Collateral lawsuits and Adversary lawsuits in bankruptcy actions

Posted on April 10, 2023 by Neil Garfield
If the party named as claimant or Plaintiff or Beneficiary did not own any unpaid debt and said party, therefore, suffered no economic injury by and through any action or inaction of the defendant or homeowner, then despite the appearance of default, no legal default has occurred even upon declaration of such by a disinterested third party.
1916 article on collateral attacks.
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The bottom line on collateral attacks is that the attack must be based on a theory that ultimately affects a finding of whether the trial court ever had jurisdiction. This means that there was no justiciable issue — one party was injured and alleging that the other party caused the injury.

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If the answer is yes, the court did have jurisdiction, it follows that the court had the authority to hear the case and render judgment even if the judgment is perceived as wrong. Such judgments or actions must be attacked by either post-judgment motions or by appeal (or both).

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But if the answer is no, the court never had any authority to hear any allegations, facts, or even arguments about the law. The sole action permitted to be taken by the trial judge is dismissal — regardless of when the issue is raised, including on appeal.

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In foreclosure litigation, the custom and practice is the pursuit of a forced sale by claiming rights under the statutory scheme allowing for foreclosure.
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Presumptions indeed arise that the holder in due course of a promissory note, had acquired the underlying debt.
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Presumptions also arise upon an allegation of possession of the original promissory note — and these presumptions are allowable even though the designated claimant is alleged to have physical possession but did not pay for such possession and never received any authority to enforce from the owner of the underlying debt, if any.
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But that is only the case for a party seeking to enforce a promissory note, not in the case where the party seeks to enforce a mortgage deed or deed of trust. This is the difference between Article 3 (negotiable instruments) and Article 9 (secured transactions  — non-negotiable instruments).
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 And it is unequivocally true that foreclosure is meant to enforce unpaid debts. But the allegations that the said claimant is merely a holder and not a holder in due course gives rise to a new presumption, to wit: that the attributes of a holder in due course are not being alleged — namely payment of value in good faith and without knowledge of the maker’s defenses.
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For example, the absence of any allegation or proof of payment of value gives rise to the presumption that no consideration was paid to support any alleged assignment or endorsement. The case is over because the true claimant, if there is one, is neither appearing nor presenting itself as an injured party.
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If no consideration was paid for the right to present a party as a secured creditor, then it may be presumed that no payment was required. If no payment was required, it may fairly be inferred and even presumed that no asset could be purchased or sold.
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If the party named as claimant or Plaintiff or Beneficiary did not own any unpaid debt and said party, therefore, suffered no economic injury by and through any action or inaction of the defendant or homeowner, then despite the appearance of default, no legal default has occurred even upon declaration of such by a disinterested third party.
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Based on my experience and analysis, it is highly unlikely that any adversary claim or collateral claim will yield any positive result unless it attacks the jurisdiction of the court or the status of the declared beneficiary in a nonjudicial case. 

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Neil F Garfield, MBA, JD, 76, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE COMMENTS ON THIS BLOG AND ELSEWHERE ARE BASED ON THE ABILITY OF A HOMEOWNER TO WIN THE CASE NOT MERELY SETTLE IT. OTHER LAWYERS HAVE STRATEGIES DIRECTED AT SETTLEMENT OR MODIFICATION. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.

But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 14 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

Yes you DO need a lawyer.
If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

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