Court decisions often discuss the validity and meaning of a document that is involved with the

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1 FTFM PAPER No By Robert M. Janes RESULTING DOCUMENTS CAN BE TOOLS OF DECEPTION GET PAST SUPERFICIAL APPEARANCES OF ASSIGNMENTS, DEEDS, TRUSTEE APPOINTMENTS, ALLONGES, NOTICES OF SALE AND SIMILAR DOCUMENTS Court decisions often discuss the validity and meaning of a document that is involved with the ownership and control of a Note or mortgage. The discussion may focus on an assignment, appointment of a successor trustee, deed, allonge, or paper filed in public records. The borrower, too often, doesn t know how to challenge or rebut the alleged validity and importance assigned to those documents by the foreclosure machine. This type of document is frequently used by the foreclosure machine to gain acceptance of a conclusion that the document doesn t actually prove. Sure, this is a bit deceptive, but the machine is OK with any win, even one based on a sleight of hand. There are ways, however, to minimize the likelihood that such a ploy will confuse you or the judge. Your opponent will act as if such documents contain all of the information that is needed for the judge to rule against you. It will act as if the conclusion represented by the document actually proves itself without requirement of substantiating evidence. That, of course, is not true. These types of documents are not self-authenticating. Your response, therefore, should help your judge see that those types of documents contain no intrinsic truths and they only raise questions not yet answered by your opponent. When you bought your home, you entered into a purchase contract. You received a deed to your new home after you paid the purchase money and did the other things required under your purchase agreement. Similarly, when your lender sold all or part of your mortgage loan, there Copyright 2013 Page 1 of 16 FTFM Paper No. 1301

2 was a sales agreement that led to the assignment of your mortgage loan, or some part of it, to the buyer. The last documents created in these examples were a deed and an assignment. Those documents came at the end of the transaction. They were the result of the preceding agreements that had been made and the instructions given. These are examples of resulting documents. A resulting document is a paper introduced to prove a point of fact or law but which, instead, only raises the question of what caused the paper to be created. A resulting document, by itself, proves only that it was created, but little else. The resulting document you see may be a notice of sale, an allonge, an appointment of a substitute trustee, an assignment or possibly a suspicious affidavit. The physical Note is also a type of resulting document when it bears an endorsement. Papers filed in the public records are typically resulting documents. Your opponent will try to use them to support its motions and at trial. The way to challenge a resulting document is the same regardless of the context of its attempted use by your opponent. The legal significance of a resulting document can t be understood without first examining the agreements, related documents and questions raised by its use in your case. Related documents may include faxes, s, letters, and other written things that shed light on what caused the resulting document to come into existence. A Notice of Default recorded in the public records, for example, is proof that it was created and recorded. It is not proof, however, that any default exists or that your opponent was ever owed any obligation from you by law. Whether a resulting document helps prove anything larger than its mere existence is impossible to know without your opponent proving the circumstances and documents related to its creation. For each resulting document presented without complete Copyright 2013 Page 2 of 16 FTFM Paper No. 1301

3 backup of everything related to its creation, make note of what your opponent has withheld or can t prove. Then help your judge understand what is missing and remind your judge that your opponent, not you, bears the burden of proving the things it has only implied by introducing its resulting document. The questions flooding your head when you see a resulting document are important. Sharing them in a clear and concise way with your judge is good for both of you. A resulting document demands answers for the who, what, where, when, and why questions the opponent doesn t want you or your judge to ask. If the opponent had the answers, it would have introduced the supportive evidence along with the resulting document. Don t let your opponent off the hook. Highlight the unanswered questions raised by the document to help your judge understand that your opponent hasn t proven anything of significance by introducing a naked resulting document. Be constant in asking where the documents, agreements and evidence are that support the conclusions that are implied or stated by the document. Common sense and the requirements of the law applicable to your case will guide you evaluating the incomplete story presented by a resulting document. A typical residential loan Note is a negotiable instrument. This basically means that there are no contractual restrictions on its transfer to others, the principal amount owed is a fixed number, and the Note defines when payments are due. These factors appear to control most determinations as to whether or not a Note is a negotiable instrument. Interest rates (variable or fixed) and things that can happen upon delinquency or default rarely carry much weight. Once you ve signed the Note and handed it to the lender, that Note is somewhat like a check you might write against your personal bank account. The person to whom you give the check can cash it at a bank or can endorse it over to someone else who may then cash it. Similarly, the lender can endorse the Note Copyright 2013 Page 3 of 16 FTFM Paper No. 1301

4 and hand it over to someone else who may have the right to the payments you make regarding the Note. Article 3 of the Uniform Commercial Code 1 ( UCC ) defines rights and obligations respecting a negotiable instrument. 2 Every state has adopted the UCC. UCC defines who has the right to enforce your Note, that is, who is the Boss of your Note. 3 Enforce is the key factor. Only the Boss of your Note has the right to demand payments from you, 4 provide a final accounting of what is owed, if anything, 5 or the right to foreclose the mortgage-collateral you gave when taking out the loan. 6 The Boss can engage a servant to do its bidding, but the Boss is the one with the power and the one that has to give the orders that affect you. Typical of statutory law, the meaning of UCC is derived by analysis and application of other parts of the UCC. The requirements to satisfy Boss status are extensive. As demonstrated by Chapter 11 and Exhibit D of Fighting The Foreclosure Machine, the UCC requires us to look at its concepts of negotiation, transfer, delivery, indorsement, 7 and holder, and whether the transferor intended to deliver the right to enforce the Note, the requirement that 100% of the Boss rights have to be transferred or else the 1 My references to the Uniform Commercial Code ( UCC ) are those used by the American Law Institute. A UCC Locator is available at under the Resources tab and you can use it to locate the UCC in your state s laws. 2 See UCC If you ve read my book, Fighting The Foreclosure Machine, you will recognize the phrase, Boss of the Note, and understand it to reference the person entitled to enforce the Note per Article 3 of the Uniform Commercial Code. If you don t know the complexities of how the UCC defines the one person who has the right to enforce the Note, read Chapter 11 of my book or spend time in a law library. 4 See UCC 3-501(a). 5 Your obligation under the Note may have been satisfied, in full or part, without you knowing it. How much you have paid does not tell the complete story. Complete information is not available to you outside a court of law. For example, the Boss of your Note may have exercised endorsement warranty claims against some predecessor who, by its endorsement, warranted the collectability of your Note. (UCC 3-415). Insurance proceeds collected by the Boss may have created credits with which you are entitled to offset the amount owed under your Note. The Boss may have sued or threatened to sue a company that sold your mortgage loan to the Boss, and that may have resulted in a settlement payment which could also reduce or eliminate what is owed under your Note. The UCC also creates its own statute of limitations which can bar claims by the Boss if too much time has passed. See pp , Fighting The Foreclosure Machine, for more information about this statute of limitations. 6 Look at your mortgage. A default or breach of the Note is a prerequisite to enforcing the mortgage. 7 The rest of the world uses the word endorsement but the UCC likes indorsement. What I have seen is most judges and attorneys use the e version even when discussing the UCC. Copyright 2013 Page 4 of 16 FTFM Paper No. 1301

5 recipient or transferee has no Boss rights, and all circumstances involving efforts to enforce a Note that is alleged to have been lost, stolen or destroyed. A piece of paper, for example, that states Company X assigned the Note to Company Y doesn t explain why that paper was created, under what arrangements, whether the company signing the document was actually the Boss at that time (or the Boss agent), the identity of the parties to that arrangement, whether the transferor refused to promise that it was the Boss with the right to transfer the right to enforce the Note, whether the transferor intended to deliver 100% of all rights regarding the Note, or anything else that is relevant to the UCC test. An affidavit stating that the opponent had the physical Note but that it was lost, stolen or destroyed also falls far short of answering the UCC essential questions that must be answered before a person who doesn t have physical possession of the Note can enforce it in accordance with UCC 3-301(iii). I emphasize the Note, rather than the mortgage, in defensive and offensive strategies. The content, timing and recording of the mortgage might be important in your state, but, without any exception of which I am aware, no foreclosure is ever legal if the homeowner owes no obligation to his or her attacker. The Note is about debt obligations. The most fundamental aspect of a foreclosure fight is the question of whether a debt is secured by the property targeted for foreclosure. By all means, use violations of your state s foreclosure process or any weakness in your opponent s claim to your mortgage to your advantage. Use whatever law or fact helps you fend off the foreclosure machine. Don t, however, concede owing any obligation to your opponent, or to anyone else for that matter, and don t concede that your mortgage is anything other than collateral pledged solely for use by the Boss of your Note. The foreclosure machine waves a lot of papers about. It hopes that you and your judge will not ask too many questions about them. The machine can get away with not having to prove it has Copyright 2013 Page 5 of 16 FTFM Paper No. 1301

6 genuine Boss rights, but only if you let it. Each resulting document presented by your opponent can be challenged as conclusory and lacking evidentiary significance. Until the what, where, why, when and who questions have been fully answered by your opponent, the resulting document is just a piece of paper that doesn t prove anything of legal consequence. Its existence is proof that it was created and presented by the opponent, but of nothing else. Keep the w questions active in your mind, demand that your opponent provide answers to those questions, and help your judge understand how shallow and insignificant the resulting document is without those questions first being answered with complete and meaningful evidence. The UCC makes clear that the burden of proof is on the party alleging the right to enforce the Note. See The UCC and the Burden of Proof, (Chapter 11 in Fighting The Foreclosure Machine) for more details of how the UCC places the burden of proof on your opponent s shoulders for your protection. If your opponent is the plaintiff, it accepts that burden at the start of the case. If you are the plaintiff, you shift your burden of proof to your opponent by asking it to prove its Boss rights in accordance with UCC 3-501(b)(2) and other UCC provisions. Whether you are the plaintiff or the defendant, your case is more forceful and more educational for your judge if you request proof of Boss rights before the lawsuit begins by using informal discovery such as demonstrated by Exhibit E of Fighting The Foreclosure Machine. Every foreclosure is unique. Describing every circumstance you might encounter is impossible. Examples should, however, help you learn techniques that can be applied in your own foreclosure fight with the foreclosure machine. The concept is to use what a resulting document doesn t prove to deflate the importance assigned to it by your opponent. Example 1: Your opponent introduces the physical Note with one or more endorsements. Copyright 2013 Page 6 of 16 FTFM Paper No. 1301

7 A. UCC 3-205(a) & (b) establish that only the holder of the Note can make an effective endorsement on the Note. A person who satisfies holder status in strict accordance with the UCC is, at that time, Boss of the Note by my terminology. See Chapter 11 and Exhibit D of Fighting The Foreclosure Machine. Being the holder of the Note is one way a person can become entitled to enforce the Note (UCC 3-301(i)). A person can obtain holder status only by satisfying strict UCC requirements involving negotiation (UCC 3-201), delivery (UCC 1-201(b)(15)), and transfer (UCC 3-203(a)). A person also has to have physical possession of the Note to be a holder (UCC 1-201(b)(21)). A signature on the Note doesn t prove the UCC status of the signer at that time. That script or scribble doesn t even prove it was placed there by the person whose name appears. Endorsements, themselves, have no legal meaning. They highlight the need for more information before any determination can be made regarding the meaning of those endorsements and the impact of that determination on the paramount question of whether your opponent now has Boss powers. B. Where is the opponent s evidence that each endorsement was made by the then Boss of the Note? Even if Company A was the lender, its endorsement a year later on the Note may be an anomalous endorsement (UCC 3-205(d)) and of no effect if the lender, as a result of a sale or transfer, wasn t the Boss when endorsing the Note. C. An undated endorsement raises the question of when the endorsement was added to the Note, why that endorsement was made, and who was the Boss of the Note at that time. Dated or not, the same questions as to accuracy and truthfulness are present. Copyright 2013 Page 7 of 16 FTFM Paper No. 1301

8 Each link in the chain of ownership and control of the Note is important in determining whether the current person claiming Boss rights actually has any. D. What evidence does the opponent put forward showing that it obtained and evaluated evidence about the Boss status of the endorser for each endorsement that appears? If your opponent has no such research, it can t possibly have any basis for alleging that it obtained the Note from the then Boss of the Note. If your opponent doesn t have proof of the legal significance of an endorsement, neither you nor your judge can know, either. E. What would be necessary to prove that an endorsement is UCC-effective? You aren t looking for an explanation or story from your opponent. Facts are needed. Where are the agreements, faxes, s and related documents that preceded and caused the endorsement to appear on the Note? The details of those papers or the lack of such papers is what explains the legal significance, if any, of an endorsement. A shortage of such proof is, in and of itself, good evidence that the endorsement is anomalous and not an effective endorsement. F. If the endorsement was placed on the Note by the Boss, that doesn t mean the transferee became the holder, because, as outlined above, many requirements precede achievement of Boss status. The underlying agreements or related documents may show that the then Boss agreed to sign the Note but withheld some interest in it, thus denying Boss status to the transferee pursuant to UCC 3-203(d). If that transferee didn t become the Boss, a subsequent transferee of the Note also would not be a Boss. Copyright 2013 Page 8 of 16 FTFM Paper No. 1301

9 Example 2: The resulting document indicates that it was executed by someone or some company as agent for someone else. A. Where are the agreements and related documents that prove that the person who signed as agent for someone else actually was an agent for that someone else and acting within the scope of the agency relationship? The existence of an agency relationship is a fact-intensive issue that requires the presentation of meaningful evidence before the existence of the alleged agency relationship can be determined. If your opponent puts on a resulting document that reflects an agent s action for an alleged principal, the opponent is asking you and your judge to believe that the agent was acting within the scope of a legal agency relationship with the principal. Most states hold that the party asserting the existence of an agency relationship has the burden to prove its existence. 8 Check the case law or statutes of your state and you ll likely find similar legal authority. The UCC places the burden of proof on your opponent. It can t hurt your case if your state s law reinforces that burden when your opponent is relying on the existence of an agency relationship. B. Where are the agreements and related documents demonstrating that your opponent determined, as of the time of the alleged agent s signature, that the alleged principal was the Boss of the Note? Even if the signor was agent for a principal, if that 8 See, e.g., Allamon v. Acuity Specialty Products, Civil Action No. 1:10-CV-294-TH (USDCt. E.D. Tex )("Under Texas law, '[a]gency is never to be presumed; it must be shown affirmatively. The party who asserts the existence of an agency relationship has the burden of proving it.'"); Baroi v. Platinum Condominium Development, 2:09-CV PMP-GWF (USDCt. D.Nev )( The party asserting an agency relationship exists bears the burden of proving agency. ); Boart Longyear v. Alliance Industries, 12 Civ (USDCt. S.D. N.Y )(at fn65 finding that an agency relationship is established when there are facts sufficient to demonstrate both that the principal intended to grant authority to the agent and the agent assented. ); Matter of Oxford Mgmt, Inc., 4 F.3d 1329 (5th Cir.1993)("Under Louisiana law, an agency relationship cannot be presumed, it must be clearly established."); and Digital Ally v. Z3 Technology, LLC, 864 F.Supp.2d 1050 (USDCt. D.Kan ). Check the case law or statutes of your state and you ll likely find legal authority similar to that mentioned in these cases. Copyright 2013 Page 9 of 16 FTFM Paper No. 1301

10 principal was not then the Boss of the Note, the resulting document doesn t prove Boss rights were transferred to your opponent or to any successor. C. What if Mortgage Electronic Registration Systems, Inc. ( MERS ) is mentioned in your mortgage? The challenges applicable to other alleged agency relationships apply equally to the use by your opponent of any resulting document that was allegedly executed by MERS on behalf of some other company. When your mortgage mentions MERS, you will want to incorporate into your complaint or your answer to your opponent s complaint suggestions like those in Exhibit C of Fighting the Foreclosure Machine, especially suggested paragraphs ## I recommend these additions to your initial statement in court in order to clarify the presence of the MERS name in your mortgage loan and to defuse efforts by the foreclosure machine to argue that you authorized MERS to be agent of the lender or its successors by way of the mortgage you signed. The machine will make that argument because it probably has no proof of an actual agency relationship between MERS and the Boss of your Note at the time the name of MERS is used on a resulting document. As with alleged agent activities by any person or company, demand proof of an agency relationship, demand proof that the alleged agent was acting within the scope of the relationship (if that relationship gets proven), and demand proof that the alleged principal was the Boss of your Note at that time and authorized by the UCC to direct that its agent then take some action that related to enforcement of your Note. Copyright 2013 Page 10 of 16 FTFM Paper No. 1301

11 Example 3: The resulting document is a copy of something that was recorded in the public land records. A. This resulting document might be a notice of sale, notice of default, substitution of trustee document, or something else related to the pending or threatened foreclosure. If the document was actually recorded, it can usually be introduced in court to demonstrate the fact that it was actually recorded. Other than that, the content of a recorded document is subject to question. The need for proof about the content of the document is the same as with any other resulting document. Some states maintain that a recorded document is presumed to be accurate. Presumed is the operative word. Raise questions about the conclusions and content of that document, remind your judge that the burden of proof about the questions rests with your opponent, and ask the court to not attribute any legal significance to that document beyond the mere fact of having been created and filed. B. A notice of default, for example, may have all of the words required by statute or foreclosure rules. Simply containing those words does not mean that you owe an obligation to your opponent by law. Your opponent has no right to say a default exists if you have no obligation under your Note to that company. Only the Boss of your Note is entitled to enforce your obligations, if any, under your Note. Only the Boss of your Note is entitled to declare a default. 9 You will most likely enter your foreclosure lawsuit without having seen UCC-essential proof that your opponent is the Boss or that your opponent ever obtained any Boss rights from anyone. Your 9 See Default What it means in foreclosure, pg. 52, Fighting The Foreclosure Machine; and UCC 3-501(a) which clarifies that only the person entitled to enforce the instrument may make presentment, i.e., a demand related to the Note. Copyright 2013 Page 11 of 16 FTFM Paper No. 1301

12 opponent s failure to prove, following your demand for same, that it has the right to enforce your Note, means that you should deny owing anything to your opponent, deny that any balance remains due since no Boss of your Note has come forward saying otherwise, and deny that the meaning of or balance of your Note and mortgage are none of your opponent s business because it is merely an interloper in your personal affairs. Its failure to provide the requested information is an implicit admission that you owe it nothing and that it lacks any authority upon which to claim that you are in default. The statements in a notice of default are inaccurate under such circumstances and of no legal consequence until and unless your opponent proves Boss rights in accordance with Article 3 of the UCC. Example 4: Your opponent introduces an affidavit alleging that it has the physical Note. A. That affidavit was created to help your opponent. You can t force your opponent to disclose everything that led to the creation of this document if your opponent s attorney prepared it for use in your lawsuit. Attorney-client privilege usually blocks that type of inquiry. But there are other ways to object. B. Ask the obvious question. If your opponent actually had the Note, why didn t it simply produce the physical Note rather than spend money having an attorney draw up a paper and having to waste some employee s time to say that the opponent has it? Raise the question so that your judge will also see that the affidavit is suspicious. C. Where is the physical Note? Your opponent, if claiming to have the Note, is required to produce it for your inspection when you request to see it. For example, UCC 3-501(b)(2) states that your opponent must exhibit the instrument. It also has to be physically available so it can be surrendered when the obligation is extinguished Copyright 2013 Page 12 of 16 FTFM Paper No. 1301

13 (UCC 3-501(b)(2)). UCC 3-308(b) also requires the person claiming the right to enforce the Note to present it, in addition to proving its Boss rights. The UCC contains no provision that says that a copy or affidavit can suffice when the borrower demands to see the Note itself. UCC 3-501(b)(3) even affords you the right to refuse to comply with the demands of your opponent if the Note doesn t have the required endorsements. That right would be meaningless if you didn t have the right to inspect the physical Note. D. If the opponent alleges to have the physical Note, where are the agreements and related documents, such as s, faxes and letters, which led to the opponent s possession of the Note? Where is complete proof that your opponent has Boss powers? By making demands upon you, your opponent has attempted presentment according to UCC 3-501(a). The right to make demand or presentment for payment is reserved solely by or on behalf of a person entitled to enforce the Note, a reference to UCC E. UCC 3-602(a) affords you no credit of any payment unless it is made to the Boss of your Note. Yes. Pay the wrong person and your debt doesn t go down. That, too, shows an intent that you have the right to know the facts, not just self-serving summaries (like an affidavit) by your opponent; otherwise, you would have no way to protect yourself from those who claim the rights of the Boss but who can t prove those rights when challenged. F. Where are the documents that show that your opponent made an effort to learn whether the company from which your opponent claims to have obtained rights was in fact the Boss of the Note? If your opponent did no such research and analysis, it can t possibly know what Boss rights, if any, were held by that company. Your Copyright 2013 Page 13 of 16 FTFM Paper No. 1301

14 opponent s legal rights in the Note are never larger than those of the person from whom your opponent acquired its alleged interests in your Note. G. If your opponent was your lender (not a successor who just calls itself lender ), does the affidavit state that it never sold or transferred the Note? If not, why? If the affidavit doesn t allege that your opponent never transferred or sold the mortgage loan, the absence of that statement is suspicious, especially because selling and trading mortgage loans has been such a common lender practice during the past two decades. Your complaint or answer to a complaint should have contained a statement that, upon your information and belief, your mortgage loan was, in fact, sold or transferred by the lender and subsequent persons who claimed some right in your mortgage loan. The affidavit s silence about this subject is also evidence that your opponent chose to not address your claim that your mortgage loan had been sold or transferred, At the commencement of the foreclosure suit, resulting documents will be rushed to the foreground by your opponent and without any supporting documentation. This will happen as your opponent tries to defeat your claims using a procedure such as a motion to dismiss, a demurrer or a motion for summary judgment. Your rebuttal should demonstrate the questions raised by those documents. Your objective is to highlight questions that arise because of what the document states and doesn t state. Point out the things that those documents don t address and cannot prove without information that has not yet been produced by your opponent. Until you see such information, denying the existence of such supportive evidence is good form. As discussed in Chapter 12 of Fighting The Foreclosure Machine, there is no need to give your Copyright 2013 Page 14 of 16 FTFM Paper No. 1301

15 opponent an easy win in the lawsuit. Study those suggestions, be prepared and force your opponent into a full disclosure pursuant to your court s rules of discovery. By the time of trial, permitted discovery will be completed. Chapter 10 and Exhibit F of Fighting The Foreclosure Machine can help you request and force information from your opponent during the formal discovery phase. At trial, your opponent will have no more excuses. Its presentation of any resulting document that is not joined with all of the relevant supportive documentation will show that your opponent cannot produce genuine evidence that answers all of the w questions necessitated by its unsupported resulting documents. At this juncture, in addition to reminding your judge what the resulting documents do not prove, you can also add that your opponent obviously doesn t have that proof. Request your judge to rule against your opponent because it, not you, had the burden of proof regarding its alleged right to enforce your Note. Because it doesn t have the right to enforce your Note, remind your judge that your opponent also has no right to foreclose on the mortgage that was granted by you solely as collateral for the person actually entitled to enforce your Note. Do your homework and you ll see that your state s law ties the right to foreclose to existence of a defaulted obligation that is secured by the mortgage. Your opponent may refuse to comply with your requests for information through your informal and formal discovery. When I say refuse, I don t care what excuse is used, so long as the bottom-line is that your opponent doesn t deliver what appear to be the complete records and documents for every link in your Note s chain of ownership and control. Your opponent may, for example, persuade a judge that compliance with your requests might violate its private confidentiality agreement with some company or that your opponent s cost to comply with your request may be too expensive in the opponent s view. The particular excuse is not important. Copyright 2013 Page 15 of 16 FTFM Paper No. 1301

16 Try to get the complete information, but if your opponent doesn t cooperate, for any reason, then use the fact of its evidentiary failure to your advantage. Your opponent has the burden of proof. If it can t or won t produce UCC-essential proof, regardless of the reason, it must accept defeat for having failed to carry its burden. The devil is in the details. Avoiding that devil means your opponent needs to keep you and your judge away from the real and complete facts about its case. Let facts, not assumptions, guide you. Challenge each resulting document rather than risk your judge mistakenly assuming that something was proven by the document when, in fact, it was not.. Dear Reader: What you share may help others in their struggles against the foreclosure machine. Please send your comments to RMJ@FightingTheForeclosureMachine.com. Thank you. Copyright 2013 Page 16 of 16 FTFM Paper No. 1301