Though we have noted in this blog the rarity--if not potentially the impossibility--of obtaining a "free house" in mortgage foreclosure cases, as many borrowers chase much like Captain Ahab looking after his great white prize, one decision shows the extremely limited factual circumstances where a party can obtain just that.
In the case of REVERSE MORTGAGE SOLUTIONS, INC. versus the heirs of Ruby Lee Hayes (24 Fla. L. Weekly Supp. 938a), the court was faced with a reverse mortgage that was the subject of a mortgage foreclosure, which is not of itself an unusual proposition. However, what made this case unique was the fact that the bank (or perhaps its counsel) were so inattentive (which, again, is not altogether that unusual in and of itself) that it went unnoticed that more than five years had passed since the original action to foreclose had been dismissed by the trial court. Whereas, under the newest Bartram v. U.S. Bank, N.A., 41 Fla. L. Weekly S493 (Fla. November 3, 2016) case law, the statute of limitations is extended by each missed payment regardless of acceleration of the note by the bank, in this action, the default was the passing of the borrower, Ruby Hayes.
Since no payments were due (being a reverse mortgage), the court determined that no continuing default was present through which the bank could claim an extension of the statute of limitations. Final Judgment was entered in favor of the borrower's lone heir, awarding her the house and denying the bank's effort to foreclose the mortgage and note.
It's not immediately clear what the heir's plans are for the home, but should she elect to stay in the home for the remainder of her life, it may prove very difficult for the bank to collect anything on its note and mortgage whatsoever. At least for the time being, we appear to have a verified sighting of the fabled "free house" foreclosure unicorn.
We have on several occasions in this blog touched on the requirements of standing for the lender, evidentiary requirements for the default notice, and foundation for bank witnesses. Though recently there had seemed to be a tightening of requirements for proving the sending of the default notice and for qualifying a witness to speak on another institution's default notice generation protocols and record-keeping, a recent case seems to again potentially lessen the burden on lenders seeking to foreclose.
In the case of JPMORGAN CHASE BANK NATIONAL ASSOCIATION v. JEAN PIERRE 2017 Fla. App. LEXIS 4632, 42 Fla. L. Weekly D 781, 42 Fla. L. Weekly D 781 (Fla. Dist. Ct. App. 4th Dist. Apr. 5, 2017), the Fourth District Court of Appeals reversed judgment in favor of the borrowers and ordered entry of judgment for the lender (actually, the successor in interest to the lender) on the basis that the trial court's findings that the bank had not proven that a default notice had been sent and that it had not proven standing were contrary to the law.
In this case, though the witness that appeared worked for a third party servicer for the bank, she speculated about the date upon which the note had been transferred and testified that the servicer--not the bank that brought the action--owned the note. Further, she testified that she had learned during her training at the servicer about the original (not the current lender that her company was actually representing) lender's default notice generation protocols and that she was aware, generally, with those protocols and that her company had verified through collection notes that the letter had been sent.
Citing issues with standing given the testimony by the record custodian that a party other than that which filed the complaint actually owned the note and testimony which apparently led the trial court to determine the witness did not have actual familiarity with the originating lender's default notice policy, the trial court entered judgment in favor of the borrowers. The appellate court reversed and ordered entry of judgment in favor of the lender, stating (in sum) that the stated familiarity with the process by which a third party originating lender generally goes about sending letters with notice of default was sufficient and that it did not particularly matter when the witness believed the endorsement was signed transferring the note and it did not particularly matter that the witness thought her company owned the note in question rather than the Plaintiff lender.
A subtle maneuver was made by the appellate court here, as well. Though the standard of review was de novo, since the issues were deemed a matter of law, the question of whether the witness knew about the default notice procedure and whether a letter was sent was an issue of fact, since the borrowers had denied that a letter had been sent. The appellate court seems to have taken the bank witness testimony at face value and disregarded the denial by the borrowers that any notice had been sent. The trial court (which is presumed to be in the best positoin to weigh credibility of a witness) was disregarded by the appellate court on this point, which perhaps was due to the fact that the trial court did not make a finding on the record that the witness was not credible in her testimony.
Compare this case to the recently reviewed case of Allen v. Wilmington Trust, N.A., 2017 Fla. App. LEXIS 3970 (Fla. 2d DCA 2017), which we discussed here.
If you have questions about a foreclosure, a contract, or other real estate dispute reach out to the foreclosure attorneys of Icard Merrill today.
The question of who "holds" the note and mortgage (even where, as is often the case, the 'holder' cannot physcially hold the note and mortgage because they are lost) is one of the most often litigated aspects in residential foreclosures. Borrowers in default and looking for ways to keep their home (or at least to stay in the home mortgage free for as long as possible), often find themselves getting a crash course over the internet on concepts such as the "holder" of the note, indorsements, allonges, indorsements in blank, and standing. Speak to a borrower that is a veteran of a multi-year, multi-action foreclosure and an uninitiated attorney may even learn a few things about these terms as well.
Another recent case before the Fourth DCA touches on several of these concepts and helps give more guidance to those defaulted borrowers seeking to stem the virtually inevitable tide of foreclosure of their home. As the court in PennyMac Corp. v. Frost, 2017 Fla. App. LEXIS 3441 (Fla. 4th DCA 2017) stated, the note in question was originally indorsedn in blank by the original lender, however, that indorsement was marked "void." Subsequently, an allonge and blank indorsement was executed by a successor in interest to the original lender. The borrower argued (and the trial court agreed) that the original void indorsement rendered any subsequent indorsement invalid for purposes of standing without more steps being taken as a nonholder in possession of the note and with the rights of a holder.
Foreclosure actions can be challenging and very confusing to the uninitiated. Talk to an attorney in the foreclosure group at Icard Merrill today if you have questions about your home and mortgage.
A recently decided case in the Second District Court of Appeals, Allen v. Wilmington Trust, N.A., 2017 Fla. App. LEXIS 3970 (Fla. 2d DCA 2017), touched on the fact requirements that must be proven in a foreclosure action with respect to the acceleration notice. This notice has been the subject of a great many defenses at the trial court level and the subject of a fair amount of appeal briefs, as well.
As is normally the case in foreclosures, the current servicer of the loan in Allen was not the entity in interest at the time the notice of acceleration was purported to have been sent. Therefore (againa as is common in foreclosure cases), the new servicer detailed how it "onboarded" the previous bank's documents and reviewed them, and the designated servicer representative spoke confidently about what had happened with documents in the previous file (despite the fact that she could not have personally known what had transpired previously). The witness said that a letter was in the file and was dated which gave notice of the acceleration and that, because the letter was in the file, it must have been sent to the borrower (because, "servicers aren't in the habit of generating letters that they don't send" claimed the witness). However, no envelope with postage paid or other proof of actual mailing appeared in the file.
The trial court allowed the foreclosure to continue, but the Second DCA reversed, finding that simply drafting a document does not indicate the sending of that document and that, while onboarding does allow introduction of documents into evidence of the previous bank or servicer, it does not qualify a witness to testify about what happened with certain documents without actual personal knowledge of (at a minimum) knowledge of the business practices of the party that was purportedly mailing the notice. Thus, in Alen, the Second DCA again reminds banks that, yes, they must prove that they sent an acceleration notice to the borrower in order to foreclose the property and that it is not enough to simply indicate that the letter existed and was drafted at some point.
A crucial blow to wayward borrowers and a life raft for inattentive banks and foreclosure counsel were handed out simultaneously by the Florida Supreme Court recently in Bartram v. U.S. Bank, N.A., 41 Fla. L. Weekly S493 (Fla. November 3, 2016). This case will likely have far-reaching impact in the foreclosure world and likely represents a death-knell for the “free house” dream held by many borrowers and defense attorneys.
Before the Court in Bartram was the issue of statute of limitations in a foreclosure action and the impact of acceleration letters from lenders. The essence of the issue could be summarized by stating that banks are generally owed payments on a monthly basis, but when buyers default, banks often “accelerate” the note, meaning that all remaining payments come due as of the month of the acceleration notice.
The argument by defense attorneys, therefore, has long been that, by the mechanism of the acceleration notice, no more payments are due after the date of acceleration and rather one lump final payment was due. The issue arose for lenders when they then either failed to bring an action within the five-year statute of limitations following that acceleration or the bank’s action was so mis-prosecuted that it ended up being dismissed or adjudicated against the bank (meaning that the court determined that the case brought on that accelerated obligation was found in favor of the borrower). Under either scenario, the argument went; the bank had no new defaulted obligation to complain of and could no longer bring a successful case against the homeowner.
However, the Bartram decision appears to have firmly slammed shut the door on that argument. Id. The Court held (in what could conceivably be called a bit of tortured logic) that a dismissal by the bank of its action effectively acts as a “revocation” of the acceleration clause and returns the parties to their pre-foreclosure positions (i.e., monthly payments again due). Id. This allows the bank to bring a new action on payments missed post-acceleration.
Curiously, the Court stated that this artificial “revocation” mechanism may not be allowed if there is an express term to the contrary in the parties’ note/mortgage (a term that has never likely been seen in any mortgage or note). What is also curious is how the Court seemed to ignore entirely the fact that acceleration notices are often sent in advance of a foreclosure action and are not a part of the action itself (raising the question of how far “pre-foreclosure” the parties are actually being returned—potentially months or maybe longer?). Also curiously, the Court was silent on whether the borrowers could then resume making payments on the newly re-instated monthly obligation (hint: the banks won’t allow that).
This case likely represents an ugly, but potentially necessary “bail-out” for banks and their attorneys. The logic and legal basis for the ruling is fairly questionable. Yet, it often happens that banks and the massive foreclosure-focused legal firms serving them are so inattentive that cases languish for months or years and are often dismissed or not brought in a timely manner.
Therefore, allowing banks a perpetual ‘do-over’ on bringing foreclosure cases probably reaches the correct result; homes that banks lent a lot of good money to buy are returned to the banks once the borrowers have long since stopped paying for them. It would be arguably a more logical result to have homes left in the hands of borrowers if banks and their attorneys botch the great many opportunities they have to properly foreclose, but it would not necessarily be the just result. In Bartram, the court appears to have recognized the just result and simply stretched (tortured) the law to achieve it, potentially sacrificing logic to get there.
If your home is in foreclosure, or you are a lender seeking a law firm that will actively protect your rights, contact the foreclosure attorneys at Icard Merrill today.
Borrowers facing foreclosure are often scared, confused, and under extreme stress. The dream of the modern American family—ownership of a home—is in jeopardy for them. Some borrowers are also angry; whether with themselves, with the lender, or with someone else. In certain cases, this anger is justified, as has been made clear by a wave of mass or class actions in recent years against lenders for fraudulent or otherwise deceitful or predatory lending practices.
However, in some cases, that anger may not be entirely justified—as in the case of Wells Fargo Bank, N.A. v. Williamson, where the borrowers sought to have the court dismiss the lender’s foreclosure action on the basis of allegations that the lender’s “loan consultant” falsified certain portions of the loan application, including the borrower’s liquid assets, monthly income, and ownership of other real property. (199 So. 3d 1031 (Fla. 4th DCA 2016).
However, as the court astutely observed, the borrower either knew or should have known (and perhaps could not have been unaware) of those overstatements. Though the borrower claimed to have not read any of the documents and that she did not know of the false statements, the record seems to indicate she was fully aware of how much she was borrowing, how much she was required to make in payments, and the other essential terms of the loan.
As the court decided, the facts in this case could not prevent the lender from foreclosing an otherwise valid and enforceable note on the property. As for those borrowers with misplaced anger over being approved for loans they should have known they could not afford, they will have to take responsibility for those loans even if the bank was complicit in helping the borrowers get into a loan above their means. If they fail to take responsibility on their own, the court will not likely allow them avoid it for long.
If you are facing a foreclosure or need help understanding your closing documents or loan, please reach out to the transactional attorneys at Icard Merrill, who have helped thousands of people complete the purchase or sale of homes.
Anyone that has been to a foreclosure hearing or trial docket in the last five years or more will understand the obvious implications of those colloquially-termed "cattle call" dockets. A room filled with attorneys, pro se homeowners, bored (or sometimes absent) bank representatives and court staff pack most courtrooms assigned to the foreclosure cases. These conditions (and especially the dozens of cases set for the same hearing or trial time) lead to what some would consider an unusual amount of both mistakes and creative interpretations of the law and rules of evidence. A recent case outlines one (hopefully) extreme example of this situation.
In a Fourth District case, the homeowners were forced to appeal in order to overturn a judgment rendered almost entirely upon the testimony of a loan analyst that not only did not work for the then-current lender (and, seemingly never had worked for them), but also never worked for the predecessor lender and learned the information she testified to at trial by searching through Google on the internet. Sosa v. Bank of N.Y. Mellon, 187 So. 3d 943, 944 (Fla. 4th DCA 2016) It bears repeating that the witness's testimony somehow avoided being stricken despite having virtually zero foundation whatsoever other than the witness essentially having heard of the lenders and looked them up on the web. Thankfully, the appellate court prevented an egregious miscarriage of justice in this case, but the fact that a judgment was entered on these facts is frightening.
This case drives home the point that it can be absolutely crucial to have competent counsel (as well as a court reporter) in a foreclosure trial or hearing. Failure to have one could result in a homeowner having to either scramble after a zany ruling, or simply being ruled against in a way that clearly violates the law and rules of evidence. Talk to the foreclosure attorneys at Icard Merrill today if you have questions about your home.
A recent decision by the Fourth DCA illustrates an interesting phenomenon—where a court can simply use the lack of “prejudice” to the defendant to excuse a clear and express condition precedent to bringing an action in the first place where enforcing the condition precedent would likely result in elevating form over substance.
In the case of Caraccia v. U.S. Bank, Nat. Ass'n, 185 So. 3d 1277, 1278 (Fla. 4th DCA 2016), the lender sent a letter of default to an address for the borrower (a P.O. box) that had supposedly been provided by the U.S. Postal Service, and the borrower responded to the default notice using the P.O. box address as the return address. However, the mortgage stated clearly that any default letter must be sent to the borrower at the property address unless prior notice had been given to the bank by the borrower listing a new address for notices.
In determining that the failure of the bank to send the notice to the property address—a technical breach of its notice obligations under the mortgage—was not a valid basis for the borrower to move for dismissal, the court cited a 2015 Fifth DCA case (Gorel v. Bank of N.Y. Mellon, 165 So. 3d 44, 47) for the proposition that a breach of a condition precedent will not stand as a defense to “the enforcement of an otherwise valid contract” unless the defendant can show prejudice.
This holding looks to be another excellent example of cases where bad facts make bad law. Though this is likely the ‘just’ result under these facts, the holding poses an interesting slippery slope argument that potentially renders into question the enforceability of any express condition precedent and represents an interesting bypassing of the parties’ agreement by the Fourth DCA using only a similar holding from the Fifth DCA as its legal foundation. It will be interesting to see how far courts will be willing to go in ignoring clear expressions of the parties’ intentions in a written contract where there are less technically compelling facts at play.
If you have a contract and need advice on either enforcing it, defending yourself from enforcement, or just learning more about your legal rights under the contract’s terms; contact the business attorneys at Icard Merrill today.
Despite missing the statute of limitations for bringing a counterclaim of Truth in Lending Act (“TILA”) violations, defendant homeowners were entitled to a defense of setoff for TILA violations under 15 U.S. Code § 1640, found the Fourth DCA in its recent opinion rendered in Monnot v. U.S. Bank, Nat. Ass'n, 41 Fla. L. Weekly D474 (Fla. 4th DCA Feb. 24, 2016).
The Fourth DCA helped homeowner borrowers turn a long-used sword, the TILA civil remedies, into a shield against lending institutions in Monnot. Despite the fact that the consumer could not bring a successful claim against the lender under TILA because the statute of limitations had long run (a common bar for homeowners facing foreclosure—a time when the homeowner in many cases first gets a professional review of the loan documents on their behalf ), the court determined that a defense of setoff for those TILA violations could still be maintained—effectively resurrecting the viability of the claims as a shield in a foreclosure suit long after the claims should have been dead.
TILA (along with its implementing articles, Regulation Z) allows consumers to recoup actual damages (which can be tricky to prove in TILA actions since it often requires the consumer to show they would not have taken the loan had they known the truth at the time), statutory penalties of $200 to $2,000 (in purchase-money residential loans), recoupment of financing fees and charges, and attorneys’ fees and costs. Awards of these damages could help reduce or offset the lender’s damages against the consumer by thousands of dollars and help the distressed borrowers avoid judgments in excess of the property value in question (and, therefore, bankruptcy in many cases).
If you are facing foreclosure or other action to collect a debt or enforce a promissory note, contact the litigation attorneys of Icard Merrill, who have been serving residents of Sarasota, Manatee, Charlotte, Lee, and other nearby counties for decades.
In the always fascinating world of residential foreclosure cases, the specter of Ahab’s “free house” lurks in the minds of attorneys and litigants alike. The phenomenon is rarely seen and is most often prevented through creative (if outright strained) reasoning by courts who seem intent on helping prevent monolithic banks which pay far too little attention to their customers and accounts from being prejudiced by monolithic foreclosure law firms who pay far too little attention to their cases and clients. The “free house” ranges somewhere between a dream and a myth for distressed homeowners in foreclosure.
A recent case in the Fourth DCA might represent the first step towards that dream for some homeowners faced with egregiously poor showings by banks and their attorneys in foreclosure suits. In Nolan v. Mia Real Holdings, LLC, the Fourth DCA applied a commonly used procedural mechanism to the seemingly always abstract world of foreclosures to determine that, a second dismissal of the foreclosure action--even where the foreclosing entity has changed at some time during the process--will result in adjudication on the merits of the case. 185 So. 3d 1275, 1276 (Fla. 4th DCA 2016).
In Nolan, the appellate court determined that a dismissal of the foreclosure action by the bank would stand as an adjudication on the merits since it was the second dismissal (the case was first voluntarily dismissed by the predecessor bank which assigned its interest subsequent to that first dismissal) in the action against the homeowner. Since the second dismissal (again, voluntary) involved an action on the same note and alleging the same breach, the trial court determined (and the appellate court agreed) that judgment should be entered in favor of the borrowers.
The court left the bank some wiggle room in its opinion, however, stating that the lender would be “required to refile a lawsuit against the homeowners alleging a new and separate breach by non-payment of the note.” This point does not squarely address the issue which is commonly presented in situations such as this; wherein the bank has already accelerated the note and declared all payments due. In such cases, trial courts have allowed the Bank to ‘change its mind’ by decelerating the note and declaring a new breach on unpaid installments that would have been due subsequent to the previous acceleration. This bit of contract sleight of hand fails to address the mechanism by which a bank could undo its decision to cancel all future payments in favor of a lump sum due, but is a commonly applied trick to avert the “free house” phenomenon which would likely, on the balance, not be a just and equitable result in most instances.
If you are in the process of dealing with a default or foreclosure and have questions about the process, contact Icard Merrill’s foreclosure litigation attorneys, who have experience dealing with the often turbulent foreclosure arena and can help answer your questions and guide you through the process.
Much to the chagrin (and likely confusion) of more--ahem--‘veteran’ attorneys, the screenshot is starting to make its way into courtrooms across the country. A “screenshot” is a photograph taken on a smartphone, tablet, or other device that captures an image of whatever document, photo, or application is being shown on the device at the time. From a classical evidentiary standpoint, it can be a proverbial quagmire of issues; forcing a court to potentially wade through layers of hearsay and evidence custody and custodianship.
One recent case decided by the Fourth DCA illustrates how this byproduct of our technical present is being used in courtrooms—potentially resulting in a loosening of evidentiary standards. Calvo v. U.S. Bank Nat. Ass'n, 181 So. 3d 562, 563 (Fla. 4th DCA 2015). In Calvo, the record custodian for U.S. Bank testified using screenshots captured, presumably, from bank records. It is unclear from the opinion what additional foundation was required, if any, in testifying about the content of the screenshots and how they were created (though this case involved a mortgage foreclosure action—which has, at times, presented a lax evidentiary environment).
Unfortunately for U.S. Bank, the screenshots apparently did not provide as much detail as the appellate court required in order to establish standing at the time the complaint was filed and the case was remanded, reversing the bank’s foreclosure win and requiring the trial court to hand the bank an involuntary dismissal defeat (and likely costing the bank attorneys’ fees and costs, to boot).
As electronic data, devices, and their use continues to expand and replace paper documents in our daily lives, these types of issues will likely become more prevalent in court battles, as well. An attorney with experience in electronic discovery and in dealing with electronic evidence could save your case—and your money. Contact the litigation team at Icard Merrill for help managing your electronic evidence.
The non-resident cost deposit has long been a tool used by local litigators to harass and annoy out of state plaintiffs and their counsel. The requirement pursuant to Florida Statutes § 57.011 forcing an out of state plaintiff to deposit $100 with the clerk when instituting an action to cover potential future costs for a prevailing defendant seems to achieve little other than to give persnickety—or, perhaps vexatious—litigants a handy procedural tool for getting a case dismissed on somewhat more arcane procedural grounds. The bond is substantially less than the amount of costs normally incurred in defending an action, so it provides little of the protection which presumably was in the legislature’s mind when enacting the law.
Continuing a trend away from this type of ‘form above substance’ procedural trickery, the Second DCA recently decided to turn the tables on a crafty defendant seeking dismissal of a mortgage foreclosure case on the basis of failure to timely pay a non-resident cost bond by the out of state plaintiff bank. Dyck-O’Neal, Inc. v. Duffy, 40 Fla. L. Weekly D2660a (Fla. 2nd DCA 2015). In this case, the Second DCA observed that, though the plaintiff had failed to either post the bond within twenty days following notice of the requirement or more than one month before a hearing on defendant’s motion to dismiss the complaint, the defendant had failed to show any prejudice, which meant the case should not have been dismissed.
As the appellate court noted, the trial court has discretion to consider the facts of the case and the coercive—but not punitive—nature of § 57.011 in securing the crucial sum of $100 from a carpetbagger plaintiff. Thus, compliant (albeit tardy) plaintiffs can avoid a tricky procedural pitfall which could cost them attorneys’ fees on top of costs.
As always, procedural traps abound for the unwary litigants. Contact mortgage and real estate litigators that are experienced in dealing with these issues (and a host of others) for help navigating your legal issue.