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C.R.C.P. 121 #1-15 Certificate of Conferral: Plaintiffs, in good faith, have contacted
defendants regarding this motion for summary judgment.
Comes now plaintiffs Mason L Ramsey & Judith Mae Nevilles Motion for Summary
Judgment on undisputable facts and controlling law.
MEMORANDUM OF POINTS AND AUTHORITIES
I. PROCEDURAL HISTORY
This action was initially commenced on October 29 th, 2010. Defendants
CITIMORTGAGE and CITIBANKfiled a joint motion to dismiss pursuant to F.R.C.P. 12
(b)(6) on the grounds that Plaintiffscomplaint failed to state claim because defendants are not
state actors, that CITIBANKas a parent corporation ofCITIMORTGAGE should not be held
liable because it did not foreclose on plaintiffs. Defendants also invoked the ROOKER-
FELDMAN & the YOUNGER ABSTENTIONDOCTRINES to dismiss plaintiffs action.
II. INTRODUCTION AND BACKGROUND
The history of national banking legislation has been "one of interpreting grants of both
enumerated and incidental `powers' to national banks as well as federal savings associations
[which include savings banks]. Bank of America et al v City of San Francisco et al309 F.3d
551 (9th Circuit) (2002) as the court stated:
Congress has legislated in the field of banking from the days ofM'Culloch v.
Maryland, 17 U.S. (4 Wheat.) 316, 325-26, 426-27, 4 L.Ed. 579 (1819), creatingan extensive federal statutory and regulatory scheme. The history of national
banking legislation has been "one of interpreting grants of both enumerated andincidental `powers' to national banks as grants of authority not normally limited
by, but rather ordinarily pre-empting, contrary state law." (citations omitted).
Indeed, since the passage of the National Bank Act in 1864, the federal presencein banking has been significant. See id. at 32-33, 116 S.Ct. 1103. Similarly, since
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the passage of the HOLA in 1933, OTS regulations have governed the "powers
and operations of every federal savings and loan association from its cradle to its
corporate grave." de la Cuesta, 458 U.S. at 145, 102 S.Ct. 3014
A number of Supreme Court cases have stated 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)
Easton v. Iowa,188 U.S.220 (1903) On that premise the question presented is whether a law
of the United States can authorize a power of sale foreclosure to a national bank like
CITIBANK, a federal instrumentality and public bank corporation, acting through its
subsidiary CITIMORTGAGE without violating the 5th Amendment. Plaintiffs submit that in
this case CITIBANKacting through its subsidiary CITIMORTAGE violated both the 5th
Amendment (Bivens claim) under color of federal law because they are federal instrumentalities
and the 14th Amendment by using power of sale foreclosure under color of state lawThe
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 to what can be determined and does not allow
an appeal, and an eviction under the 14th Amendment also under color of state law both
actionable under 42 US 1983.
In Watters v Wachovia292 U. S. 559 the court said:
National banks' business activities are controlled by the National Bank Act
(NBA),12 U. S. C. 1 et seq., and regulations promulgated thereunder by the
Office of the Comptroller of the Currency (OCC), see 24, 93a, 371(a).. TheNBA specifically authorizes federally chartered banks to engage in real estate
lending, 12 U. S. C. 371, and "[t]o exercise ... such incidental powers as shall be
necessary to carry on the business of banking," 24 Seventh. Among incidentalpowers, national banks may conduct certain activities through "operating
subsidiaries," discrete entities authorized to engage solely in activities the
bank itself could undertake, and subject to the same terms and conditions as
the bank. See 24a(g)(3)(A); 12 CFR 5.34(e).[bold added]
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The Supreme Court has made numerous decisions which would have been relevant in
determining whether non-judicial procedures were applicable given the nature of these
corporations. Though several appellate courts have had occasion to determine the
constitutionality of non-judicial procedures in the form of a power sale provision, 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 under special law
for public and national purposes. This issue deals with the right of these corporations to put
such a provision in a contractas a power of sale provision, and rests on whether the act of
foreclosure is agovernmental actor aproprietary act. It is an issue which, in the context of the
current economic crisis and massive foreclosures, sweeps the breadth of this nation like a plague
destroying families and communities as it spreads, swelling the homeless population in its wake.
This issue involves a constitutional right affecting millions of families.
III. STATEMENT OF THE FACTS
The facts are not in dispute. CITIBANKis a national bank and CITIMORTGAGE is
its operating subsidiary. CITIBANK is a federal instrumentality, federally chartered public
bank corporation created for public and national purposes. As a national bank, CITIBANK
conducts certain activities through its subsidiary CITIMORTGAGE. (See Watters v Wachovia
292 U. S. 559 ) CITIMORTGAGE is an instrumentality ofCITIBANK.(See Watters v.
Wachovia, 05-1342, at p. 15) CITIBANKacting through its subsidiary CITIMORTGAGE
foreclosed on plaintiffs on October 13th, 2010 through a power of sale (non-judicial foreclosure)
administered under a rule 120 hearing of the State of Colorado Foreclosure Law by a Public
Trustee who is an agent of the state. The rule 120 hearing is limited to two issues with no right
to appeal. CITIBANKacting through its subsidiary CITIMORTGAGE evicted plaintiffs using
the Colorado FED statute on November 30th, 2010. As a national bank, [B added]
IV. LAW AND ARGUMENT
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A. GOVERNMENT CONTROL OVER BANKS IS AS APOLICYMAKER TO
ADVANCE ITS PUBLIC ECONOMIC POLICY GOALS
National Banks, like CITIBANKand Federal Savings Associationsare 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. ..)
Infra, Easton citing Osborn.
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
and implemented by the Necessary and Proper Clause to engage in fostering commerce in 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.
Even before the Revolution began, Alexander Hamilton had recognized that the future of
America lay in business and industry. Hamilton understood that to develop into an industrial
power, America would need a powerful economic system. Hamilton also argued that the
Central Bank was necessary to the nation in cases of emergency such as the financing of war. (In
the Report of Credit II, Dec. 1790) Further, the Office of The Comptroller of the Currency in
its publication-- National Banks and the Dual Banking System (2003) p. 3 wrote:
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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 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 governments control over national banks is as apolicymakerproviding guidance
for theirnational public policy goals through the government regulatory agencies who maintain
exclusive control over the banks which does not terminate.
B. POWER OF SALE PROVISIONS SHOULD NOT BE CONSTRUED TO ACT AS
A WAIVER OF A HOMEOWNERS PROCEDURAL DUE PROCESS
National Banks, like CITIBANK, its subsidiary CITIMORTGAGE and Federal Savings
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 the
borrowers default can be authorized by a law of the United States when the operative
consequence 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 obligation under the
Constitution. 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:
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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, those
provisions neither dispensing with a prior hearing nor indicating the procedure bywhich repossession was to be achieved.(cite)
In practical terms the power of sale foreclosure allows a bank like CITIBANK, and by
extension CITIMORTGAGE, in some states like California, the right to take the property 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 forum such as in the Rule 120 hearing where a less than
full and fair hearing is employed with no right to appeal. It also allows the government, through
CITIBANKand CITIMORTGAGE, federal instrumentalities, to evade its most solemn
obligations under the Constitution by simply resorting to the corporate form. Lebron,
infra at p. 374,375
In Warren v. GNMA, 521 S.W.2d 441 (Mo. en banc 1975). The rationale for its decision
was found in Federal National Mortgage Association v. Howlett, 521 S.W.2d 428 (Mo.1975) .
The Missouri Court only discussed the 14th amendment constitutional question and stated:
"We hold that the foreclosure of the deed of trust on appellant's property was pursuantto the Contractual provisions in the deed of trust and Not by authority of state law. It
follows that appellant's contention that state action was present on the theory that thepower of sale exercised by the trustee was conferred by state statute is overruled."(Emphasis added).
Whether the foreclosure was pursuant to the Contractual provisions in the deed of trust was
by authority of state law is irrelevant in this case where federal instrumentalities like
CITIBANKand CITIMORTAGE are involved because foreclosure had to be pursuant to the
authority of the laws of the United States.
The Missouri Supreme Court relied upon the reasoning and result inBryant v. Jefferson
Fed. Sav. & Loan Assoc., 166 U.S.App.D.C. 178, 509 F.2d 511 (D.C.Cir. 1974). After the
Warren decision, similar results were reached in cases involving extrajudicial foreclosures,
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Charmicor, Inc. v. Deaner, 572 F.2d 694 (9th Cir. 1978);Northrip v. FNMA,527 F.2d 23 (6th
Cir. 1975); Apaov. San Diego Home Loans, Inc.,324 F3d 1091, Ninth Circuit (2002). The fact
that there was a provision in the contract is not dispositive. As in Fuentes, the fact that there is a
power of sale provision did not amount to a waiver of the appellants' procedural due process
rights, those provisions neither dispensing with a prior hearing nor indicating the procedure by
which repossession was to be achieved.
InJohnson v United States Department of Agriculture, 734 F. 2d 774(11th cir., 1984)
the court examined the validity of a power of sale clause when the court said:
Due process rights may be waived, D.H. Overmyer Co. v. Frick Co., 405 U.S.
174, 185, 92 S.Ct. 775, 782, 31 L.Ed.2d 124 (1972), although there is a strong
presumption against waiver. Gonzalez v. County of Hidalgo, 489 F.2d 1043,
1046 (5th Cir.1973). Waiver depends upon the facts of a particular case,
United States v. Wynn, 528 F.2d 1048, 1050 (5th Cir.1976), and is good only
if it is done in an informed manner. Overmyer, supra 405 U.S. at 186-87
Have we created a situation where federal instrumentalities CAN put a power of sale
provision in a mortgage contract that subjects homeowners to either no hearing, or an inadequate
hearing such as a rule 120 of the Colorado Foreclosure Law and also evade its most solemn
obligations under the Constitution? Such would not be acceptable to the court inLebron.
The Supreme Court Cases ofOsborn v Bank of United States, 22 U.S.738 (1824),
Shoshone Mining Co. v. Rutter, 177 U.S. 505, & inRunyan 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 be authorizedby a law of the United States. The appellate courts in the power of
sale foreclosure cases embraced each others decisions without making reference to several
Supreme Court decisions which examined the nature of corporations created by an act of
Congress concluding that their activities were governmental, and were content with the notion
that Congress could adopt local customs on debtor creditor relations without further analysis
when the issue should be decided under federal law.
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C. NATIONAL BANKS LIKE CITIBANK ARE PUBLICNOT PRIVATE CORPORATIONS
InEaston v. Iowa,188 U.S.220 (1903) the Court said of national banks:
We think that this view of the subject is not based on a correct conception of the
federal legislation creating and regulating national banks. That legislation has inview the erection of a system extending throughout the country, and independent,
so far as powers conferred are concerned, of state legislation which, if permitted
to be applicable, might impose limitations and restrictions as various and asnumerous as the states. Having due regard to the national character and
purposes of that system, we cannot concur in the suggestion that nationalbanks, in respect to the powers conferred upon them, are to be viewed as
solely organized and operated for private gain. [B,U added]
The Court inEaston went on to say at p. 230 that the principles enunciated in
McCullough v Maryland, 17 U.S. 316(1819), and in Osborn v Bank of United States, 22
U.S.738 (1824), though expressed in respect to banks incorporated directly by acts of
Congress, were still applicable to the later and present system of national banks . The Court
cited with approval the holding of the latter as expressed 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
public and national purposes. That the mere business of banking is, in its
own nature, a 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.[bold, underline & italics added]
The court inEaston goes on to say:
'National banks are instrumentalities of the Federal government, created fora public purpose, and as such necessarily subject to the paramount authority ofthe United States. It follows that an attempt by a state to define their duties or
control the conduct of their affairs is absolutely void, wherever such attempted
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exercise of authority expressly conflicts with the laws of the United States, and
.impairs the efficiency ofthese agencies of the Federal government
Our conclusions, upon principle and authority, are that Congress, having powerto create a system of national banks, is the judge as to the extent of the powers
which should be conferred upon such banks, and has the sole power to regulateand control the exercise of their operations[B,I,U added]
In view of the holding in Osborn which Justice Marshall held that banks were public and
not private bank corporationsbecause 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 private corporations? And why not consider them agencies of the Federal
government as referred to inEaston as well as to FEDERAL SAVINGS ASSOCIATIONS .
Certainly the court in In Acron Investments, Inc. would have considered CITIBANKand by
extension CITIMORTGAGE an agency of the federal government because, as the court held
in that case, control of the government over the corporations was more than custodialor
incidental. Acron Investments, Inc.et al v Federal Savings and Loan Insurance Corporation ,
363 F.2nd 236 (9th Circuit, 1966)
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 facultywhich it possesses. 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 put as the strongest against the Bank. . . [H]as thisbeing a right to make this particular contract? .. . .[T]his question, too,
depends entirely on a law of the United States [U added]
The court in Osborn at p. 823, made it clear that federally chartered corporations created
under acts of Congress could . . .acquire no right, make no contract, bring no suit, which isnot authorized by 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. In an excerpt fromShoshone
Mining Co. v. Rutter, 177 U.S. 505,509,510 ,citing Osborn, the court said:
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A corporation has no powers and can incur no obligations except as
authorized or provided 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 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 added]
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, eitherexpressly, 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 added]
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 it
then be said that the provision in a mortgage contract requiring a mortgagor to transfer his rights
to a trustee with a power of sale for the non-payment of a mortgage is authorized by the federal
charter and the law that created that charter? Is this not the right to foreclose on an owner
without resort to judicial process or a meaningful hearing? Is this not the right to deprive a
person of procedural due process? We must then ask the question: Is the act of the national
or federal savings associations in foreclosing non-judicially within the scope of a law of
Congress? Can the government by way of a federal charterauthorize a right to a bank to do
what it is forbidden to do itself? It is fundamentally clear that the government can impart no
greater power through a charter than they possess themselves. The power to deny a person of
procedural due process is denied to the government under the 5th Amendment and is equally
denied to the banks. As John Locke said nearly 300 years ago: Nobody can transfer to
another more power than he has in himself [ TWO TREATISE OF GOVERNMENT,
BOOK II]
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The courts in Osborn,Shoshone and Runyan show us that the conduct of banks in
pursuit of non-judicial foreclosures must be done under the authority of the federal charter
which is a law of the United Statesand therefore under color of federal law. Thus National
banks and federal savings associations could be considered governmental actors like the
assumption made by the First Circuit in Gerena v Puerto Rico Legal Services, Inc., 697 F. 2d
447(1st Cir. 1983) Congress can delegate powers but it must be powers that they can exercise
themselves. Thus, in United States v Grimaud, 220 U.S. 506 (1911) the Supreme Ct citing
Justice Marshall at pg. 517 said.
It will not be contended that Congress can delegate to the courts, or to any other
tribunals, powers which are strictly and exclusively legislative. But Congress may
certainly delegate to otherspowers which the legislature may rightfully exercise
itself. [B,I,U added]
D. THE LENDING FUNCTIONS OF NATIONAL BANKS AND
FEDERAL SAVINGS ASSOCIATIONS ARE GOVERNMENTAL AND
NOT PROPRIETARY
In Federal Land Bank v. Bismarck Co. of St. Paul, 314 U. S. 95 (1941) the issue was
whether the lending functions were proprietary 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 federal
government 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.Graves v. New York ex rel. O'Keefe,306 U. S. 466, 306 U. S. 477. It also followsthat, when Congress constitutionally creates a corporation through which the
federal government lawfully acts, the activities of such corporation are
governmental. (cites)
As part of their general lending functions, the land banks are authorized to
foreclose their mortgages and to purchase the real estate at the resulting sale.
They are "instrumentalities of the federal government, engaged in theperformance of an important governmental function."(cites)
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Like federal land banks, the lending functions including foreclosures of federal savings
assns/federal savings banks, and National banks as federal instrumentalities, are no less
governmental than the land banks inBismarck.
It is well settled that the enabling Act, Home Owner Loan Act (HOLA) is constitutional.
Pittman v. Home Owners' Loan Corp.,308 U. S. 21. InPittman, the court said:
that the activities of the Corporation through which the national
government lawfully acts must be regarded as governmental functions, and
as entitled to whatever immunity attaches to those functions when performed
by the government itself through its departments. (cite) [B added]
E. CITIBANK & CITIMORTGAGE ARE FEDERAL INSTRUMENTALITIES
FOR THE PURPOSE OF ATTACHING THE CONSTITUTIONAL
OBLIGATIONS UNDER THE 5TH AMENDMENT
Can the government divest itself of its identity with a corporation created and participated
in for a public purpose sufficiently to allow the corporation to use a procedure that does not
allow procedural due process? That question was asked, and answered in Lebron v National
Railroad Passenger Corporation. 513 U.S. pgs 374, 375, when the court clarified and expanded
the definition of federal actor. The court said:
c) There is a long history of corporations created and participated in by the United
States for the achievement of governmental objectives. Like some other
Government corporations, Amtrak's authorizing statute provides that it
"will not be an agency or establishment of the United States 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
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not for Congress to make the final determination of Amtrak's status as a
Government entity for purposes of determining the constitutional rights of
citizens affected by its actions. The Constitution constrains governmental action
by whatever instruments or in whatever modes that action may be taken
(e) Amtrak is an agency or instrumentality of the United States for thepurpose of individual rights guaranteed against the Government by theConstitution. This conclusion accords with the public, judicial, and congressionalunderstanding over the years that Government-created and -controlled
corporations are part of the Government itself.(cites) ; A contrary holding wouldallow the government to evade its most solemn constitutional obligations by
simply resorting to the corporate form, (cites[B,I,U added]
Like Amtrak, national banks including CITIBANKand its operating subsidiary
CITIMORTGAGE, as well as federal savings associations are federal instrumentalities. The
banks are members in banking systems created to advance the governments economic public
goals, and controlled through the directors of The Comptroller of the Currency and The Office
of Thrift Supervision respectively. Like Amtrak it is not for Congress to make the final
determination of the status of these corporations as government entities for purposes of
determining the constitutional rights of citizens affected by its actions. Homeowners are citizens
whose constitutional rights are affected when non- judicial foreclosures are exercised by
federally chartered corporations like National banks and federal savings associations . 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 corporation it creates for an
important governmental function. It must follow that with the immunities from taxation and
state laws that frustrate the activities of corporations for which acts of Congress were enacted
preempting state laws, the constitutional obligations of the government must also attach. For
as Justice Scalia said inLebron,at p. 399:
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.
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InLebron, respondent also invoked the courts decision in theRegional Rail
Reorganization Act Cases,419 U. S. 102 (1974), which found the 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]heresponsibilities 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," ibid.-which contrasts
with the public interest "goals" set forth in Amtrak's charter, see 45 U. S. C. 501a.Amtrak is worlds apart from Conrail: The Government exerts its control not as a
creditorbut 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 corporationbythe 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 a
policymakerand not as a creditor as in Conrail. The elements which led the court inLebron to
attach the constitutional obligations of the 1st amendment to the corporation can also be
attributed against CITIBANKand CITIMORTGAGE in attaching its 5th amendment
obligation to this case 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 and implemented through the Necessary and Proper
Clause. Thus the governments control through the regulatory agencies is as a policymaker
where control would never terminate upon any term certain. Control of the operations is
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exercisedby the directors of the Office of the Comptroller of Currency and the Office of Thrift
Supervision respectively, independent federal regulatory agencies vested with plenary
authority to administer the National Bank Act of 1864 (NBA) and the Home Owners' Loan Act
of 1933 (HOLA). The Director of the Comptroller of the Currency is appointed by the
President, by and with the advice and consent of the senate.(12 USC 2) The Director of the
OTS is appointedby the President, by and with the advice and consent of the senate. (12 USC
1462c) The Court in Easton explains the governments control when the court said:
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.
In federal savings associations the government control is clarified in Fidelity Fed. S. &
L. v. De la Cuesta, 458 U.S. 141 (1982) at p. 161 when the court said:
The broad language of 5(a) expresses no limits on the Board's authority toregulate the lending practices of federal savings and loans. As one court put it,
"[I]t would have been difficult for Congress to give the Bank Board a broader
mandate." [cites] And Congress' explicit delegation of jurisdiction over the"operation" of these institutions must empower the Board to issue
regulations governing mortgage loan instruments. [B,I,U added]
F. THE COLORADO FORECLOSURE LAW VIOLATES PLAINTIFFS
DUE PROCESS AND EQUAL PROTECTION RIGHTS
Under color of state lawThe Colorado Foreclosure Law,plaintiffs were foreclosed.
The Foreclosure law provides for a Public Trustee who is an agent of the state administering a
process that provides inadequate due process to homeowners. In doing so the state has so far
insinuated itself into a position of interdependence with the private entity that it must be
recognized as a joint participant in the challenged activity which is ajoint action between the
state of Colorado and CitiMortgage. Foreclosure of a deed of trust by public trustee's sale under
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the applicable statutes is activated by a power of sale in the deed of trust. Plaintiffs were
subjected to a rule 120 hearing limited to two issues:
a. the debtor is in default and, action collateral to such hearing is necessary to
resolve all other issues. Ragsdale Bros. Roofing v. United Bank, 744 P.2d 750 (Colo.App. 1987); In re Carpenter, 200 Bankr. 47 (D. Colo. 1996).
b. To establish the status of the debtor with respect to military service. Hastings v.
Security Thrift & Mtg. Co., 145 Colo. 36, 357 P.2d 919 (1960).
Borrowers who raise arguments that the Rule 120 hearing won't address, can file a
separate civil case. But those who go that route are quickly hamstrung by a requirement to post a
"supersedeas" bond in the amount of 125% of the mortgage debt, where national banks are
exempt from posting such bonds on appeal under the National Bank Act.(12 U.S.C. 91)
A Public Trustee is appointed by the Governor to serve in every county of the State of
Colorado. The Trustee is not required to be an attorney. Under rule 120 hearing (a non-judicial
hearing) there can be no appeal, nor a right to a jury trial. The homeowner has no right to raise
affirmative defenses. Standing is presumed in favor of the lender upon averments by the lender
or its attorney that the lender is a real party in interest.
In 1989 the Colorado Supreme Court passed ruled that a party seeking to exercise a
particular legal remedy must have standing which means that the party must OWN the legal
right to exercise a particular claim.Goodwin v. District Court, 779 P.2d 837 (Colo. 1989)
But, judges routinely accept less than certifiable proof to determine who is the real party
in interest. A copy of the original deed of trust and certificate of qualified holder which is a form
generated by the lenders attorney is all that lenders flash for the courts to determine. No
notarized assignment from one lender to another is required as proof.
InLINDSEY V. NORMET, 405 U. S. 56 (1972) the court said:
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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 toprovide 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. A rule 120
hearing does not provide a full and fair hearing, nor does it provide appellate review. The state
can deny one or the otherbut cannot deny both.
InJean C. Rosenfield vs HSBC Bank, USA & Stephanie Y. Omalley, Civil Action No.
10-cv-00058-MSK-MEH the court held:
A Rule 120 proceeding is not the equivalent of a civil lawsuit. It is notadversarial in nature; its orders are not final or appealable; the notice
procedures require only service by mail, nor formal process; its inquiry isconstrained to an extremely narrow issue; the standard of proof required is
nothing more than a reasonable probability; and the rule expressly reserves the
rights of parties to litigate the same issues (and others) in any other proceeding.Plymouth Capital, 955 P.2d at 1016; C.R.C.P. 120(d); United Guar. Resid. Ins.
Co. v. Vanderlaan, 819 P.2d 1103, 1105 (Colo. App. 1991). Moreover, the
findings of the Rule 120 court are not entitled to preclusive effect.Vanderlaan, id.
Thus, even if the Rule 120 court had entertained the Plaintiffs defense ofRescission, nothing that court found with regard to that issue would have finally
and conclusively resolved the parties rights on that question, and furtherlitigation in a traditional lawsuit would have been necessary to obtain an actualadjudication of the parties rights. Thus, one can hardly say that raising an issue in
a proceeding that is non-final and non-preclusive is the equivalent of asserting a
claim premised upon that issue so as to halt the running of the statute oflimitations.[B, U]
The due process problem arises when the bank claims it is a qualified holder of an
evidence of debt pursuant to C.R.S 38-38-101. If the foreclosing party is a qualified holder
(bank, financial institution, or public company), it may file a copy or the evidence without
proper indorsement or assignment, and the indorsement or assignment is deemed proper.
C.R.S. 38-38-101(6)(b). The qualified holder is also deemed to indemnify the homeowner in
the event another party later steps forward and asserts that it owns the debt:
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Foreclosure by qualified holder without original evidence of debt, original or
certified copy of deed of trust, or proper indorsement. (a) A qualified holder, whether acting
for itself or as agent, nominee, or trustee under section 38-38-100.3(20)(j), that elects to
foreclose without the original evidence of debt pursuant to subparagraph (II) of paragraph (b) of
subsection (1) of this section, or without the original recorded deed of trust or a certified copy
thereof pursuant to subparagraph (II) of paragraph (c) of subsection (1) of this section, or without
the proper indorsement or assignment of an evidence of debt under paragraph (b) of subsection
(1) of this section shall, by operation of law, be deemed to have agreed to indemnify and defend
any person liable for repayment of any portion of the original evidence of debt in the event that
the original evidence of debt is presented for payment to the extent of any amount, other than the
amount of a deficiency remaining under the evidence of debt after deducting the amount bid at
sale, and any person who sustains a loss due to any title defect that results from reliance upon a
sale at which the original evidence of debt was not presented. The indemnity granted by this
subsection (2) shall be limited to actual economic loss suffered together with any court costs and
reasonable attorney fees and costs incurred in defending a claim brought as a direct and
proximate cause of the failure to produce the original evidence of debt, but such indemnity shall
not include, and no claimant shall be entitled to, any special, incidental, consequential, reliance,
expectation, or punitive damages of any kind. A qualified holder acting as agent, nominee, or
trustee shall be liable for the indemnity pursuant to this subsection (2). Colo. Rev. Stat. Ann.
38-38-101(2).
But for the power of sale provision in the mortgage contract, plaintiffs would have the
benefits of a full trial on the merits in a court of competent jurisdiction with the right to raise
affirmative defenses as well as the right to a jury trial. Plaintiffs would be allowed discovery as
well as the right to cross examine witnesses and a right to appeal.
As a procedure that denied plaintiffs due process, the rule 120 order of foreclosure would
be void. Eckel v. MacNeal, 628 N.E.2d 741 (Ill. App.Dist. 1993)
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InLINDSEY V. NORMET, 405 U. S. 56 (1972) the court held that the posting of a
double bond violated the Equal Protection Clause. The court said:
. The double bond prerequisite for appealing an FED action does violate the Equal
Protection Clause, as it arbitrarily discriminates against tenant wishing to appealfrom adverse FED decisions. It heavily burdens the statutory right of an FED
defendant to appeal, and is not necessary to effectuate the State's purpose ofpreserving the property at issue. Pp. 405 U. S. 74-79.
Like the bond requisite inLindsey, which was held discriminatory against a tenant
wishing to appeal from adverse FED decisions, the requirement of a supersedeas bond is also
discriminatory[cr civil procedure 62(d)]; and ColoradoRule Change 2005 (13)CC Rules of
Civil Procedure Chapter 1, (3) Bond Amount] which states:
Supersedeas Bonds. Unless the court otherwise orders, or any applicable statute
directs a higher amount, the amount of a supersedeas bond to stay execution of
a money judgment shall be 125% of the total amount of the judgment
entered by the court (including any prejudgment interest, costs and attorneys
fees awarded by the court). The amount of a supersedeas bond to stay executionof a non-money judgment shall be determined by the court.[B,U added]
Thus the bond requirement in order to file a stay for the homeowner to stay in his home
while pursuing a collateral action should be declared a violation of the Equal Protection Clause.
G. EVICTION DUE TO A POWER OF SALE FORCLOSURE IS A MALICIOUS
ABUSE OF PROCESS AND A DENIAL OF PROCEDURAL DUE PROCESS
ACTIONABLE FOR DAMAGES UNDER 42 US 1983.
After wresting the right of title from plaintiffs through the power of sale foreclosure
CITIBANK, acting through its subsidiary CITIMORTGAGE filed an FED action to wrest the
right of possession. The eviction should be viewed against the backdrop of the power of sale
foreclosure. 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-
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judicial foreclosure is a malicious abuse of process and by definition a denial of procedural
due process and the final step under color of state law in furtherance of the deprivation by
CITIBANKand its subsidiary CITIMORTGAGE begun by the power of sale foreclosure.
Jennings vs. Shuman, 567 F.2d 1213 (3rd
). Two events but one transaction to complete the
deprivation of due process. Thus, an action for damages under 42 US 1983 lies as a remedy to
plaintiffs who has been deprived of due process under color of state law.
H. CITIBANK IS LIABLE FOR THE ACTS OF ITS SUBSIDIARY
CITIMORTGAGE is an operating subsidiary of CITIBANK. As an operating
subsidiary the OCC has treated operating subsidiaries as an incorporated division or
department of the parent bank. On January 16th, 2003, Julie I. Williams, First Senior Deputy
Comptroller and Chief Counsel, issued an interpretive letter(#971) stating the OCCs position:
Because the activities of an operating subsidiary are limited to activities inwhich the parent bank could engage directly, an operating subsidiary is in
practice a separately incorporated division or department of the parent bank
Exhibit 1, OCCS Interpretive letter #971)[B added]
Being a separately incorporated division or department of the parent bank is inconsistent
with CITIMORTGAGE being a separate entity from its parent corporation CITIBANK.
CITIMORTGAGE is in effect an instrumentality ofCITIBANKby which CITIBANK
conducts the business of banking. 24(SEVENTH) (See also Watters 05-1342 at p. 15, when
the court said: For the past four decades operating subsidiaries have emerged as important
instrumentalities of national banks)
The regulations 12 cfr 5.34 et seq. shows the close relationship of the two entities.
(c) Scope. This section sets forth authorized activities and application or notice procedures fornational banks engaging in activities through an operating subsidiary.
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(e) Standards and requirements(1)Authorized activities. A national bank may conduct in an
operating subsidiary activities that are permissible for a national bank to engage in directly either
as part of, or incidental to, the business of banking, as determined by the OCC.
(A) The bank has the ability to control the management and operations of the subsidiary
(B) The parent bankowns and controls more than 50 percent of the voting (or similar type of
controlling) interest of the operating subsidiary, or the parent bank otherwise controls theoperating subsidiary and no other party controls more than 50 percent of the voting (or similartype of controlling) interest of the operating subsidiary; and
(C) The operating subsidiary is consolidated with the bankunder Generally Accepted
Accounting Principles (GAAP).
( 3 ) The bank ( i ) Has the ability to control the management and operations of the subsidiary byholding voting interests sufficient to select the number of directors needed to control the
subsidiary's board and to select and terminate senior management. [B,I,U]
Thus, the regulations blur the distinction between CITIMORTAGE and its parent.
A handful of courts have imposed liability on the parent corporation on the parents
ability to control its subsidiary. Thus inIdaho V. Bunker Hill, 647 F. Supp. 1064, 1068.
(D.Id.1986)and U.S. V. Nicolet,857 F.2d 202 federal district courts found that while employees
of the parent companies did not actually exercise control over hazardous waste activities, the
parent corporations were familiar with the practices and had power to control both the disposal
and resulting release of the hazardous substances as well as the ability to abate the
contamination. The United States Court of Appeals for the Eleventh Circuit ruled that degree of
control required to impose operatorliability on a parent depended on whether the parent was
involved in the same business as the subsidiary.Jacksonville Electric Authority v. Bernuth
Corp , 996 F.2d 1107 (11th Cir.1993). Even though CITIBANKdidnt foreclose on plaintiffs
directly, CITIBANKwas familiar with the practice and had the ability to constrain the practice
of foreclosure by CITIMORTGAGE and was engaged in the same business.
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V. CONCLUSION
The issue called upon for the court to determine is whether federal instrumentalities, like
CITIBANKand CITIMORTGAGE, could put a provision in a mortgage contract which could
subject a homeowner to either no hearing as in California, or if a hearing like rule 120 in
Colorado which does not allow a full and fair hearing nor a right to appeal. It is clear from
Supreme Court decisions that a law of the United States has to authorize what they did, and the
acts of the banks cannot be sanctioned where the government cannot exercise the right
themselves and where procedural due process cannot be provided. The power of sale provision
not only acts as a waiver of a homeowners rights but as a means to evade the governments
obligations under the Constitution. A proposition that the court found repugnant inLebron.
The rationale inLebron which held Amtrak to the same proscriptive requirements as that of the
government for the purpose of a 1st amendment violation is present in this case with respect to a
5th amendment violation by defendants CITIBANKand CITIMORTGAGE as federal
instrumentalities created for public and national purposesthe advancement of the government
economic goals under the mandate of the Commerce Clause. Control by the government is as a
policymakerwhere control will nevershift upon any term certain.
The fact that a provision is put in the mortgage contract should not be used to validate its
own existence for such a right is subject to the authority of the National Bank Act and by
implication the Constitution of the United States for its very existence. For as the court in
Runyan said: the corporation must show that the law of its creation gave it authority to make
such a contract. The Colorado Foreclosure law which allows the use of Public Trustees
demonstrates a significant participation on the part of the state in the non-judicial foreclosure
process. Thus State action is clearly present. Measured against the Colorado unlawful
detainer, rule 120 hearing is but a shadow of the rights due citizens when such substantive rights
of property are involved. It thus follows that Plaintiffs eviction pursuant to the power of sale
foreclosure was a malicious abuse of process and by definition a denial of procedural due
process., Jennings, supra
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The subject corporations cited share a common heritage with CITIBANK. They are
corporations federally chartered and created under acts of Congress for important public and
national purposes for which the Supreme Court has ruled on that premise in a number of cases
that their activities weregovernmental. Thus inBismarckthe Court ruled that the lending
functions weregovernmental notproprietary; and thatforeclosure was part of the general
lending functions. In Lebron, the Court ruled that the corporation was part of the
government for the purpose of determining its constitutional obligations toward the rights of
citizens affected by its actions. The decision inBismarckandPittman which rested on the fact
that the activities of the corporation were governmental for the purpose of protecting the
corporations privileges and wereentitled to whatever immunity attaches to those
functions when performed by the government itself through its departments was equally
applied inLebron to the corporations constitutional obligations when it affected the rights of its
citizens as if it were when performed by the government itself through its departments .
The settled principles enunciated by these Supreme Court cases which are now established
under the doctrine ofstare decisis lead to one conclusion--- that National banks like
CITIBANKacting through its subsidiary CITIMORTGAGE and federal savings associations
use of a power of sale foreclosures must be governmental acts and a 5th amendment violation of
due process. Add a state Public Trustee to the 120 hearing to the equation and a violation under
color of state law breeds a 14 th Amendment claim under 42 US 1983.
Traditionally, it is the national governments exclusive role to promote the economic
health of the nation through the Commerce Clause. It does so by creating instrumentalities like
national banks giving them the powers to advance the public economic goals. Thus CITIBANK
as a national bank, and CITIMORTGAGE are performing a public function. The use of a
public Trustee to foreclosures in a rule 120 hearing by these lenders is a clearlyjoint action.Thus the public function and thejoint action is sufficient to subject the challenged activity to
constitutional limitations. Lynne Huxtable & Jeffrey A. Agnew v. Timothy F. Geithner, et
al., Case No. 09cv1846 BTM(NLS).
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Clearly CITIBANKis liable for the acts of its subsidiary CITIMORTGAGE which is
as the OCC has determined an incorporated division or department of the parent bank.
Plaintiffs were subjected to a rule 120 hearing which was less than a full and fair hearing
on the merits without a right to appeal and a supersedeas bond requirement too burdensome
and impossible to obtain. Thus, even underLindsey would qualify as a denial of due process, and
the Equal Protection Clause. The order of foreclosure should be considered void.
Constitutional powers conferred on a corporation should not be used to produce an
unconstitutional result. As was written in FIRST NATIONAL BANK OF BAY CITY V.
FELLOWS, 244 U. S. 416 (1917) when the court said at pgs 419, 420:
"We admit, as all must admit, that the powers ofthe government are limited,and that its limits are not to be transcended., with respect to the means bywhich the powers it confers are to be carried into execution, which will enable
that body to perform the high duties assigned to it in the manner most beneficial
to the people. Let the end be legitimate, let it be within the scope of the
Constitution, and all means which are appropriate, which are plainly
adapted to that end, which are not prohibited, but consist with the letter and
spirit of the Constitution, are constitutional. [B,I]
The right to procedural due process in a mortgage contract cannot be waived; otherwise
the government would be allowed to evade its most solemn obligation under the Constitution.
Respectfully submitted,
___________________ Date:___________, 2011
MASON L. RAMSEY
_________________ Date:___________, 2011
Judith Mae Neville
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Cases
Apaov. San Diego Home Loans, Inc.,324 F3d 1091, Ninth Circuit (2002)........1, 5
Bank of America et al v City of San Francisco et al309 F.3d 551 (Ninth Circuit)
(2002)......................................................................................................................1
Bryant v. Jefferson Fed. Sav. & Loan Assoc., 166 U.S.App.D.C. 178, 509 F.2d
511.......................................................................................................................1, 5
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Bunker Hill, 647 F. Supp. 1064, 1068. (D.Id.1986)..............................................18
Charmicor, Inc. v. Deaner, 572 F.2d 694 (9th Cir. 1978);..................................1, 5
Conference ofFederalSavings and LoanAssociations et alv.Alan L. Stein et
al. 604 F.2d 1256 (9th Circuit) (1979)...................................................................1
Easton v. Iowa,188 U.S.220 (1903)..........................................................................6
Federal Land Bank v. Bismarck Co. of St. Paul, 314 U. S. 95 (1941)...................9
Federal National Mortgage Association v. Howlett, 521 S.W.2d 428 (Mo. en banc
1975).......................................................................................................................5
Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. 141 (1982................................1, 13
FIRST NATIONAL BANK OF BAY CITY V. FELLOWS, 244 U. S. 416.........1
Fuentes v. Shevin, 407 U.S. 67 (1972).................................................................1, 4
Gerena v Puerto Rico Legal Services, Inc., 697 F. 2d 447(1st Cir. 1983)...............9
Goodwin v. District Court, 779 P.2d 837 (Colo. 1989)............................................1
In Acron Investments, Inc.et al v Federal Savings and Loan Insurance
Corporation , 363 F.2nd 236 (9th Circuit, 1966)......................................................7
Jennings vs Shuman, 567 F.2d 1213 (3rd).............................................................16
Johnson v. United States Department of Agriculture, 734 F.2d 774(11th circuit,
1984).......................................................................................................................5
LINDSEY V. NORMET, 405 U. S. 56 (1972)........................................................15
McCullough v Maryland, 17 U.S. 316(1819),.........................................................7
M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 325-26, 426-27, 4 L.Ed. 579
(1819),.....................................................................................................................1
National Banks and the Dual Banking System(2003)...............................................4
Northrip v. FNMA, 527 F.2d 23 (6th Cir. 1975)...................................................1, 5Osborn v Bank of United States, 22 U.S.738 (1824)...........................................1, 6
Pittman v. Home Owners' Loan Corp., 308 U. S. 21........................................1, 10
Regional Rail Reorganization Act Cases, 419 U. S. 102 (1974)...........................12
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Regional Rail Reorganization Act of 1973, 301, 87 Stat. 1004.......................5, 12
Runyan v. Lessee of Coster, 39 U .S. 122 , p. 129 (1840).......................................6
Shoshone Mining Co. v. Rutter, 177 U.S. 505.........................................................6
United States v Grimaud, 220 U.S. 506 (1911).1,9
v. Bernuth Corp , 996 F.2d 1107 (11th Cir.1993)..................................................18
V. Bunker Hill, 647 F. Supp. 1064, 1068. (D.Id.1986).........................................18
Warren v. GNMA, 521 S.W.2d 441 (Mo. en banc 197........................................1, 5
Watters v Wachovia292 U. S. 559...................................................................1, 2, 3
Statutes
42 US 1983................................................................................................................2
Home Owners' Loan Act of 1933..............................................................................1
National Bank Act...................................................................................................13
The Colorado Foreclosure Law........................................................................1, 13
The Home Owners' Loan Act of 1933.......................................................................1
Other Authorities
, OCCS Interpretive letter #971.........................................................................17
National Banks and the Dual Banking System(2003) p. 3........................................4
Rules
24(SEVENTH..........................................................................................................17
Easton v. Iowa,188 U.S.220 (1903).................................................................passim
F.R.C.P. 12 (b)(6)......................................................................................................1
Fuentes v. Shevin, 407 U.S. 67 (1972)..................................................................4, 5
rule 120 hearing.........................................................................................................2v........................................................................................................................passim
Constitutional Provisions
14th Amendment.......................................................................................................16
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5TH AMENDMENT..................................................................................................1
MEMORANDUM OF POINTS & AUTHORITIES
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