Robosigning And Non-Judicial States

The Market Ticker ® - Commentary on The Capital Markets

Posted 2010-12-30 09:57
by Karl Denninger
in Foreclosuregate

All I can say is "yep, yep and yep."

With all of the press robo-signing has gotten, it is a bit surprising that everyone is having such a hard time concluding
whether these practices effect California foreclosures. My assistant even said to me today, "but the banks say that it doesn't
matter because California is non judicial."

Because the topic has not gotten the treatment it deserves, I will gladly do the job. The following are by no means a
complete list, but are the most clear LEGAL reasons (setting aside pure moral questions and the U.S. Constitution) that the
Robo-Signer Controversy will lead to massive litigation in California.

In short, Robo Signers are illegal in California because good title cannot be based on fraud, robo signed non judicial
foreclosure sales are void as a matter of law, the documents are not able to be recorded in California if they are not
notarized, which we know was often not done properly, and finally, because they robo signed forgeries ARE intended for
judicial proceedings, including evictions and bankruptcy relief from stay motions.

Mr. Rooney, the author, is a real lawyer who works in this area. His analysis (as a matter of fact and law) matches mine as a non-
lawyer - that is, you can't base something on a fraud, and thus that which flows from that fraud is legally void as if it never
happened.

If I sell you something and you "pay" me with counterfeit currency the sale is void as you never gave actual consideration. Not
only did you commit a felony passing the bad currency but as a matter of basic contract law since you never provided the
consideration you promised in the original bargain passage of ownership of the thing you bought never happened. You
may have physical possession but you obtained through a fraudulent artifice and as such the conveyance is void.

I am regularly surprised at how many people of otherwise-reasonable intelligence and understanding keep professing that all this
robosigning and bogosity in various documents are "no big deal", especially in non-judicial states. In point of fact while the
foreclosure may be non-judicial if there's someone in the house you still need a writ or other judicial act, even if
perfunctory, to evict the current resident. Since the "robosigned" (or just plain bogus) documents are used as the predicate of
that proceeding they are in fact used in a court proceeding and thus still constitute knowingly-false swearing before a court -
the definition of perjury - as well.

For those who live in a non-Judicial state and thus think they have no recourse, they're wrong. You do.

What I'd really like to see is more attorneys like Mr. Rooney start digging into the conveyance aspect of things, because I continue
to assert (as I have since this all began four years ago) that the real problems lie there.

We will only clear the market, and resolve the problems with land titles and lending, when these deals are all fraud-
audited and we find out who has the paper, what was and what was not delivered as required by the PSAs in these deals,
and thus, who currently in legal and actual fact is owed money at this point in time.

If these investigations disclose that the securitizer or originator still has the loan but was paid for it in full then the MBS buyers
have every right and reason to force the unwind of the transaction. What they don't have the right to is the cash flows,
including payments and recovery during foreclosure, on a note they don't actually own!

Again, this does not result in a "Free House" lottery. Someone is owed money. The loan may be unsecured or the holder may
not have "holder in due course" protections as a consequence of the willful and intentional acts during and after the closing of that
loan but the money is, in fact, owed. But until we re-join the ownership of the note with the lending of the capital, which in my
opinion is likely to require the unwinding of many of these deals, there is no way to know for any particular loan what its
status is in terms of security interest, whether holder-in-due-course protections apply or not, and whether the best option for the
actual entity that owns the paper and is owed money is to modify the loan (perhaps including a writedown of principal), a short-
sale the property, an unsecured debt collection action (which may include bankruptcy for the borrower) or foreclose.

Such a determination cannot be made without first establishing who holds the actual paper and what their actual
economic interest is in that paper, which means we must begin with fraud audits on all of these deals. Before we
foreclose on anyone we must demand conclusive proof that the transfers of the loan are in order in accordance with the
PSA governing the deal (for a securitized mortgage) and that the flow of capital allegedly given in exchange for that paper
actually occurred.
Why Robo-Signatures Are Illegal in California and Other Non-Judicial Foreclosure States
By Michael Patrick Rooney, Esq.

With all of the press robo-signing has gotten, it is a bit surprising that
everyone is having such a hard time concluding whether these practices
effect California foreclosures. My assistant even said to me today, "but the
banks say that it doesn't matter because California is non judicial."

Because the topic has not gotten the treatment it deserves, I will gladly do
the job. The following are by no means a complete list, but are the most
clear LEGAL reasons (setting aside pure moral questions and the U.S.
Constitution) that the Robo-Signer Controversy will lead to massive litigation
in California.

In short, Robo Signers are illegal in California because good title cannot be
based on fraud, robo signed non judicial foreclosure sales are void as a
matter of law, the documents are not able to be recorded in California if
they are not notarized, which we know was often not done properly, and
finally, because they robo signed forgeries ARE intended for judicial proceedings, including evictions and
bankruptcy relief from stay motions.

1. Good Title Cannot Be Based on Fraud (Even as to a 3d Party).

In the case of a fraudulent transaction California law is settled. The Court in Trout v. Trout, (1934), 220
Cal. 652 at 656 made as much plain:

"Numerous authorities have established the rule that an instrument wholly void, such as an undelivered
deed, a forged instrument, or a deed in blank, cannot be made the foundation of a good title, even under
the equitable doctrine of bona fide purchase. Consequently, the fact that defendant Archer acted in good
faith in dealing with persons who apparently held legal title, is not in itself sufficient basis for relief."
(Emphasis added, internal citations omitted).

This sentiment was clearly echoed in 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th
1279 at 1286 where the Court stated:

"It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in
the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully
conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would
be inequitable to purchaser and parties." (Emphasis added).

Hence, if forged Robo Signed signatures are used to obtain the foreclosure, it CERTAINLY makes a
difference in California and other non-judicial foreclosure states.

2. Any apparent sale based on Robosigned documents is void - without any legal effect - like Monopoly
Money.

In Bank of America v. LaJolla Group II, the California Court of Appeals held that if a trustee is not
contractually empowered under the Deed of Trust to hold a sale, it is totally void. It has no legal effect
whatsoever. Title does not transfer. No right to evict arises. The property is not sold.

In turn, California Civil COde 2934a requires that the beneficiary execute and notarize and record a
substitution for a valid substitution of trustee to take effect. Thus, if the Assignment of Deed of Trust is
robo-signed, the sale is void. If the substitution of trustee is robo-signed, the sale is void. If the Notice of
Default is Robo-Signed, the sale is void.

3. These documents are not recordable without good notarization.

In California, the reason these documents are notarized in the first place is because otherwise they will not
be accepted by the County recorder. Moreover, a notary who helps commit real estate fraud is liable for
$25,000 per offense.

Once the document is recorded, however, it is entitled to a "presumption of validity", which is what spurned
the falsification trend in the first place. Civil Code section 2924.

Therefore, the notarization of a false signature not only constitutes fraud, but is every bit intended as part
of a larger conspiracy to commit fraud on the court.

4. The documents are intended for court eviction proceedings.

A necessary purpose for these documents, AFTER the non judicial foreclosure, is the eviction of the rightful
owners afterward. Even in California, eviction is a judicial process, albeit summary and often sloppily
conducted by judges who don't really believe they can say no to the pirates taking your house. However, as
demonstrated below, once these documents make it into court, the bank officers and lawyers become
guilty of FELONIES:

California Penal Code section 118 provides (a) Every person who, having taken an oath that he or she will
testify, declare, depose, or certify truly before any competent tribunal, officer, or person, in any of the
cases in which the oath may by law of the State of California be administered, willfully and contrary to the
oath, states as true any material matter which he or she knows to be false, and every person who testifies,
declares, deposes, or certifies under penalty of perjury in any of the cases in which the testimony,
declarations, depositions, or certification is permitted by law of the State of California under penalty of
perjury and willfully states as true any material matter which he or she knows to be false, is guilty of
perjury. This subdivision is applicable whether the statement, or the testimony, declaration, deposition, or
certification is made or subscribed within or without the State of California.

Penal Code section 132 provides: Every person who upon any trial, proceeding, inquiry, or investigation
whatever, authorized or permitted by law, offers in evidence, as genuine or true, any book, paper,
document, record, or other instrument in writing, knowing the same to have been forged or fraudulently
altered or ante-dated, is guilty of felony.

The Doctrine of Unclean Hands provides: plaintiff's "unclean hands" bar injunctive relief when the plaintiff's
misconduct arose from the transaction pleaded in the complaint. California Satellite Sys. v Nichols (1985)
170 CA3d 56, 216 CR 180. The unclean hands doctrine demands that a plaintiff act fairly in the matter for
which he or she seeks a remedy. The plaintiff must come into
court with clean hands, and keep them clean, or he or she will be denied relief, regardless of the merits of
the claim. Kendall-Jackson Winery Ltd. v Superior Court (1999) 76 CA4th 970, 978, 90 CR2d 743. Whether
the doctrine applies is a question of fact. CrossTalk Prods., Inc. v Jacobson (1998) 65 CA4th 631, 639, 76
CR2d 615.

5. Robo Signed Documents Are Intended for Use in California Bankruptcy Court Matters.

One majorly overlooked facet of California is our extremely active bankrtupcy court proceedings, where, just
as in judicial foreclosure states, the banks must prove "standing" to proceed with a foreclosure. All
declarations submitted in support of standing to file a proof of claim, objections to a plan and most
importantly perhaps Relief from Stays are fraud upon bankruptcy court if signed by robo-signers.

Conclusion

Verified eviction complaints, perjured motions for summary judgment, and all other eviction paperwork
after robo signed non judicial foreclosures in California and other states are illegal and void. The paperwork
itself is void. The sale is void. But the only way to clean up the hundreds of thousands of effected titles is
through litigation, because even now the banks will simply not do the right thing. And that's why robo
signers count in non-judicial foreclosure states. Victims of robosigners in California may seek declaratory
relief, damages under the Rosenthal Act; an injunction and attorneys fees for Unfair Business practices, as
well as claims for slander of title; abuse of process, civil theft, and conversion.
 Michael Rooney Law Office (MRLO)

580 California Street 16th Floor San Francisco, CA 94104

Featured Content (click to view):

1. Why Robo Signers Are Illegal In California and Other Non

Judicial Foreclosure States
2. LOOKING FOR CASELAW ON MERS? Check "Recent
Rulings" to the left.
3. WALK AWAY FROM YOUR MORTGAGE! - by Roger Lowenstein
for the New York Times
4. Office of the Comptroller of the Currency Releases Mortgage
Modification Statistics: find out what is being done, what works, what doesn't,
and what new solutions are suggested.
5. JPMorganChase implicated in using "Robosignors" to perpetrate mortgage
fraud: http://www.bloomberg.com/news/2010-09-27/jpmorgan-based-
home-foreclosures-on-faulty-court-documents-lawyers-claim.html
6. ONEWEST/INDYMAC allowed to steal for a living:

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Homeowners who want to fight foreclosure do have an option.

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