Category Archives: Legal

Key Components of Prenuptial Agreements! Important Provisions in Well Drafted Premarital Agreements

Under what circumstances should a prenuptial agreement be considered in Rhode Island?

Premarital agreements are not right for every couple! Prenuptial agreements are most prevalent in second marriages. They are especially prevalent in first or second marriages when one or both of the parties have children of a prior marriage or relationship. They are also prevalent when a future spouse has a child or children from a prior relationship.

This article only pertains to prenuptial agreement drafted in Rhode Island or that will be interpreted by Rhode Island law.

Is there any difference between a prenuptial and a premarital agreement?

Premarital agreement, antenuptial agreement and prenuptial agreement are all different terms for the same document and are used interchangeably.

Preserving assets for children.

When a person has a child from a different relationship and is considering a marriage, he / she often wants to insure that his / her child will inherit hard earned assets. A person wants to insure that their assets will go to their children rather than their new spouse or the new spouses’ children.

Many parents fear that their hard earned assets that were acquired before the marriage will go to their new spouse or his / her children upon divorce or death rather then their own child.

Estate planning can be a crucial element of a good prenuptial agreement!

Without protection through estate planning, will, trust or a prenuptial agreement, a substantial portion of your separate assets may go to your new spouse upon divorce or upon your death. Estate planning can also be a very important element in premarital agreements. I strongly advise that you retain a Rhode Island (RI) Divorce and Family law attorney / lawyer to draft or represent you concerning the execution of the premarital agreement.

Prenuptial agreements are often entered into when either husband or wife has acquired significant premarital “separate” property / assets. In many cases, one of the spouses will have a more substantial estate then the other spouse.

Be careful! The suggestion of a Prenuptial can be an emotionally charged issue!

Tread very carefully when suggesting a premarital agreement with your future spouse especially in a first marriage!

Often, your future husband / wife will be very upset with the suggestion that they should sign a premarital agreement. This is a very delicate subject. It could potentially imperil the entire relationship. Some people feel that premarital agreements run contrary to the marriage covenant. Others are against prenuptials because they believe that in essence, it is planning for divorce when marriage is ideally forever.

Negotiate the prenuptial well in advance of the wedding!

It is a very bad idea to suggest a prenuptial at the last minute. You should propose the prenuptial well in advance of the wedding. The last thing you want to do is negotiate a complex contract a week or two before the wedding. It can be unseemly to be contacting a lawyer / attorney right before the wedding and can put unfair pressure on your spouse.

What are standard provisions put into a simple prenuptial agreement?

The most standard prenuptial agreements simply protect a person’s separate premarital property. In many instances the parties waive all right title and interest to the premarital property of the other party. The prenuptial agreement should also address issues concerning the appreciation in value of premarital property during the course of the marriage. The prenuptial should address additions to the premarital property after the wedding. The prenuptial should also address when premarital property is used to purchase other property during the course of the marriage.

The most simple, prenuptial agreements simply state that all property that the parties owned prior to the marriage would be their separate property free and clear of all claims of the other party. In this scenario any property acquired after the marriage would be marital property subject to equitable distribution. This type of prenuptial should also address the issue of the increase in value of premarital property.

Some prenuptial agreements go even farther and state that property acquired in an individuals name during the course of the marriage would be separate property that the other party would have no rights to upon divorce or death. The enforceability of such a provision is tenuous at best.

Prenuptial agreements can essentially state any provisions that the parties desire and the law allows.

What are the most important elements of a good antenuptial agreement?

The most important facet of a good premarital agreement is clarity. The second must important facet of a prenuptial is complete and full disclosure.

Both parties must disclose all assets and liabilities.

If the parties have not disclosed material and substantial assets and liabilities, the prenuptial may not be enforceable. Husband and wife should attach a financial statement as an exhibit to the prenuptial. If the parties do not properly disclose their assets and liabilities, then it is questionable whether the parties agreed to anything because they do not know what they were agreeing to.

Are both the prospective wife and husband required to get an attorney / lawyer?

No. The parties are not required to have an attorney / lawyer to review the prenuptial in Rhode Island(RI). Prenuptial agreements are still valid and enforceable even if one of the parties had an attorney draft the agreement and the other party did not have a lawyer review the agreement.

Defining Separate Property:

The parties need to define what constitutes separate property and whether separate property includes additions, increase in value (appreciation) of separate property. The parties need to address the reinvestment of the separate property into another asset during the course of the marriage.

Retirement Accounts, 401k, 403(b), pensions

You may consider a provision concerning 401k, 403(b), Stock Options, Pensions, Retirement Accounts as well as the increase in value, additions and or reinvestments of such retirement accounts after the marriage. In order to waive marital rights to certain retirement accounts you may need a provision under IRS guidelines agreeing that your spouse will sign appropriate forms to waive or relinquish spousal benefits.

Waiver of Alimony

Some premarital agreements require one or both spouses to waive their rights to alimony or temporary alimony. This can be a crucial portion of a prenuptial agreement. This is often also the most contentious area of negotiations.

Real estate

Some premarital agreements address issues concerning Real Estate especially separate real estate of the parties. You want to discuss with your lawyer whether or not your spouse will be agreeing to waive their right to elect against the will of the other upon death and waive the statutory life estate. This is very important in Rhode Island. You may want to consider putting the real estate in trust. This is all very complicated and should not be done without an attorney

Jointly Held – Marital property.

You need to consider whether you want the agreement to include how marital property will be divided upon divorce. Some people agree that all marital property will be divided 50/50 upon divorce or separation. Other agreements are silent on this issue.

Choice of Law:

The parties should state under which law the prenuptial agreement should be interpreted. If the parties reside in Rhode Island then they should have Rhode Island law apply in the future.


Will each party be responsible for separate premarital debt. Who will be responsible for joint premarital debt? Will the parties agree to split joint marital debt 50-50? Who will pay individual / sole debt incurred during the marriage?

Life Insurance

Is either party agreeing to maintain a life insurance policy for the benefit of the other spouse? This is often done as a way to make sure the spouse will collect upon death even if the person’s estate plan otherwise excludes the spouse. Will the life insurance be required to be maintained after the divorce or separation?


Who will get to keep gifts between the parties? What will happen to joint gifts or gifts given to one person but not the other. Who will get the engagement ring, wedding band, jewelry, art etc?

Severability clause

Most good premarital agreements contain a severability clause such as the one set forth here: “SEVERABILITY. If any provision of this Agreement is held to be invalid or unenforceable by a Court of competent jurisdiction, this Agreement shall be construed as if such illegal, invalid or void provision were not a part hereof and the validity of the remaining provisions shall be unaffected thereby.”

Legal fees upon divorce. Will either party be required to pay the others legal fees as part of the divorce?

Some prenuptial agreements address the issue of legal fees in a potential divorce.

Acknowledgments of counsel or the opportunity to retain a lawyer and acknowledgment that agreement is freely and voluntarily entered into.

It is important that the parties acknowledge that they carefully read the agreement, that they signed it freely and voluntarily and that they believe that the agreement is fair and equitable to them.

Many agreements contain a paragraph similar to this: ACKNOWLEDGMENT. The parties have, during a series of conferences between themselves, mutually agreed upon the arrangements set forth herein. Each party hereto declares that he or she has had the opportunity to seek independent legal advice by counsel of his or her own selection and that each is satisfied as to this agreement’s fairness. The wife has retained Attorney X to represent her. The provisions of this Agreement and their legal effect have been fully explained to the parties and each party acknowledges that he and she believes the Agreement is fair and equitable, and is freely and voluntarily entered into.

Integration and modification provision.

It is crucial that there are no side agreements or verbal agreements outside of the four corners of the documents. An integration clause is an important facet of a prenuptial agreement.

Cooperation provision

A Cooperation provision is essential to a good antenuptial agreement.

“COOPERATION. The parties hereto shall at any time, and from time to time, execute and deliver all such deeds and other documents as may be necessary, and do all such things as the other of them, his or her heirs, executors or administrators shall reasonably require for the purpose of giving full effect to this Agreement. Each of the parties hereto shall release and quitclaim unto the other, or to such others as he or she respectively may request, all of his or her rights of courtesy or of dower. It is the intention of this clause to permit and empower each of the parties hereto to deal with his or her own separate property now owned or hereafter acquired, in all respects, except as limited by this Agreement, as if each party hereto were single.”

Disclosure Provision

“DISCLOSURE. Each of the parties has made a full disclosure to the other of all property, assets and liabilities owned or otherwise held by each respective party, as listed in Exhibits “A,” “B,” “C,” and “D” attached hereto. The parties hereby acknowledge that they are aware that in the future the financial circumstances of either or both of them may be altered in some way, whether substantially, directly, indirectly or otherwise.”

Notary and Attestation of Counsel.

The agreement must be signed in front of a notary and if the parties both have attorneys they may want to include an attestation of counsel paragraph that both lawyers sign.

Article by David Slepkow 401-437-1100

Rhode Island Attorneys legal Notice per RI Rules of Professional Responsibility:

The Rhode Island Supreme Court licenses all lawyers in the general practice of law, but does not license or certify any lawyer or attorney as an expert or specialist in any field of practice.

David Slepkow is a Rhode Island Lawyer concentrating in divorce, family law, restraining orders, child support, personal injury law, child custody and visitation. David has been practicing for over 10 years and is licensed in Rhode Island, Massachusetts and Federal Court. Free initial consultations. You can contact attorney David Slepkow by going to Rhode Island Divorce Family Lawyer

Can a Legistor Cross Carpet and Still Keep His Seat Under Nigerian Law?

Our chief concern here is to discuss the legal consequences of the current spate of party defection by members of the Peoples Democratic Party (PDP) to the All Progressive Congress (APC).

We shall leave the task of recounting Nigeria’s history on carpet crossing to historians and shall not be bordered by it. We shall also not allow ourselves to be drawn into arguments as to the morality/propriety of carpet crossing.

The media is awash with the news of the defection of 37 PDP members of the House of Representatives to the APC. Already, five PDP governors have dumped the party for the APC. The collapse of the PDP as the ruling party in Nigeria and as Africa’s biggest political party seems imminent as unconfirmed reports say that twenty-two senators are planning to also dump the party for the APC.

Nigerian law on carpet crossing begins and ends with the provisions of Sections 68(1)(g) and 109(1)(g) of the 1999 Constitution of the Federal Republic of Nigeria. These sections provide that:

“a member of the Senate or House of Representatives or State House of Assembly shall not vacate his seat in the House of which he is a member if being a person whose election into the House was sponsored by a political party, he becomes a member of another political party before the expiration of the period for which the House was elected.

Provided that his membership of the latter political party is not as a result of a division in the political party of which he was previously a member of a merger of two or more political parties by one of which he was previously sponsored.”

It is interesting to note that unlike the purport of above provisions, Sections 135 and 180 of the said Constitution which provides for circumstances under which the President or his Vice, and a Governor or his Deputy could cease to hold office does not mention party defection as a ground for vacating or ceasing to hold office.

From the above provisions therefore, Nigerian law on carpet crossing could be summarized as follows:

1. A Legislator in Nigeria could lose or vacate his seat in parliament if he defects from the party that sponsored him into the Legislative House to another party.

2. A Nigerian Governor, Deputy Governor, President or Vice President cannot vacate or cease to hold office for defecting from the political party that sponsored him into office to another.

3. Before a Legislator in Nigeria could be made to lose his seat in parliament for defecting to a party other than the one that sponsored him into the House, the principal officer of that Legislative House( the Senate President, the Speaker of the House of Representatives or the Speaker of the State House of Assembly as the case may be) or a member of that Legislative House must first present evidence satisfactory to the Legislative House concerned that a member has defected from the political party that sponsored him into the House to another political party and has by operation of law vacated his seat in Parliament.

4. It follows from the above that if there is no satisfactory evidence presented to the Legislative House on a member’s defection, the member who is alleged to have defected can still retain his seat. He will however continue to be known and addressed as a member of the party that sponsored him into the House.

5. A Legislator in Nigerian can cross carpet to a party other than the one that sponsored him into the House and still keep his seat if he can prove that his defection was as a result of a division within his former party.

6. Also, a Legislator in Nigeria will not lose/vacate his seat even though he has defected from the party sponsored him to another party if he can prove that his membership of a new party is as a result of a merger of two or more political parties or factions by one of which he was previously sponsored.

The position that while a Legislator in Nigeria is liable to lose his seat in parliament for cross carpeting to another party, the President, Vice President, Governor or Deputy Governor is not liable and cannot be forced to vacate or cease to hold office for the same reason was endorsed by the Nigerian Supreme Court in the case of AGF V. Atiku Abubarkar (2007)4 S.C (pt.11)62 where the issue before the court was whether the Vice President’s defection from the PDP( on whose platform he was elected into office) to the Action Congress of Nigeria(ACN) meant that he had automatically vacated and ceased to hold that office.

The Supreme Court held that it is only Legislators that are liable to vacate their seats in parliament for defection to a different party from the one that sponsored them into office. The supreme held that the constitution does not envisage or provide for the vacation /cessation of the office of the President, Vice President, Governor or Deputy Governor for defection from the party that sponsored them into office to another party. The Apex court held therefore that Vice-President Atiku Abubarkar was entitled to keep and/or in office even though he had effected from the PDP to the ACN.

Again, the position that a legislator may lose his seat in parliament for cross carpeting to another political party has been affirmed by the court in some decisions. For instance, the Federal High Court of Nigeria sitting in Akure in the case of Hon. Ifedayo Sunday Abegunde v. The Ondo State House of Assembly & Ors. sacked Mr. Abegunde, a House of Representatives member representing Akure North and South, Ondo State for defecting from the Labour Party to the ACN. Mr Abegunde had been elected into the House under the auspices of the Labour Party in the April 2011 General Elections. He however, defected to the ACN during the currency of the tenure of the House. The court held that Mr Abegunde had vacated his seat and ceased to be a member of the House by operation of law. This decision was affirmed and upheld by the Court of Appea in Re Hon. Ifedayo Sunday Abegunde v. The Ondo State House of Assembly & Ors. (2014) LPELR-23683(CA),Appeal No.CA/AK/110/2012.

Again, in the case of Hon. Michael Dapialong v. Chief (Dr) Joseph Chibi Dariye, Appeal No. S.C 39/2007 the Supreme Court took judicial notice of the fact that between 25th and 26th July,2006, fourteen members of the twenty-four members of the Plateau State House of Assembly including the Speaker and the Deputy Speaker thereof defected from the PDP platform on whose they were elected to the House in 2009 to the Advanced Congress of d Democrats(ACD) as a result of which the said 14 members were held to have vacated their seats by operation of law.

Relying on the Supreme Court decision in AGF V. Atiku Aburbakar therefore, we can safely conclude that the five PDP Governors that had defected to the APC can validly do so without being liable to vacate or cease to hold their offices. This is because the Constitution simply does not penalize the President, Vice President, a Governor or Deputy Governor who dumps the party that sponsored him into office for another party. Also, unlike Legislators, these members of the executive arm of Government are not required to proffer explanations or reasons to justify defection.

However, some persons have argued that even though the Constitution does not penalize defection by Governors, the Supreme Court decision in Rotimi Amaechi v INEC Appeal No. SC 525/2007 could be relied upon to effect the vacation from office of Governors who defect from the parties that sponsored them into office to another political party before the expiration of their tenure. Acording Mr Dan Nwayanwu, Chairman of the Labour Party of Nigeria, the Supreme Court’s dictum in Amaechi’s Case to the effect that it is the political party and not the candidate for which the electorate cast their votes could be interpreted and applied to mean that Governors who get elected into office only to dump the party that sponsored them into office for another party should vacate or cease to hold office upon defection.

Mr Dan Nwamyawu in an interview granted to Sunday Trust Newspapers in 2007 advocated that Governors who defect to parties other than the ones that sponsored them into office should be kicked out of office on the basis of the decision in Amaechi v. INEC. We humbly disagree with this position. This is because the Constitution does not impose any penalty or legal disability on carpet crossing by Governors. Secondly, the Supreme Court in Amaechi’s Case did not decide the issue of the consequence of a Governor’s defection from his party. Rather, the question in Amaechi’s case was whether a person who did not contest an election could be heard to challenge an election or be declared as Governor. The decision in AGF V. Atiku Abubarka for all intents and purposes remains the authoritative exposition of the law on party defection in Nigeria.

It is by now beyond doubt that the five PDP governors who had defected to the APC are entitled to do so without any attendant penalty or legal disability. But can the same be said of the 37 members of the House of Representatives members who have defected to the APC? Can they validly dump the PDP for the APC without losing their seat in parliament?

By a letter addressed to the Speaker of the House of Representatives, titled ‘Communication of Change of Political Party’ and dated the 18tth December, 2013, the 37 defecting Federal Lawmakers explained that their defection from the PDP to the APC was as a result of the internal crisis within the PDP. The Lawmakers also premised their defection from the PDP to the APC on the fact that the PDP has broken into two factions: the New PDP and the Old PDP. The so-called New PDP consisting of the dissatisfied and disgruntled members of the party, the majority of whom have defected to the APC.

It is to be recalled that in Agundade’s case, he had argued that given the internal crisis, division and factionalization within the Labour Party, he was entitled by virtue of the proviso in Section 109(1)(g) of the 1999 Constitution to defect from the Labour Party to the ACN without losing or having to vacate his seat in the House. The court however ruled that since he could not prove division or factionalization within the Labour Party, he was not entitled to keep or retain his seat after he decamped to the ACN. That he vacated his seat upon defection to the ACN by operation of law.

The proviso to the provisions of Section 68(1) (g) and 109(1) (g) of the 1999 Constitution are to the effect that although a Legislator would ordinarily lose his seat if he defects to a party different from the one that sponsored him into the Legislative House, he is entitled to keep his seat if he can prove that:

1. He defected to a new party as a result of division within the party that sponsored him into the house.

2. His membership of the new party is as a result of the merger of two or more political parties or factions by one of which he was previously sponsored.

Before we proceed to examine whether the internal crisis rocking the PDP falls within the proviso to Sections 68(1)(g) and 109(1) (g) of the Constitution, it is pertinent to determine what constitutes division in a political party. The constitution does not define word “division”. The Oxford Advanced Learners Dictionary of Current English, 6th Edition, defines division as a disagreement or difference in opinion or way of life etc especially between members of a society or an organization.

According to Professor Okey Okon of the South Central University, California, USA, division could arise from:

1. Ideological differences and
2. Organizational differences.

Organizational differences denote conflict, division, crisis etc arising as a result of the way and manner the party is run, operated or managed. In fact, all conflicts and crises arising from the management and operation of the organic structure of the political party fall under the category of organizational differences. Conflict, division or crises arising from organizational differences bordering on such issues as internal democracy mechanism of the party, conduct of primaries election, funding, election of principal officers of the party, adoption of candidates as party flag bearer for election, handling of party finances, planning and execution of election campaign strategies etc come under organizational differences.

It is a notorious fact that the PDP has from inception been bedeviled by internal crises caused by the occurrence of undemocratic practices within the party. The defecting 37 Federal Legislators have alleged that their defection from the PDP to APC was as a result of division and internal crises within the party and that they are entitled to keep their seats in parliament. We do not know the particulars of the alleged division or crises within the PDP but if their allegations are true then they are entitled to keep their seats in parliament.

We shall now turn our attention to the issue of whether ideological differences constitute division as to entitle a defecting legislator to retain his seat in parliament. Ideological differences relates to conflict, disagreement, crisis or division arising from a conflict between a party member’s ideas, beliefs, conviction, principles, philosophy or policy with those of his political party. When a member disagrees with his party’s ideas, policies, programs, philosophy or principles on socio- political or economic issues does this disenchantment or disagreement with his party entitle him to defect to another party without having to lose/vacate his seat in parliament? Does this conflict or disagreement with his party constitute division as envisaged by the proviso in Sections 68(1)(g) and 109(1)(g) of the 1999 Constitution?

Professor Okey Okon is of the opinion that ideological differences constitute division within the meaning of Sections 68(1)(g) and 109(1) (g) of the Constitution and at such empowers a Legislator to defect to another party without losing his seat whenever he disagrees with the policy and philosophy of his party. According to the learned Professor, ideological differences are a form of division which should justify a legislator to defect to another party without having to lose or vacate his seat. He opined that any interpretation of the law to exclude ideological difference as constituting division is erroneous. The learned Professor further posits that failure to treat ideological differences as division will deprive Legislators of the sense of safety and protection they need to stand up for what they believe in. He held that such a narrow reading of the law will provide perverse incentives for Legislators to emphasize compliance at the expense of principles and conviction to expediency.

We however beg to disagree with this position. With due respect to the learned professor, the proviso to Section 68(1) (g) and 109(1) (g) of the Constitution cannot be objectively interpreted to mean that whenever a legislator disagrees with the policy or philosophy of his party on socio-economic political or other issues he can dump his party for another party and still retain his seat in parliament. Such an interpretation of the law cannot be the intendment of the drafters of the Constitution. It is important to note that the relevant provision reads… “As a result of a division in the political party”… This shows clearly that what the law envisages is a situation where there is a conflict or disagreement within the party that leads to internal crisis or instability in the party. In other words, ideological differences alone cannot justify defection.

However, for ideological differences to justify defection, they must be of such magnitude and intensity as to lead to crisis, instability, factionalization and conflict within the party. The Noscitur Associis rule of construction of statutes states that the company a word keeps suggests its meaning. The word “division” as used in Sections 68(1)(g) and 109(1) (g) of the 1999 Constitution are accompanied by the words “merger” and “factions” which words denotes a change or alteration in the organic structure of a political party. We therefore agree with Professor Okey to the extent that ideological differences can constitute division which can justify defection only when such differences are of such magnitude and intensity as to lead to instability or crises within the party. A mere difference in opinion or belief will not suffice to justify defection.

Indeed, legislators do not have to defect to a new party to express or hold opinions or views contrary to those favoured by their party unless of course doing so would result and actually results to instability and crisis/conflict within the party. It is submitted that to allow defection merely on the ground that a legislator disagrees with the policies or ideological position of his party on certain socio-economic cum political or moral issues would defeat the intention of the framers of the constitution. The constitution clearly intends to discourage and penalize legislators for defection except on rare and exceptional circumstances. Making mere differences in opinion and belief a ground for political defection would provide legislators an excuse for political prostitution.

It is interesting to note that the 37 defecting legislators have also sought to justify their defection on the ground that the PDP was divided into two political parties; the old PDP and the new PDP which consist of the defecting and disgruntled member. They alleged that the new PDP has formally merged with the APC. We are of the opinion that if these allegations are true then the 37 defecting legislators are entitled to so defect without having to lose their seats. It is pertinent to note that the PDP has obtained a court order declaring the so-called new PDP illegal and restraining its members from parading themselves as PDP members. The question that arises from this development is, what is the legal effect of this order on the rights of these defecting legislators to keep their seats. It is our humble opinion that the court order has no effect whatsoever on the rights of the defecting legislators to keep their seats. The order merely prohibits the use of the name PDP by the defecting faction. It does not mean that the defecting faction is an illegal group because they are not a group of criminals or bandit.

Indeed, Sections 39 and 40 of the 1999 Constitution guarantees the right to freedom of expression as well as the right to freedom of association. The court order therefore cannot operate to deprive or in any way prejudice the defecting members’ entitlement to keep their seats.

The PDP has reacted to the defection of its member, especially the 37 Federal lawmakers by saying that any member of the party that renounces its membership of PDP shall be made to vacate his seat. There are also reports in the media that the PDP has gone to court to obtain a declaration for the vacation of the seats and offices of the defecting legislators and five governors. Let’s keep our fingers crossed as we watch the drama unfold.

The Myth That All Foreclosures By Power Of Sale Provisions Are Constitutional

The issue is one of First Impression because the Supreme Court of the United States has never decided whether a federally chartered bank corporation created under an act of Congress to provide an important public and national purpose could use a non- judicial procedure that allows the taking of a property interest without a hearing thus violating the 5th Amendment. The Court, however, 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 trustee sale provision, none have vetted the corporations seeking this remedy. 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 contract and rests on whether the act of foreclosure is a governmental act or a proprietary 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 the lives of millions of families across this nation.

It would allow homeowner a level playing field with the banks to negotiate loan modification. If the bank had to take them to court, the homeowner could raise affirmative defenses and a right to a jury trial. I ask that you look at the arguments proffered in this letter to make your decision and that you act quickly.



To resolve the issue of the constitutionality of a trustee sale by National banks and federal savings associations, we must first identify the nature of the corporations. NATIONAL BANKS AND FEDERAL SAVINGS ASSOCIATIONS are federally chartered corporations created under acts of Congress (The Homeowner Loan Act (HOLA) and the National Bank Act(NBA) for a public and national purposes. In Conference of Federal Savings and Loan Associations et al v. Alan L. Stein et al. 604 F.2d 1256 (9th Circuit) (1979) the court related the history of HOLA and the reason for its’ creation:

The Home Owners’ Loan Act of 1933, 12 U.S.C. §§ 1461 Et seq. (HOLA), was the result of congressional dissatisfaction with state law and practice in the financing of home construction.

….. The Federal Home Loan Bank Board (the Bank Board) was created with extremely broad powers to promulgate rules and regulations. 12 U.S.C. § 1464(a) provides in part:

…[T]he Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as ‘Federal Savings and Loan Associations’ * * * and to issue charters therefore, giving primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States.” [bold added]


National banks and federal savings associations are agencies of the United States created to promote its fiscal policies. 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. Federal Savings associations also have the same benefits and are no less instrumentalities of the federal government than national banks whose purpose is to promote its fiscal policies. Alexander Hamilton argued that the Central Bank was necessary to the nation in cases of emergency such as the financing of war… Hamilton believed that there was a symbiotic relationship between agriculture, commerce, and manufacturing, and that progress in each of these sectors was necessary for America’s economic development. (In the Report of Credit II, Dec. 1790)


Non-judicial foreclosures have been the subject of a flurry of cases including the most current Apao v. San Diego Home Loans, Inc.,324 F3d 1091, Ninth Circuit (2002) a California corporation. Margaret Apao lost her home to a foreclosure and sale under Hawaii’s non-judicial foreclosure statute. The federal district court dismissed the complaint for failure to state a claim and that the sale was a purely private remedy. Apao appealed to the Ninth Circuit. The Ninth Circuit affirmed the district court’s decision on the grounds that previous decisions of appellate courts upheld the constitutionality of similar non-judicial procedures. The Ninth Circuit held in Apao that the case of Charmicor v. Deaner, 572 F2nd 694 “was controlling” although the consumers in Apao attempted to distinguish it. In Charmicor, the consumers claimed that the statute offended due process by failing to provide a pre-sale hearing and that it offends civil rights statutes and the equal protection clause by discriminating against appellant’s shareholders, who are black. The court in Charmicor noted that the “complaint failed to state a claim for relief under the civil rights statutes, because the record was utterly barren of any facts or allegations that could support a claim under the equal protection clause”, the Ninth Circuit affirmed. The court in these cases made no reference to several Supreme Court decisions which examined the nature of corporations created under an act of Congress and were content with the notion that Congress could adopt the local customs on debtor creditor relations without further analysis. The fact of the matter is that the issue should be determined under federal law.


In Easton v. Iowa,188 U.S.220 (1903) the Court said of national banks:

…[W]e cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for private gain.

The Court in Easton went on to say at 188 U.S. 220 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 which held that banks were public and not private corporations and that they were federal instrumentalities created for public and national purposes. The court in Osborn made it quite clear that everthing that the corporations assumed to do must be done even under its contracts must be done under the authority of the federal charter and the law that created that corporation. In other words under “color of federal law”. It was a theme recurring in other Supreme Court decision.

In view of the holding in Osborn which Justice Marshall held that 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 in Easton, why should we now consider national banks private corporations? And why not consider

them “agencies of the Federal government” as referred to in Easton? And why should the same reasoning not apply to FEDERAL SAVINGS ASSOCIATIONS.

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

… The corporation must show that the law of its creation gave it authority to make such contracts.”.

Did the law of its creation (HOME OWNER LOAN ACT or NATIONAL BANK ACT ) give National banks and federal savings associations the right to make this contract with this 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? Is this not the right to foreclose on an owner without resort to judicial process and a 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 charter authorize 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 ” [John Locke, TWO TREATISE OF GOVERNMENT, BOOK II] The Supreme Court decisions 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 States” and therefore “under color of federal law”. Thus National banks and federal savings associations Mortgage fsb could be considered a “governmental actor” like the assumption made by the First Circuit in Gerena v Puerto Rico Legal Services, Inc., 697 F. 2d 447(1st Cir. 1983)


If all the acts, rights and obligations of corporations with federal charters must be done under the authority of the federal charter and a law of the United States, including rights created in contract, how can Congress authorize a provision that it could not exercise itself? The provision can only be validated by what it represents and the constitutional implications it may give rise to.

In United States v Grimaud, 220 U.S. 506 (1911) the Supreme Court decided that very issue and the court citing Justice Marshall at 220 US pg. 517 said.

The court held that Congress can only delegate those powers, or rights that they could exercise themselves.

The powers of a corporation are express and incidental. Runyan at p. 129 supra. If Congress cannot confer the power to foreclose non judicially to National banks and federal savings associations then the provision is ultra vires and void.


In Federal Land Bank v. Bismarck Co. of St. Paul, 314
U. S. 95 (1941) the court was faced with determining
whether the lending functions were proprietary or governmental. The court held that the lending functions of the land bank were governmental and not proprietary because it was created under an act of Congress in which the government lawfully acted. It included foreclosure as part of the general lending functions. 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 the performance of an important governmental function.”(cites)


Can Congress 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 a hearing? That question was asked and answered in Lebron v National Railroad Passenger Corporation. 513 U.S. pgs 374, 375 when the court held that amtrak was created under an act of Congress to achieve government objectives and that although Amtrak’s authorizing statute provides that it “will not be an agency or establishment of the United States Government,” it was still held as an agency or instrumentality for the purpose of determining rights of it citizens affected by it’s actions. Thus amtrak was held to have violated Lebron 1st Amendment Constitutional rights. Justice Scalia thus established that not only the priveleges of government are created in favor of the corporation but also the obligations of government.

Like Amtrak, national banks and federal savings associations are federal instrumentalities and members in banking systems created for a public purposes and controlled by the director of The Office of Thrift Supervision and the director of the Comptroller of the currency. 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. Consumers are citizens whose constitutional rights are affected when non- judicial foreclosures are exercised by federally chartered corporations like National banks and federal savings associations.


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 al 309 F.3d 551 (Ninth Circuit) (2002) Consider this hypothetical. The California legislature would makes a law that as a matter of public policy foreclosures of any kind will not be permitted on a homeowner’s primary residence. The OTS is charged with the supervision of the Home Owner Loan Act like the Office of the Controller of Currency is “charged with supervision of the National Bank Act” NationsBank of N.C.N.A. v Variable Annuity Life Ins. Co. 513 U.S. 252, 256(1995) The OTS and the OCC would promulgate rules allowing the banks to foreclose on the homes that have defaulted and in concert with the banks claim that the power to foreclose was an incidental power of national banks and also federal savings banks and therefore would preempt state law. The State would challenge that decision in court.

Both Acts are silent on the necessity of banks foreclosures to secure the residential property in the event of default. The Acts, however, do bestow upon banks the authority to exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as necessary to carry on the business of banking…”12 U.S.C.§24(Seventh). The OTS authority to preempt state laws affecting its lending practices lies in 12 cfr §560.2. Because these sections are not explicit on the limits of “incidental powers”, an inquiry as to whether the NBA or HOLA would support the use of either one or both methods of foreclosures (Judicial foreclosures and/or non-judicial foreclosure) would be necessary. The holding in United States v. Grimaud, 220 U.S. 506(1911) would apply. The NBA or HOLA could authorize the former but not the latter because the government could not exercise the power to foreclose non-judicially itself.


In Acron Investments, Inc. et al v Federal Savings and Loan Insurance Corporation, 363 F.2nd 236 (9th Circuit, 1966) the court was given the task of determining if the Federal Savings & Loan Insurance Corporation (FSLIC) was an “agency”. After reviewing all the relevant code sections the court concluded that the corporation was an “agency” under 28 USC 451 because the control of the government over the corporation was more than custodial or incidental.

Under the Ninth Circuit’s own test national banks and federal savings associations are “agencies”. Any doubt as to government’s control over the “operations” as being “custodial or incidental” is dispelled in Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. 141 (1982) at p. 161 when the court held that “Congress’ explicit delegation of jurisdiction over the “operation” of these institutions must empower the Board to issue regulations governing mortgage loan instruments

With respect to National Banks the holding in Easton would apply as the court held that Congress has the sole power to regulate and control the exercise of their operations.


The subject corporations cited share a common heritage with National banks and federal savings associations. 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 were governmental. Thus in Bismarck the Court ruled that the lending functions were governmental not proprietary; and that foreclosure 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 Ninth Circuit and other appellate courts have yet to apply the settled principles enunciated by these Supreme Court cases which lead to one conclusion— that National banks and federal savings associations’ use of a Trustee Sales(non-judicial foreclosures) must be a governmental acts and a 5th amendment violation of due process.

Introduction To Tax Laws

This article discusses different components of Income Tax Law.

Before we discuss components, it is important to know the difference between an act and a law. So, let me ask you.

What is the difference between an act and a law? Are both the same? The answer is no. An act is just a part of the law. Law is basically a broader subject that includes various acts.

The components of IT law –

  • The Income Tax Act, 1961 – This is the most important component of IT law. It contains the legislations or the provisions of IT law.
  • The Income Tax Rules, 1962 – This defines the procedure to be followed in compliance with the provisions of the act. Note – You need to understand the difference between Act and Rules. An Act will only state the provisions. It will not define the ways to carry on the provision. However, IT rules will state the process to be followed.
  • Annual Finance Act – This is popularly known as budget. It prescribes the rates of income tax to be followed for a given financial year. It also brings amendments in the IT law.
  • Circulars and Notifications – These are issued by the Ministry of Finance. Circulars are explanatory in nature. They do not add any new section or provisions. They only explain the existing provision.
  • Case Laws – These are the judicial pronouncements of the court. The judge of the High Court is binding in a particular state, i.e., It is territorial jurisdiction. However, the judgement of the supreme court is binding throughout the country and is the law of the land.

Discussion about Section 1 and Section 2

For any Act, Section 1 defines the date of applicability and place of applicability. For example the IT Act, 1961 was passed in the parliament and not forced. The date of Applicability of the IT Act, 1961 was 1st April, 1962.

Section 2 consists of definitions. It is always presented in alphabetical order.

Concept of Previous Year and Assessment Year

Under Income Tax, a year always starts from 1st April and ends on 31st March. Whatever income is earned in one particular year, the taxes are paid in the next year. If income is earned in the year 2013-14, tax is paid in 2015-16.

The year in which income is earned is termed as previous year. It should be made clear that previous year does not refer to the earlier year, but it means the current accounting year.

The year in which we pay taxes is termed as Assessment Year.

Income is taxable on?

Income is taxable on salaries, house property, business profession, capital gains and other sources.

Unique Aspects of Louisiana Payroll Law and Practice

The Louisiana State Agency that oversees the collection and reporting of State income taxes deducted from payroll checks is:

Dept. of Revenue

P.O. Box 201

Baton Rouge, LA 70821-0201

(225) 219-0102

Louisiana requires that you use Louisiana form “L-4 (R-1300), Employee’s Withholding Exemption Certificate” instead of a Federal W-4 Form for Louisiana State Income Tax Withholding.

Not all states allow salary reductions made under Section 125 cafeteria plans or 401(k) to be treated in the same manner as the IRS code allows. In Louisiana cafeteria plans are not taxable for income tax calculation; not taxable for unemployment insurance purposes. 401(k) plan deferrals are not taxable for income taxes; taxable for unemployment purposes.

In Louisiana supplemental wages are required to be aggregated for the state income tax withholding calculation.

You must file your Louisiana state W-2s by magnetic media if you are have at least 250 employees and are required to file your federal W-2s by magnetic media.

The Louisiana State Unemployment Insurance Agency is:

Department of Labor

1001 N. 23rd St.

P.O. Box 94094

Baton Rouge, LA 70804-9094

(225) 342-7690


The State of Louisiana taxable wage base for unemployment purposes is wages up to $7000.00.

Louisiana requires Magnetic media reporting of quarterly wage reporting if the employer has at least 250 employees that they are reporting that quarter.

Unemployment records must be retained in Louisiana for a minimum period of five years. This information generally includes: name; social security number; dates of hire, rehire and termination; wages by period; payroll pay periods and pay dates; date and circumstances of termination.

The Louisiana State Agency charged with enforcing the state wage and hour laws is:

Department of Labor

1001 North 23rd St.

P.O. Box 94094

Baton Rouge, LA 70804-9094

(225) 342-3011

There is no provision for minimum wage in the State of Louisiana.

There is also no general provision in Louisiana State Law covering paying overtime in a non-FLSA covered employer.

Louisiana State new hire reporting requirements are that every employer must report every new hire and rehire. The employer must report the federally required elements of:

  • Employee’s name
  • Employee’s address
  • Employee’s social security number
  • Employer’s name
  • Employers address
  • Employer’s Federal Employer Identification Number (EIN)
  • Employee’s occupation

This information must be reported within 20 days of the hiring or rehiring.
The information can be sent as a W4 or equivalent by mail, fax or electronically.
There is a $25 penalty for a late report in Louisiana and $500 for conspiracy.

Louisiana does not allow compulsory direct deposit

Louisiana has no State Wage and Hour Law provisions concerning pay stub information.

Louisiana requires that employee be paid no less often than semimonthly or biweekly for manufacturing, mining, or public service corporations.

Louisiana requires that the lag time between the end of the pay period and the payment of wages to the employee not exceed ten days after pay period; 15 days for public service corporations.

Louisiana payroll law requires that involuntarily terminated employees must be paid their final pay with in 15 working days and that voluntarily terminated employees must be paid 15 days after they quit.

Deceased employee’s wages of $6,000 must be paid to the surviving spouse or adult child (in that order) if there is an instrument indicating relationship to deceased.

Escheat laws in Louisiana require that unclaimed wages be paid over to the state after one year.

The employer is further required in Louisiana to keep a record of the wages abandoned and turned over to the state for a period of 10 years.

There is no provision in Louisiana law concerning tip credits against State minimum wage.

In Louisiana the payroll laws covering mandatory rest or meal breaks are only that minors under 16 must have 30 minutes rest after five hours of work.

Louisiana statute requires that wage and hour records be kept for a period of not less than one year. These records will normally consist of at least the information required under FLSA.

The Louisiana agency charged with enforcing Child Support Orders and laws is:

Support Enforcement Services Program

Department of Social Services

P.O. Box 94065

618 Main St.

Baton Rouge, LA 70804

(225) 342-4780

Louisiana has the following provisions for child support deductions:

  • When to start Withholding? Immediately after receipt of order.
  • When to send Payment? Within 7 days of Payday.
  • When to send Termination Notice? Within 10 days of termination.
  • Maximum Administrative Fee? $5 per pay period.
  • Withholding Limits? 50% of disposable earnings.

Please note that this article is not updated for changes that can and will happen from time to time.

Charles J. Read, CPA has been in the payroll, accounting and tax business for 30 years, the last fifteen in private practice. Mr. Read is the author of “How to Start a New Business”.