Identification of Actual Creditor is essential for Deciding Many Issues

CREDITORS ARE NECESSARY AND INDISPENSABLE PARTIES: I think this piece identifies the correct issues in the identification of actual creditors — i.e., parties entitled to receive payment from a homeowner. Inferentially it raises the very issues that foreclosure defense lawyers have been raising for years — without knowing the identity of the real creditor, how can you connect the real creditor to the snowstorm of documents created by the banks, trustees and servicers?

Get a consult! 202-838-6345 to schedule CONSULT, leave message or make payments.
Hat tip to Dan Edstrom
The financial industry has successfully re-defined law, procedure and rules as they progress through the avalanche of foreclosures which is continuing despite well-placed reports to the contrary. Perhaps the most important “re-write” has been the notion that the actual creditor need not be disclosed, despite the fact that all authority and actions must flow from the actual creditor.
Those who have pursued foreclosure have used legal presumptions in a twisted way — arriving at the conclusion that a debtor need not know the identity of the actual creditor in order for the obligation to be enforced.
The enforcement consists of three separate and distinct issues — enforcement of the debt, enforcement of the note and use of the mortgage (or deed of trust) to force the sale of property.
The debt arises by operation of law upon the homeowner’s receipt of money from a third party as long as the money was not a gift. In THAT transaction the debtor is the person who received the money and the creditor is the one who gave the money. It is simple. The debtor owes the money to the creditor. Interposing a servicer changes nothing. The debt is still owed to the creditor no matter how many agents are appointed to deal with the debtor. So knowing the identity of the creditor is a prerequisite to determining the authority of multiple third parties who claim to be holders, servicers, or agents of the creditor.
The note is an instrument which defines the debtor, defines the creditor and defines the terms of repayment from the debtor to the creditor. The note cannot change the debt. If the debt was for $100,000, the execution of a note for an amount different than the debt would be improper. The note is not the debt — it is merely evidence of the debt, which means that the parties to the note must be the same parties to the debt. Inserting a Payee on the note who is different than the creditor creates two liabilities when there was only one transaction.
The debtor owes the creditor as a result of the transaction in which the creditor’s money was used to fund the transaction and the maker of the note, while the same as the debtor in the original transaction, has now signed a document to a separate party in which there is a separate liability to the Payee PLUS the original liability to the actual creditor.
Under the merger rule the debt is supposed to be merged into the note to prevent multiple liabilities. Substitution of a new party on the note prevents the merger rule from operating. The merger rule is a principle of law that says that the execution of the note should result in merger of the debt with the note because the note is accurately asserting the identity of the parties to the debt and the terms of repayment, thus avoiding multiple liability for one transaction.
The mortgage instrument is a statement that real property is collateral for the faithful performance under the note. If the maker of the note fails to perform then the collateral can be sold to satisfy the balance due on the note. But without a valid note that memorializes the terms of the debt, the mortgage is collateral for an obligation that does not exist — unless the note is improperly sold to an innocent third party who pays value, in good faith without knowledge of the maker’s defenses. That bona fide third party is protected under the law.
If the maker executes an instrument that is defective in some way by reference to parole evidence (outside the assertions made on the note) then the third party can enforce the note against the maker despite the existence of otherwise valid defenses of the maker of the note. For anyone other than an innocent holder in due course, the burden is on them to prove that the note was merged with the debt.
Thus in the case of a holder in due course the issue of whether the note was merged with the debt becomes irrelevant. The maker is limited to bringing claims against the parties who tricked the maker into signing an instrument that did not merge the debt into the note.
See the following from

In re Vargas, 396 BR 511 – Bankr. Court, CD California 2008

explains further why the above issues are so important:

The identification of the secured creditor for a claim (or a movant, objector, etc.) serves several important functions. First, it will (presumably) link the creditor, movant or objector to the Schedule A list of real property owned by the debtor. Second, this identification (presumably) links the creditor, movant or objector to the Schedule D list of creditors holding secured claims. Third, this identification permits the judge to determine whether he must recuse himself based on the Code of Conduct for United States Judges (requiring recusal in a variety of circumstances based on the judge’s relationship, if any, to a party seeking relief – i.e. moving party, objecting party, creditor/claimant, etc.)[1]  See In re Vargas, 396 BR 511 – Bankr. Court, CD California 2008.
U.S. Bank, National Association has alleged to have been appointed as a trustee (without evidence of any kind whatsoever), but none of the beneficiaries have been included or disclosed in Proof fo Claim 2-1 or disclosed in this case at all, despite Debtors repeated objections. The beneficiaries for complex Wall Street financial engineering transactions are typically hedge funds and other large scale investors, including those managing retirements funds, such as those that Federal employees (and Federal judges) may be invested in.
The trustee is only an agent for the beneficiaries, and holds only bare legal title to the (alleged) mortgages belonging to the trust. The beneficiaries are the beneficial owners of the trust assets, and are an indispensable party. See Office of the Comptroller of the Currency Interpretive Letter #1016 located on a government website here: The note attached to Proof of Claim 2-1 provides the following definition: Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the “Note Holder.” The only parties entitled to payments for this type of “trust” are the beneficiaries.

Pursuant to FRCP Rule 19(a) PERSONS REQUIRED TO BE JOINED IF FEASIBLE, Debtor states that the beneficiaries are required parties, are subject to service of process, and their joinder will not deprive the court of subject matter jurisdiction (to the extent the purported creditor has a valid, legally binding and enforceable claim against Debtor or the estate).  With the beneficiaries absent, the court cannot accord complete relief among existing parties. The beneficiaries (allegedly) claim an interest relating to the subject action (claim against Debtor or the estate) and are so situated that disposing of the action in the beneficiary’s absence will: (i) as a practical matter impair or impede the beneficiary’s ability to protect their interest; (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

            Pursuant to FRCP Rule 19(b) WHEN JOINDER IS NOT FEASIBLE, Debtor states that to the extent the beneficiaries cannot be joined, the claim should be dismissed or stricken from the record. In equity and good conscience: (i) allowing the claim or denying the claim without determining the beneficiary’s actual pecuniary interest in the claim would prejudice that beneficiary or the existing parties (especially Debtor); (ii) rendering a judgment in the beneficiary’s absence would not be adequate; and/or (iii) the “creditor” does have another remedy if the action were dismissed (i.e. the claim stricken or disallowed) for nonjoinder, as that party could file a judicial action requiring it to prove their case by presenting affirmative claims and asking for affirmative relief (this due process requirement is sorely missing from Proof of Claim 2-1).
Finally, the “creditor” has not provided the names of all the indispensable parties (beneficiaries), nor provided evidence of their existence, nor complied with FRCP Rule 19(c) which imposes on the “creditor”: “When asserting a claim for relief, a party must state: (1) the name, if known, of any person who is required to be joined if feasible but is not joined; and (2) the reasons for not joining that person.”
CA. Civ. Code 1550 provides the elements of a contract in California, which includes parties capable of contracting. An alleged trustee is only a trustee if there are beneficiaries to act as an agent of. CA. Civ. Code 1558 provides that parties to a contract must not only exist, but must be identifiable. Debtor has consistently, timely, and repeatedly objected to the refusal and failure to disclose the existence of any and all beneficiaries for which U.S. Bank, National Association as a purported trustee is acting on behalf of.
The Fourth, Ninth and Tenth Circuits apply an abuse of discretion standard to the district court’s determination for both necessary and indispensable parties. See Washington v. Daley, 173 F.3d 1158 (9th Cir. 1999); NATIONAL UNION FIRE v. RITE AND OF SOUTH CAROLINA, 210 F.3d 246 (4th Cir. 2000); Davis v. US, 192 F.3d 951 (10th Cir. 1999).

7 Responses

  1. SAME with Defendents and Perpetrators …….. Just the FACTS ……. The REAL, No Fooling, Historical, Undeniable FACTUAL …………. FACTS ………

  2. Copy that …

    This adds to the joint-lock and stranglehold of the false-creditors, when applied in the proper venue of course.

    Thank you for good usable information, with case cites. (nice)

  3. Strike that ,, I found a large block of text identical to that posted at the link but it obviously isn’t the source … The same arguments must be used quite often… ignore the 03:12 post please.

  4. I don’t know where/what the tanned text is from, but it isn’t from In re Vargas.

Leave a Reply

%d bloggers like this: