Nemo Dat Quod Non Habet: The Mortgage Transfer Rule

Nemo Dat. Say what? You may have heard the phrase, but do you know what this maxim of law means? It is powerful, and it goes by the Latin term Nemo dat quod non habet.

The common law principle of Nemo dat quod non habet literally means one cannot sell what one does not own. Yet this is done time and time again in mortgage transfers across this country. I have spent 12 years tracing chain of title, and the violations of this principle are not rare exceptions. They are the pattern.

General Rule: Section 21(1) Sale of Goods Act 1979

21(1) Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of goods is by his conduct precluded from denying the seller’s authority to sell.

This principle is not a technicality. It is not a loophole. It is a fundamental rule that ensures the integrity of every chain of title. When a party purports to sell or assign something it does not own, the transferee acquires nothing. The transferee’s title is no better than the transferor’s title. If the transferor had no title, the transferee has no title. The Uniform Commercial Code codifies this same principle for goods in UCC § 2-403(1), and the common law extends it to real property instruments.

The Quandary in the Courts

The courts operate under the presumption that what the foreclosing party says and does is true and correct. This puts the people fighting foreclosures in a quandary. The judge’s inadequacy in applying correct findings of law is due to the rancid pungency from the many caldrons of misinformation. This misinformation comes boiling over from the banks and inept lawyers. It is then spread liberally to pleadings and briefs as one would make a peanut butter and jelly sandwich.

The presumption that the foreclosing party acts lawfully is deeply embedded in the judicial system. Judges presume that the servicer would not be in court if it did not have the right to be there. They presume that the assignment was proper. They presume that the chain of transfers was valid. But presumption is not proof. In my experience, when the homeowner or their attorney actually examines the chain of title, the assignments, and the endorsements, they often find that the party attempting to foreclose acquired nothing. The party that assigned to them had nothing to assign.

The Need for More Knowledge

More knowledge is needed to have a complete understanding of legal rights that pertain to Legal Title of property. What was supposed to take place? What did take place? What did not take place? All of these questions must be answered to understand what rights were acquired, if any.

The attorney who understands nemo dat quod non habet has a powerful tool. The question is simple: Did the assignor actually own what it purported to assign? If the answer is no, then the assignee has nothing. If the assignee has nothing, the assignee cannot foreclose. The entire foreclosure case falls apart when the chain of transfers is examined under this principle.

Even a Thief May Enforce a Note

The concept that a Note holder, even one who is not legitimate, may nevertheless bring an action on the Homeowner Note is entrenched in commercial law. It is commonly summarized by the axiom “even a thief may enforce a note.” However, the taking of the Homeowner’s home by foreclosure is an alternate equitable remedy. Equity does not allow a “thief” to use a stolen Promissory Note to foreclose through the Homeowner’s Mortgage lien.

This is a critical distinction that many attorneys miss. There is a difference between enforcing a note, which is a commercial action to collect on a debt, and foreclosing on a mortgage, which is an equitable remedy that takes someone’s home. The former may be available to a party who holds the note, even if their acquisition was questionable. The latter requires proper chain of title and proper acquisition of the security interest. In Carpenter v. Longan, 83 U.S. 271 (1872), the Supreme Court established that the note and mortgage are inseparable. When the security interest was never properly transferred under UCC § 9-203, the foreclosure is wrongful regardless of who holds the note.

Stand Up or Lay Down

Now is the time to quit holding your tongue. Let the words come out. Expose the wrongdoings of the lenders and the servicers. Now is the time to make this whole. This is not the time for half-truths. Do you choose to stand up or lay down? I cannot make that decision for you.

What I can do is equip you with the tools. The tools are these writings. Use them wisely.

Examining the Chain of Title

The application of nemo dat quod non habet to mortgage litigation requires a careful examination of the chain of title. A mortgage fraud investigation can uncover whether the parties attempting to foreclose actually acquired what they claim. The chain of title is the sequence of transfers that documents who held the note and who held the security interest at each point in time. When the chain is broken, when a transfer was made by a party that had nothing to transfer, the principle of nemo dat quod non habet applies. Every subsequent transfer is also void.

The attorney building a case on this principle must trace the chain of title from origination to the present. Who originated the loan? Who was the original payee on the note? Who was the original beneficiary on the security instrument? When was the intangible payment obligation sold? When was the assignment of the security instrument executed? Was the assignor the same party that held the note? Was the assignee the same party that acquired the intangible obligation?

In the vast majority of securitized loans I have examined, the answer to at least one of these questions reveals a break in the chain. The party that executed the assignment did not hold the note. The party that acquired the intangible obligation is not the party named in the assignment. The timing of the transfer does not match the timing of the assignment. Each of these breaks is a point where nemo dat quod non habet applies.

A Moral Principle

The principle of nemo dat quod non habet is not just a legal doctrine. It is a moral principle. You cannot give what you do not have. The banks have been giving what they do not have for years. It is time for the courts to recognize this, and for homeowners and their attorneys to demand that the law be applied equally to the banks as it is to everyone else.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted, all rights reserved.