Why are conditions precedent so important in foreclosure cases?

The mischaracterization of a condition precedent alters the burden of proof. (e.s.) If compliance with the HUD regulation is a condition precedent to foreclosure, the plaintiff carries the burden of proving substantial compliance with the condition when it presents its case, so long as the borrower has made a specific denial of the plaintiff’s allegation that it had satisfied all conditions precedent (e.s.).2 See, e.g., Chrzuszcz, 250 So. 3d at 769–70. But if compliance with 24 C.F.R. § 203.604 is an affirmative defense, “[t]he defendant, as the one who raises the affirmative defense, bears the burden of proving that affirmative defense.” Id. at 769 (citing Custer Med. Ctr. v. United Auto. Ins. Co., 62 So. 3d 1086, 1096 (Fla. 2010) (“An affirmative defense is an assertion of facts or law by the defendant that, if true, would avoid the action and the plaintiff is not bound to prove that the affirmative defense does not exist.”))Lakeview Loan Servicing v. Walcott-Barr. Judge Gross,  Concurring opinion.

Article 9 §203 of the Uniform Commercial Code (UCC) has been adopted as state law in all 50 states. It states that a claimant must have paid value for the underlying debt before seeking enforcement of a security instrument and it states that this is not mere guidance. It expressly states that it is a condition precedent to any attempt to enforce the security instrument (e.g. mortgage or Deed of trust).

The reason this is important is the technical construct of the burden of proof. If the homeowner denies that all conditions precedent have been satisfied then it is the claimant who must prove that all conditions precedent must be satisfied. Since one of those conditions precedent is the payment of value one exchange for ownership of the underlying obligation, a proper denial (answer in judicial cases) is sufficient in those cases to require the foreclosure mill to prove the payment of value. there are no exceptions.

In non-judicial foreclosures, this issue is muddied and its application is potentially unconstitutional. That is because the homeowner must file the lawsuit and declare that the foreclosure mill and its “client” failed to satisfy conditions precedent including the state statute adopting Article 9 §203 UCC.

In judicial foreclosures, the foreclosure mill will most likely be unable to actually prove that anyone paid value for the underlying obligation. The homeowner can seal the doom of the foreclosure mill simply by aggressively pursuing discovery seeking proof of payment. In non-judicial foreclosures, the homeowner must rely on discovery because the foreclosure has not made any allegations and therefore has nothing to prove.

Many lawyers and pro se litigants get confused in applying these “technical” requirements. The foreclosure mill will always rely on allowable legal presumptions arising from the apparent facial validity of notes, allonges, mortgages, and assignments. If the document is indeed facially valid then the presumption is that it can be admitted into evidence as both relevant and as proof of the matters asserted in the document — namely that the mortgage or note has been transferred. but you will rarely find an instrument that recites that the underlying debt was transferred. that is where legal presumptions enter the picture.

So the first thing a homeowner must do is challenge whether the document is facially valid. the answer to that often comes in the signature block where the actual party and their authority is unclear without parol evidence. If that is the case, then the document is not facially valid. Therefore no legal presumptions arise from facial validity. If the attack on facial validity fails then the homeowner must counterattack the evidence, which is now admitted, by rebutting the legal presumption, to wit: that no value was paid. That is done in discovery where the failure to respond to the discovery can if pursued correctly, lead to the conclusion that no such payment occurred. The condition precedent fails and the homeowner wins.

This is technical but not a technicality in the lay sense of the word. In the national code preceding the UCC and for centuries before it, forfeiture of property — especially homestead property — was considered to be a draconian remedy where only money was involved.

So it evolved that while you could get judgments for debts, you could not execute that judgment by selling the debtor’s property unless you had actually paid for the debt. That is why there are so many differences between Article 3 UCC and Article 9. Mortgages are not negotiable instruments.

But even with notes the fact that a claimant alleges possession of the original note does not mean they actually have it. they must prove it. And the fact that they possess it does not mean that they have the right to enforce it. But possession raises the presumption of the right to enforce. This is another area of mistakes and errors by homeowners, lawyers, trial judges, and even appellate judges.

The right to enforce can ONLY come from the one who owns the underlying obligation OR, under Article 3, someone who paid for the note in good faith and without knowledge of the maker’s defenses. There is no law in existence that will confirm ownership of the debt without payment — but payment is often presumed. So rebutting the presumption is key to winning foreclosure cases.

The absence of knowledge and use of these legal precepts is fatal to efforts to defend one’s home from unlawful seizure and foreclosure. The presence of knowledge is no guarantee of results but it raises the likelihood of a successful defense to highly probable.

BOTTOM LINE: It is not enough that you know the opposition never paid for the underlying debt. You must either force them to prove payment or prove they did not. The only other possibility that produces the same result is revealing that the opposition should not be permitted to submit evidence of ownership or authority over the debt because they refused or failed to respond to discovery — but that requires aggressive motion practice to succeed.

Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.

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One Response

  1. I am wondering since when FORGERY, PERJURY , FRAUD UPON THE COURT, and IMPERSONATION became a “facially valid” evidence.

    Citation (below)Whenever judicial independence is undermined, tyranny, chaos and then anarchy, in that order, are its inevitable corollaries.

    Here are NO judicial independence in foreclosure Courts. Money rule.

    Mill lawyers are coming to the Court with robo-stamped document (in my situation it was a SEPARATE BLANK page, not even a Note. Someone stamped a blank white page, brought it to the Court and judges helped them to steal my home while criminally concealed material evidence – a brand new “Note” – also without any “assignments” and mercilessly tortured me from the bench.

    I DID challenged validity of this “document” . Murky Judge cracked jokes in my face about “Murky MERS practices” – and concealed evidence based on which he ruled – but personally instructed mill lawyers to put in the Order that I inspected ORIGINALS”

    Neil said 95% homeowners walk away while only about 5% fight.

    Well, maybe it was a right decision to give Federal Reserve and their Wall Street fascists everything they want.

    It will save “homeowners” (non-exist) from enormous tortures in the Court and maybe save their lives.

    During WWII those who left their homes to fascists and went elsewhere survived. Those who decided to fight mostly died or were severely injured. Below is a citation how in the past Judiciary helped Hitler to destroy opposition.

    EVERYONE whom I know and and who tried to fight Federal Reserve and its Members (who is the actual party behind all foreclosures filed by Black Knight and CoreLogic) suffered irreparable damages – both physically, emotionally and financially. Lost families, substance abuses, depression, health problems just name it.

    If you decide to fight, Judges will destroy you from the bench, one way or another.

    One of my friends suffered from heart failure after being tortured in the Court by Bank of America and their Judges; and spent 4 days in coma.

    Another friend where US Bank a acted as Plaintiff and an “Agent for HUD” (I guess it was HUD at large) was kicked on the streets like a stray dog, all his personal belongings were broken while fascists threw them out and boarded his home. Fascists did not even allowed him to pick up his personal belongings – all was moved to the storage. He had to live in the car for about a week; his dog died from stress on his hands; plus he had to pay about $700 to retrieve his belongings from the storage. Soon after fascists demolished his house – which was in a very good shape. So, after about 8 years of fight with very obvious fraud, and thousands of dollars pent on lawyers, George is physically, emotionally and financially destroyed by JUDGES who support these crimes. And his wounds will never heal.

    Back to “valid evidence” Robo-signing is prohibited by the Settlement,but Judges dot care. Forging someone’s signature on a document is a crime. Judges don’t care because their investments are at stake, as well as “donations” from Banks’ lawyers.

    Where integrity vs money, money win.

    The stamp bears a signature of a long-defunct “responsible party” (often looks different that the actual signature, like David Spector, former CWF now PennyMac CEO). This is a text-book forgery. Judges don’t care.

    When Mill lawyers file FORGED assignment into a NON existing Trust by never worked at MERS employees who pose as “Vice Presidents” – it is impersonation at its finest. Judges don’t care. Its perfectly fine for never worked for MERS “employee” to “transfer” someone’s home into a non-existing entity several years after the “Lender” disappeared, in violation of every single law in this Country, particularly IRS Rule 860 and Pub. 938

    Judges know about it but don’t care ( they only care about their money invested in the Scam)

    I think Courts will continue controlled demolition of American economy .

    It will continue until THE PEOPLE will finally learn the truth.

    Any democracy is as strong or as weak as the institutions that underpin its edifice. When democracy is subverted it is the institutional reliability of the judicial system that is dismantled first. A grand sweep of history bears testimony to these maxims. Whenever judicial independence is undermined, tyranny, chaos and then anarchy, in that order, are its inevitable corollaries.

    Various aspects of Nazi rule from 1933 to 1945 have received copious amounts of attention in the form of books, documentaries, films and a range of highly scholastic analysis. A forgotten feature, however, of that period was the systematic destruction of an independent judicial system. Before the Nazis first appropriated dominance in 1933, Adolf Hitler did not wax eloquent against the judiciary. This was due to the fact that the German legal system was both Federal in character and deeply embedded in the classical Western legal tradition of an autonomous judiciary both at the base and at its pinnacle.

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