One common practice that I've seen in foreclosure cases is the magically
appearing or Ta-Da! allonge. These documents are supposed to be permanently
affixed to the original promissory note and contain indorsements from
one party to another. In general, the Uniform Commercial Code presumes
the authenticity of the signatures on an allonge.
This means that a borrower must present evidence that the signatures on
an allonge are forged (or at least that they could be forged) in order
to challenge the validity of the signatures. Making this allegation will
require more than a "suspicion" that the signatures are forged.
In general, hiring a handwriting expert to analyze the signatures will
be cost-prohibitive for most homeowners.
In the case of
Erica Congress v. U.S. Bank, however, Ms. Congress made a different argument. She did not attack the
validity of the signatures on the allonge, she attacked the authenticity
of the allonge itself. In her case, the allonge was suddenly produced
after she raised the objection that U.S. Bank lacked the standing to sue
her. Effectively, once her argument was raised, an allonge magically appeared
"on the eve of trial."
The trial court held Ms. Congress to a rather high evidentiary standard
to prove that the allonge was invalid -- the clear-and-convincing evidence
standard. However, as the appellate court aptly notes, the Uniform Commercial
Code does not require that a party challenging the authenticity of signatures
on an instrument show more than substantial evidence of such a defect.
The same goes for challenging the allonge's validity in general.
The appellate court found that the trial court should have applied the
perponderance of the evidence standard, which is a significantly lower
burden of proof. As a result, it remanded the case back to the trial court
for a rehearing based on the lower standard.
This is significant simply because Alabama is not the most consumer-friendly
jurisdiction in the nation. It's also significant because it demonstrates
that questioning the timing of an allonge is a valid argument -- so long
as it is supported by other facts.
In this case, Ms. Congress presented the testimony of a forensic examiner.
The examiner stated that given the allonge's placement in the loan
origination file, it was highly likely that it was prepared some time
after the filing of the lawsuit. Let's also not forget that an allonge
should be permanently affixed to the original note. If the document is
physically remote from the rest of the note, that should raise two red flags.
We've recently had success in cases where we asked similar timing questions.
Anyone defending a
foreclosure lawsuit would do well to examine every document and do some due diligence
with regard to investigating the various players in a transaction. I recently
discovered a lawsuit that was filed by a company that had not existed
for 2 years at the date of filing. Every case is unique, and not every
case will have these kinds of flaws. However, it's always worth checking
-- you will often be surprised by what you find.