Getting the Judge to See Things Your Way Isn't Easy

I have received many comments and questions about my article  yesterday. Here is one response I wrote to one reader and client.

I have been exploring different wording and presentations to get through to judges. I think my efforts over the last 13 years are defined by that mission. I don’t think that simply presenting numbers to a judge will be sufficient for the judge to open his or her mind to the possibility that the case before them is not really a foreclosure. My current thinking is that a very aggressive effort to force the opposition into answering questions about any transaction in which the debt was purchased is probably the most efficient way to start the education of the judge.

• There can be little question that the borrower is entitled to know who owns the debt.
• There is no question that the legal presumptions arising from the possession of the promissory note are rebuttable.
• Therefore there can be no question that questions regarding ownership of the debt must be allowed in Discovery.
• Knowing you won’t get answers is the path toward getting the judge upset with your opposition.

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It is not merely the act of asking the question that proves the point. Knowing that they cannot and will not answer that question is what gives the homeowner leverage.

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By filing a motion to compel and then obtaining an order compelling the opposition to answer the questions and produce the documents you take the next step.

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In filing a motion for sanctions because they still didn’t comply with your Discovery request and they didn’t comply with the court order, the judge will respond to the defiance of the court order. by filing a renewed motion for sanctions including striking the pleadings of the other side and limiting their ability to introduce evidence of ownership of the debt merely by referring to possession of the promissory note, you are giving the judge an opportunity to slap them on the wrist and require them to provide proof of purchase of the debt. After continued defiance, a motion in limine could conceivably eliminate the Foreclosure completely.

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But in all events it still doesn’t seem likely that even with clear evidence of defiance of the Court and Court procedure that a judge will presume that the case at bar was not really a foreclosure. Rather they are more likely to conclude that the foreclosure violated too many requirements to be allowed. That is why they frequently dismiss without prejudice. Even after a complete failure of proof, the judges still maintain the view that if the Foreclosure had been allowed, it would have produced sale proceeds that would have been applied to the debt.

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The notion that the sale proceeds would actually have been distributed as Revenue is completely counterintuitive and runs against the natural bias of every human being that sits on the bench. Just because it is true doesn’t make it acceptable. These judges have been rubber stamping illegal foreclosures for years. They are human. Finding that the foreclosure was actually a scheme to generate revenue and not any effort to repay an unpaid debt would in effect be an admission of error in thousands of cases.

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As we have found so often, being right does not mean you are going to win. You have to work with what you have. And what you have, in most cases, is a judge who believes their principal function is to uphold contracts. This view is not wrong and in fact it is completely correct.

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The issue we confront is that in securitization as practiced by the investment banks on Wall Street the contract was completely changed after the origination of the loan.

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This is only possible because there is no actual loan agreement such as you would find in a commercial loan. There is no letter of commitment and there is no written agreement. There are no express warranties from the lender. All the “warranties” are implied from statute.

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In residential loan transactions the loan agreement is not defined but it is generally viewed as being the promissory note and the security instrument, which is the mortgage or deed of trust. But under contract law there are many additional terms that are contained within federal and state laws governing deceptive Lending and the disclosure documents that were presented to the borrower. Those provisions are the implied terms of the loan agreement and are every bit as important, if not more important than the terms expressed in the note and mortgage. 

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One of the tasks of a litigator is to educate the judge as to all of the components of the initial loan agreement. This will at least get the judge to consider possibilities outside of what is merely contained in the promissory note and mortgage.

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