In Higgins, et al. v. BAC Home Loans, et al., a case filed in the Fayette Circuit Court, Higgins and other property owners sought statutory damages under KRS 382.360 for the failure of their mortgage holders to file an assignment of them mortgages in the county clerk’s office. The promissory notes held by the originating lenders were clearly transferred to others and monitored and serviced through the MERS system, but the defendants argued that the “transfer of the note” was not a transfer of the mortgage and therefore the statutory obligation to file an assignment was never triggered. This position was inconsistent with the last 75 years of caselaw in Kentucky. The various mortgage holder defendants (such as Bank of America, Chase, Wells Fargo and US Bank) argued that their actions were not subject to the statute because a transfer of the note is not a transfer of the mortgage — yet the mortgage is nothing without the note; it is merely the securitization of the note. The defendants removed the case to federal court and filed motions to dismiss. The US District Court for the Eastern District of Kentucky rendered a lengthy and learned opinion finding that not only that the defendants had no grounds for dismissal but that the statute did apply to their transfer of the notes. See Doc 73, Opinion and Order. USDC EDKy regarding US Bank, March 31, 2014. and Doc 74, Opinion and Order. USDC EDKy regarding FNMA FHFA, March 31, 2014, and Doc 75, Opinion and Order. USDC EDKy regarding BOA et al , March 31, 2014.
The defendants then filed an interlocutory appeal to the US Court of Appeals, a procedure that requires the permission of the district court and of the appellate court. The United States Court of Appeals for the Sixth Circuit in its opinion simply “re-wrote” the Kentucky statute in question and made clear that the Kentucky law does not mean what it says. Read the USCA 6th Circuit Opinion entered July 15, 2015. See Doc 48-2 . The Court of Appeals further directed the homeowners’ case dismissed yet the homeowners had plead others grounds for statutory violations by the defendants that were never addressed or appealed by the defendants. The district court had no choice but to dismiss the balance of the homeowners’ case on remand given the language of the opinion from the Sixth Circuit and the homeowners appealed that dismissal. In an opinion oozing with the arrogance that can only come from a federal appellate court, the dismissal was affirmed. Thus, with a stroke of the pen, the federal court system has stricken from the Kentucky statutes what our state legislators presented, voted on and passed through the General Assembly in KRS 383.360 and some 75 years of Kentucky caselaw that held the transfer of the note takes with it the mortgage.
