Editor’s Comment: There is no question that the primary tactic of all pretender lenders in the false claims of securitization is that they should not have to prove the transactions. According to the banks they only have to bring a storybook to class that talks about the transaction. The story book consists of the original promissory note, deed of trust (mortgage) and alleged sales or transfers of the note or loan. These documents talk ABOUT the transaction in which money exchanged hands but here are no pictures showing the transaction itself — like a picture of me handing you $100 on a note you signed saying you owe me $100.
But what if you signed the note to get the loan and then I didn’t give you the loan? No money exchanged hands. The answer appears to be that I can still sue you as the holder of the note but the presumption that I am the owner of the note or that the note is evidence of the debt is rebutted by your testimony and denial of ever having received the money. So I can sue but I can’t win.
Suppose you got the real loan from someone else the same day. I could point to that transaction to show that you DID receive the money and if you didn’t know how to handle that argument, you would end up paying off a loan you never received. Or you would point out to the Judge that the cancelled check is made out from someone else than me and that I failed to show privity or agency between me and the third party.
The problem is that in most cases, the storybook is a fairy tale. The payee never loaned the money and was a naked nominee along with MERs who was also a naked nominee, leaving no party in interest on either the note or the mortgage (deed of trust). Neither the designated “lender” nor the designated nominee holder of the security (MERS) handled, funded or accepted any money from the borrower.
The reason why the banks have gotten this far is that the illusion was complete when the money arrived at the closing table. It was assumed that the money came from the payee or secured party. It was further assumed that assignments and transfers of the loan would not have taken place unless there was proof of payment exhibited by the assignor. It never occurred to anyone that the money had not come from the originators but from an undisclosed third party whose name should have been on the note and mortgage. It never occurred to anyone, despite the clear provisions of TILA, that there was a duty to disclose to the borrower with whom he or she was dealing and how much they were making in profit or fees or other compensation out of this little loan. In some cases the profit exceeded the loan itself.
In Discovery, the principal thing you want to see is the proof of payment and proof of loss. The proof of loss is a showing that the holder actually paid money for the loan. In nearly all cases, no such transaction exists. Proof of payment is the same thing but together they require an answer to whether the trust still exists and whether the mortgage bond has since been renegotiated or sold or reconstituted into a different asset pool.
This is why most cases end in discovery. The bankers are the ones with unique access to the information you need, without which they submit a credible explanation of where the documents went, where they were last seen and to whom they were being sent. At some point, the bankers are forced to fess up that they don’t have the original note, they didn’t pay for the loan, they don’t own the loan, and thus have no right to submit a credit bid at auction. They will be forced to admit that the funding for the loan came from a third party undisclosed to Borrower and whose compensation was undisclosed to borrower, and that this was intentionally hidden from both the investor/lenders and the borrowers — for the sole purpose of collecting insurance and credit default swap money diverting it from the investors.
If the investors prove that they are entitled to the insurance and credit default swap money, then their loan balances will be correspondingly reduced with each dollar received (which they should have received in the first place). The investors’ receivable account would be correspondingly reduced which means that the receivable from borrowers would be correspondingly reduced since the creditor is not entitled to more than one payment. This in turn would have substantially reduced the principal due by borrowers, the number of “defaults”, the number of underwater borrowers and increased the number of settlements and modifications.
Further, the terms agreed to by the borrower were changed and contradicted by the conversion of the loan receivable to a bond receivable based upon indentures of a bond wherein a trust or REMIC was supposedly buying the loans.
But if you look for the actual monetary transaction between the trust and the party supposedly endorsing the note or selling the loan to the trust, the transaction in which money exchanged hands is entirely missing. No cancelled check, no wire transfer receipt, no wire transfer instructions, no ACH confirmation, no check 21 confirmation. It simply isn’t there which means that the investor money never funded the trust, and thus the trust lacked the funds to purchase the loans.
The bankers do a perfect two-step at this point. First they they ARE agents of the trust or REMIC and that is what made the transaction legal and enforceable, then they say they were NOT agents of the investors when it came to receiving insurance, credit default swaps proceeds or federal bailouts. I can find no support in the law of principal and agent that supports their position and I doubt if there is any such support.
In the case below, the bankers are essentially saying that for purposes of the discovery the claims of the borrower should be treated as a story book with no likelihood of success whereas the stories in the bankers’ comic book (i.e., the note and mortgage) should be taken seriously. The trial Court disagrees and lands squarely on its feet simply following common sense, precedent and existing rules. Discovery granted.
Posted on March 14, 2013 by Neil Garfield
. 250068 – Taylor v. JP Morgan Chase
On 4 Dec.2012, Plaintiff served deposition notices for Deborah Brignac (hereafter “Brignac”) and Colleen Irby (hereafter “Irby”), officers of Defendant California Reconveyance Co. (hereafter “CRC”), along with a deposition notice for another person not involved in this motion, Luis Alvarado (hereafter “Alvarado”). (Naicker Dec., ¶2, Ex.A). Plaintiff set the depositions for 10 Jan.2013. (Ibid.) Defendants served objections on January 4, 2013, asking P to withdraw the deposition notices. (Id., ¶4, Ex.B). Defendants asserted that the depositions would cause unnecessary burden, expense, and intrusion which would outweigh the benefits of the discovery, arguing that certain of Plaintiff’s claims lacked merit, thus rendering the discovery unwarranted. (Ibid.) Defendants also objected on the ground that Plaintiffs had “unilaterally” served the deposition notices with a chosen date without first meeting and conferring with Defendants about acceptable dates. (Ibid.) Defendants move to quash the deposition notices of Brignac and Irby, or, in the alternative, to issue a protective order. Defendants argue that Brignac and Irby can have no information likely to lead to discovery of admissible evidence because Brignac only signed an assignment (the 1st Assignment) of the deed of trust (Deed) which was rescinded and Irby’s sole alleged role was to sign the subsequent assignment (2nd Assignment), and Plaintiff’s claims regarding the conduct in which they may have been involved, are invalid.
Plaintiff opposes this motion, arguing that the deponents both possess likely relevant information because they are officers of CRC, they both signed assignments of the Deed involved in this case, so were personally involved in Plaintiff’s transactions at some point, and Plaintiff needs information on the murky transactions amongst the Defendants, about which he is otherwise unable to obtain information.
A party may serve written objections or risk waiving any problems with a deposition notice. (Code of Civ. Proc. § 2025.410(a)). A party may also file a motion for an order staying the deposition and quashing the deposition notice. Code of Civ. Proc. § 2025.410. A “deposition is stayed pending determination of motion.” (Code of Civ. Proc. § 2025.410(c)).
A party may “promptly” seek a protective order before, during, or after a deposition. (CCP section 2025.420).
On a motion for a protective order, the court, “for good cause shown, may make any order that justice requires to protect any party… from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.” (Code of Civ. Proc. § 2025.420). The burden of proof is on the party seeking the protective order to demonstrate “good cause.” (Emerson Elec. Co. v. Sup.Ct. (1997) 16 Cal.4th 1101, 1110).
Defendants’ arguments appear to be entirely groundless. Defendant’s argue, essentially, that P’s claims are invalid on the merits so any deposition of these witnesses would be a waste of time and thus the burdens would outweigh the benefits. That argument is completely invalid since there is no basis for a party to argue that another party has no right to obtain evidence supporting a claim simply because the claim may fail. The appropriate methods for raising such arguments are demurrer, which has failed, or judgment on the pleadings, or summary judgment or adjudication and Defendants present no authority indicating that this is a valid basis for avoiding deposition. Defendants also argue that the deponents will not likely provide relevant information because Plaintiff has been able to allege nothing more than the fact that they signed two assignments of his Deed. This is unpersuasive since, as Plaintiff argues, he is not likely to have any information of the inner workings of the Defendant corporations absent discovery. What Plaintiff has shown, and Defendants admit, indicates that these two witnesses clearly have at least some personal involvement beyond simply beyond being potentially knowledgeable officers, and thus are to some degree percipient witnesses to some of the events at issue in this action. Defendants also argue that the notices are improper because Plaintiff served them without first warning Defendants that he was going to notice the depositions or without first obtaining an agreed deposition date. These arguments are not supported by authority.
Accordingly, Defendant’s motion to quash and for a protective order is denied.
Code of Civil Procedure section 2025.420(d) states that on a motion for a protective order the court “shall” impose monetary sanctions on the losing party unless that party acted with substantial justification or other circumstances make sanctions unjust.
Both parties seek monetary sanctions. In this case, the motion lacks merit and Plaintiff’s opposition was warranted. Plaintiff seeks sanctions of $875 for about 2.5 hours spent at $350 an hour; Defendants seek sanctions of $3,460. The court awards sanctions to Plaintiff in the amount of $875. Defendant’s request for sanctions is denied.