Partial transcript and notes from Neil Garfield Show on Pleading and Proving Fraud

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Hi Neil Garfield here and this is Thursday April 18th, 2019. Fraud is a many splendid thing if you can prove it. But you can’t prove it unless you get past a motion to dismiss. And you won’t get past a motion to dismiss without a clear and convincing recitation of facts that show the court that you have allegations which if proven mean that fraud occurred and that you should be compensated for it.
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Second, reminding you of what I said last week, the 11th Circuit Circuit Court of  Appeals has ruled that emotional distress damages and punitive damages can be recovered by mortgage borrowers under the Fair Credit Reporting Act. So you have the FDCPA, RESPA, TILA, and the FRCA all with potential damage claims and all possible counts in a lawsuit or in affirmative defenses for recoupment.
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The same is true for fraud claims which can also be alleged as an affirmative defense in recoupment and potentially avoid the application of the statute of limitations. Damages in recoupment are only available up to the value of the claim asserted against you but in most cases that is really all what homeowners want — to get rid of the foreclosure or reduce it to a fraction of what was claimed.
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Third, I have an article coming out about this. Bruce Jacobs in Miami has once again nailed U.S. Bank which is now facing an order to show cause why they shouldn’t be held in contempt. Jacobs asked for documents the bank should have had if they were an actual claimant with an actual claim.
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Of course U.S. Bank virtually never has an actual claim and it’s never a true claimant. It appears as a ghost. Jacobs persisted when  they refused to respond to discovery. He filed a motion to compel. The judge entered an order compelling U.S. Bank to deliver what they didn’t have —  the Bank couldn’t defend with the fact it didn’t have such documents because that would be admitting to not having a claim in the first place.
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So the foreclosure mill lawyers, who probably never had any contact with U.S. bank even though they were claiming it was their client, just stonewalled. The lawyers did this because it works. Most lawyers and pro se litigants give up if they still don’t get the discovery because they think the documents exist. But they don’t. And Jacobs knew that so he filed a motion for sanctions which was also granted but then the judge changed that to an order to show cause why they shouldn’t be held in contempt.
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And that demonstrates what I have been saying for 13 years. To beat the bank you must be willing to go the distance and not give up. To win you must understand and proceed on the assumption that the bank is not a real claimant and that there is no claim and therefore are no documents to back up the claim except those that have been fabricated, forged, backdated and robosigned.
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Which brings us back to tonight’s subject. Pleading and Proving Fraud
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Fraud can be a very effective claim or defense. But it is not an easy claim. Fraud must be both pled and proven clearly and convincingly. Some view the burden of pleading and proof as unfair when compared to a claim for foreclosure which has a burden of proof that requires only that it is more likely than not that the claimant is real and has a real claim entitling the claimant to a remedy. That is a philosophical argument.
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If fraud is used as a defense the damages are limited to the amount of the foreclosure claim. If it is used as a counterclaim or in a separate lawsuit then the statute of limitations is probably going to be an issue because the fraud most likely occurred many years before.
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But the counter arguments to application of the statute of limitations are active concealment of the truth and continued misrepresentation, and then maturation of the claim which might not accrue until the foreclosure is decided against the borrower. I think the only valid argument is active concealment. But depending upon which state you are in the statute of limitations may not be applicable if fraud is alleged as an affirmative defense in recoupment.
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The pleading and proof requirements for fraud in all circumstances are very rigorous. Knowing now to plead and wording the complaint or defense properly is essential to getting fraud on the table in litigation which by the way opens the door to discovery that might not otherwise be allowed if you are merely defending the foreclosure on other grounds. That said, a successful action for fraud has a high likelihood of achieving a significant verdict for compensatory and potentially punitive damages.
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This is where there is often conflict between lay people who think they know what fraud is and lawyers who know that in order to successfully defend with fraud or prosecute a claim for fraud, they must satisfy the requirement elements of fraud.
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So someone tells a lie. Is that fraud? Not without the rest of the elements. Did anyone hear the lie? If yes, you can proceed with other elements. What was the lie, when was it communicated, how was it communicated and to whom? If you can’t specify that then you have no fraud claim.
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What part of the representation or statement was untrue? How do you know it was untrue? So far you still don’t have a fraud claim alleged and so you won’t be able to rave it without a complaint that satisfies the required elements of a fraud defense or claim. You may think that you do but you wishing doesn’t make it so.
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Did the party who made the statement or representation know it was untrue? How do you know that? Was it sales puffery or designed to make you do something that they knew would result in your demise or detriment? How do you know that?
If you are pleading fraud upon the court be careful not to make it a claim of the court and to keep it as claim of the homeowner. So you can allege that the there was fraud upon the court resulting in a foreclosure but I think you also need the element of fraud perpetrated upon the homeowner which is tricky when you get to reasonable reliance.
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Did you actually rely on the lie? If you didn’t, there is no fraud claim. Did you reasonably rely on the lie? If you shouldn’t have relied on it then there is no fraud claim.
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Did you suffer some sort of legally recognizable damage as a result of the your reasonable belief that the lie was a true statement instead of a false statement? How will you prove those damages?
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So for example you might want to say that the filing of a void assignment of mortgage was a lie and you would probably be right. But so far you have not alleged fraud. You must specify the statements, which can include conduct and omissions, that were untrue and were known by the parties who prepared, executed and recorded the assignment.
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Notice that there are three separate steps — preparation which we all know is fabrication, execution which we all know is forgery and robosigning and recording which we all know is utterance of a false instrument. But the actual parties who performed each of those functions is different under the current bank scheme. And the bank who rode it is nowhere to be seen in the paperwork. So the actual miscreant who committed the fraud did it through several layers of intermediaries each of whom will be blamed by the bank as having committed an error and was not part of a fraudulent scheme. Suing the correct party is essential to proving fraud. In REMIC situations I think one of the correct parties is the bank that is named as trustee but there is more.
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Which leads me to my final conclusion. I think is high time that the investment banks were sued including individuals in the investment bank that put this scheme in motion. The investment bank is the one party who indisputably had actual knowledge of all the moving parts of the fraudulent scheme that they call securitization but which in fact was an illegal scheme to collect money from investors, collect names, signatures and reputations of borrowers, and profit  by trading on the money of investors and the reputation of borrowers without any disclosure of what they were doing and contrary to the the intent of both the investors and the borrowers.
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Thus the act of filing a void assignment of mortgage in favor of a trustee who has no trustee powers for a trust that doesn’t exist without the transfer of the debt which has long since been sold to third parties in the shadow banking market is a coverup for the initial fraud related to the origination or acquisition of the debt.
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Each assignment was a representation that the loan had been transferred but the parties all knew that there was no transaction in which the debt was purchased because there was no debt in their chain.
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Everybody knew except the borrower and the court who relied upon the facial validity of instruments to arrive at factual and legal conclusions that were contrary to the actual facts because of legal presumptions advanced by the lawyers for a claimant who in some cases did not even exist such less possess a claim.
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They knew that they were misleading the court and the borrower and they knew their goal was to get a foreclosure sale, knowing full well that they possessed no claim to that remedy nor any other claim for collection of any debt due from the borrower. And they blocked and concealed the borrower’s access to the true owners of the risk of loss that should ahem been available to borrowers under state and federal laws to negotiate settlements and modifications.
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They knew they were throwing families out of their homes and they knew they had no right to do so. The investment bank knew that it had sold the debt many times over to investors in the shadow banking market in addition to the the initial sales to the initial investors who purchased the initial certificates.
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Do you need to prove and allege all that? No. You only need to say that the assignment, or even the loan documents themselves, contained lies upon which you and the court relied to your detriment. And then specify which of the “statements” were lies.
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And specifically that the assignment was a representation of a transaction that the parties knew had never taken place, to wit: the purchase and sale of the debt and that at the time of the foreclosure none of the sprites involved in the foreclosure had any interest in the debt nor did they expect to receive money from the sale of the property  if the foreclosure was successful.
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That is where the investment bank comes in. Because it is the investment bank who actually receives the proceeds of foreclosure which is why you see something called an assignment of bid after foreclosure judgment.
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The investment bank is submitting, through layers of intermediaries, an illegal credit bid, which is a presentation that it owns the debt and that the sale of the house will be used to pay down the debt. It won’t and the parties all know that.
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How much detail you choose to plead is amateur of style and strategy. But unlike other such claims fraud requires a much higher pleading and proof standard than most other claims.
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We are here to help you as needed. Just go to www.lendinglies.com or send us a Registration statement for a free preliminary review.
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Notes for Show
Six elements of fraudThe Elements of Fraudulent Misrepresentation

In order to prevail in a lawsuit for fraudulent misrepresentation, the plaintiff must be able to prove the following six elements:

  1. A representation was made (in contract law, a representation is any action or conduct that can be turned into a statement of fact).
  2. The representation was false.
  3. The representation, when made, was either known to be false or made recklessly without knowledge of its truth.
  4. The representation was made with the intention that the other party rely on it.
  5. The other party did, in fact, rely on the representation.
  6. The other party suffered damages as a result of relying on the representation.

Remedies for Fraudulent Misrepresentation

Depending on the nature of the case, remedies for fraudulent misrepresentation can include rescission of the contract and damages. Rescission of the contract is the most common remedy, since fraudulent misrepresentation renders it voidable(as opposed to simply “void”). Therefore, the parties may choose not to rescind the contract — which restores the parties to their pre-contractual positions — if this is not possible. With respect to damages, only actual losses stemming from the misrepresentation may be claimed.

FRAUD BY OMISSION

He argues that an omission cannot support a fraudulent inducement claim under Florida law. He is wrong. “Florida law recognizes that fraud can occur by omission.” ZC Ins. Co. v. Brooks, 847 So. 2d 547, 551 (Fla. 4th DCA 2003); see also Berg v. Capo, 994 So. 2d 322, 327 (Fla. 3d DCA 2007) (“Fraud may be established by either an intentional misrepresentation or omission of a material fact.”).

RECOUPMENT Florida Statute 673.3051 Defenses and claims in recoupment.

(1) Except as stated in subsection (2), the right to enforce the obligation of a party to pay an instrument is subject to:

(a) A defense of the obligor based on:

1. Infancy of the obligor to the extent it is a defense to a simple contract;
2. Duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor;
3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms; or
4. Discharge of the obligor in insolvency proceedings;
(b) A defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
(c) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
(2) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in paragraph (1)(a), but is not subject to defenses of the obligor stated in paragraph (1)(b) or claims in recoupment stated in paragraph (1)(c) against a person other than the holder.
(3) Except as stated in subsection (4), in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (s. 673.3061) of another person, but the other person’s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.
(4) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (1) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.

5 Responses

  1. What about fraud against the administration who allowed all to happen?

  2. Neil ,

    THANKS A MILLION for the transcripts ,, VERY HELPFUL …

    Bob G.

    Agree that there are grammar and spelling issues in most posts … I always copy/paste to a word doc and make my own corrections.. I find that it make me re-read closely… Neil is busy and I have rarely seen errors that weren’t obvious and easily fixed..

  3. To Toby Fernsler…please contact me …feet4fins@yahoo.com
    I live in Grand Junction, CO and had my rule 120 hearing…What a joke!!!

  4. Perhaps this presents a route to bringing fraud charges against judges, especially in semi-judicial states like here in Colorado. A theory some of us have been exploring, and is supported by local case law, is that a judge in a non-judicial Rule 120 foreclosure hearing loses judicial immunity due to lack of due process. These judges are willfully ignoring the fraud that comes before them, on the basis that Rule 120 does not allow for consideration of things like fraud. Thus they become party to the fraud perpetrated on the homeowners. All of the elements are there; known false representation with the intention it be relied upon, reliance on the hearing, and harm upon the homeowner.

  5. there is a lot of good info in this post, but PLEASE, NG, proof read before posting. Sloppy writing may be an indication of sloppy thinking, which is not good for business…yours or ours. thanx.

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