subject to individual rights guaranteed against the government by the

Constitution. Substantial evidence is more than a mere scintilla. It means such relevant

evidence as a reasonable mind might accept as adequate to support a conclusion.

Richardson v.Perales, 402 U.S. 389, 401 (1971)

Judge Daniels and the magistrate abdicated their duty to draw the reasonable

inferences in favor of plaintiffs from the facts and the Supreme Court decisions relied

by plaintiffs as was required by the standard of review. The facts presented in

Plaintiffs complaint are sufficient to put the defendants on notice of the claims for relief

being alleged, but they also demonstrate that Plaintiffs can support their claims with

sufficient facts and Supreme Court decisions that this Court should not affirm the courts

judgment of dismissal for failure to state a claim.

In GEORGE MICHAEL CURLEY v ROB PERRY ET AL, 247 f.3D 1278(10th
http://openjurist.org/750/f2d/810http://openjurist.org/750/f2d/810http://openjurist.org/750/f2d/810


3/39


Cir. 2001) the court said: We reiterate that the district court should allow a plaintiff an

opportunity to cure technical errors or otherwise amend the complaint when doing so

would yield a meritorious claim. Cf.Denton v. Hernandez, 504 U.S. 25, 34 (1992)

The Court inHernandez ID at p. 34 said:

it would be appropriate for the Court of Appeals to consider, among other things,whether the plaintiff was proceeding pro se, see Haines v. Kerner, 404 U. S. 519,

520-521 (1972); whether the court inappropriately resolved genuine issues of

disputed fact, see supra, at 32-33; whether the court applied erroneous legal

conclusions, see Boag, 454 U. S., at 365, n.; whether the court has provided a

statement explaining the dismissal that facilitates "intelligent appellate review,"

ibid.; and whether the dismissal was with or without prejudice.

ISSUES PRESENTED FOR REVIEW

I. Whether a Power of Sale foreclosure provision in a Trust Deed MUSTbeauthorizedas an incidental power of the express lending

functions granted by the National Bank Act to national banks.

II. Whether CitiBank, as a National Bank, is a public corporation andfederal instrumentality subject to the 5

thAmendment.

III. Whether a Rule 120 foreclosure hearing MUST employ a standard ofproof to qualify the lenders standing as the real party in interest by clear and convincing evidence to satisfy the protection of a

fundamental property right under the due process clause of the 14th

Amendment .

IV . Whether a Rule 120 hearing violates the 14th

Amendment Due Processand Equal Protection Clause because it is a summary proceeding withno right to appeal Nor a right to a jury trial.

STATEMENT OF THE CASEPlaintiffs brought this action after being subjected to the Colorado Rule 120

foreclosure hearing upon default of their mortgage payments. The foreclosing lender was

CitiMortgage an operating subsidiary and instrumentality of CitiBank N.A., a national

public bank corporation created under the authority of the National Bank Act(NBA) for
http://vlex.com/vid/19987407http://vlex.com/vid/19987407


4/39


public and national purposes and regulated and controlled by the Office of the Comptroller

of the Currency. The foreclosing lender CitiMortgage was not the original lender which

was Decision One, thus raising an issue of proof to foreclose as the real party in interest.

The Rule 120 hearing is a non-judicial summary proceeding limited in scope with noright to appeal nor a jury trial, and requiring little proof by the lender or its attorney that the

lender is the real party in interest. A copy of the original Deed of Trust with their name on

it with a Certificate of Qualified Holder, a form generated by the Attorney attesting (not

under penalty of perjury) to the fact that the lender is the real party in interest is all that is

required by the Public Trustee and the Judge. The court does not require a notarized

assignment from one lender to another. The facts thus raise the issues of the procedural due

process under the 14th Amendment requirements in a Rule 120 hearing which was brought

to the federal district court on federal question jurisdiction (28 U.S. 1331).

On 10/29/2010, plaintiffs filed their complaint which was amended on 01/21/2011

naming only CitiBank and CitiMortgage who filed a joint motion to dismiss.

Plaintiffs filed a Response to the Motion to dismiss on 01/10/2011.

Magistrate Craig B. Shaffer rendered his Report and Recommendation on

07/28/2011 to dismiss with prejudice plaintiffs' amended complaint for failure to state a

claim from a 12(b)(6) motion to dismiss without allowing leave to amend as requested,

although Judge Daniels did not so state dismissal with prejudice in his order.

On 08/15/2011 plaintiffs filed their amended Objection to the Report and Recom-

mendation of the magistrate, and on 09/01/2011 defendants filed their Response.

STATEMENT OF FACTS

On November 18, 2005 Plaintiffs executed a note and Deed of Trust to Decision One

Mortgage which was recorded on 12/09/2005 with the County Clerk. On August 05,

2009 Defendant CitiMortgage Case filed in Arapahoe County Court 2009 CV204434 (Rule

120) followed by plaintiffs response on 10/13/2009. On 10/13/2009 in Rule 120Court

Authorized the Sale of plaintiffs property and on 10/16/2009 plaintiffs filed a Counter


5/39


Claim --# 2009CV204434 (Rule 120) which is not allowed. On 12/ 2009 CitiMortgage

entered a HAMP MODIFICATION --- accepting two payments and returning a third in

February 2010 - saying that the MORTGAGE was turned over to SPECIALIZE LOAN

SERVICING. On 03/09/ 2010 plaintiffs Mason & Judi sent QWR (Qualified writtenrequest asking for debt verification) Nothing was ever returned confirming the debt. On 07/

29/2010 Plaintiffs received a letter received from Aronowitz & Mecklenburg sent copy of

Deed of Trust with CitiFinancials name. On October 13, 2010 plaintiffs were foreclosed

and on October 28, 2010 Aronowitz filed for Writs of possession and restitution and moved

by order before 11/30/2010 . On 10/29/2010 plaintiffs filed the Federal Court Case.

Throughout the Rule 120 hearing plaintiffs objected to the sketchy proof that

CitiMortgage offered to show standing as the real party in interest.

SUMMARY OF ARGUMENT

CitiBank and CitiMortgage , its operating subsidiary and instrumentality, are

federal instrumentalities subject to the Due Process Clause of the 5th

Amendment.

CitiBank, as a National Bank, is apublic corporation NOTprivate corporationbecause

national banks were created for public and national purposes. Further, the right to put a

power of sale provision in a Deed of Trust which leads to no hearing as in California, or

to a hearing that provides inadequate due process such as a Rule 120 foreclosure hearing in

Colorado, must be authorized as an incidental power of the expressed lending powers

granted by the National Bank Act; but, it must be a right that Congress can exercise itself.

The Rule 120 foreclosure hearing also denies plaintiffs due process and equal

protection of the laws because there is no right to appeal and no jury trial made available

even though, section 23 of the Colorado Constitution holds a jury trial as a right. Also the

Rule 120 foreclosure hearing involves a property interest (in this case plaintiffs home),

the lender has the burden of submitting by clear and convincing evidence that it has

standing to foreclose as the real part in interest to satisfy the requirements of the 14 th

Amendment. Following the unconstitutional foreclosure, evictions must be considered as

an abuse of process and by definitiona denial of due processactionable under 42 US 1983.


6/39


LAW AND ARGUMENT

A.PROCEDURAL HISTORY AND ASSIGNMENT OF ERRORSJudge Wiley Y. Daniels affirmed the magistrates Report and Recommendation and

dismissed plaintiffs complaint for failure to state a claim under 12(b)(6), and in so doingcommitted the same errors of law by evading the inferences that should have been drawn

from facts and the Supreme Court decisions as required under the standard of review. In

reviewing a dismissal for failure to state a claim(12b(6), the court must accept as true the

plaintiff's well-pleaded factual allegations and all reasonable inferences must be indulged

in favor of the plaintiff, Swanson v. Bixler,750 F.2d 810, 813 (10th Cir.1984).

InLAWRENCE GOLAN, et al., vs JOHN ASHCROFT, Civil Action No. 01-B-

1854 in the District Court of Colorado 10th Circuit, the court said :

The governments motion to dismiss must, therefore, be rejected. Contrary to the

governments argument, the issue isnotwhether plaintiffs Complaintprovesthat a constitutional violation has occurred on the merits. That issue must waitfor trial. Theonly issue on this motion to dismiss is whether the Complaintstates a colorable legal claim that Congresss grant and exercise of power is

subject to constitutional review. It clearly does. A colorable claim is simply onethat is not wholly insubstantial or frivolous. (cite) Plaintiffs have alleged

more than sufficient legal grounds and allegations of harm to satisfy the liberalstandards of pleading. (cite)

As in the Golan case, plaintiffs have a colorable claim which is not wholly

insubstantial or frivolous. Bernstein v. U.S. Dept of State, 922 F. Supp. 1426, 1433

(N.D. Cal. 1996) Plaintiffs alleged the following facts which is supported with Supreme

Court citations and ample appellate citations which plaintiffs rely on, and which the court

can draw the reasonable inference that defendants are governmental bodies for the

purpose of individual rights guaranteed against the government by the Constitution as

plaintiffs have alleged in the complaint.(APPENDIX, AMENDED COMPLAINT, PT 1):

14. a corporation is an agency of the Government for purposes of theconstitutional obligations of Government rather than the "privileges of the

government," when the State has specifically created that corporation for the
http://openjurist.org/750/f2d/810http://openjurist.org/750/f2d/810http://openjurist.org/750/f2d/810


7/39


furtherance of governmental objectives, and not merely holds some shares butcontrols the operation of the corporation through its appointees. Lebron v

National Railroad Passenger Corporation. 513 U.S. pgs 374, 375.20. National Banks are federally chartered bank corporations and were createdunder an Act of Congress [The National Bank Act(NBA)].

21. National Banks are public not private corporations because they werecreated for public and national purposes.Easton v. Iowa, 188 U.S.220 (1903).22. National Banks are federal instrumentalities of the federal government.

Easton v. Iowa, 188 U.S.220 (1903).

23. National Bank operations are regulated and controlled by thegovernment[Easton v. Iowa, 188 U.S.220 (1903)] through the Office of TheComptroller of Currency

24. The acts of federally chartered corporations created for public and nationalpurposes must be authorized by a law of the United States. Osborn v Bank of

United States, 22 U.S.738 (1824)25. The acts of National Banks must be authorized by its respective act ofcreation---The National Bank Act.

27. The power of sale provision in a contract which does not allow a hearing isnot a right or power that Congress can delegate or authorize because it is not a

power that Congress can exercise pursuant to the 5th

Amendment. United States v

Grimaud, 220 U.S. 506 (1911).

28. When the Government creates a corporation for which it lawfully acts, theactivities of the corporation are governmental. Federal Land Bank v. BismarckCo. of St. Paul, 314 U. S. 95 (1941).

29. The lending functions of CITIBANK & CITIMORTGAGE aregovernmental and that foreclosures are part of the general lending functionsbecause they are constitutionally created just as inFederal Land Bank v. Bismarck

Co. of St. Paul, 314 U. S. 95 (1941).

30. Plaintiff alleges that with respect to federally chartered corporations, themanner of foreclosure must be done under federal law; not state law and, federal

law cannot authorize non judicial foreclosures because it is repugnant to the 5th

Amendment to the Constitution.

31.The contract provisions for repossession by the seller on the buyer's default did

not amount to a waiver of the appellants' procedural due process rights, thoseprovisions neither dispensing with a prior hearing nor indicating the procedure by

which repossession was to be achieved.Fuentes v. Shevin, 407 U.S. 6732. Plaintiff submits that the use of non-judicial foreclosures by power of saleprovisions violate the 5

thAmendment when the remedy is sought by federally

chartered corporations like national banks like CITIBANK and its subsidiary

CITIMORTGAGE.


8/39


33. The Colorado Unlawful detainer Action ( 13-40-101 et seq.) isunconstitutional as applied. It must be viewed against the backdrop of the non-

judicial foreclosure which preceded the unlawful detainer.

34. As applied, it is a derivative action to complete the deprivation of propertywithout procedural due process begun by the power of sale foreclosure which is a

violation of the 5thAmendment (Bivens claim).35. It is also a malicious abuse of process because the Colorado UnlawfulDetainer Action was never meant to effectuate and complete such a deprivation of

due process that was begun by the power of sale foreclosure. Though two separate

events, it is one transaction. If the power of sale foreclosure is a Bivens style 5th

amendment violation, then the eviction that followed must be a maliciousabuse ofprocess and the final step under color of state law in furtherance of thatdeprivation by CITIBANK and its subsidiary CITIMORTGAGE and bydefinition a denial of procedural due process. Jennings vs Shuman, 567 F.2d

1213 (3

rd

).

In Judge Wiley Y. Daniels opinion , APPENDIX, PT B, at p. 4,5 the judge states:

Also cited by Plaintiffs isFirst Nat. Bank in St. Louis v. State of Missouri, 263

U.S. 640 (1924);Easton v. State of Iowa, 188 U.S. 220 (1903) andBank of America

v. City and County of San Francisco, 309 F.3d 551, 55 (9th Cir. 2009). Those cases

recognized Case 1:10-cv-02653-WYD -CBS Document 45 Filed 09/28/11 USDC

Colorado Page 5 of 10 -6- that Congress has created an extensive federal statutory

and regulatory scheme as to national banks, and held that a state may not subject a

national bank to state laws that interfere or are contrary to federal laws. Again,these are inapposite. None of these cases or other authority cited by Plaintiffs

addressed or held that national banks are governmental bodies for purposes ofindividual rights under the Constitution.[B, U ]

Judge Daniels focused narrowly on the fact that none of the Supreme Court decisions

cited, specifically held that national banks are governmental bodies for the purposes of

individual rights under the Constitution. As a trier of fact, Judge Daniels drew no

inferences from the allegations of fact supported by these Supreme Court decisions in the

light most favorable to plaintiffs before dismissing plaintiffs complaint. In a sense, the

Judge abdicated his duty. Yet, inLebron, also cited, the court held Amtrak is an agency or

instrumentality of the United States for the purpose of individual rights guaranteed against

the Government by the Constitution[B,U] in spite of the fact that the authorizing statute

stated that Amtrak was not an agency or instrumentality of the United States and on which


9/39


the lower courts concluded that Amtrak was not a federal instrumentality. In like manner

a reasonable inference thatshould be inferred is that CitiBank and CitiMortgage, which

are instrumentalities of the United States, should be considered governmental bodies for

the purpose of individual rights guaranteed against the government by Constitution. InLebron vs. National Passenger Car Railway, 513 U.S. 374, 375, it was the 1

stAmendment.

In this case the 5th

Amendment (Bivens claim). The fact that, as Judge Daniels held, the

Supreme Court has not Specifically held that national banks as Governmental bodies for

purposes of individual rights under the Constitution only shows that the Supreme Court

has not specifically overtly made that decision and does not preclude him from making

the reasonable inference of that conclusion. An inference is a deduction of fact that

may be logically and reasonably drawn from another fact or group of facts found or

otherwise established in the action.Blacks Law Dictionary. The Substantial evidence

standard should be applied which is more than a mere scintilla. It means such relevant


Richardson v.Perales, 402 U.S. 389, 401 (1971) Plaintiffs have submitted facts and

substantial evidence in the form of relevant Supreme Court decisions that a reasonable

mind could accept that CitiBank, as a national bank, is a federal actor subject to the 5th

Amendment Due Process Clause. The Supreme Court decisions cited are the foundation for

the inference that national banks violate the 5th

Amendment when exercising power of sale

foreclosures which lead to a denial of due process. Therefore, it is not necessary that the

Supreme Court specifically hold that national banks are Governmental bodies for purposes

of individual rights under the Constitution. The Supreme Court has provided guidance for

that conclusion as this court will find in the ensuing analysis. In like manner the due

process issue and the Equal Protection issue are similarly presented and discussed further.

Plaintiffs submit that CitiBank is a public corporationNOTprivate corporation as

held by the Supreme court inEaston vs. Iowa, 188 U.S.220 (1903) citing Osborn v Bank

of United States, 22 U.S.738 (1824 , and its operating subsidiary CitiMortgage are federal

instrumentalities subject to the due process clause of the 5th

Amendments. Plaintiffs submit


10/39


that the Rule 120 foreclosure hearing denied plaintiffs due process rights under the 14th

Amendment as set forth in the arguments.

At p. 11, (APPENDIX, PTC), magistrate Craig B Shaffer states:

Plaintiffs maintain that the manner of foreclosure by a federal chartered

corporation must be done under federal law.***( theirBivens claim finds no

support under prevailing law. Plaintiffs first claim is premised, in part, on thebelief that some unspecified federal law establishes a foreclosure procedure that

overrides state law. To the contrary, [I]n the absence of any controlling federal

law, property and interests in property are creatures of state law.Barnhill v.Johnson, 503 U.S. 393, 398 (1992). Cf. United States v. Bissell, 504 F.3d 956, 968

(observing that [t]rust deeds are generally creatures of state law).

At p.1 of the report(APPENDIX C), the magistrate took judicial notice of the

defendant's trust deed which stated that both state law and federal law is applicable to the

parties rights and obligations which is central to plaintiffs' argument in this case:

The Deed of Trust states that the parties rights and obligationsshall be

governed byfederal law and the law of the jurisdiction in which the Property islocated. See Exhibit 2 (doc.#32-2), at p. 14 of 60, attached to Defendants Motionto Dismiss Plaintiffs First Amended Complaint.[B ]

The controlling federal law overthe partiesrights and obligations in the Deed of

Trust would be the National Bank Act and the 5th

Amendment. The parties referred to in

the Deed of Trust would be the defendants, CitiBank N.A. and CitiMortgage which

implicates the government through the National Bank Act; and Plaintiffs, Mason L Ramsey

and Judith Mae Neville. The rights referred to in the Deed of Trust is the defendants'

rights asauthorizedas an incidental power of the expressed lending powers of a bank

pursuant to the powers granted through the National Bank Act, such as the right to put a

Power of Sale provision which leads to a 5th Amendment denial of procedural due

process. It also involves the right of plaintiffs NOT to be deprived of property without

procedural due process under the 14th

amendment. The obligations implicitly referred to

in the Trust Deed includes the obligations of the government through it instrumentalities,


11/39


CitiBank and CitiMortgage, not to evade its most solemn obligations under the

Constitution. Lebron vs. National Passenger Car Railway, 513 U.S. 374, 375

Plaintiffs have never denied that property, and interest in property and trust deeds are

creatures of state law, but national bank corporations like CitiBank N.A., and itsinstrumentality, CitiMortgage, arecreatures of federal law. It is interesting to note that

prior to the Civil War the term property was applied to blacks to deny them the

constitutionalprotections afforded to a person until men and women of conscience said

enough, they are not property . Because these men and women said enough, this class

of persons has become doctors, lawyers, and even judges. Both Judge Daniels and the

magistrate arbitrarily designating National Banks as private corporations' denied the

Constitutional protections to homeowners when the Supreme Court inEaston citing

Osborn, has held that national banks are public corporations. While a state may

establish the manner of foreclosures private citizens and private corporations may

undertake, the pivotal issue in this case is the nature of the banks as public corporations

acting as federal instrumentalities which dictates the manner of foreclosure fromnon-

udicialtojudicial foreclosures. On that premise rest plaintiffs' claims that non-judicial

foreclosures violate the 5th

amendment when exercised by public corporations created for

public and national purposes. The magistrates holding that banks were private

corporations and a not federal instrumentalities subject to due process flies in the face of

the Supreme Court decisions cited in plaintiff's argument and posed in plaintiff's

complaint. Power of Sale foreclosures deny due process which either do not allow a

hearing such as in California, or subjects a homeowner to a procedure that does not allow a

full and fair hearing with no right to appeal and a willingness on the part of the Trustee

and the Judge to accept from the lender less than certifiable proof that the lender is

the real party in interest. As Justice Scalia inLebron ID, at p. 374 said:

Amtrak is an agency or instrumentality of the United States for the purpose ofindividual rights guaranteed against the Government by the Constitution. ***A contrary holding would allow the government to evade its most solemn

constitutional obligations by simply resorting to the corporate form.[B,U ]


12/39


Like Amtrak, CitiBankas a national bank is a public not private corporation because it

is a federal instrumentality, created for public and national purposes.Easton citing

Osborn. The decision by Justice Scalia took into account the fact that the authorizing

statute specifically stated that Amtrak was NOT an agency or instrumentality of theGovernment. National banks cannot deny that they are federal instrumentalities.

The magistrate says that [F]oreclosure proceedings are generally handled by state

courts, not federal courts. Plaintiffs are not advocating that federal courts be used as

foreclosure venues. Foreclosures should be in state court where a full and fair hearing and

a right to be able to rebut dubious proof given by a lender that the party seeking foreclosure

is the real party in interest which is NOT the case in a rule 120 hearing. Because a 14th

Amendment protected interest is involvedproperty, the standard of proof requires a

heightened burden of proof--clear and convincing evidence and is discussed more fully in

sections III & IV.

At the bottom of p.11 of the magistrates report (APPENDIX, PT C), the magistrate

refers toEdward v. Dubrish, 2009 Wl 1683989, at *11. Colo. 2009) and states

Foreclosure is a contractual matter, governed by state law. But when it comes to

national banks , like CitiBank, the Supreme Court in Osborn, at pgs 823,824 said:

The case of the Bank is, we think, a very strong case of this description. The charter

of incorporation not only creates it, but gives it every faculty which it possesses.

The power to acquire rights of any description, to transact business of any

description, to make contracts of any description, to sue on those contracts, is given

and measured by its charter, and that charter is a law of the United States. This

being can acquire no right, make no contract, bring no suit, which is not authorized

by a law of the United States. It is not only itself the mere creature of a law, but all

its actions and all its rights are dependent on the same law***

InRunyan v. Lessee of Coster, 39 U .S. 122 , p. 129 (1840) the court Said:

***[T]hat a corporation possesses only those properties which the charter of its

creation confers upon it, either expressly, or as incidental to its very existence.That corporations created by statute must depend for their powers and the mode of

exercising them, upon the true construction of the statute.


13/39


***he corporation must show that the law of its creation gave it authority to make

such contracts[B,U added]

InHudson County Water Co. v. McCarter, 209 U. S. 349 (1908) the court said:

One whose rights, such as they are, are subject to state restriction cannot removethem from the power of the state by making a contract about them. But the

contract, the execution of which is sought to be prevented here was illegal when it

was made. The contract will carry with it the infirmity of the subject matter

In that case it was a state statute. In this case it is the 5th

and 14th

amendments. The

constraints of the government pass on to CitiBank, and CitiMortgage, and cannot be

avoided byputting a power of sale clause in a contract to put them beyond the reach of

the 5th

Amendment. As Justice Scalia said inLebronat p. 375, ...It would allow the

government to evade its most solemn obligations by simply resorting to the corporate

orm.

FirstNational Bank v. Missouri, 263.S. 640 (1924)pgs 666,667 the court said:

National banks, like other corporations, have such powers as their creator confers on

them, expressly or by fair implication, and none other. Thomas v. West Jersey R. Co.,101 U. S. 71, 101 U. S. 82;Logan County National Bank v. Townsend, 139 U. S. 67,

139 U. S. 73. Powers not so conferred are in effect denied; a prohibition is impliedfrom the failure to grant them. First National. Bank v. National Exchange Bank, 92 U.

S. 122, 92 U. S. 128;California National Bank v. Kennedy, 167 U. S. 362, 167 U. S.

367. In short, all the powers of a national bank, like its right to exist at all, havetheir source in the laws of the United States. [B, U ]

At p. 14, APPENDIX, PT C, the magistrate said:

Plaintiffs contend, however, that they were denied due process because the Rule

120 Proceeding did not provide a full and fair hearing, nor [did] it provide

appellate review. In support of this argument, Plaintiffs rely onLindsey v. Normet,405 U.S. 56 (1972)*** Like Rule 120 of the Colorado Rules of Civil Procedure, the

Oregon statute did not prevent the evicted tenant from bringing his own action

against the landlord or seeking affirmative relief in a subsequent lawsuit.Id. at 66.

But, the rule 120 is far from being like the FED action in Oregon. While the Oregon
http://us/101/71/case.htmlhttp://us/101/71/case.html%2382http://us/139/67/case.htmlhttp://us/139/67/case.html%2373http://us/92/122/case.htmlhttp://us/92/122/case.htmlhttp://us/92/122/case.html%23128http://us/167/362/case.htmlhttp://us/167/362/case.html%23367http://us/167/362/case.html%23367http://us/167/362/case.html%23367http://us/167/362/case.html%23367http://us/167/362/case.html%23367http://us/167/362/case.htmlhttp://us/92/122/case.html%23128http://us/92/122/case.htmlhttp://us/92/122/case.htmlhttp://us/139/67/case.html%2373http://us/139/67/case.htmlhttp://us/101/71/case.html%2382http://us/101/71/case.html


14/39


FED actions and the Colorado FED action have the right to jury trial and a right to appeal,

the rule 120 proceeding does not. The rule 120 hearing allows the lender to submit less than

certifiable proof to show that it is the real party in interest. An issue which draws into

question the standard of proof required under the 14

th

Amendment when a fundamentalproperty interest is involved. And While one has a right to file a separate action in a court

of competent jurisdiction which is also allowed in FED actions, you must post a bond, or

cash as required by the judge. A bond that no bond holder would post and an economy

where no one has any money to pay cash in order to stay. One must move out before he can

vindicate his rights. FED actions have a right to a jury trial as well as a right to appeal.

Why do FED actions have more rights than an owner who is being foreclosed? This draws

into question the Equal Protection of the Law.

The substantive due process clause guarantees the fairness of laws, and that laws will

be reasonable and not arbitrary. A violation of a fundamental right is subject to strict

scrutiny. The government has the burden of showing that the action is necessary to

promote a compelling or overriding state interest. If no fundamental right is involved, the

rational basis test is used for economic liberties. But a fundament right is involved----

property (plaintiffs home)-- which a Rule 120 procedures unnecessarily burdensplaintiffs

property rights. Neither the defendants nor the Government can point to any compelling

state interest because the only thing that activates a rule 120 hearing is the power of sale

provision. Absent the power of sale provision, defendants would be required to take

plaintiffs through a judicial foreclosure. If it were a compelling state interest, the state

would have required all foreclosures to be processed through a Rule 120 hearing.

There is a failure of Due Process in foreclosure proceedings. The rush to process

foreclosures means that the required affidavits under oath were not actually attested, and

rushed through courts with little scrutiny. Plaintiffs protested vigorously in the Rule 120

hearing the proof submitted by the CitiMortgage that they were the real party in interest.

In many cases, the debt is owed to the lender who will eventually get the collateral.

Because the money is clearly owed by the borrower, the relaxed attitude in getting


15/39


documents properly notarized runs afoul of due process. Ignoring procedural requirements

risks infringing people's liberties when it comes to collections activities and bankruptcy

filings, and brings turmoil to the economy. Although due process tolerates variances in

procedure "appropriate to the nature of the case,"Mullane v. Central Hanover Trust Co.,339 U.S.06, 313 (1950) it is nonetheless possible to identify its core goals and

requirements. First, "Procedural due process rules are meant to protect persons not from

the deprivation, but from the mistaken or unjustified deprivation of life, liberty, or

property."Carey v. Piphus, 435 U.S.47, 259(1978). Thus, the required elements of due

process are those that "minimize substantively unfair or mistaken deprivations" by enabling

persons to contest the basis upon which a State proposes to deprive them of protected

interests.Fuentes v. Shevin, 407 U.S. 67, 81 (1972) The core of these requirements is

notice and a hearing before an impartial tribunal. Due process may require an opportunity

for confrontation and cross-examination, and for discovery. Thus, the required elements of

due process are those that "minimize substantively unfair or mistaken deprivations" by

enabling persons to contest the basis upon which a State proposes to deprive them of

protected interests.Fuentes ID. At pg 81 "Procedural due process rules are shaped by the

risk of error inherent in the truth-finding process as applied to the generality of cases."

Mathews v. Eldridge, 424 U.S. 319. Judge Daniels and the magistrate avoided applying

the facts to plaintiffs arguments supported by the Supreme Court decisions cited.

I

A Power of Sale foreclosure provision Must be authorized asAn incidental power of the express lending functions granted

by the National Bank Act to national banks.

INTRODUCTION AND BACKGROUND

The history of national banking legislation has been "one of interpreting grants of

both enumerated and incidental powers' to national banks and federal savings

associations [which include savings banks].Bank of America et al v City of San Francisco

et al309 F.3d 551 (9 Circuit(2002) As the court stated:
http://supreme.justia.com/us/407/67/index.htmlhttp://supreme.justia.com/us/407/67/case.html#81http://supreme.justia.com/us/407/67/case.html#81http://supreme.justia.com/us/407/67/index.html


16/39


Congress has legislated in the field of banking from the days ofM'Culloch v.

Maryland, 17 U.S. 316, 325-26 (1819), *** Indeed, since the passage of the

National Bank Act in 1864, the federal presence in banking has been significant.

(cite). Similarly, since the passage of the HOLA in 1933, OTS regulations have

governed the "powers and operations of every federal savings and loan associationfrom its cradle to its corporate grave."de la Cuesta, 458 U.S. at 145, 102 S.Ct.3014 [B,I]

Several Supreme Court cases have held that all of the powers of national banks are

derived from the Laws of United States; and national banks are federal instrumentalities

created for national and public purposes. Osborn v Bank of United States, 22 U.S.738

(1824) On that premise the question presented is whether a law of the United States, like

the National Bank Act, canauthorize a power of sale foreclosure to a national bank likeCitiBank, a federal instrumentality and public bank corporation, acting through its

subsidiary CitiMortgage without violating the 5th

Amendment. Plaintiffs submit that in this

case defendants violated both the 5th

Amendment (Bivens claim) under color of federal

law and the 14th

Amendment by using power of sale foreclosure under color of state law

The Colorado Foreclosure Law by requiring a Public Trustee, an agent of the State to

subject a homeowner to a rule 120 hearing which is limited in scope without a right to

appeal and sketchy requirement demanded of the lender to show standing , as well as an

eviction under the 14th

Amendment , both under color of state law, actionable under 42 US

1983. The Supreme Court has made numerous decisions relevant in determining whether

non-judicial procedures were applicable given the nature of these corporations as federal

instrumentalities. Though several appellate courts have had occasion to determine the

constitutionality of non-judicial procedures in the form of a power sale provisions, none

have vetted the corporations seeking this remedy in light of relevant Supreme Court

decisions. The issue goes to the core of the nature of federally chartered corporations

created for public and national purposes. This issue deals with the right of these

corporations to put such a provision in a contract as a power of sale provision, and rests on

whether foreclosure is agovernmental act or aproprietary act affecting millions.

InFirst National Bank of Eastern Arkansas v. Taylor ,907 F.2d 775 the Arkansas


17/39


Insurance Department notified FNB that debt cancellation contracts were the equivalent of

credit life insurance policies, and thus subject to state insurance laws. The Commissioner

initially urged that such a prohibition does not conflict with federal law because the

National Bank Act does not grant national banks the power to offer debt cancellationcontracts. In addition to enumerating specific powers, including the lending of money,

the National Bank Act grants national banks the power to exercise "all such incidental

powers as shall be necessary to carry on the business of banking." 12 U.S.C. Sec. 24

(Seventh). TheComptroller, through 12 C.R. Sec.7.7495, interpreted "incidental powers"to include debt cancellation contracts. The court in Taylor said:

the district court found, the debt cancellation contracts were directly related to

FNB's expressly-authorized lending power. ***, [W]e deem the Comptroller's

authorization of this activity as reasonable and within the incidental powersgranted by the National Bank Act.[U and B ]

This court is asked, Is a power of sale foreclosureprovision which leads to either

no hearing as in California, or to a less than full and fair hearing without a right to appeal or

jury and sketchyproof provided by the lender or his attorney that the lender is the real

party in interestwithin the incidental powers of the express lending powers granted by

the National Bank Act to national banks? Thus, the self-evident inference drawn from

the opinion in Taylorand the cases cited shows us that the National Bank Act MUST

authorize national banks, either expressly or as incidental to their grant of authority over

contracts with power of sale provisions, but only powers that Congress can exercise itself.

II

CitiBank, as a national bank, is a public corporation &

federal instrumentality subject to the 5th

Amendment

Judge Daniels erred in dismissing plaintiffs complaint on the magistrates Report and

Recommendation. Both the Judge and the magistrate failed to apply the requirements of

the standard of review which requires all reasonable inferences must be indulged in


18/39


avor of the plaintiff.Swanson v. Bixler,750 F.2d 810, 813 (10th Cir.1984) Both the

magistrate and the judge misapprehended the Supreme Court citations relied by plaintiffs

by holding that the Supreme Court decisions did not specifically hold that national banks

are governmental bodies for the purpose of individual rights guaranteed against thegovernment, and that national banks are private corporations not subject to a Bivens

claim.( APPENDIX, PT B, at p. 4,5) Upon further scrutiny, those assertions will be found

to be untenable. Judge Daniels should have decided the issue by applying the facts and

Supreme Court decisions under the substantial evidence standard. It means such relevant


Richardson v.Perales, 402 U.S. 389, 401 (1971) Thus, a reasonable mind would have

accepted the facts and these Supreme Court decisions were adequate to support the

conclusion that a national bank, like CitiBank, is a governmental body for the purpose of

individual rights guaranteed against the government by the Constitution. InLebron, the

court was faced with same decision that Judge Daniels faced, but the court did not evade

plaintiffs arguments and facts that Amtrak was a governmental body as did Judge Daniels

and the magistrate towards the same argument and facts against CitiBank. The Court in

Lebron, at pgs 378-380 said:

The United States Court of Appeals for the Second Circuit reversed. 12 F.3d 388

(1993). The panel's opinion first noted that Amtrak was, by the terms of the

legislation that created it, not a Government entity, id., at 390; and then concluded

that the Federal Government was not so involved with Amtrak that the latter's

decisions could be considered federal action, id., at 391-392. Chief Judge Newman

dissented. We granted certiorari. 511 U.S. 1105 (1994).

We have held once, Burton v. Wilmington Parking Authority, 365 U.S. 715, 6 L.Ed. 2d 45, 81 S. Ct. 856 (1961), and said many times, that actions of private

entities can sometimes be regarded as governmental action for constitutionalpurposes. (cites) It is fair to say that "our cases deciding when private action mightbe deemed that of the state have not been a model of consistency." Edmonson v.

Leesville Concrete Co., 500 U.S. 614, 632, 114 L. Ed. 2d 660, 111 S. Ct. 2077

(1991) (O'CONNOR, J., dissenting). It may be unnecessary to traverse that

difficult terrain in the present case, since Lebron's first argument is thatAmtrak is not a private entity but Government itself. Here, however, we are
http://openjurist.org/750/f2d/810http://openjurist.org/750/f2d/810http://www.law.cornell.edu/supremecourt/text/365/715http://www.law.cornell.edu/supremecourt/text/500/614http://www.law.cornell.edu/supremecourt/text/500/614http://www.law.cornell.edu/supremecourt/text/365/715http://openjurist.org/750/f2d/810


19/39


satisfied that the argument that Amtrak is a Government entity is fairlyembraced within the question set forth in the petition for certiorari whichexplicitly presentsneither the "Government entity" theorynor the "closelyconnected to Government" theory of First Amendment application,but ratherthe facts that would support both. The argument in the petition, moreover,

though couched in terms of a different but closely related theory, fairly embracedthe argument that Lebron now advances. See Pet. for Cert. 16-18.[B.U]

InLebron, ID. At pg 397, the court went on to say:

That Government-created and controlled corporations are (for many purposesat least) part of the Government itself has a strong basis, not merely in pastpractice and understanding, but in reason itself. It surely cannot be thatgovernment, state or federal, is able to evade the most solemn obligations imposedin the Constitution by simply resorting to the corporate form. [B,U ]

As inLebron, plaintiffs arguments are based on the facts, the entire record on appeal,

and the historical opinions of the Supreme Court which embrace both theories in support of

the conclusion that CitiBank N.A. is a governmental body for the purpose of individual

rights guaranteed against the government by the Constitution . In this case the 5th

Amendment Due Process Clause. InEaston v Iowa,188 U.S.220 , pg. 230 the court said:

We think that this view of the subject is not based on a correct conception of the

federal legislation creating and regulating national banks.***Having due regard tothe national character and purposes of that system, we cannot concur in the

suggestion that national banks, in respect to the powers conferred upon them,areto be viewed as solely organized and operated for private gain.[B,U ]

The Court inEastonwent on to say ID at p. 230 that the principles enunciated in

McCullough v Maryland, 17 U.S. 316(1819), and in Osborn v Bank of the 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 system of national banks.

The Court cited with approval the holding of the latter by Chief Justice Marshall:

The bank is not considered as aprivate corporation whose principal object is

individual trade and individual profit, but as apublic corporation created for publicand national purposes. That the mere business of banking is, in its own nature, a


20/39


private business, and may be carried on by individuals or companies having no

political connection with the government, is admitted, but the bank is not such an

individual or company. It was not created for its own sake or for private purposes.It

has never been supposed that Congress could create such a corporation.[B,I, U ]

In view of the holding in Osborn which Justice Marshall held that national banks were

public and not private bank corporations because they were created for public and

national purposes , which was approved and held applicable to later national bank

corporations not directly created by Congress by the Supreme Court inEaston, why should

we now consider national banks like CitiBankprivate corporations? And why not

consider them agencies of the Federal government as held inEaston at p. 239. Certainly

the Ninth Circuitwould have considered CitiBank and CitiMortgage, as a self evident

inference, agencies of the federal government because, as the court held in AcronInvestments, Inc.et al v Federal Savings and Loan Insurance Corporation, 363 F.2

nd

236,1966) , government control of the corporations is more thancustodialor incidental.

In Osborn at p. 22 U.S. 823 the court said of these national banks:

The charter of incorporation not only creates it, but gives it Every faculty which itpossesses. The power to acquire rights of any description, to transact business of

any description, to sue on those contracts, is given and measured by its charter, and

that charter is a law of the United States. Take the case of a contract, which is putas the strongest against the Bank. [H]as this being a right to make this particular

contract? **[T]his question, too, depends entirely on a law of the United States [B]

The court in Osborn,at p. 823, made it clear that national banks which are federally

chartered bank corporations like CitiBank, created under an act of Congress could . .

.acquire no right, make no contract, bring no suit,which is notauthorizedby a law of

the United States. It is not only itself the mere creature of law, but all its actions and all its

rights are dependent on the same law. [B,U ]In Shoshone Mining Co. v. Rutter, 177 U.S. 505,509,510 , the court said:

A corporation has no powers and can incur no obligations except as authorized orprovided for in its charter. Its power to do any act which it assumes to do, and its

liability to any obligation which is sought to be cast upon it, depend upon its


21/39


charter, and when such charter is given by one of the laws of the United States there

is the primary question of the extent and meaning of that law[B,U]

InRunyan v. Lessee of Coster, 39 U .S. 122 , p. 129 (1840) the court Said:

***[T]hat a corporation possesses only those properties which the charter of itscreation confers upon it, either expressly, or as incidental to its very existence.That corporations created by statute must depend for their powers and the mode of

exercising them, upon the true construction of the statute. The corporation must

show that the law of its creation gave it authority to make such contracts[B,U ]

Did the law of its creation, the NATIONAL BANK ACT, give CitiBank &

CitiMortgage the right to make this contract with a power of sale provision? Can the

government by way of a federal charter authorize a right to a bank to do what it is

forbidden to do itself? It is clear that the government can impart no greater power through

a charter than it possesses itself. As John Locke said nearly 300 years ago: ***Nobody

can transfer to another more power than he has in himself [ TWO TREATISE OF

GOVNMENT, BOOK II] The courts in Osborn,ShoshoneandRunyan show us that

banks foreclosures MUST be done under the authority of the federal charter which is the

National Bank Act . In United States v Grimaud, 220 U.S. 506,517 (1911) the court said:

***Congress may certainly delegate to otherspowers which the legislature mayrightfully exercise itself. [B,I,U ]

InEaston,at p. 239, the court said 'National banks are instrumentalities of the

Federal government, created for a public purpose, and as such necessarily subject to

the paramount authority of the United States. [B, U] The paramount authority of the

United States is the Constitution includes the 5th

Amendment Due Process Clause. If the

Constitution only constrains the government Judge Daniels could reasonably infer that

CitiBank is a governmental body for the purpose of individual rights guaranteed against the

government by the Constitution. Banks cannot choose what part of the Constitution it

would allow itself to be subjected to.

B.GOVERNMENT CONTROL OVER BANKS IS AS A POLICYMAKER


22/39


National Banks, like CitiBank and Federal Savings Associations are federally chartered

corporations created under acts of Congress (The National Bank Act of 1864(NBA) and

The Homeowner Loan Act of 1933(HOLA) respectively, for public and national purposes.

CitiBank, as a national bank, was not created for its own sake, or for private purposes. ..,Osborn at p. 823 . National banks and federal savings associations are among the agencies

of the United States created to advance the governments public economic policy goals

under the Commerce Clause to engage in fostering commerce throughout the nation which

is a purely public function exclusive to the government. As a reward national banks and

federal savings associations benefit by not paying state taxes, avoiding state predatory

lending laws through the concept of Federal preemption, allowing them to export high

interest for the credit card thus avoiding the state usury laws. The expansion of the national

banking system in 1864 with the creation of the Office of the Comptroller of the Currency

ushered a more progressive agenda to implement Hamiltons vision that there was a

symbiotic relationship between agriculture, commerce, and manufacturing, and that

progress in each of these sectors was necessary for Americas economic development.

Long before the Revolution , Hamilton recognized that the future of America lay in

business and industry, and that a Central Bank was necessary to the nation in cases of

emergency in the financing of war. (Report of Credit II, Dec. 1790). Hamilton understood

that to develop into an industrial power,America would need a powerful economic system.

In the OCCs -- National Banks and the Dual Banking System (2003) p. 3 it was stated:

Although a system of national banks would not be created until 1863, the need for

and desirability of federal banks and their potential role in shaping a national

economy were evident from the very beginning of the United States***

InFirst National Bank v. Missouri, 263 U.S. 640 (1924) at p.664 the court said:

The national banks organized under the act are instruments designed to be used to

aid the government in the administration of an important branch of the public

service. They are means appropriate to that end. ***

Thus, the government's control over the operations of national banks is as a


23/39


policymaker providing guidance for national goals through the regulatory agencies

to maintain exclusive control over the bank operations which does not terminate.

InFederal Land Bank v. Bismarck Co. of St. Pa, 314 U. S. 95 the issue was

whether the lending functions wereproprietary orgovernmental. The court said:

The argument that the lending functions of the federal land banks are

proprietary, rather than governmental, misconceives the nature of the federalgovernment with respect to every function which it performs. The federal

government is one of delegated powers, and from that it necessarily follows

that any constitutional exercise of its delegated powers is governmental. (cite)

It also follows that, when Congress constitutionally creates a corporation

through which the federal government lawfully acts, the activities of suchcorporation are governmental. (cites)

As part of their general lending functions, the land banks are authorizedto foreclose their mortgages and to purchase the real estate at the resultingsale. They are "instrumentalities of the federal government, engaged in the

performance of an important governmental function."(cites) )[B,U]

The conclusions that can be drawn fromBismarck, as self-evident inferences, are

that if the lending activities of the land bank are governmental, and foreclosure is part of

the general lending functions as the court held,then foreclosure is a governmental activity,

andthe federal land bank is a governmental actor. In like manner Citibank , as a national

bank and sister entity created by Congress for an equally public purpose and under equally

established guidelines must, as a self-evident inference, be a governmental actor for the

purpose of 5th

Amendment rights guaranteed against the government by the Constitution

when foreclosing. It is a reasonably inference that Judge Daniels and the magistrate

should have drawn in the motion to dismiss as required under the standard of review.

InPittman v. Home Owners' Loan Corp.308 U. S. 21, the court said:

***that the activities of the Corporation through which the nationalgovernment lawfully acts must be regarded as governmental functions, and asentitled to whatever immunity attaches to those functions when performed bythe government itself through its departments. (cite) [B]
http://api.ning.com/us/308/21/case.htmhttp://api.ning.com/us/308/21/case.htmhttp://api.ning.com/us/308/21/case.htmhttp://api.ning.com/us/308/21/case.htm


24/39


But with the immunities the obligations of government must also attach as was held

inLebron, at p. 375 when the court said:

(c) ***Like some other Government corporations, Amtrak's authorizingstatute provides that it "will not be an agency or establishment of the UnitedStates Government,***"

(d)Although 541 is assuredly dispositive of Amtrak's governmental statusfor purposes of matters within Congress's control--e.g., whether it is subject to

statutes like the Administrative Procedure Act-and can even suffice to deprive it of

all those inherent governmental powers and immunities that Congress has the

power to eliminate-e. g., sovereign immunity from suit-it is not for Congressto

make the final determination of Amtrak's status as a Government entity for

purposes of determining the constitutional rights of citizens affected by itsactions. The Constitution constrains governmental action by whateverinstruments or in whatever modes that action may be taken***

(e)Amtrak is an agency or instrumentality of the United States for the purposeof individual rights guaranteed against the Government by the Constitution.***A contrary holding would allow the government to evade its most solemnconstitutional obligations by simply resorting to the corporate form[B,U ]

Like Amtrak, national banks including CitiBank and its operating subsidiary

CitiMortgage are federal instrumentalities. The banks are members in banking systemscreated to advance the governments economic public goals, and controlled through the

director of The Comptroller of the Currency. Like Amtrak CitiBank and CitiMortgage

should be considered government entities for purposes of determining the constitutional

rights of citizens affected by its actions. Homeowners are citizens whose constitutional

rights are affected by non- judicial foreclosures exercised by federally chartered

corporations like CitiBank and its instrumentality CitiMortgage. To paraphrase an old

saying, that with great power comes great obligations. This is no less true when

Congress confers enumerated and incidental powers on a bank it creates for important

governmental functions. It follows that with the immunities from taxation and state laws

the constitutional obligations of the government must also attach. For as Justice Scalia said

inLebron, at p. 399:


25/39


But it does not contradict those statements to hold that a corporation is an agency of

the Government for purposes of the constitutional obligations of Government rather

than the "privileges of the government," when the State has specifically created that

corporation for the furtherance of governmental objectives, and not merely holds

some shares but controls the operation of the corporation through its appointees.

InLebron, respondent also invoked the courts decision in theRegional Rail

Reorganization Act Cases,419 U. S. 102 (1974), which found that Consolidated Rail

Corporation, or Conrail,not to be a federal instrumentality, despite the President's power

to appoint, directly or indirectly, 8 of its 15 directors. See id., at 152, n. 40; Regional Rail

Reorganization Act of 1973, 301, 87 Stat. 1004. But the court specifically observed in

that case, that the directors were placed on the board to protect the United States' interest

"in assuring payment of the obligations guaranteed by the United States," and that

"[f]ull voting control ... will shift to the shareholders if federal obligations fall

below 50% of Conrail's indebtedness." 419 U. S. , at 152. Moreover, we noted,

"[t]he responsibilities of the federal directors are not different from those of the

other directors to operate Conrail at a profit for the benefit of its shareholders,

...which contrasts with the public interest "goals" set forth in Amtrak's charter, ***.

Amtrak is worlds apart from Conrail: The Government exerts its control not as a

creditor but as a policymaker, and no provision exists that will automatically

terminate control upon termination of a temporary financial interest.In distinguishing Amtrak from Conrail for the purpose of determining that Amtrak was

a federal instrumentality subject to constitutional constraints, the court focused on the

control of the corporation by the government, the public interest goals of the corporation,

that no provision existed that would automatically terminate the governments control upon

termination of a temporary financial interest, and the fact that in Amtrak the role of the

government was as apolicymakerand not as a creditor as in Conrail. The elements which

led the court inLebronto attach the constitutional obligations of the 1st

amendment to the

corporation can also be attributed against CitiBank and CitiMortgage in attaching its 5th

amendment obligation because defendants are federal instrumentalities created for public

and national purposes in carrying out the governments public economic goals as

mandated by its authority under the Commerce Clause. Thus the governments control
http://supreme.justia.com/us/419/102/case.htmlhttp://supreme.justia.com/us/419/102/case.htmlhttp://supreme.justia.com/us/419/102/case.html


26/39


through the regulatory agencies is as a policymakerwhere control wouldnever

terminate. Control of the operations is exercised by the director of the OCC over national

banks and the director of the OTS over Federal Savings Associations.

InAmerican Bankers Mortgage Corp. v Federal Home Loan Corp. (D.C. No. 94-55967 1995, 9

thCir.) the court decided the issue against the framework ofLebron. The

court held that Freddie Mac was not an entity subject to the due process clause of the 5th

Amendment because it was more private, and compared to Amtrak, the government control

over the operations was much less. Neither case decided what would be the bare minimum

control over the operations by the government that would suffice to put a corporation under

the due process clause. That however is not the case here for as the Court inEastonvIowa

explained the governments control over the operations of national banks at p. 239:

Our conclusions, upon principle and authority, are that Congress, having power to

create a system of national banks, is the judge as to the extent of the powers which

should be conferred upon such banks, andhas the sole power to regulate and

control the exercise of their operations[B,I,U]

In federal savings associations the government control is clarified inFidelity Fed. S.

& L. v. De la Cuesta, 458 U.S. 141 (1982) p. 161, as the court said:

The broad language of 5(a) expresses no limits on the Board's authority to

regulate the lending practices of federal savings and loans. [cites]*** And

Congress' explicit delegation of jurisdiction over the "operation" of these

institutions must empower the Board to issue regulations governing mortgage loan

instruments.

Since the elements which led the Court inLebron to attach the constitutional

constraints to Amtrak could be attributed to CitiBank in this case, Judge Daniels and the

magistrate could have reasonably inferred that CitiBank, acting through its subsidiary, is

a governmental actor for the purpose of attaching the 5th

Amendment Due Process Clause.

C.POWER OF SALE PROVISIONS SHOULD NOT BE CONSTRUED ASWAIVERS OF A HOMEOWNERS PROCEDURAL DUE PROCESS

National Banks, like CitiBank, its subsidiary CitiMortgage and Federal Savings


27/39


Associations, are federal instrumentalities advancing the economic public goals of the

government. It is a designation critical in determining their status as federal actors, and

whether the use of a power of sale provision in a mortgage contract is constitutional. At

issue is whether a power of sale provision assigning a right to a Trustee upon default can beauthorized by a law of the United States when the operative result is to provide a waiver of

a homeowners due process requirements under the 14th and 5th Amendments of the

Constitution as well as relief of the governments constitutional obligations. A waiver that

is not knowingly made and a constitutional obligation so slyly evaded. The power of sale

provision exercised upon default cannot dictate what due process is due, for as the court in

Fuentes v. Shevin, 407 U.S. 67 (1972) said:

The contract provisions for repossession by the seller on the buyer's default did

not amount to a waiver of the plaintiffs' procedural due process rights, those

provisions neither dispensing with a prior hearing nor indicating the procedure by

which repossession was to be achieved.(cite)

In practice, the power of sale foreclosure provision has acted like a waiver, allowing

banks like CitiBank, and by extension CitiMortgage, in some states like California, the

right to take a home from a homeowner without a hearing; and in a state like Colorado with

a Public Trustee, the right to subject a homeowner to an inadequate Rule 120 hearing where

a less than full and fair hearing is employed with no right to appeal and minimal

requirement for the lender to prove that it has standing to foreclose. It also allows the

government, through CitiBank and CitiMortgageto evade its most solemn obligations

under the Constitution***. Lebron, at p. 374,375

The Supreme Court Cases ofOsborn v Bank of United States, 22 U.S.738 (1824),

Shoshone Mining Co. v. Rutter, 177 U.S. 505,Runyan v. Lessee of Coster, 39 U .S. 122 ,p. 129 (1840) clearly stated that whatever the corporation assumed to do including rights in

contract must beauthorizedby a law of the United States. The appellate courts in the

power of sale cases embraced each others' decisions without reference to Supreme Court

decisions which concluded that corporations created by Congress were governmental, and


28/39


were content with the notion that Congress could adopt local customs on debtor creditor

relations when the issue must be decided under federal law---The National Bank Act.

III

A Rule 120 foreclosure hearing MUST employ a standard of proof to qualify thelenders standing as the real party in interest by clear and convincing evidence

to satisfy the protection of a fundamental property right under the due process clauseof the 14th Amendment.

Under color of state lawThe Colorado Rule 120 Foreclosure Law, plaintiffs were

foreclosed. The Foreclosure law provides for a Public Trustee, an agent of the state,

administering a process that provides inadequate due process to homeowners.

The rule 120 hearing is discriminatory against homeowners who have no right to a

jury and no right to appeal while the Colorado justice system provides a jury and right to

appeal in FED actions for tenants who can appeal from a negative ruling . Foreclosure of a

deed of trust by public trustee's sale is activated by a power of sale limited to two issues:

a. the debtor is in default and, action collateral to such hearing is necessary toresolve all other issues. (cite)

b. To establish the status of the debtor with respect to military service.(cite)

Borrowers who raise arguments that the Rule 120 hearing won't address, can file a

separate civil case. Homeowners have no right to appeal nor a jury trial, and limited

defenses. Standing is presumed in favor of the lender upon its averments by the lender or

its attorney that the lender is a real party in interest. But, judges routinely accept less than

certifiable proof to determine who the real party in interest is. A copy of the original

deed of trust and certificate of qualified holder which is a form generated by the lenders

attorney without a notarized assignment as proof which brings us to the standard of proof

to be employed in the Rule 120 to determine the lender's claim as a holder of the mortgage

to satisfy the 14th

amendment.

InPlymouth Capital Co. v. District Court, 1955 P.2d 1014 (1998) the court said:


29/39


[T]he scope and purpose of a Rule 120 hearing is very narrow: the trial court must

determine whether there is a reasonable probability that a default or other

circumstance authorizing exercise of a power of sale has occurred.

Beyond that narrow determination that a reasonable probability that there was a

default, the court does not concern itself of any relevant evidence bearing on the lender's

standing as the real party in interest. In Plaintiffs' Response in Opposition to the Motion to

Dismiss p12, lns 13-22(APPENDIX, PT 2), plaintiffs said:

The Original holder of the Mortgage and Deed of Trust of plaintiffs was Decision

One. At the rule 120 hearing, CITIMORTGAGE never produced proof of the

assignment from Decision One to CITIMORTGAGE/CITIFINANCIAL of its

rights under the mortgage and Deed of Trust[ In spite of our strenuous objections

at the hearing]. What CITIMORTGAGE did send to plaintiffs was an altered copyof the original Deed of Trust with their name in the upper left hand corner. ***It

was obvious that they made a copy of the original Deed of Trust and replaced it

with the name of CITIFINANCIAL. Subsequent to the adverse ruling which did not

properly allow the issue of standing which was clearly required by the ruling in

Goodwin v. District Court, 779 P.2d 837 (Colo. 1989)*** [B ]

We also objected in the federal court to the sub-standard level of proof that the lower

court allowed CitiMortgage to submit that it was the real party in interest.

In APPENDIX, PT 2 at, pg 13, lns 1-17 Response to Motion to Dismiss, plfs said:

The abuses cited by plaintiff in this case regarding a rule 120 hearing are not

the exception but the rule. At least two other cases have surfaced raising the

same issuesPrater et al vs. Bank of New York Mellon et al and BRUCE C.

McDONALD vs. FEDERAL HOME LOAN MORTAGE CORPORATION

Case Number 2010cv6. ***In both cases the issue was based on the false

documents submitted by the law firm to show that the lenders were thereal parties in interest. Law firms like Aronowitz & Mecklenburg needonly produce copies of those documents accompanied by a certificationof qualified holder, a document generated by the law firm attesting that

the bank has the right to foreclose on the homeowner. ***[B,U ]

What is starting to emerge from these three cases is a pervasive pattern of

deception being practiced by the lenders and their respective attorneys like

Aronowitz & Mecklenburg, in the various counties in Colorado as well as


30/39


venues across this nation; and, a pattern of misfeasance on the part of the

Public Trustees who are all too willing to accept less than certifiable proofthat the lender is the real party in interest as the lien-holder. [B,]

The 14th Amendment of the United States Constitution states *** [N]or shall any

state deprive any person of life, liberty, or property, without due process of law; nor denyto any person within its jurisdiction the equal protection of the laws. [B,U ]

The Supreme Court of Hawaii in STATE v. KOTIS, No 18823(1999) said:

***The Addington Court 99 S.Ct. 1804, 60 L.Ed.2d 323 (1979). consideredwhat standard of proof [was] required by the Fourteenth Amendment to the

Constitution in a civil proceeding brought under state law. *** The Addington

court noted that the standard of proof by clear and convincing evidence had been

required in civil cases involving allegations of fraud or some other quasi-

criminal wrongdoing by the defendant because [t]he interests at stake in thosecases are deemed to be more substantial than mere loss of money

Because the Rule 120 hearing involves a fundamental property interest (plaintiffs

home) which is protected by the due process clause of the 14th

Amendment, the standard of

proof before a persons property is taken should be by clear and convincing evidence

which should extend to the determination ofwho is the real party in interest with standing

to foreclose. But the Public Trustee in the Rule 120 hearing only requires that theforeclosing Lender present a copy of the Trust Deed and an Affidavit, a form generated by

the Lender or its' attorney that the lender is the real party in interest without requiring that

it be attested to under penalty of perjury. No notarized assignment by the original lender to

the foreclosing lender need be provided , nor was it provided in the Rule 120 hearing which

is the subject of this case. When it comes to a claim against the property there should be a

heightened burden of proof. In Colorado, a party filing a claim of adverse possession must

establish through clear and convincing evidence that the possession is actual, adverse,

hostile, under claim of right, exclusive, and uninterrupted for eighteen consecutive years

with a good faith belief that the possessor is the actual owner of the property. Colo.

Rev. Stat. -41-101 (2010) Not so in a rule 120 hearing. The standard of proof should be

no less than that provided in a claim of adverse possession and as commanded in


31/39


Addington v. Texas, 441 U.S. 418, 99 S.Ct. 1804, 60 L.Ed.2d 323 (1979) where the proof

involving a right under the 14th

Amendment is by clear and convincing evidence.

In light ofGoodwin v. District Court, 779 P.2d 837 (Colo. 1989) which held that a real

party in interest defense must be allowed in a Rule 120 , the lenders burden MUST be byclear and convincing evidence. The Due Process Clause does prevent the deprivation of

liberty or property upon application of a standard of proof too lax to make reasonable

assurance of accurate fact finding.Hawkins v. Bleakly, 243 U.S. 0, 214 ; Thus, as the court

inAddington said:

"[T]he function of a standard of proof, as that concept is embodied in the Due Process

Clause and in the realm of fact finding, is to 'instruct the fact finder concerning the

degree of confidence our society thinks he should have in the correctness of factualconclusions for a particular type of adjudication."'

Plaintiffs are not limited from raising this argument in support of their claim that they

were denied due process in the Rule 120 , for as the court inLebron at pg 374 said:

Our traditional rule is that [o]nce a federal claim is properly presented, a party canmake any argument in support of that claim; parties are not limited to the precise

arguments they made below.

IV

. A Rule 120 hearing violates the 14th

Amendment DueProcess and Equal Protection Clause because it is a summaryproceeding with no right to appeal Nor a right to a jury trial.

InLINDSEY V. NORMET, 405. S. 56 (1972) the court said:

This Court has recognized that, if a full and fair trial on the merits is provided, the

Due Process Clause of the Fourteenth Amendment does not require a State to

provide appellate review, (cites)

Conversely, if a full and fair trial on the merits is NOT provided, the Due Process

Clause of the Fourteenth Amendmentrequires a State to provide appellate review. The

Rule 120 hearing does not provide a full and fair hearing, nor does it provide appellate

review. The state can deny one or the other but cannot deny both. The inclusion by the


32/39


Court of the above quoted passage must be read and analyzed in the context of the

procedures implicit in the FED action referred inLindsey. The complaint inLindsey

alleged that the tenant was limited in the defenses it could set up in the FED action. If the

FED action itself inLindsey was a full and fair hearing which would include issues thetenant could have brought in a separate action then there was no requirement for the state to

provide appellate review. But, if the FED action inLindseywas a summary proceeding

without appellate review, then plaintiffs submit that a reasonably strong inference that

could have been drawn in the motion to dismiss by the magistrate and Judge Daniels is that

the Supreme Court would have held that the FED action would be in violation of the 14th

amendment and would have required the State in the Oregon FED action to provide

appellate review to satisfy the Due Process Clause of the 14th Amendment, otherwise it

would have had no relevance to the case itself and no need to include it.

InLindsey, ID at p. 64 the court stated the FED procedure:

The Oregon Forcible Entry and Wrongful Detainer Statute may be tried toeither a judge or a jury, and the only issue is whether the allegations of the

complaint are trueA defendant who loses such a suit may appeal

The FED action in Colorado,like the FED action inLindsey, does have a constitutional

right to appeal [article 40, 13-40-120] and a right to a jury [Colorado Constitution, section

23], has a right to counter-claim even though the actions are summary with a right to file a

separate action to determine other issues that cannot be addressed in such summary

proceedings. A rule 120 foreclosure hearing has none of those rights with the exception of

the right to a separate action. InLindsey, ID. At pg. 78, the court said When an appeal

is afforded, however, it cannot be granted to some litigants and capriciously or

arbitrarily denied to others without violating the Equal Protection Clause. Why then

is a Homeowner precluded in a Rule 120 foreclosure proceeding from a right to appeal, a

right to a jury trial, and a right to counter-claim when these rights are afforded in the

Colorado FED action? There is no rational basis for this arbitrary and disparate treatment


33/39


between a tenant and a homeowner whose property interest is at risk. Homeowners as a

class should not to be singled out for "arbitrary and irrational" treatment when seeking

legal relief made available by the State. SeeBankers Life & Casualty Co. v. Crenshaw,

486 U.S. 71, 83 (1988) The Colorado Rule 120 foreclosure law discriminates againsthomeowners and bears no rational relation to a legitimate end and therefore does not

comport with equal protection. White v. Colorado, 157 1226,1232 (10th

Cir. 2001)

D. EVICTION DUE TO A POWER OF SALE IS A 14th

AMENDMENTABUSE OF PROCESS ACTIONABLE UNDER 42 US 1983.

The eviction should be viewed against the backdrop of the power of sale foreclosure as

one transaction. If the power of sale foreclosure was a 14th

Amendment and/or a 5th

Amendment violation (a Bivens claim) then it follows that the eviction as a derivative

action to the non-judicial foreclosure is an abuse of process even if it is notmalicious, and

by definitiona denial of procedural due processJennings vs. Shuman, 567 F.2d 1213

(3rd

), and the final step under color of state law in furtherance of the deprivation by

defendants begun by the power of sale foreclosure.

CONCLUSION

In sum, the 14th and 5th

Amendment, the legislative history of national banks, theSupreme Court case law and common sense support a holding, as self evident inferences,

that the defendants are governmental bodies, and that plaintiffs have been denied both due

process and the equal protection of the law by being subjected to a Rule 120 hearing by

CitiBank, a national bank through its instrumentality CitiMortgage. Plaintiffs have stated

enough facts & law to establish a Bivens claim by the inferences that could be drawn by

the Judge as required on a motion to dismiss. Even though the Supreme Court has as yet

not specifically held that national banks are governmental bodies for the purpose of

individual rights guaranteed against the government by the Constitution, those Supreme

Court cases do provide the framework which, coupled with the facts alleged, in which the

judge could have made the reasonably strong inference to support that conclusion as

required by the Standard of Review. The court inLebron at p. 397 offers guidance when it


34/39


said That Government-created and -controlled corporations are (for many purposes

at least) part of the Government itself has a strong basis, not merely in past practice

and understanding, but in reason itself. Thus, the conclusion held inBismarck that the

lending functions including foreclosure were governmental, and the conclusion inLebronthat Amtrak was a governmental body, were both premised on the fact that both entities

were federal instrumentalities just as CitiBank and it operating subsidiary, CitiMortgage.

The inference drawn from that fact is that foreclosure is a governmental act and

CitiBank and CitiMortgage are governmental actors subject to the 5th

Amendment.

The cases cited show that the power of sale provision must be authorized by the

National Bank Act as an incidental power of the express lending function and that lenders

must prove by clear and convincing evidence their status as the real party in interest to

satisfy the due process clause of the 14th

Amendment in the Rule 120 foreclosure hearing.

It also follows that the eviction that followed the deprivation of property in the

foreclosure must viewed as part of the foreclosure and an abuse of process which is by

definition a denial of due process. Any deficiencies in the complaint can be amended.

Respectfully submitted,

___________________ Date:___________, 2011MASON L. RAMSEY

_________________ Date:___________, 2011

Judith Mae Neville


35/39


TABLE OF AUTHORITIES

PAGE

Cases

Acron Investments, Inc. et al v Federal Savings and Loan InsuranceCorporation , 363 F.2

nd236 (9

thCircuit, 1966)....35

American Bankers Mortgage Corp. v Federal Home Loan Corp.

(D.C. No. 94-55967 1995, 9th

Cir.) .................................................................... 1, 35Bank of America et al v City of San Francisco et al 309 F.3d 551(9th Circuit(2002) .................................................................................................... 1Black's Law Dictionary..Carey v. Piphus, 435 U.S. 247, 259(1978). ..............................

6th Edited Appellate Brief

Documents

Transcript of 6th Edited Appellate Brief