Can a Broken Chain Lead to Cancellation of Instrument: NO!

In the strategy I have dubbed DENY and DISCOVER I have cautioned lawyers and pro se litigants from starting with an attack on the documents which clouds the mind of the Judge. You should start by denying that the money came from the party on the note, denying that you ever completed a financial transaction with the payee on the note or any of its putative successors. If you never completed a deal with the originator, which in most cases is true, then you have every reason to deny the obligation, note and mortgage and file actions for quiet title and cancellation of void instrument (the mortgage or deed of trust).

To do otherwise gets you in the thick of a he-said she-said argument that most borrowers and their attorneys are losing. Denying the whole thing, the Judge is constrained to accept your denial as true. That puts the matter at issue. And if it is at issue in must be put o the trial docket, which enables you to pursue discovery, during which you will find the absence of any money in all the transactions claimed by the other side.

THEN you use the the false, fabricated, forged documents breaking the chain as corroboration for your denial, affirmative defenses and counterclaim. Otherwise you are affirming what is already in the Judge’s mind: there was a loan, the borrower didn’t pay when due, and now the borrower wants some relief.

Instead you take control of the narrative and get the Judge to accept the fact that you are alleging there was no transaction, which means there was no loan, no payment due, no default and no right to issue of Notice of Sale, auction or credit bid from a non-creditor who neither funded nor pruchased the cloan.

A broken chain of title comes from one of two things, the second of which is almost universally missed by pro se litigants and lawyers. Caveat: the more you argue about the documents alone the further you dig into the rabbit hole.

The chain is broken either when the parties on their face show no continuity of title. So when A sells to B and B sells to C and C sells to D then there is an unbroken chain of title. Anyone who has attended Max Gardner’s boot camp has been taught this ad nauseum. If A sells to B and then C sells the same thing to D, you have a broken chain of title on its face and it isn’t hard to show that neither C nor D ever was a stakeholder.

But this does not lead to cancellation of the instrument. Cancellation is directed only at those documents that were defective, void or voidable from the beginning. See Cal Sec 3412 or its counterpart in all other states. So what does happen?

Demonstrating a broken chain merely means that, in the above example where A sold to B, that B still has title. But that doesn’t mean that B can do anything with it or can claim being a legitimate stakeholder or creditor. If B received payment in full from ANYONE, there is no receivable for the loan obligation. Therefore while theoretically the foreclosure can begin, it will not end with a sale, auction or credit bid, because the creditor can only submit a credit bid for the amount due from the borrower to the creditor. If that foreclosing party really wants the property, they must bid and pay cash like anyone else.

Which brings us to the second break in the chain. “for value received” is so commonplace, nobody reads it or pays any attention to it. But the fact is that the payee on the note never loaned the money nor purchased the loan. So in discovery, when I say follow the money, I mean follow the actual transactions in which the other side can prove money ex changed hands. It didn’t. Nobody paid for anything because the whole scheme was funded by investor-lenders ignorant of how their money was actually being used.

But by creating paperwork that carries with it the assumption or presumption that the assignee of course paid the assignor, the banks and servicers have so far accumulated title to more than 6 million homes most of which with a credit bid from a party who neither funded nor purchased the loan and who therefore could not be a creditor and who was not permitted under statute to submit a credit bid. This break in the chain of title is more akin to civil theft but it qualifies as a break.

Tags: broken chain of title, follow the money, for value received, Max gardner's
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