The burden of proof in any case is to prove the elements of the case that has been alleged. The stated allegations in every case carry presumptions of validity for purposes of a motion to dismiss, but the implied allegations must still be proven if not admitted. In the case of a Holder in Due Course. Th defining elements of a holder in due course are that the holder purchased the note FOR VALUE in GOOD FAITH with NO KNOWLEDGE OF DEFENSES OF THE BORROWER.
Hence the burden of proof for an HDC is merely show to show possession of the note, combined with the method of by which they acquired the note — i.e., that they purchased the note for value in good faith without notice of borrower’s defenses, even if there was no consideration, even if the note was procured by fraud. The mistake made by both trial courts is that they ignore the allegation in the foreclosure complaint that the suing party is the HOLDER and is devoid of any allegation that says or would support that they are a HOLDER IN DUE COURSE.
see (a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under Section 3-402(a).
(b) If the validity of signatures is admitted or proved and there is compliance with subsection (a), a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under Section 3-301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.
Note that the implied allegation and presumption is that the loan existed and that a loan contract was consummated. Defendants denies this and therefore the prima facie case must establish the loan and the loan contract, in good faith and in accordance with the requirements of existing law and good sense.
Hence the HDC prima facie case is to prove the elements of being a holder in due course and the default (before the purchase) of the note. This is congruent with Article 9 of the UCC which requires purchase of the mortgage in order to enforce it. Otherwise, without the purchase, the suing party is limited to obtaining a judgment for damages, getting a judgment lien and then recording it against what is mostly homestead property.
If there is any difference between HDC and HOLDER with rights to enforce, it is that the holder, by its own allegations admits that it did not purchase the note and mortgage for value, in good faith, and without knowledge of the borrower’s defenses. This means that the borrower’s defenses against the original stated lender may be asserted against that lender and any alleged successors to the note, which is the title document (and evidence of) the note.
The prima facie face of the holder therefore varies from the the prima facie case of the HDC in that the loan is presumed for the HDC, but not so for the HOLDER. The original consideration for the loan is the loan of money from the stated lender on the note and mortgage.
And to the extent that the loan process violated law, it cannot be said to be in good faith. If table funded loans were the pattern of conduct for the lender, then the loan was predatory per se. (TILA, Reg Z).
Hence a holder who cannot prove that the loan was made from the originator to the borrower, has nothing to convey to the successors who profess to have endorsements and assignments, none of which convey anything, since the original note was not supported by consideration.
In the normal course of events banks do not lend money and then ask for the note to be signed. First they ask for the note to be signed and then they supply the money. If they don’t advance money to the borrower, then the contract is not complete. If the terms of the note differ from the agreement with either the real lender or the borrower, then then there is no contract to be enforced.
Thus the burden of proof of the HOLDER is vastly different from the prima facie case of the HDC. If the name of the real lender was withheld, then the loan was table funded which is wrong both under the Florida deceptive lending laws and Florida laws concerning the filing of a false instrument.
And if the loan was table funded it was wrong and if part of a pattern of conduct of table funded loans, it violates the content and intent of TILA and Reg Z and is presumptively predatory. This introduces elements of a burden of proof for both the plaintiff and the defendant, where the suing party is only a HOLDER and not a HOLDER IN DUE COURSE.
The prima facie case MUST be different than the prima facie case of an HDC. The principal elements of the HOLDER’s case are the existence of a loan, — and if a third party became involved as a purchaser of the loan, then the prima facie case of the HOLDER must show consideration for both the loan and the sale of the loan as well as the identity of the third party, who is supposed to be protected by both the note and mortgage. These elements are not required for an HDC. But they are required for a HOLDER — because the HOLDER is not entitled to the presumptions and protections of an HDC.
Where, as in most cases including this one, the name of the actual lending party was purposefully concealed or in any event solely known by the named lender and closing agent and specifically unknown to the borrower, the burden is clearly more fairly on the HOLDER suing to enforce to show the existence of an enforceable loan contract that did not violate law. Otherwise it is not entitled to be the presumptions and protections of a party who pays value in good faith without notice of borrower’s defenses (pone of which is denial of the contract and therefore denial of the right to enforce it).
Only the named payee on the note and the named mortgagee on the mortgage can easily attest to the transfer of money from the supposed lender to the borrower. They have the cancelled checks, wire transfer receipts etc. They have the proof of payment to the prior lender. The borrower has none of these things and to place the burden on the borrower is not only patently unfair, it opens the door for any stranger to any transaction to pick up a piece of it and sue to enforce it with impunity even while he is actually defrauding the party entitled to receive the money.
Hence the prima facie case of a HOLDER is to prove the loan, prove the loan contract and prove compliance with lending laws. It is ONLY then that the burden should shift to the borrower. This is different from the HDC where the borrower has the burden of proving affirmative defenses that in most cases are actually claims against third parties rather than the innocent purchaser of the loan for value without notice of defenses.
Accordingly we offer the clear requirements of law — that the burden of proof for a HOLDER alleging rights to enforce include the proof of the actual loan by competent best evidence, with proper foundation and not with hearsay evidence adduced from a made for litigation report that lacks any semblance of authenticity.
Make them prove the loan, make them prove through their witness that the loan was not in violation of public policy and public laws, THAT IS THEIR PRIMA FACIE CASE. THEN they can assert a position of an injured party entitled to redress.
Filed under: foreclosure