Anderson v. O'Sullivan

NAZARIAN, J. Cynthia Lorraine Anderson appeals from an order of foreclosure in the Circuit Court for Prince George’s County denying her motion to stay the foreclosure of her house. Ms. Anderson borrowed $501,383.00 from JPMorgan Chase Bank (“JPMorgan”) and its trustees, and the debt was memorialized in a promissory note secured by a Deed of Trust. When Ms. Anderson defaulted on her loan payments in August 2009, JPMorgan commenced this action for foreclosure. After the court denied her Motion to Stay the proceedings, the foreclosure sale proceeded, and she appeals.

We agree with the circuit court that her legal theories— which bear significant resemblance to discredited “Redemp-tionist” and “Vapor Money” theories—are not valid defenses or meritorious arguments, to the extent they were raised. We also disagree that Ms. O’Sullivan lacked standing to foreclose, and we agree with the trustees that the Motion to Stay did not comply with the requirements under Md. Rule 14-211. I. BACKGROUND On November 28, 2008, Ms. Anderson signed a promissory note that memorialized a loan of $501,383.00 secured by a Deed of Trust on her home in Bowie, Maryland. The Deed of Trust listed Cynthia L. Anderson as the borrower, Melinda Clayton as the trustee, and JPMorgan as the beneficiary.

The Deed of Trust included one provision relevant to this appeal: 20. Substitute Trustee. Lender, at its option, may from time to time remove Trustee and appoint a successor trus ⁵⁰⁴ tee to any Trustee appointed hereunder by an instrument recorded in the city or county in which this Security Instrument is recorded. Without conveyance of the Property, the successor trustee shall succeed to all the title, power and duties conferred upon Trustee herein and by applicable law.

Ms. Anderson defaulted on the loan on August 1, 2009. Under regulations set forth by the Commissioner of Financial Regulation, JPMorgan entered Ms. Anderson’s date of default as August 2, 2009. Ms. Anderson immediately contested the default by sending two letters to JPMorgan dated August 10, 2009, one asking to inspect the original promissory note and the second requesting access to numerous records and answers to nearly thirty questions. 1 JPMorgan appointed substitute trustees under paragraph 20 of the Deed of Trust on October 29, 2012, replacing Melinda Clayton with Laura H.G. O’Sullivan and six other individuals (the “Substitute Trustees”) 2 . JPMorgan and the Substitute Trustees (collectively “the Appellees”) sent Ms. Anderson a Notice of Intent to Foreclose on September 16, 2013.

The Appellees conducted a loss mitigation analysis, but records show that Ms. Anderson elected not to negotiate modification or mitigation with JPMorgan after the analysis was completed on November 20, 2012. 3 On December 3, 2013, Ms. Anderson requested a “hearing on standing” and filed requests for interrogatories. She submitted another request that the court compel the Substitute ⁵⁰⁵ Trustees to answer interrogatories on January 15, 2014. She filed a Motion to Dismiss on May 6, 2014 and a Motion to Stay on May 27, 2014. On June 2, 2014, the court denied the Motion to Stay, ruling that she failed to state a valid defense or present a meritorious argument, file timely, state a factual or legal basis, or provide supporting documents (the “June 2 Order.”).

In response, Ms. Anderson filed a Motion for an Emergency Hearing the same day. The Substitute Trustees sold the home to JPMorgan at an auction on June 3, 2014 for $323,400.00, and reported the sale on June 10. Ms. Anderson filed an appeal on June 17, 2014. 4 II. DISCUSSION Ms. Anderson’s brief contains a long list of “Questions Presented” for our review. 5 The record is muddy as to ⁵⁰⁶ whether Ms. Anderson filed a timely appeal and which order she was appealing, but because she is representing herself, we have read her papers as flexibly as they permit, and have construed it as an appeal from the denial of her Motion to Stay, ie., from the June 2 Order. 6 ⁵⁰⁷ In order to stay and dismiss a properly initiated foreclosure proceeding, a borrower must “state with particularity the factual and legal basis of each defense that the moving party has to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action.” Md. Rule 14-211(a)(3)(B).

These defenses must not only be articulated, but documented, id., (a)(3)(C), and, if untimely, the borrower must demonstrate good cause why the motion wasn’t filed on time. Id., (a)(3)(F). The court then makes an initial determination on the merits and “shall deny the motion, with or without a hearing, if the court concludes from the record before it that the motion ... was not timely filed and does not ⁵⁰⁸ show good cause for excusing non-compliance with subsection (a)(2) of this Rule,” Md. Rule 14-211(b)(l)(A), or “does not on its face state a valid defense to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action.” Md. Rule 14-211 (b)(1)(C). The June 2 Order found that the Motion to Stay was untimely, that it did not state a valid defense or meritorious argument, and lacked supporting documents.

Our independent review of the record and the law confirms that the circuit court ruled correctly. Ms. Anderson’s arguments, which at times are confusing, misconstrue statutes and lack a viable basis in law. She never refers to her legal theories under any particular name, but we recognize them as theories advocated by proponents of the “Redemptionist Movement” and the “Vapor Money Theory.” No Maryland court has directly opined on either theory in a reported opinion, but many federal and state courts have, 7 and they have found unanimously, and unequivocally, that neither qualifies as a valid defense to or meritorious argument to foreclosure. ⁵⁰⁹ A. Neither the “Redemptionist Theory” nor the “Vapor Money Theory” is a viable legal theory. The “Redemptionist Theory” calls for proponents to “exploit the UCC filing process” to take advantage of an individual’s fictional “strawman” personality.

Monroe v. Beard, 536 F.3d 198, n. 4 (3rd Cir.2008). Beard succinctly summarized the essence of the Redemptionist argument: [T]he “Redemptionist” theory ... propounds that a person has a split personality: a real person and a fictional person called the “strawman.” The “strawman” purportedly came into being when the United States went off the gold standard in 1933, and, instead, pledged the strawman of its citizens as collateral for the country’s national debt. Re-demptionists claim that [the] government has power only over the strawman and not over the live person, who remains free. Individuals can free themselves by filing UCC financing statements, thereby acquiring an interest in their strawman.

Thereafter, the real person can demand that government officials pay enormous sums of money to use the strawman’s name. Id. Citing Black’s Legal Dictionary as authority, Redemption-ists reason that a “strawman” is “one who acts as an agent for another for the purpose of taking title to real property and executing whatever documents and instruments the principal may direct respecting the property. Person who purchases property for another to conceal identity of real purchaser, or to accomplish some purpose otherwise not allowed.” The American’s Bulletin, Redemption Manual: From Government-Imposed Ignorance To Enlightenment as a Secured Party Investor 257 (4.5 ed. 2008) (quoting Black’s Legal Dictionary (6th ed.) (emphasis in original)).

This “legal fiction,” therefore, must be “captured,” by filing the appropriate UCC financing statements to “secure a claim via a ‘superior security interest’ against the all capitalized legal fiction/Straw-man, the property and the collateral.” Id. at 258 . Only after the appropriate UCC-1 financing statement is filed is the Redemptionist “redeemed.” Id. Through this redemption the Redemptionist now becomes “the Holder in Due Course” of ⁵¹⁰ the property held by the strawman, and can access the “Charge Back Process,” which “goes back to the United States Treasury to charge-up what is called your ‘UCC CONTRACT TRUST ACCOUNT,’ identified by your/the Debtor/Straw-man’s ‘Social Security Number’ ... The Charge Back charges up the account for future discharge of debt.” Id.

A clear distinction is made between the real person and the fictional strawman by “writing it in all capital letters,” so “when your name is written in all capital letters, IT IS NOT YOUR NAME!” Id. (Emphasis in original.) The “Vapor Money Theory,” on the other hand, contends that banks essentially lend a borrower their own money when a loan is issued: The “vapor money” (or “no money lent”) theory posits that Congress has never given banks the authority to extend credit and, thus, banks act beyond their charters when making loans. Proponents claim banks create money “out of thin air,” through ledger entries and bookkeeping tricks, by “depositing” a borrower’s promissory note without the borrower’s permission, listing the note as an “asset” on the bank’s ledger entries, and then lending a borrower back his own “money.” Since banks do not have enough “real money in their vaults” to cover the sums lent, loans are not backed by actual money—the only real money is gold or silver; paper money is worthless since it is created by an illegitimate Federal Reserve—making them invalid ab initio and creating no obligation for repayment. Stevenson v. Bank of America, 359 S.W.3d 466, n. 6 (Ky.Ct. App.2011).

Ms. Anderson’s brief seems to reflect, albeit not with clarity, that she subscribes to both theories. She attempts to separate herself (as “Cynthia Lorraine Anderson”) from her straw-man (strawperson?) (as “CYNTHIA LORRAINE ANDERSON”) by claiming that she is the “General Executor Of this Birth Estate (CYNTHIA LORRAINE ANDERSON).” She claims that the United States has an interest in the estate of her strawman and therefore also bears the financial respon ⁵¹¹ sibilities of her mortgage: “[t]he United States is Secure Party creditor of this Estate (CYNTHIA LORRAINE ANDERSON) held in trust.” This is the only explanation we can divine for her claims that Ms. O’Sullivan’s foreclosure action 'constitutes an act of treason against the United States and the State of Maryland. 8 She discounts the validity of paper money and the Federal Reserve, and argues for the “Vapor Money Theory” in its entirety, if not by name: Financial Institutions, through sleight of hand, creating the appearance of “lending” money, dupe the Men and Women into signing the all important original note (fraud in the inducement), thinking they received a “loan”, when in fact they just created a publicly issued debt instrument (30 yr bond) that is discounted (original issue discount) to its present face value (i.e. amount of purported “loan”). Without express or implied consent by the Men or Women, their instrument is then illegally converted (alteration voids the note) by indorsing the note “pay to the order of without recourse.” ... Via the “magic” of fractional reserve “banking” (Financial Institution), that note is hypothecated (pledged to borrow multiple times the face amount), and/or securitized (depending on whether it’s a residential or commercial “portfolio” note) and is used by the bank (Financial Institution) or the SPV (special purpose vehicle) or REMIC (real estate mortgage investment conduit) to “fund” further instruments and securities (derivatives) via false statements to the bondholders on the back end (i.e.

AAA rated toilet paper sold to investors and pension funds). We agree with the United States District Court of the District of Connecticut in McLaughlin that we must not “lightly ⁵¹² ascribe such beliefs to anyone,” but we are constrained to conclude that “the only plausible explanation [we] can discern for the arguments in [the appellant’s] filings is that they are rooted in this Redemptionist theory.” McLaughlin v. Citi-Mortgage, Inc., 726 F.Supp.2d 201, 210 (D.Conn.2010). These contentions have not, will not, and cannot be accepted as valid. Beyond the overwhelming legal precedent rejecting them, government agencies have also condemned these theories.

The IRS has opined that “[t]here is no authority under the Internal Revenue Code or any other applicable law that supports the claim that taxpayers may avoid their federal tax obligations based on ‘straw man’ arguments ... or similar arguments. The formatting of a taxpayer’s name in all uppercase letters on government documents or elsewhere has no significance whatsoever for federal tax purposes.” Internal Revenue Bulletin April k, 2005, Rev. Rui. 2005-21, Internal Revenue Service (last viewed July 10, 2015), http://www.irs. gov/irb/2005-14_IRB/arl3.html#d0e756. The ruling concludes by holding that “[c]laims based on ‘straw man’ arguments or on similar arguments, to avoid federal tax obligations, are frivolous and have no merit.” Id. Similarly, the FBI has identified the “Redemption/Strawman/Bond Fraud” scheme that discounts the validity of individuals harking the Redemp-tionist Theory.

Common Fraud Schemes, Federal Bureau of Investigation (last viewed July 10, 2015), https://www.fbi.gov/ scams-safety/fraud/fraud. Ms. Anderson’s contentions do not, therefore, raise a valid defense to the foreclosure proceeding before us. JPMorgan did not loan Ms. Anderson her own money when she signed the Promissory Note, and she alone has the responsibility to repay the money she borrowed. No volume of UCC filings can shift Ms. Anderson’s financial burden to her “strawman,” and the law recognizes no difference between Cynthia Lorraine Anderson and CYNTHIA LORRAINE ANDERSON.

Ms. Anderson cannot dodge her legal and financial responsibilities by claiming herself as “general executor,” denying her citizen ⁵¹³ ship, 9 or through any other filings or declarations to these effects. B. The Substitute Trustees and JPMorgan had standing to foreclose, and Ms. Anderson failed to state her defenses in the Motion to Stay with the particularity required under Md. Rule 14-211(a)(3). We similarly reject Ms. Anderson’s argument that the Substitute Trustees have no standing to foreclose. The original Deed of Trust unambiguously references the beneficiary and lender as JPMorgan, and contains the provision that “[t]his Security Instrument secures to Lender: ...

(c) the performance of Borrower’s covenants and agreements under this Security Instrument and the Note.” This includes the foreclosure procedure, paragraph 18, and the substitute trustee provision in paragraph 20. The original Note lists JPMorgan as the “lender,” directly linking the ownership of the Note to the allonge, and the covenants and provisions of the Deed of Trust. The transfer to the Substitute Trustees adhered with the requirements of paragraph 20. Once the Deed of Trust is legally transferred, “the right to enforce the deed of trust follow[s].” Deutsche Bank Nat.

Trust Co. v. Brock, 430 Md. 714, 728 , 63 A.3d 40 (2013) (citing Svrcek v. Rosenberg, 203 Md.App. 705, 727 , 40 A.3d 494 (2012)). Furthermore, Deutsche Bank noted that, as the borrower pays and incrementally discharges her obligations under the note with each payment, it necessarily follows that the party to whom the borrower pays is entitled to enforce the note. Id. at 729 , 63 A.3d 40 . There is a distinction between the owner of a note and the holder, but the holder has standing to enforce the note, so we are not required to consider whether the owner has been sufficiently identified in this case.

Id. Ms. ⁵¹⁴ Anderson knew where to send payment on the loan, and to whom she should address the payment, as she successfully made payments until she didn’t. Her own exhibit references JPMorgan as the lender on the Deed of Trust and the holder of the Note. JPMorgan, as the holder of the note,