How California Pro Se Homeowners and/or their Attorneys Can Effectively Respond to Interrogatories

13 Tuesday May 2014

Many Homeowners defending their Homes from pretender lenders either in State or Federal courts must know how to effectively push the Banks to the corner using litigation proceedings in order to get the Banks to either modify their mortgage loans or pay damages as a result of fraudulent mortgage transactions.

One of the tools that Homeowners and/or their foreclosure Defense Attorneys must be employed to accomplish that task during litigation proceeding is “interrogatory”, which is part of the Discovery process.

While every case is different and civil litigation styles vary widely from homeowner to homeowner or from lawyer to lawyer, the one constant in all litigation is basic preliminary written discovery. The goal of written discovery is to

permit all parties to identify essential issues necessary to evaluate the case and prepare for depositions and trial. Written discovery usually starts with form interrogatories and special interrogatories.

Unfortunately, all too often, the defense interrogatories are prepared by an inexperienced attorney, generating extra billing hours by propounding useless repetitive questions which are often sent without regard to your client’s privacy rights or the relevant issues in the case. The discovery propounded by defense firms are too often boilerplate forms which have not been tailored to the specific case and may not even have been reviewed by the propounding attorney.

Responding to this discovery can be an arduous and unpleasant task. Huge amounts of time can be consumed in preparing responses to some of the nonsense propounded.

What makes the problem even more challenging is that you must ensure that you accurately and completely respond to valid interrogatories. Failure to provide responsive information to proper interrogatories is both improper and unethical. It can also result in a bar to presenting that evidence at trial. Just as important, significant information about your case must be provided if you expect the defense to engage in meaningful mediation.

Given that backdrop, as to each interrogatory propounded, the first question you must ask yourself is “must I object?” The next thought you should have is “should I object,” followed by what “objections are available?” Once you have completed that analysis and asserted proper objections, the final question you must decide is whether to answer the question once the objection is stated.

While this article will focus on specific objections, the procedure in responding to discovery is important. Code of Civil Procedure section 2030.290 provides that if responses to interrogatories are not timely, all objections are waived, including the work product protection.

When must/should an objection be stated

If an objection is not stated in response to written discovery, that objection is waived. (Code of

Civ. Proc. section 2030.290; and Scottsdale Ins. Superior Court (1997) 59 Cal.App.4th 263, 273 [69

Cal.Rptr.2d 112, 118].) Although there may be reasons to postpone objections in other areas, it is good

practice in written discovery to state all applicable objections in your initial written response.

There are exceptions to waiver. For example, a delayed objection on the grounds of privacy.

(Heda v. Superior Court (1990) 225 Cal.App.3d 525, 530 [275 Cal.Rptr. 136, 139].) However, rather

than risk a court ruling regarding a waiver by failing to object, applicable privacy and privilege

objections should always be stated. Should the written discovery process land you in law and motion, a

practitioner who errors on the side of over-objecting will fair better than the attorney who missed a

significant objection.

Homeowner Attorney’s job is not only to prosecute your client’s case, but also to protect their client’s privacy.

When the defense starts seeking information not related to the issue at bar, or other personal information, it is the Attorney’s job to defend his client’s privacy, even if it might be easier to simply give the defense what they are asking for.

Should information be provided even if an objection is stated

For a plaintiff’s attorney, a discovery battle is an undue consumption of time, for a defense

attorney, it is a billing bonanza. If you win you lose and if you lose you lose. The best outcome for a

plaintiff’s attorney is to avoid the fight. Pick your battles wisely.

There is almost no risk in stating an objection if the request is answered anyway. Most requests

should be answered, even if an objection is stated. However, objecting to every request without

providing any answers is sure to end in a motion by the defense. If an improper question seeks

information that will not hurt your case and does not invade your client’s privacy, answer the question.

Nothing will generate more interest from the defense than a response which makes opposing counsel

think you are hiding something important.

There may be discovery requests that seek information defendant’s are entitled to, but the request

is improper in its form. There may be discovery requests that seek information that will not damage

your case. There may be discovery requests that require a showing of relevance that your judge will

eventually grant. In those situations, state the objection, but comply with the request. Specify that

compliance does not waive the objection: “Subject to and without waiving said objections plaintiff

responds as follows…”

Objecting to interrogatories

A Pulitzer has never been awarded for objections to written discovery. State objections simply

and clearly. Support your objections with legal authority. An objection should be stated just as it would

in a response to a meet and confer letter, and then into an opposition to a motion to compel. A judge

will notice and appreciate this kind of consistency.

Responding to interrogatories is enough work on its own without having to reinvent the wheel

and spend countless hours researching cases to support your position that defendant’s interrogatory is

vague, ambiguous, overbroad, burdensome, oppressive, and not likely to lead to admissible evidence.

Therefore, set forth below are suggested objections to the most common discovery issues.

Objections to interrogatories Argumentative:

“Objection. This discovery request as phrased is argumentative. It requires the adoption of an assumption, which is improper.” Any discovery request that requires the adoption of an assumption is argumentative. This is objectionable as to form. The classic example is “When did you stop beating your wife.” This question assumes facts that may not be true, but requires the answer adopt the assumption.

Already asked, repetitive discovery:

“Objection. This discovery request has, in substance, been previously propounded. (See Interrogatory/Request No. ___.) Continuous discovery into the same matter constitutes oppression, and Plaintiff further objects on that ground. (Professional Career Colleges v. Superior Court (1989) 207 Cal.App.3d 490, 493-494 [255 Cal.Rptr. 5, 7-8].)” Although not a forceful objection, if the defendant continuously seeks the same information,

irrespective of the phrasing of the request, it may be grounds for a protective order based upon oppression.

Attorney client privilege:

“Objection. The request seeks information subject to the attorney-

client privilege. The attorney-client privilege is broadly construed, and extends to “factual information”

and “legal advice.” (Mitchell v. Superior Court (1984) 37 Cal.3d 591, 601 [208 Cal.Rptr. 886, 891].)”

Communications between client and counsel are privileged. They are presumed to be made in

confidence, and broadly privileged against from discovery. This is an very broad privilege which

extends to “factual information” and “legal advice.”

Attorney work-product protection:

“This discovery request seeks attorney work product in violation of Code of Civil Procedure sections 2018.020 and 2018.030. (Cite appropriate case law and/or analysis of how the information sought is derivative in nature.)”

Code of Civil Procedure section 2018.030 subdivision (a) states, “[a] writing that reflects an

attorney’s impressions, conclusions, opinion, or legal research or theories is not discoverable under any

circumstances.” Subdivision (b) expands the protection to include any other attorney work-product,

“unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery

in preparing that party’s claim or defense or will result in injustice.”

The purpose of this protection is to “[p]reserve the rights of attorneys to prepare cases for trial

with that degree of privacy necessary to encourage them to prepare their cases thoroughly and to

investigate not only the favorable the unfavorable aspects of those cases,” and to “[p]revent attorneys

from taking undue advantage of their adversary’s industry and efforts.” (Code of Civ. Proc. section

2018.020.)

In analyzing the work-product privilege, courts have determined that only derivative materials

are protected. Derivative work-product is that information created by or resulting from an attorney’s

work on behalf of a client that reflects the attorney’s evaluation or interpretation of the law or the facts

involved. Nonderivative materials are those that are only evidentiary in character. These are not

protected even if a lot of attorney “work” may have gone into locating and identifying them. (

Mack v. Superior Court (1968) 259 Cal.App.2d 7, 10 [66 Cal.Rptr. 280, 283] .

There is ample case law delineating derivative versus nonderivative work product. Objections

into this are should contain case law on point. The following cases will assist in tailoring your work

product objection: Mack v. Superior Court of Sacramento County; Williamson v. Superior Court of Los Angeles County (1978) 21 Cal.3d 829 [148 Cal.Rptr. 39]; Brown v. Superior Court of Butte County, (1963) 218 Cal.App.2d 430 [32 Cal.Rptr. 527]; and Nacht & Lewis Architects v. Superior Court (1996) 47 Cal.App.4th 214 [54 Cal.Rptr.2d 575].

Premature disclosure of experts:

“Objection. The interrogatory seeks premature disclosure of expert opinion in violation of Code of Civil Procedure sections 2034.210, 2034.220, and 2034.270. The interrogatory also seeks attorney work-product in violation of Code of Civil Procedure sections 2018.020 and 2018.030. Plaintiff has not decided on which, if any, expert witnesses may be called at trial; insofar as this interrogatory seeks to ascertain the identity, writings, and opinions of plaintiff’s experts who have been retained or utilized to date solely as an advisor or consultant, it is violative of the work-product privilege. (See South Tahoe Public Utilities District v. Superior Court

(1979) 90 Cal.App.3d 135 [154 Cal.Rptr. 1]; Sheets v. Superior Court (1967) 257 Cal.App.2d 1 [64 Cal.Rptr. 753];

and Sanders v. Superior Court , (1973) 34 Cal.App.3d 270 [109 Cal. Rptr. 770].)”

It is improper for an interrogatory to seek either the identity, writings or the opinions of an expert

prior to the exchange of expert witnesses. (South Tahoe Public Utilities District v. Superior Court

(1979) 90 Cal.App.3d 135, [154 Cal.Rptr. 1].) Plaintiff attorneys commonly encounter discovery

requests which seek medical, biomechanical, or legal conclusions. Often the only source of information

to respond to the interrogatory is from an expert witness. Since the work-product protection includes the

work-product of an attorney’s employees and agents, it includes the opinions of employees and agents.

(Rodriguez v. McDonnell Douglas Corp . (1978) 87 Cal.App.3d 626, 647-648. [151 Cal.Rptr. 399, 410-

411].)

Burdensome, oppressive, overbroad:

“Objection. This discovery request is so broad and unlimited as to time and scope as to be an unwarranted annoyance, embarrassment, and is oppressive.

To comply with the request would be an undue burden and expense on the plaintiff. The request is calculated to annoy and harass plaintiff. (See Code of Civ. Proc. section 2030.090 subd. (b); and Columbia Broadcasting System, Inc. v. Superior Court of Los Angeles County (1968) 263 Cal. App. 2d 12, 19 [69 Cal.Rptr. 348, 352].)”

While this is often a valid objection, it is rarely a basis for not providing a response. Before standing on this objection, sincere meet and confer efforts should be made to resolve the issue.

Collateral source rule: “Objection. This discovery request seeks information not relevant to the subject matter of this lawsuit and not calculated to lead to the discovery of admissible evidence in violation of the collateral source rule. This request is also an invasion of Plaintiff’s right to privacy. (See Hrnjak v. Graymar (1971) 4 Cal.3d 725 [94 Cal.Rptr. 623]; Pacific Gas & Electric Company v. Superior Court (1994) 28 Cal.App.4th 174 [33 Cal.Rptr.2d 522]; and Helfend v. SCRTD (1970) 2 Cal.3d 1 [84 Cal.Rptr. 173].)

Code of Civil Procedure section 2017.210 permits discovery only of “insurance…[that] may be liable to satisfy in whole or in part a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.” Health insurance is not insurance available to satisfy a judgment or reimburse of payments made to satisfy a judgment. Code of Civil Procedure section 2017.210 was enacted to permit a plaintiff to discover information about a defendant’s liability insurance in order to facilitate settlement. The legislative history, context and purpose of Code of Civil Procedure section 2017.210 demonstrate that the section was specifically intended to authorize limited discovery of a defendant’s liability insurance coverage and not any other type of insurance. (See Catholic Mut. Relief Soc. v. Superior Court (2007) 42 Cal.4th 358 [64 Cal.Rptr.3d 434].)

Furthermore, personal financial information is within the “zone of privacy” protected by the California Constitution, Article I, §1. (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656 [125 Cal.Rptr. 553, 555]). The Insurance Information Act and Privacy Protection Act, Insurace Code section 793, et seq., limits the disclosure of information in connection with insurance transactions. (Griffith v. State Farm Mutual Auto Ins. Co.

(1990) 230 Cal.App.3d 59, 65-71 [281 Cal. Rptr. 165, 167-171].) “Privileged information” refers to any individually identifiable information that both “(1) relates to a claim for insurance benefits…(2) is collected in connection with or in reasonable anticipation of a claim for insurance benefits…” (Ins. Code section 791.02 subd. (v).)”

Unless the case involves an exception to the collateral source rule (Civil Code section 3333.1 or Government Code section 985), an objection should be asserted to providing any information about health insurance, health insurance policies or payments made by a health insurance or other insurance company, including an objection to Form Interrogatory No. 4.1. Asserting such an objection is particularly important in today’s climate in which some judges have interpreted Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3d 635 [246 Cal.Rptr.

192] to require a post-verdict hearing to reduce plaintiff’s medical bills to the amount actually paid.

An increasing number of bench officers do not agree that the Hanif case gives the defendant a right to such a post-trial hearing or reduction, which effectively abrogates the collateral source rule.

Counsel should begin educating the judge with respect to this issue during discovery, rather than

waiting until after a verdict for plaintiff. Furthermore, a more persuasive argument can be made that

there is no evidentiary basis for a post-trial ruling by the judge where there is no admissible evidence of

what the insurance company paid on behalf of its insured.

Equally available: “Objection. The information sought in this discovery request is equally available to the propounding party. (See Code of Civ. Proc. section 2030.220 subd. (c); and Alpine Mutual Water Co. v. Superior Court (1968) 259 Cal.App.2d 45 [66 Cal.Rptr. 250].)”

A party has an obligation to make a reasonable and good faith effort to obtain requested information, “except where the information is equally available to the propounding party.” (Code of Civ. Proc. section 2030.220 subd. (c).)

Irrelevant: “Objection. Irrelevant. Plaintiff’s _____ is irrelevant to the subject matter of this

matter, and the information sough is not reasonably calculated to lead to the discovery of admissible

evidence. (Code of Civ. Proc. section 2017.010.)”

Again, this may be an objection worth stating, but is an objection which a court generally is not

likely to sustain. Broad discovery is permissible by both parties, and a relevancy objection in discovery

is largely disfavored.

Medical records/medical history:

“Objection. This discovery request seeks to discover plaintiff’s medical history and/or treatment which is completely unrelated to the issues in this litigation in violation of plaintiff’s constitutionally protected right to privacy under Article I, Section I of the California Constitution. (Vinson v. Superior Court (1987) 43 Cal.3d 833, 842 [239 Cal.Rptr 292, 299]; and Davis v. Superior Court (1992) 7 Cal.App.4th 1008, 1014-1016 [9 Cal.Rptr. 2d 331, 335].) To require plaintiff to delineate his or her entire medical history is not reasonably calculated to lead to the discovery of admissible evidence, and overbroad. (Hallendorf v. Superior Court (1978) 85 Cal.App.3d 553, 557 [149 Cal.Rptr. 564, 566.]) The disclosure of medical history and medical records cannot be compelled even though they may, in some sense, be relevant to the substantive issues of litigation. The medical records must be directly relevant to the lawsuit. (In re Lifschutz (1970) 2 Cal. 3d 415, 435 [85 Cal.Rptr. 829,842].)”

In an injury case, the injured parties privacy rights are subordinate to the right of discovery, but

only as to relevant medical history. Plaintiffs can still assert their right of privacy to protect the

disclosure of medical information not directly relevant to the lawsuit. (Vinson v. Superior Court (1987)

43 Cal.3d 833, 842 [239 Cal.Rptr. 292, 299].) This applies to mental health records in an injury claim where only “garden variety” emotional distress is claimed. (Davis v. Superior Court (1992) 7 Cal.App.4th 1008, 1014-1016 [9 Cal.Rptr.2d 331, 334-336].)

More than thirty-five special interrogatories:

“Objection. This interrogatory fails to comply with Code of Civil Procedure section 2030.030 subdivision (b) as the propounding party has exceeded the limit of special interrogatories.”

A party may not serve more that thirty-five (35) total special interrogatories without a supporting declaration setting forth the need for the additional requests. (Code of Civ. Proc. section 2030.030.)

Absent a declaration, the responding party is still obligated to respond to the first thirty-five (35) special

interrogatories. (Code of Civ. Proc. section 2030.030 subd. (c).)

Prefatory instructions and definitions:

“Objection. This set of discovery utilizes preliminary instructions and relies on preliminary/introductory definitions in violation of Code of Civil Procedure section 2030.060 subdivision (d).”

Written discovery sets often have prefatory instructions and definitions. This is improper. (Code of Civ. Proc. section 2030.060 subd. (d).) Definitions are proper, but must appear in the interrogatory itself. (Id.) In response, state an objection in each and every request. (Code of Civ. Proc. section 2030.210 subd. (a)(3).)

Preparing a defendant’s case and legal contentions: “Objection. This discovery request seeks

the legal reasoning and theories of plaintiff’s contentions. Plaintiff is not required to prepare the

defendant’s case. (Sav-On Drugs, Inc. v. Superior Court of Los Angeles County

(1975) 15 Cal.3d 1, 5 [123 Cal.Rptr. 283, 286].). A plaintiff is not required to prepare the case of his opponent. (Ryan v. Superior Court of Los Angeles County (1960) 186 Cal.App.2d 813, 819, [9 Cal.Rptr. 147, 151].)”

While it is be proper to discover a plaintiff’s legal contentions, the legal reasoning or theories

behind the contentions are not discoverable. (Sav-On Drugs, Inc. v. Superior Court of Los Angeles

County (1975) 15 Cal.3d 1, 5 [123 Cal.Rptr. 283, 287].) A party is not obligated to perform legal

research for another party. (Id.)

Subparts, compound, conjunctive, or disjunctive: “Objection. This interrogatory contains

subparts, or a compound, conjunctive, or disjunctive question in violation of Code of Civil Procedure

section 2030.060 subdivision (f).”

Social Security Information: “Objection. A party’s social security number is “clearly irrelevant to the subject matter of the action.” (Smith v. Superior Court of San Joaquin County (1961)

189 Cal.App.2d 6, 9, 13, [11 Cal.Rptr. 165, 168, 170].)”

Tax returns and W-2s: “Objection. Information regarding tax returns, including income tax returns, W-2 and/or 1099 forms, is privileged under federal and state law. (See Webb v. Standard Oil Co. (1957) 49 Cal.2d 509 [319 P.2d 621]; Brown v. Superior Court (1977) 71 Cal.App.3d 141 [139 Cal.Rptr. 327]; Aday v. Superior Court

(1961) 55 Cal.2d 789 [13 Cal.Rptr. 415]; Schnabel v. Superior Court (1993) 5 Cal.4th 704 [21 Cal.Rptr.2d 200].) This privilege is to be broadly construed. (Sav-on Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 6-7 [123 Cal.Rptr. 283, 287].)”

Compilation required: “Objection: The interrogatory would necessitate the preparation of a

compilation, abstract, audit or summary from documents in plaintiff’s possession; because such

preparation would be similarly burdensome and/or expensive to both the propounding and responding

parties, plaintiff herewith offers to permit review of the following documents, _____________, from

which propounding party can audit, inspect, copy or summarize. Responding party will make said

documents available for review upon reasonable request. (Code of Civ. Proc. section 2030.230; and

Brotsky v. State Bar of California (1962) 57 Cal. 2d 287 [19 Cal.Rptr. 153].)”

Continuing interrogatory: “Objection: The question requires the responding party to supplement an answer to it that was initially correct, thus constituting a “continuing” interrogatory in violation of Code of Civil Procedure section 2030.060 subd. (g).”

Conclusion

These “standard” objections are a helpful starting point in dealing with interrogatory responses.

Responding to discovery without giving each question significant analysis can cause a lot of damage to

your case. On more important issues, it is always worthwhile to check all citations and check for any changes in the law.

If you find yourself in an unfortunate situation of losing or about to your home to wrongful fraudulent foreclosure, and need a complete package that will help you challenge these fraudsters and save your home from foreclosure visit:http://www.fightforeclosure.net

What Homeowners Needs to Know About Proof of Claim in Bankruptcy Proceedings

12 Monday May 2014

Posted by BNG in Bankruptcy, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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A. General
1. Except in Chapter 11 cases, in which certain scheduled claims are “deemed filed” a creditor desiring to receive distributions in a bankruptcy case must file a timely proof of claim.

2. A proof of claim is a written statement that sets forth the creditor’s claim. It must conform substantially to Official Form 10, which can be found in the Bankruptcy Rules. While completing the proof of claim form is not difficult, it must be done carefully to avoid mistakes that could give the trustee or the debtor grounds to defeat the claim.

3. In most cases, the Court will have sent to creditors a proof of claim form with the initial Notice of Commencement of Case.

4. With the implementation of mandatory electronic case filing (ECF) in most districts, proofs of claim must be filed electronically if filed by counsel, unless the lawyer has obtained an exemption.

B. Definition of Claim
1. A “claim” in bankruptcy is defined as:
“(A) a right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or
(B) a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
2. A “Debt” is defined in bankruptcy as “a liability on a claim.”
3. Claims “arise” for bankruptcy purposes when all “transactions” or acts necessary for liability occur.
4. A claim arises regardless of whether the claim is contingent, liquidated, or matured when the petition is filed.

C. Filing Proofs of Claim
1. As noted above, proofs of claim must substantially conform to Official Form 10.
2. The creditor or the creditor’s agent must sign the proof of claim.
3. Copies of the documents evidencing the claim, and evidence of perfection of any security interest claimed, must be attached to the proof of claim.
4. The bar date establishes the date by which proofs of claim must be filed against the estate. The bar date is similar to a statute of limitations and must be strictly observed.
5. For non governmental creditors, claims must be filed within 90 days after the first date set for the meeting of creditors. The bar date for governmental claims is 180 days after the date of the order for relief.
6. In Chapter 11 cases, the court fixes the bar date for filing proofs of claim and notice of such deadline must be given to all creditors and parties in interest.
7. A creditor may seek leave for an extension of time to file a late proof of claim due to inadvertence, mistake, or carelessness amounting to “excusable neglect” as well as due to intervening circumstances beyond the parties’ control.

D. Secured Claims
1. “Secured claims” include “liens,” “security,” “security agreements” and “secured claims.”
2. An allowed claim secured by a lien on property in which the estate has an interest, or that is subject to setoff, is a “secured claim” to the extent of the value of the creditor’s interest in the estate’s interest in the property, or the amount subject to setoff. A secured claim carries the right to “adequate protection” of collateral.
3. Secured creditors are not required to file proofs of claim. The secured creditor holding a pre-bankruptcy lien need not file a proof of claim to preserve its status as a secured creditor, and the lien will pass through the bankruptcy case unaffected regardless of whether the secured creditor files a proof of claim. When there is a pre-petition arrearage, the secured creditor may wish to file a proof of claim to establish its claim for treatment in a Chapter 11 or 13 plan. Similarly, where the claim is only partially secured, the creditor may wish to file a proof of claim to establish a claim for the unsecured portion of its debt.
4. Common Mistakes
a. Failure to provide proof of debt. Rule 3001(c) requires that evidence of all claims based on a writing be filed with the proof of claim form. Most claims have some documentary evidence that should be filed with the proof of claim.
b. Misuse of check boxes. Official Form No. 10 contains boxes to check only for secured and priority claims. An unsecured claim without priority status under the Bankruptcy Code is the default, and there is no box to check for unsecured, non-priority claims. Creditors should only claim secured or priority status if there is a good faith basis to do so.
b. Failure to provide proof of perfection of security interest. The nature of the proof required depends upon the requirements for perfection of a security interest in the underlying collateral. For example, the creditor should provide copies of certificates of title for motor vehicles and manufactured homes, a copy of the recorded deed of trust for real estate, and copies of the recorded UCC-1 financing statement(s) for security interests in other personal property. If the documentation is lengthy, a summary may be provided.
c. Improper claim of priority status. Priority claims as prescribed by the Bankruptcy Code are paid before other claims, which is a considerable advantage. Creditors often claim priority status when they are not legally entitled to do so. A creditor should not file a proof of claim form alleging priority status without a good faith basis to do so.
d. Late Filed Claims. With few exceptions, claims filed after the bar date are subject to disallowance. Creditors who learn of a bankruptcy filing should file promptly a proof of claim even if they do not receive official notice from the Court.
e. Failure to indicate amended claim. Duplicate proofs of claim are a recurring problem for bankruptcy trustees. The proof of claim contains a box to check if a proof of claim replaces or amends a previously filed proof of claim. Creditors often file replacement or amended proofs of claim without checking the “replace” or “amends” box. This creates obvious confusion because it is not clear whether the latest claim is a new, separate claim. If the box is not checked, the debtor or the trustee may object on the grounds that one of the claims is a duplicate of the other, and an inattentive creditor may find that the preferred claim is disallowed. Checking the “amends” or “replace” box makes it clear that there is only one claim. It may be helpful to explain the reason for the amendment on the face of the proof of claim or in an attachment.

E. Allowance of Claims and Objections
1. If a proof of claim is timely and properly filed, it is “deemed allowed” unless a party in interest objects.
2. Claims scheduled as undisputed, fixed or liquidated in Chapters 9 and 11 are deemed allowed even if no proof of claim is filed.
3. A “party in interest” may object to the proof of claim. The objection becomes a “contested matter.” If the objection is joined with a demand for relief of the kind specified in Bankruptcy Rule 7001, it becomes an adversary proceeding. At least 30 days notice of a hearing is required on an objection to a proof of claim.
4. Once filed, a proof of claim constitutes “prima facie evidence of the validity and amount of the claim”. As a result, the party objecting to a properly filed proof of claim has the initial burden of presenting sufficient probative evidence to overcome the prima facie effect of the proof of claim.
5. Once the objector has produced “sufficient evidence to place the claimant’s entitlement at issue”, the burden of proof then shifts to the creditor to establish the validity and amount of its claim. The claimant bears the ultimate burden of establishing a valid claim by a preponderance of the evidence.
6. Neither the Bankruptcy Code nor the Bankruptcy Rules establish an absolute deadline for filing an objection to a claim. In Chapter 7 cases, objections should be filed prior to any distribution by the Chapter 7 trustee. In Chapter 11 cases, the plan of reorganization will often include a deadline to object to claims.

F. Effect of Filing a Proof of Claim.
1. A proof of claim supersedes the claim as scheduled by the debtor.
2. A claim is “deemed allowed” unless and until an objection is filed.
3. Only creditors holding allowed claims are entitled to vote on the confirmation of a Chapter 11 plan of reorganization. If a party objects to a claim prior to the claimant voting on a plan of reorganization, the claimant is ineligible to vote on the plan. On request of the claimant, the Bankruptcy Court, after notice and a hearing, can temporarily allow the claim for voting purposes in an amount that the Bankruptcy Court deems proper.
4. A creditor must hold an allowed claim in order to receive a distribution under a Chapter 7, a Chapter 13, or a Chapter 11 bankruptcy case. A properly executed and filed proof of claim establishes a creditor’s allowed claim, unless a party in interest objects.
5. There is some risk for a creditor in filing a proof of claim because the creditor is generally deemed to have submitted itself to the jurisdiction of the Bankruptcy Court for purposes of the claim and issues related to the treatment and payment of the claim. This may not be desirable in all circumstances. It may result in a waiver of the right to a jury trial.

G. Objections

(1) An objection to claim is a “contested matter” under FRBP 9014. Except to the
extent otherwise provided in this rule, an objection to claim must comply with
LBR 9013-1 and be titled “Motion for Order Disallowing Claim” unless the
objection is to become an adversary proceeding pursuant to FRBP 3007(b).
(2) A claim objection must include the number, if any, assigned to the disputed claim
on the court’s claims register.
(3) A separate objection must be filed to each proof of claim unless:
(A) The objection pertains to multiple claims filed by the same creditor;
(B) The objection is an omnibus claim objection; or
(C) The court orders otherwise.
(4) An omnibus claim objection asserts the same type of objection to claims filed by
different creditors (e.g., claims improperly filed as priority claims, duplicate claims,
claims filed after the bar date, etc., as described in FRBP 3007(d)). In addition to
the requirements set forth in FRBP 3007(e), an omnibus claim objection must:
(A) Identify the name of each claimant and the claim number in the caption of
the objection; and
(B) Include as exhibits the documents supporting each claim objection
organized and indexed by claim number.
(5) If more than 20 objections in a case are noticed for hearing on a single calendar,
the objector must comply with the supplemental procedures contained in the Court
Manual available from the clerk and on the court’s website.
(b) Notice and Hearing.
(1) A claim objection must be set for hearing on notice of not less than 30 days.
(2) The claim objection must be served on the claimant at the address disclosed by the claimant in its proof of claim and at such other addresses and upon such parties as
may be required by FRBP 7004 and other applicable rules.
(3) Notice of the objection on or conforming to court-mandated form F 3007-1.3,
Notice of Objection to Claim must be served with the claim objection. The notice
must advise the claimant of the date, time, and place of hearing, and state:
(A) A response must be filed and served not later than 14 days prior to the date
of hearing set forth in the notice; and
(B) If a response is not timely filed and served, the court may grant the relief
requested in the objection without further notice or hearing.
(4) The court will conduct a hearing on a claim objection to which there is a timely
response.
(5) If the claimant timely files and serves a response, the court, in its discretion, may
treat the initial hearing as a status conference if it determines that the claim objection involves disputed fact issues or will require substantial time for presentation of evidence or argument.
(6) If the claimant does not timely file and serve a response, the court may sustain the
objection and grant the motion for order disallowing the claim without a hearing.
(A) The objector must file a declaration attesting that no response was served
upon the objector. The declaration must identify the docket number and filing date of the objection to claim, notice, and proof of service of the notice and objection to claim, and be served on the claimant.
(B) The objector must also lodge a proposed order prepared and served in accordance with LBR 9021-1 which provides for service of the entered order on the claimant and counsel, if any, and the United States trustee.
(c) Evidence Required.
(1) An objection to claim must be supported by admissible evidence sufficient to
overcome the evidentiary effect of a properly documented proof of claim executed
and filed in accordance with FRBP 3001. The evidence must demonstrate that the
proof of claim should be disallowed, reduced, subordinated, re-classified, or
otherwise modified.
(2) A copy of the complete proof of claim, including attachments or exhibits, must be
attached to the objection to claim, together with the objector’s declaration stating
that the copy of the claim attached is a true and complete copy of the proof of
claim on file with the court, or, if applicable, of the informal claim to which
objection is made.
(3) If the complete proof of claim is not readily available from the court file, the
objector may formally request a copy from the holder of the claim by serving the
creditor with a notice in substantially the same form as court-approved form.

H. Notice of Request for a Copy of Proof of Claim.
F 3007-1.2, Notice of Request for a Copy of Proof of Claim.
(A) The request must advise the holder of the claim that failure to supply a complete copy of the proof of claim, including all attached documentation, within 30 days of the notice may constitute grounds for objection to the claim based on the claimant’s failure to provide requested documentation to support the claim.
(B) If an objection is filed on this basis, it must be accompanied by a declaration providing evidence that the proof of claim was not readily available from the court file or otherwise.
(4) If the basis for the objection is that the proof of claim was filed after the bar date,
the objection must include a copy of each of the following:
(A) The bar date order, if any;
(B) The notice of bar date; and
(C) Proof of service of the notice of bar date.
(5) If the basis for the objection is that there are duplicate proofs of claim, the objection must include a complete copy of each proof of claim.

How Homeowners Can Effectively Challenge Lender’s Proof of Claim in Bankruptcy Adversarial Proceedings

11 Sunday May 2014

Posted by BNG in Bankruptcy, Federal Court, Foreclosure Defense, Fraud, Judicial States, Litigation Strategies, Non-Judicial States, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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Many Homeowners who find the need to file a Chapter 13 Bankruptcy years after lenders has failed to modify their mortgage loans may find the needs to pursue the unscrupulous lenders through the the special proceeding in the Bankruptcy law called “Adversarial Proceeding”.

When Homeowners in Chapter 13 Bankruptcy listed their lender as “Unsecured Credit”, the burden of proof usually shift to the creditor to show how its claims against the borrower is secured. Doing so, requires that the lender present the necessary documentary proof and then ascertain how it came about acquiring those payment rights or the right to institute and maintain foreclosure action against Homeowner’s property.

When lenders are listed as “Secured Creditors”, even though the word “secured” made it appear as if the lender has all the rights in the world to pursue the foreclosure, absolutely not. The bankruptcy law requires that all claimants listed on the Chapter 13 Bankruptcy timely file what is called a “proof of claim”, as to their entitlement for the interest they were claiming. Whether or not such “proof of claim” is timely filed by the lender determines how its interest if any, is going to be protected when the Trustee distributes the money. However, if Homeowners commenced what is know as “Adversarial Proceeding” within that Chapter 13 Bankruptcy proceedings, then lenders are forced to substantiate their claims. This is the point where all events in the mortgage loan transaction comes to light including but not limited to “assignments and transfers, possession of deeds of trust, mortgage or notes, recordings in the county, MERS issues etc. The burden thus still shifts to the lender to show how it came about with the rights of ownership or enforcement it is claiming against Homeowner’s property.

Ordinarily, the first step a creditor will take upon learning of a debtor’s bankruptcy case is to file a proof of claim to seek payment of money owed. A claim or interest that has been filed with the court will be allowed, and will serve as the basis for distribution of the creditors claim, unless a party in interest objects. Once filed, a proof of claim constitutes prima facie evidence of the validity and amount of the claim. Often times months or even years will go by before a creditor hears anything further about his claim from the debtor, trustee or any other party. Consequently, an objection to a claim may be brought long after the claim was filed. There is no absolute deadline in the Code or Rules for filing an objection to a claim. In Chapter 7 cases, objections should be filed prior to any distribution by the trustee and in Chapter 11 cases, oftentimes the plan of reorganization will include a deadline to object to claims. Typically, a claim objection is preceded by a letter requesting additional documentation from the claimant by the debtor or trustee.

If a Trustee or Debtor files an objection to claim, the objection becomes a “contested matter.” If the objection is joined with a demand for relief of the kind specified in Bankruptcy Rule 7001 (governing adversary proceedings), it becomes an adversary proceeding. At least thirty days notice of a hearing is required on an objection to a claim. Once an objection has been filed, the burden of proof shifts to the creditor to prove the amount and validity of the claim. The claimant bears the ultimate burden of establishing a valid claim by a preponderance of the evidence.

Filing a successful proof of claim is the key to unlocking a creditor’s right to recover against a debtor in bankruptcy. Only in limited circumstances may a creditor recover against the debtor’s estate without properly filing a proof of claim. This article addresses the various stages of filing, attacking and defending a proof of claim.

A proof of claim is “a written statement setting forth a creditor’s claim.” To aid creditors, the judiciary has created an “Official Form” for filing proofs of claim that comply with the Bankruptcy Code and Rules. The deadline for filing proofs of claim is fixed by the Bankruptcy Court.

The proof of claim serves to give notice to the Bankruptcy Court, the debtor-in-possession/trustee, and other interested parties of the creditor’s claim. Beyond alerting others to the existence of the claim, it also begins the process of establishing the amount of the claim, by requiring the creditor to specify the amount owed as of the petition date. Finally, the proof of claim identifies thetype of claim, such as whether it is a secured or unsecured claim, and any priority asserted by the creditor. The proof of claim is therefore more than just a “written statement” of the creditor’s claim, but also the opening salvo in the creditor’s attempt to obtain a distribution from the debtor’s estate which must be completed with care.

The Official Form requires a claimant to describe its claim as an unsecured or secured priority claim. Claims receive different treatment under the Bankruptcy Code, depending upon the priority, and accordingly, this required designation is more than a technicality. A secured claimant who has perfected a security interest in a particular piece of collateral is entitled to receive a distribution from that specific property before any other creditors can recover from that specific property. If the claim is unsecured, the Bankruptcy Code establishes a schedule of “priorities” giving the order in which unsecured claimants are paid back, based on the type of claim, until the debtor’s estate is exhausted. As a few examples, priority unsecured claims (in order) include domestic support obligations; wages, salaries and commissions; consumer deposits; and other unsecured claims.

More basic requirements for filing a proof of claim include a signature by the creditor or its authorized agent. Further, if the claim is based on a written document, the creditor should file a copy of the document; or if the document is no longer available, the creditor should explain how it came to be lost or destroyed. If the creditor possesses a security interest in the debtor’s property, the creditor should include evidence of the security interest’s perfection.

While the ultimate burden of persuading the Bankruptcy Court that the claim is valid always rests with the claimant, once a creditor files a proof of claim complying with these rules, the proof of claim becomes “prima facie evidence of the validity and amount of the claim.” If left unchallenged, the creditor will be entitled to receive distributions from the debtor’s estate in order to satisfy its claim. As courts have recognized, this effectively shifts the burden to objectors to present evidence casting doubt on the claim, with such evidence carrying at least equal evidentiary force as the details in the proof of claim. However, the objector having done so, the burden returns to the claimant to demonstrate the ultimate validity of its claim.

The Bankruptcy Code and Rules allow for a “party in interest” to object to the proof of claim. Such objections must be written and filed with the Bankruptcy Court. The objector must also serve a copy on the claimant at least 30 days before the hearing on the objection. The objector should also make it clear that this is an objection to a proof of claim filed in the case and specify which proof of claim is affected.

One typical tactic that objectors employ is the so-called “omnibus objection,” resulting from the fact that many claims are vulnerable to objections on the same basis. As a consequence, objectors will often set forth a general legal basis for a reduction or elimination of particular claims, and then attach as an exhibit a list of claims to which the objection applies. For example, claims that were filed late-that is, they were filed after the claims filing deadline, are often the subject of a so-called “omnibus objection.”

Before 2007, this type of objection posed additional challenges to claimants. It was often difficult for claimants to know whether they had been named in the objection because the Bankruptcy Rules did not require objectors to list claims in alphabetical or numerical order, meaning that a creditor could easily miss that its proof of claim was being challenged among the hundreds or even thousands of claims named in just a single omnibus objection. This required a careful inspection of the attached exhibit to determine if its claim was affected.

Seeing the need to impose limits on such unwieldy objections, the judiciary amended the Bankruptcy Rules to make omnibus objections more accessible to creditors. First, the amended Bankruptcy Rules allow omnibus objections only on limited grounds, including duplication, claims that were filed in the wrong case, amended claims, late claims and other procedural objections.

Other than circumscribing when an objector can employ an omnibus objection, the Bankruptcy Rules now also detail how the objection can be made, with the ultimate goal of making it easier for creditors to determine whether one of their claims has been named. The omnibus objection must list claimants alphabetically (and additionally list them by category of claims if appropriate) and provide a cross-reference to claim numbers. For each claim, the objector must state the grounds of the objection and cross-reference the pages in the omnibus objection pertinent to the stated grounds.

An omnibus objection must also explain, “in a conspicuous place,” that claimants receiving a copy of the objection should find their names and claims therein. These rules prohibit objectors from naming more than 100 claims per omnibus objection. Finally, the title of the objection must state the objector’s identity and its ground for objection and be numbered consecutively with the objector’s other omnibus objections.

The objection may assert the claim is not reflected in the debtor’s books and records, the amount of the claim or classification of the claim is incorrect or other grounds specific to the nature of the claim. Creditors have difficulty where the objection to their claim is not explicitly specific to their claim, as it may be combined with dozens of other claims in an Omnibus Objection. Often an Omnibus Objection results from having many claims that are vulnerable to objections on the same basis and thus, will contain the basis of the Objection and a corresponding list or chart identifying the creditor’s claim to which the objection applies.

At this point, it may be beneficial for the creditor to hire experienced bankruptcy counsel to defend their claim. If a timely response is not given to the objection, the claim will likely be disallowed and thus, the creditor receives nothing from the bankruptcy estate, despite having had a valid claim. If a timely response is filed, the Bankruptcy Court will conduct an evidentiary hearing to establish the validity of the claim, along with its amount as of the petition date. The hearing is usually scheduled when the objection is filed. The Court may however establish a discovery schedule prior to the hearing if the claim dispute so requires. Ordinarily, if an objection to a claim is raised, the court (after notice and a hearing) determines the amount of the claim as of the date of the filing of the bankruptcy petition, and allows the claim, unless it deems it not allowable under Section 502, such as a claim that is unenforceable due to a valid defense and a claim for post-petition interest on an unsecured claim.

Of course, if no objection is made, the creditor will be entitled to receive distributions from the debtor’s estate in order to satisfy its claim.

After an objection is filed, the creditor is required to submit a written response. If a timely response is filed, the Bankruptcy Court will conduct an evidentiary hearing to establish the validity of the claim, along with its amount as of the petition date. Often, the hearing is scheduled at the time the objection is filed; however, depending upon the size and nature of the claim, the court may establish a discovery schedule prior to the hearing. The court will generally look to non-bankruptcy law to determine whether to allow the claim.

The proofs of claim process demonstrates how important it is that the respective parties get their roles right. Creditors must be diligent in properly filing a proof of claim to recover from the debtor’s estate and in carefully filling out the Official Form to ensure that their claims are properly characterized and quantified. A party in interest must make a cogent objection to the proof of claim sufficient to overcome its presumption of validity and take heed of recent changes to the rules governing omnibus objections.

What Homeowners in Washington Needs to Know About Saving Their Homes

10 Saturday May 2014

Posted by BNG in Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Landlord and Tenant, Legal Research, Litigation Strategies, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, RESPA, State Court, Your Legal Rights

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This outline covers mainly Washington law, but an effort has been made to include information that will be useful in most foreclosure contexts. Bankruptcy and tax issues pervade foreclosures, but are beyond the scope of this article. The focus is upon residential foreclosures as opposed to commercial foreclosures although there is substantial overlap.

TABLE OF CONTENTS

I. GENERAL CONSIDERATIONS

A. WHETHER TO REINSTATE, DEFEND OR GIVE-UP
B. OFFENSIVE STRATEGY

II. DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES
A. INTRODUCTION
B. PROCEDURE FOR RESTRAINING TRUSTEE’S SALES
C. DEFENSES BASED ON TRUSTEE MISCONDUCT
D. POST-SALE REMEDIES
E. SETTING ASIDE THE TRUSTEE’S SALE
F. ADDITIONAL STATUTORY REMEDIES
G. RAISING DEFENSES IN THE UNLAWFUL DETAINER
(EVICTION) ACTION
H. DAMAGES FOR WRONGFUL FORECLOSURE

III. DEFENDING JUDICIAL FORECLOSURES
A. INTRODUCTION
B. HOMESTEAD RIGHTS
C. UPSET PRICE
D. DEFICIENCY JUDGMENTS
E. REDEMPTION RIGHTS
F. POSSESSION AFTER SALE
G. POST FORECLOSURE RELIEF

IV. MISCELLANEOUS ISSUES
A. BANKRUPTCY
B. WORKOUTS (DEED IN LIEU)
C. LENDER LIABILITY
D. MOBILE HOME FORECLOSURES
E. TAX CONSEQUENCES OF FORECLOSURE

V. THE GOVERNMENT AS INSURER, GUARANTOR OR LENDER
A. INTRODUCTION
B. HUD WORKOUT OPTIONS
C. THE VA HOME LOAN PROGRAM
D. RURAL HOUSING LOANS

VI. RESOURCES

I. GENERAL CONSIDERATIONS

A. WHETHER TO REINSTATE, DEFEND OR GIVE-UP

By far the most important decision that must be initially made is whether the property is worth saving. This is often ignored and wasted effort is expended when there is no “equity” (realistic fair market value minus all debt, liens, property taxes, anticipated foreclosure costs, late fees, and selling costs) in the property.
The options are as follows:
1. Reinstatement. Pay the costs and late charges and stop the process. In most non-judicial foreclosures this is permitted up until the date of sale. In Washington the lender must allow reinstatement 10 days prior to the sale date. See RCW 61.24. Often a lender or relative will loan necessary funds and take a subordinate lien on the property to do so. The makes sense only if the new payments are within the means of the debtor.
2. Sell the Property. If there is equity, but no ability to reinstate, then immediately list and sell the property to recoup equity.
3. Obtain Foreclosure Relief. Most government insured loans (if, VA, FHA) have programs allowing (or requiring) lenders to assist defaulting borrowers. See discussion under §V infra. Check into these options immediately.
4. Give Up. This is actually an option as most state laws permit the debtor to remain in possession during the foreclosure process and redemption period rent-free. Most laws, especially in non-judicial foreclosure states – do not allow (or at least limit) deficiencies. Debtors contemplating bankruptcy should take advantage of homestead rights and redemption rights. If there is no equity or negative equity and no ability to make payments, there is no economic reason to try to avoid foreclosure.
5. Defend the Foreclosure. After all of the above have been considered, defense of the foreclosure may be warranted. This outline discusses some defenses that may result in re-instatement of the mortgage or recovery of equity.
B. OFFENSIVE STRATEGY
In addition to defenses that may be raised, there may be affirmative claims that can be brought against the lender which should be immediately determined and raised in a counterclaim or set-off or, in the case of non-judicial foreclosure, brought by separate suit and coupled with an injunction against continuing the non-judicial foreclosure. These claims can also be brought in bankruptcy. See, e.g. In re Perkins, 106 BR 863 (1989).
A few examples of affirmative claims:
1. Truth-in-Lending Act Violations. Often lenders will hand the debtor a claim, which can turn a debt into an asset. If the Truth-in-Lending disclosure statement is less than one year old, there may be damage claims for improper disclosure. See, 15 U.S.C. 1635. More importantly, there may be a right of rescission, which can be exercised up to three years after the closing resulting in a tremendous advantage to the borrower. See, e.g., Beach v. Ocwen Fed Bank, 118 S. Ct. 1408 (1998).
2. Usury. If a state usury law applies (usually on seller financed real estate), this can parlay a debt into an asset. Federal pre-emption generally prevents this, but there are exceptions. See, RCW 19.52.
3. Mortgage Broker Liability, Lender Liability, Unfair or Deceptive Acts or Practices. Numerous claims that arise in the mortgage financing context give rise to set-offs that can allow negotiation out of the foreclosure. See e.g. Mason v. Mortgage America, 114 Wn. 2d 842 (1990). Intentional breach of contract gives rise to emotional stress damages. See, Cooperstein v. Van Natter, 26 Wn. App. 91 (1980); Theis v. Federal Finance Co., 4 Wn. App. 146 (1971).
Under a new federal statute to regulate high interest, predatory loans, Congress enacted in 1994 the Home Ownership and Equity Protection Act (effective on loans after October 1, 1995). This amendment to the Truth-In-Lending Act requires greater disclosures in loans where a number of factors exist such as, points exceeding 8% and other excessive costs. Penalties include enhanced damages and rescission. See 15 U.S.C. 1602(u) and 15 U.S.C. 1640(a).
The Mortgage Broker Practices Act, RCW 31.04 and the Consumer Protection Act also have enhanced damages and attorney fees.

II. DEFENDING NONJUDICIAL DEED OF TRUST FORECLOSURES

A. INTRODUCTION

The deed of trust is currently one of the most common devices for securing conventional and government insured or guaranteed real estate loans. The deed of trust may be typically foreclosed either judicially as a mortgage or non-judicially. Set forth below are the jurisdictional variations in security agreements and the most common foreclosure procedures#.

Nonjudicial

# 1

Jurisdiction
Customary Security Agreement
Customary Foreclosure Procedure

Alabama
Mortgage
Nonjudicial

Alaska
Deed of Trust
Nonjudicial

Arizona
Deed of Trust
Nonjudicial

Arkansas
Mortgage
Judicial

California
Deed of Trust
Nonjudicial

Colorado
Deed of Trust (Semi-judicial)
Public Trustee’s Sale

Connecticut
Mortgage

Judicial-Strict Foreclosure

Delaware
Mortgage
Judicial

Dis. of Col.
Deed of Trust
Nonjudicial

Florida
Mortgage
Judicial

Georgia
Security Deed
Nonjudicial

Hawaii
Mortgage
Judicial

Idaho
Mortgage
Judicial & Nonjudicial

Illinois
Mtg. & D.T.
Judicial

Indiana
Mortgage
Judicial

Iowa
Mortgage
Judicial

Kansas
Mortgage
Judicial

Kentucky
Mortgage
Judicial

Louisiana
Mortgage
Judicial

Maine
Mortgage
Judicial (Nonjudicial for Corporate Borrower)

Maryland
Deed of Trust
Nonjudicial

Massachusetts
Mortgage
Nonjudicial

Michigan
Mortgage
Nonjudicial

Minnesota
Mortgage
Nonjudicial

Mississippi
Deed of Trust
Nonjudicial

Missouri
Deed of Trust
Nonjudicial

Montana
Instlmnt. Contract
Nonjudicial

Nebraska
Deed of Trust Mortgage
Judicial & Nonjudicial

Nevada
Deed of Trust
Nonjudicial

New Hampshire
Mortgage
Nonjudicial

New Jersey
Mortgage
Judicial

New Mexico
Mortgage
Judicial

New York
Mortgage
Judicial

North Carolina
Deed of Trust
Judicial

North Dakota
Mortgage
Judicial

Ohio
Mortgage
Judicial

Oklahoma
Mortgage
Judicial

Oregon
Deed of Trust
Nonjudicial

Pennsylvania
Mortgage
Judicial

Puerto Rico
Mortgage
Judicial

Rhode Island
Mortgage
Nonjudicial

South Carolina
Mortgage
Judicial

South Dakota
Mortgage
Judicial & Nonjudicial

Tennessee
Deed of Trust
Nonjudicial

Texas
Deed of Trust
Nonjudicial

Utah
Deed of Trust
Nonjudicial

Vermont
Mortgage
Strict Foreclosure

Virgin Islands
Mortgage
Judicial

Virginia
Deed of Trust
Nonjudicial

Washington
Deed of Trust
Nonjudicial

West Virginia
Deed of Trust
Nonjudicial

Wisconsin
Mortgage
Judicial

Wyoming
Mtg. & Installment Contracts

foreclosure is allowed in approximately one-half of the states. Also listed are the states that permit nonjudicial foreclosure and their relevant statutes#. With nonjudicial foreclosure, it is not necessary to utilize the court for the foreclosure sale unless a deficiency judgment is sought. Nonjudicial foreclosure is often the preferred method of foreclosure because it is more efficient than judicial foreclosure and quicker. The nonjudicial foreclosure procedure has been found constitutional between private parties on the basis that there is no state action#, but there is a serious question as to whether the government can direct a lender to use a nonjudicial procedure#.

______________________________________________________________________________________

Judicial
# ALABAMA: ALA. CODE §§35-10-1 TO 35-10-10; [FORECLOSURE AFTER 12/1988 §§35-10-11 TO 35-10-16]
(1991).
Alaska: Alaska Stat. §§34.20.090 to 34.20.100 (1991).
Arizona: Ariz. Rev. Stat. Ann. §§33-807 to 33-814 (West 1991).
Arkansas: Ark. Code Ann. §§18-50-108; 18-50-116 (1987).
California: Cal. Civ. Code §§2924 to 2924(h) West 1992).
D.C.: D.C. Code Ann. §§45-715 to 45-718 (1991).
Georgia: Ga. Code Ann. §§9-13-141; 44-14-162.4; 44-14-48; 44-14-180 to 187 (Harrison 1991).
Idaho: Idaho Code §§6-101; 104; 45-1502 to 45-1506 (1991).
Iowa: Iowa Code Ann. §654.18 (West 1992).
Maine: Me. Rev. Stat. Ann. tit. 14, §§7-105; 7-202 (1988).
Massachusetts: Mass. Gen. Laws Ann. ch. 183, §§19, 21; ch. 244, §§11-15 (West 1992).
Michigan: Mich. Comp. Laws Ann. §§451-401 et seq.; 600.2431; 600.3201 et seq.; 600.3170 (West 1992).
Minnesota: Minn. Stat. Ann. §§580.01 to 580.30; 582.01 et seq. (West 1992).
Mississippi: Miss. Code Ann. §§11-5-111; 15-1-23; 89-1-55 (1972).
Missouri: Mo. Ann. Stat. §§442.290to 443.325 (Vernon 1992).
Montana: Mont. Code Ann. §§25-13-802; 71-1-111; 71-1-223 to 232, 71-1-311 to 317 (1991).
Nebraska: Neb. Rev. Stat. §§76-1001 to 1018 (1981).
Nevada: Nev. Rev. Stat. §§107.020; 107.025; 107.080 to 107.100; 40.050; 40.453 (Michie 1991).
New Hampshire: N.H. Rev. Stat. Ann. §§479:22 to 479:27 (1991).
New York: N.Y. Real Prop. Acts §§1401 to 1461 (McKinney 1992).
North Dakota: N.D. Cent. Code §35-22-01 (1992).
Oklahoma: Okla. Stat. Ann. tit. 46, §§40 to 49 (West 1992).
Oregon: Or. Rev. Stat. §§86.705 to 86.795 (1989).
Rhode Island: R.I. Gen. Laws §§34-11-22; 34-20-4; 34-23-3; 34-27-1 (1984).
South Dakota: S.D. Codified Laws Ann. §§21-48-1 to 21-48-26; 21-48A-1 to 21-48A-5 (1992).
Tennessee: Tenn. Code Ann. §§35-5-101 to 35-5-112 (1991). See, Note, Power of Sale Foreclosures in
Tennessee, 8 Mem. St. U.L. Rev. 871 (1978).
Texas: Tex. Prop. Code Ann. §§51-002; 51.003; 51.005 (West 1992).
Utah: Utah Code Ann. §§57-1-23 to 57-1-34 (1986).
Vermont: Vt. Stat. Ann. tit. 12, §§4531a to 4533 (1991).
Virginia: Va. Code Ann. §§55-59.1 to 55-59.4; 55-61 to 55-66.7 (Michie 1991).
Washington: Wash. Rev. Code Ann. §§61.24.010 to 61.24.130 (West 1992).

_______________________________________________________________________________________

West Virginia: W. Va. Code §§38-1-3 to 38-1-12 (1991).
Wyoming: Wyo. Stat. §§34-4-101 to 34-4-113 (1991).

# See Charmicor, Inc. v. Deaner, 572 F.2d 694 (9th Cir.1978); Northrip v. Federal National Mortgage Association, 527 F.2d 23 (6th Cir.1975); Barrera v. Security Building & Investment Corp., 519 F.2d 1166 (5th Cir. 1975); Bryant v. Jefferson Federal Savings & Loan Association, 509 F.2d 511 (D.C. Cir.1974); Lawson v. Smith, 402 F.Supp. 851 (N.D.Cal.1975); Global Industries, Inc. v. Harris, 376 F.Supp. 1379 (N.D.Ga.1974); Homestead Savings v. Darmiento, 230 Cal.App.3d 424, 281 Cal.Rptr. 367 (1991); Leininger v. Merchants & Farmers Bank, macon, 481 So.2d 1086 (Miss.1986); Wright v. Associates Financial Services Co. of Oregon, Inc., 59 Or.App.688, 651 P.2d 945 (1983), certiorari denied 464 U.S. 834, 104 S.Ct. 117, 78 L.Ed.2d 116 (1983); Kennebec Inc. v. Bank of the West, 88 Wash.2d 718, 565 P.2d 812 (1977); Dennison v. Jack, 172 W.Va. 147, 304 S.E.2d 300 (1983).
# Island Financial, Inc. v. Ballman, 92 Md.App. 125, 607 A.2d 76 (1992); Turner v. Blackburn, 389 F.Supp. 1250 (W.D.N.C.1975); Vail v. Derwinski, 946 F.2d 589 (8th Cir.1991), amended by 956 F.2d 812 (8th Cir.1992) and Boley v. Brown, 10 F.3d 218 (4th Cir.1993) which held that the VA’s control over the foreclosure process in VA guaranteed loan foreclosures constitutes sufficient governmental action to trigger due process protections. Accord, U.S. v. Whitney, 602 F. Supp. 722 (W.D. N.Y. 1985); U.S. v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1986). See Also Leen, Galbraith & Gant, Due Process and Deeds of Trust – Strange Bedfellows, 48 Wash.L.Rev. 763 (1973).

B. PROCEDURE FOR RESTRAINING TRUSTEE’S SALE

Anyone having an interest in the real property security, including the borrower, may restrain the non-judicial foreclosure of a deed of trust on any proper ground#. Proper grounds for enjoining a trustee’s sale include: (1) there is no default on the obligation, Salot v. Wershow, 157 CA.2d 352, 320 P.2d 926 (1958), (2) the deed of trust has been reinstated, (3) the notice of default, notice of sale, or proposed conduct of the sale is defective, Crummer v. Whitehead, 230 CA.2d 264, 40 CR 826 (1964), (4) the lender has waived the right to foreclose, (5) a workout/settlement has been agreed to, (6) equitable reasons that would entitle a debtor to close a sale of the property or complete a refinance, (7) to enforce government relief programs, and trustee misconduct. Finally, there may be defenses to the debt (i.e. usury, truth in lending violations, misrepresentation of the seller, breach of warranty by the seller, etc.) or set-offs, which substantially reduce the debt.

1. Time for Filing Action
The action can presumably be filed any time before the scheduled trustee’s sale, but the sooner the better. Under Washington law, if one seeks to restrain the sale, five days notice must be given to the trustee and the beneficiary. See the Revised Code of Washington (hereinafter “RCW”) 61.24.130(2); Note, supra, footnote 4. A trustor in California has at least one hundred and ten days (after the recording of the notice of default) to seek to enjoin the sale. In California, fifteen days are required for noticing a motion for a preliminary injunction. See CCP section 1005.

______________________________

# See, e.g., Reiserer v. Foothill Thrift and Loan, 208 Cal.App.3d 1082, 256 Cal.Rptr. 508 (1989) (unpublished opinion); Metropolitan Life Insurance Company v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646 (Tex.App.1988); Bekins Bar V Ranch v. Huth, 664 P.2d 455 (Utah 1983); National Life Insurance Co. v. Cady, 227 Ga. 475, 181 S.E.2d 382 (1971); Peoples National Bank v. Ostrander, 6 Wn.App. 28, 491 P.2d 1058 (1971). See, generally, note, Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323 (1984); Restraining Orders in Non-Judicial Deed of Trust Foreclosures, Property Law Reporter, June 1987 (Vol. 3 Nos. 4 & 5).

2. Effect of Lis Pendens
Filing a lis pendens at the time the lawsuit is commenced constitutes constructive notice to purchasers and others dealing with the property of the claims and defenses asserted by the plaintiff#. Even if the plaintiff does not seek an order restraining the trustee’s sale or a restraining order is denied, purchasers at the sale acquire the property subject to the pending litigation#.

3. Notice of Application for Restraining Order
In Washington, a person seeking to restrain a trustee’s sale must give five days notice to the trustee setting forth when, where and before whom the application for the restraining order or injunction will be made. See RCW 61.24.130(2). See also Civil Rules 6 and 81 of the Civil Rules for Superior Court regarding computation of time.

________________________________

# Putnam Sand & Gravel Co. v. Albers, 14 CA3d 722, 92 CR 636 (1971).

# Avco Financial Services Loan, Inc. v. Hale, 36 Ohio App.3d 65, 520 N.E.2d 1378 (1987); Land Associates, Inc. v. Becker, 294 Or. 308, 656 P.2d 927 (1982), appeal after remand 74 Or.App. 444, 703 P.2d 1004 (1985).

4. Payment Obligation
When a preliminary injunction is sought, many states require the petitioner to post an injunction bond to protect the lender from injury because of the injunction#. Some courts require the party seeking the injunctive relief to pay to the court the amount due on the obligation#. If the amount due on the obligation is in dispute, most courts will require the borrower to tender at least what he/she acknowledges is due#.
Under Washington law, if the default is in making the monthly payment of principal, interest and reserves, the court requires such sum to be paid into the court every thirty days. See RCW 61.24.130(1)(a). A practice tip: even if local law does not require this, it would advantageous to offer to make ongoing payments. Then the creditor loses nothing during the pendency of the suit. In the case of default on a balloon payment, the statute requires that payment of the amount of the monthly interest at the new default rate shall be made to the court

clerk every thirty days. See RCW 61.24.130 (1)(b). If the property secured by the deed of trust is an owner occupied single family dwelling, then the court must require the party seeking to restrain the trustee’s sale to make the monthly payment of principal interest and reserves to the clerk of the court every 30 days. See RCW 61.24.130(1).
Although the amount that the party seeking to restrain the trustee’s sale must pay as a condition of continuing the restraining order would ordinarily be the regular monthly payment on the obligation, RCW 61.24.130(1)(a), when there is a balloon payment past due, RCW 61.24.130(1)(b) provides:

In the case of default in making payments of an obligation then fully payment by its terms, such sum shall be the amount of interest accruing monthly on said obligation at the non-default rate, paid to the clerk of the court every thirty days.

__________________________

# See Hummell v. Republic Federal Savings & Loan, 133 Cal.App.3d 49, 183 Cal.Rptr. 708 (4th Dist.1982); Broad & Locust Associates v. Locust-Broad Realty Co., 318 Pa.Super. 38, 464 A.2d 506 (1983); Strangis v. Metropolitan Bank, 385 N.W.2d 47 (Minn.App.1986); Franklin Savings Association v. Reese, 756 S.W.2d 14 (Tex.App.1988); Koegal v. Prudential Mutual Savings, Inc., 51 Wn.App. 108 (1988).

# See Ginther-Davis Center, Limited v. Houston National Bank, 600 S.W.2d 856 (Tex.Civ.App. 1980), error refused n.r.e.; see also Tiffany, Real Property, § 1549 (3d Ed. 1939) for a list of cases; Thompson, Real Property § 5179 (1957). Cf. Grella v. Berry, 647 S.W.2d 15 (Tex.App.1982).
# See Glines v. Theo R. Appel Realty Co., 201 Mo.App.596, 213 S.W. 498 (1919).

This is consistent with the intent to preserve the status quo while the lawsuit is pending and provide security only for prospective harm.

Failure to seek a restraint may constitute a waiver of all rights to challenge a sale for defects whenever the party who received notice of the right to enjoin the trustees sale, had actual or constructive knowledge of a defense to foreclosure prior to the sale, and failed to bring an action to enjoin the sale. The doctrine of waiver would thus preclude an action by a party to set aside a completed trustee’s sale#. Finally, RCW 61.24.130 allows the court to consider the grantor’s equity in determining the amount of security. This would significantly help a borrower avoid a costly bond. An appraisal showing equity should persuade a court that the lender is protected while the underlying dispute is resolved in court.

When a party knew or should have known that they might have a cause of action to set aside the sale but unreasonably delayed commencing the action, causing damage to the defendant, the doctrine of laches may bar the action#.

_________________________________

# Koegel v. Prudential Mutual Savings, Inc., 51 Wn. App. 108, 114 (1988); Steward v. Good, 51 Wn. App. 509, 515 (1988).

C. DEFENSES BASED ON TRUSTEE MISCONDUCT

Most defenses that are available in judicial foreclosures are also available in nonjudicial foreclosures of deeds of trust. Defenses may include violation of Truth-in-Lending, usury statutes, other consumer protection legislation, or special requirements when the government is the lender, insurer, or guarantor, infra. Other defenses are unique to nonjudicial foreclosure of deeds of trust because they relate to the particular obligations imposed upon trustees who conduct the sale of the real property.

1. Breach of Fiduciary Duties
A trustee selling property at a nonjudicial foreclosure sale has strict obligations imposed by law. In most states, “a trustee is treated as a fiduciary for both the borrower and the lender.”#

________________________________________________________________________________________

# Carlson v. Gibraltar Savings, 50 Wn. App. 424, 429 (1988).
# Baxter & Dunaway, The Law of Distressed Real Estate (Clark Boardman Company, Ltd., November 1990). See Spires v. Edgar, 513 S.W.2d 372 (Mo.1974).

In McPherson v. Purdue, 21 Wn. App. 450, 452-3, 585 P.2d 830 (1978), the court approved the following statement describing the duties of a trustee from California law:
Among those duties is that of bringing “the property to the hammer under every possible advantage to his cestui que trusts,” using all reasonable diligence to obtain the best price.

In Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 683 (1985), the Washington Supreme Court adopted the following view:
Because the deed of trust foreclosure process is conducted without review or confrontation by a court, the fiduciary duty imposed upon the trustee is “exceedingly high”.

The court went on to illuminate four duties of the trustee:

(1) The trustee is bound by his office to use diligence in presenting the sale under every possible advantage to the debtor as well as the creditor;

(2) The trustee must take reasonable and appropriate steps to avoid sacrifice of the debtor’s property and his interest;

(3) Once a course of conduct is undertaken that is reasonably calculated to instill a sense of reliance thereon by the grantor, that course of conduct can not be abandoned without notice to the grantor; and

(4) When an actual conflict of interest arises between the roles of attorney for the beneficiary and trustee, the attorney should withdraw from one position, thus preventing a breach of fiduciary duty.

In Blodgett v. Martsch, 590 P.2d 298 (UT 1978), it was stated that “the duty of the trustee under a trust deed is greater than the mere obligation to sell the pledged property, . . . it is a duty to treat the trustor fairly and in accordance with a high punctilio of honor.” The Supreme Court in Blodgett went even further and found that the breach of this confidential duty may be regarded as constructive fraud#.

The general rule is summarized in Nelson & Whitman, Real Estate Finance Law, (West Publishing Co., 3d Ed. 1994), §7.21:
. . . a trustee in a deed of trust is a fiduciary for both the mortgagor and mortgagee and must act impartially between them. As one leading decision has stated, “the trustee for sale is bound by his office to bring the estate to a sale under every possible advantage to the debtor as well as to the creditor, and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of debtor and creditor alike, apprising both of the intention of selling, that each may take the means to procure an advantageous sale.”

Mills v. Mutual Building & Loan Association, 216 N.C. 664, 669, 6 S.E.2d 549, 554 (1940).
The fiduciary duty of a trustee to obtain the best possible price for trust property that it sells has been discussed in nonjudicial and other contexts#.

_______________________________________________________________________________________

# See also McHugh v. Church, 583 P.2d 210, 214 (Alaska 1978).

However, this “fiduciary” characterization of a trustee is not accepted in all jurisdictions. The California Supreme Court has stated,
“The similarities between a trustee of an express trust and a trustee under a deed of trust end with the name. ‘Just as a panda is not a true bear, a trustee of a deed of trust is not a true trustee.’ *** [T]he trustee under a deed of trust does not have a true trustee’s interest in, and control over, the trust property. Nor is it bound by the fiduciary duties that characterize a true trustee.”

Monterey S.P. Partnership v. W.L. Bangham, Inc. 49 Cal.3d 454, 462, 261 Cal.Rptr. 587,592 (1989).

In most jurisdictions, a trustee cannot, without the express consent of the trustor, purchase at the sale that he conducts#. A court may impose additional affirmative duties (beyond the statutory requirements) upon the trustee in certain circumstances.

This could include a requirement that a trustee’s sale be continued, if necessary, to prevent a total loss of the debtor’s equity. West v. Axtell, 322 Mo. 401, 17 S.W.2d 328 (1929). RCW 61.24.040(6) authorizes a trustee to continue a trustee’s sale for a period or periods totaling 120 days for “any cause he deems advantageous.”

___________________________

# See Cox v. Helenius, supra, at p. 389; Allard v. Pacific National Bank, 99 Wn. 2d 394, 405, 663 P.2d 104 (1983), modified by 99 Wn.2d 394, 773 P.2d 145 (1989). superseded by RCW 11.100.140 as stated in Conran v. Seafirst Bank, 1998 Wn.App. Lexis 156.. See also National Life Insurance Company v. Silverman, 454 F.2d 899, 915 (D.C. Cir. 1971), in which the court stated that the same good faith is required of trustees under a deed of trust of real estate as is required of other fiduciaries.

# See Smith v. Credico Industrial Loan Company, 234 Va. 514, 362 S.E.2d 735 (1987); Whitlow v. Mountain Trust Bank, 215 Va. 149, 207 S.E.2d 837 (1974).

However, the Washington Court of Appeals has ruled that the trustee need not exercise “due diligence” in notifying interested parties of an impending sale. Morrell v. Arctic Trading Co., 21 Wn. App. 302, 584 P.2d 983 (1978). Further, the general rule is that a trustee is not obligated to disclose liens or other interests which the purchaser could or should have discovered through his or her own investigation. Ivrey v. Karr, 182 Md. 463, 34 A.2d 847, 852 (1943). The Washington courts have held that even when a trustee is aware of defects in title, the trustee only undertakes an affirmative duty of full and accurate disclosure if s/he has made any representations or answered any questions concerning the title. McPherson v. Purdue, 21 Wn. App. 450, 453, 585 P.2d 830 (1978). However, despite this general rule, there is authority behind the proposition that a trustee has a fiduciary duty to restrain the sale due to defects known to the trustee. In Cox v. Helenius, 103 Wn.2d 383,*,693 P.2d 683 (1985), in which the trustee knew that the right to foreclose was disputed and that the attorney for the trustor had failed to restrain the sale, the court held that the trustee should have either informed the attorney for the trustor that she had failed to properly restrain the sale or delayed foreclosure. As a result of the trustee’s failure to do so, the sale was held void.

Trustees are not permitted to “chill the bidding” by making statements which would discourage bidding, for example, a statement that it is unlikely that the sale will be held because the debtor intends to reinstate#. If a trustee does engage in “chilled bidding”, the sale is subject to being set aside#.

____________________________________________________________________________________

# See, Nelson & Whitman, supra, Section 7.21; Dingus, Mortgages-Redemption After Foreclosure Sale in

Missouri, 25 Mo.L.REV. 261, 284 (1960).

# Biddle v. National Old Line Ins. Co., 513 S.W.2d 135 (Tex.Civ.App.1974), error refused n.r.e.; Sullivan v. Federal Farm Mortgage Corp., 62 Ga.App.402, 8 S.E.2d 126 (1940).

# Queen City Savings v. Manhalt, 111 Wn.2d 503 (1988).

2. Strict Construction of the Deed of Trust Statute
The nonjudicial foreclosure process is intended to be inexpensive and efficient while providing an adequate opportunity for preventing wrongful foreclosures and promoting the stability of land titles#. However, statutes allowing foreclosure under a power of sale contained within the trust deed or mortgage are usually strictly construed. Id. at 509.
Recent decisions have moved away from the strict construction ruling, holding that some technical violations of statutes governing nonjudicial foreclosures will not serve as grounds for setting aside sale when the error was non-prejudicial and correctable. See Koegal, supra at 113. An example of a non-prejudicial and correctable error is noncompliance with the requirement that the trustee record the notice of sale 90-days prior to the actual sale when actual notice of the sale was given to the debtors 90-days prior to the sale and the lack of recording caused no harm. Steward, supra at 515. Further, inconsequential defects often involve minor discrepancies regarding the notice of sale. In Bailey v. Pioneer Federal Savings and Loan Association, 210 Va. 558, 172 S.E.2d 730 (1970), where the first of four published notices omitted the place of the sale, the court held that since there was “substantial compliance” with the requirements specified by the deed of trust and since the parties were not affected in a “material way,” the sale was valid#. In another case, where the notice of sale was sent by regular rather than by statutorily required certified or registered mail and the mortgagor had actual notice of the sale for more than the statutory period prior to the sale, the sale was deemed valid#. Clearly a grantor must show some prejudice.

D. POST-SALE REMEDIES

1. Statutory Presumptions
The Washington Deed of Trust Act contains statutory presumptions in connection with a trustee’s sale that are similar to those found in most other states. # RCW 61.24.040(7) provides, in part:

. . . the [trustee’s] deed shall recite the facts showing that the sale was conducted in compliance with all of the requirements of this chapter and of the deed of trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value.

_____________________________________________________________________________________

# See also Tarleton v. Griffin Federal Savings Bank, 202 Ga.App. 454, 415 S.E.2d 4 (1992); Concepts, Inc. v. First Security Realty Services, Inc., 743 P.2d 1158 (Utah 1987).

# Macon-Atlanta State Bank v. Gall, 666 S.W.2d 934 (Mo.App.1984). For a complete list of defects considered “insubstantial”, see Graham v. Oliver, 659 S.W.2d 601, 604 (Mo.App.1983).
# See also Cal. Civ. Code § 2924 (West 1981); Utah Code Ann.1953, 57-1-28; West’s Colo.Rev.Stat. Ann. §38-39-115; Or.Rev.Stat. 86.780; So.Dak.Compiled Laws 21-48-23.

Such provisions are designed to protect bona fide purchasers and to assure that the title passed through a trustee’s sale will be readily insurable. However, although the required recitals are described as “conclusive” in favor of bona fide purchasers and encumbrancers for value, there is extensive case law setting forth the basis for rebutting these presumptions. They also don’t apply to a dispute between the grantor and grantee. See, generally, Nelson & Whitman, Real Estate Finance Law, (2d ed. 1985) § 7.21 ff. Some states employ other means of stabilizing titles, such as title insurance. Yet another means of stabilizing titles is to include a provision in the deed of trust that in the event of a trustee’s sale, the recital will be conclusive proof of the facts. See, Johnson v. Johnson, 25 Wn. 2d 797 (1946); Glidden v. Municipal Authority, 111 Wn. 2d 341 (1988), modified By Glidden v. Municipal Authority, 764 P.2d 647 (1988).

2. The Bona Fide Purchaser
The law is well settled that a bona fide purchaser, in order to achieve that status, must have purchased the property “for value.” See RCW 61.24.040(7).

The general rule is set forth in Phillips v. Latham, 523 S.W.2d 19, 24 (Tex. 1975):

[The purchaser] cannot claim to be a good-faith purchaser for value because the jury found . . . that the sale price of $691.43 was grossly inadequate. These findings are not attacked for lack of evidence. Although good faith does not necessarily require payment of the full value of the property, a purchaser who pays a grossly inadequate price cannot be considered a good-faith purchaser for value.

Further, if a lis pendens has been recorded, it “will cause the purchaser to take subject to the plaintiff’s claims.” Bernhardt, California Mortgage & Deed of Trust Practice (2d Edition 1990).

A purchaser will not then constitute a bona fide purchaser able to utilize the presumptions of regularity in recitals of the trustee’s deed. See CC § 2924. The beneficiary of a deed of trust is not a bona fide purchaser. See Johnson, supra.

E. SETTING ASIDE THE TRUSTEE’S SALE

Setting aside a trustee’s sale is largely a matter for the trial court’s discretion. Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); Brown v. Busch, 152 Ca. App. 2d 200, 313 P.2d 19 (1957). After a trustee’s sale has taken place, a trustor or junior lienor may bring an action in equity to set aside the sale. See Crummer v. Whitehead, 230 Cal. App. 2d 264, 40 Cal. Rptr. 826 (1964); see also Note, “Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust In Washington,” 59 Wash.L.Rev. 323 (1984)#.

An action may be brought to set aside a trustee’s sale under circumstances where the trustee’s sale is void. Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985). In those circumstances where the defect in the trustee’s sale procedure does not render the trustee’s sale void, the court will probably apply equitable principles in deciding what relief, if any, is available to the parties. A general discussion of equitable principles in contexts other than trustee’s sale can be found in Eastlake Community Council v. Roanoake Associates, 82 Wn.2d 475, 513 P.2d 36 (1973) and Arnold v. Melani, 75 Wn.2d 143, 437 P.2d 908 (1968). Although it is preferable to raise any defenses to the obligations secured by the deed of trust or other defects in the nonjudicial foreclosure process prior to the trustee’s sale, a trustee’s sale can presumably be set aside if there was a good reason for not restraining it. Possible reasons could include those described below.

__________________________________________________________________________________

# Attempting to Set Aside Deed of Trust Foreclosure Because of Trustee’s Fiduciary Breach, 53 Missouri L. Rev. 151 (1988).

1. Breach of the Trustee’s Duty

a. Inadequate Sale Price

The general rule on using inadequate sale price to set aside a deed of trust sale is stated in Nelson & Whitman, supra, § 7.21:

All jurisdictions adhere to the recognized rule that mere inadequacy of the foreclosure sale price will not invalidate a sale, absent fraud, unfairness, or other irregularity. Stating the rule in a slightly different manner, courts sometimes say that inadequacy of the sale price is an insufficient ground unless it is so gross as to shock the conscience of the court, warranting an inference of fraud or imposition#.

In Cox v. Helenius, supra, at p. 388, the court indicated that the inadequate sale price coupled with the trustee’s actions, would have resulted in a void sale, even if not restrained.

Generally, unless the sale price is grossly inadequate, other irregularities or unfairness must exist. However, considerable authority exists to support setting aside a sale when, coupled with an inadequate sale price, there is any other reason warranting equitable relief. Nelson & Whitman, Real Estate Finance Law, supra.

b. Hostility or Indifference to Rights of Debtor.

In Dingus, supra, at 289, it is stated:

In an action to set aside a foreclosure sale under a deed of trust, evidence showing that the trustee was hostile and wholly indifferent to any right of the mortgagor warrants setting aside the sale. Lunsford v. Davis, 254 S.W. 878 (Mo. 1923).

CF. Cox v. Helenius, supra.

c. Other Trustee Misconduct

Other trustee misconduct that would give rise to grounds for setting aside a trustees sale could include “chilled bidding” where the trustee acts in a manner that discourages other parties from bidding on the property#. Actions by the trustee which lull the debtor into inaction may also give rise to grounds for avoiding the sale#. Particular note should also be made of the discussion in Cox v. Helenius, supra, at p.390 in which trustees who serve a dual role as trustee and attorney for the beneficiary are directed to transfer one role to another person where an actual conflict of interest arises.

2. Absence of Other Foreclosure Requisites

RCW 61.24.030 sets forth the requisites to non-judicial foreclosure. Failure to meet these requisites may render the trustee’s sale void. In Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985), the court concluded that a trustee’s sale was void under circumstances where the borrower had filed an action contesting the obligation and that action was pending at the time of the trustee’s sale. The action was filed after service of the notice of default but before service of the notice of foreclosure and trustee’s sale.

___________________________________________________________________________________

# Nelson & Whitman, supra, Section 7.21. Dingus, supra, at p. 274; see also Biddle v. National Old Line Insurance Co., 513 S.W.2d 135 (Tex.Civ.App. 1974).

# Dingus, supra, at pp. 272-73; Cox v. Helenius, supra, at p. 389.

The decision in Cox was based on language in the Deed of Trust Act that made it a requisite to foreclosure that “no action is pending on an obligation secured by the deed of trust.” That part of the Cox decision was legislative overruled by Chapter 193, Law of 1985, Reg. Sess., which amended RCW 61.24.030(4) to read as follows:

That no action commenced by the beneficiary of the deed of trust is now pending to seek satisfaction of an obligation secured by the deed of trust in any court by reason of the grantor’s default on the obligation secured;

As a result of the amendment, pendency of an action on the obligation brought by the grantor does not render a subsequent trustee’s sale void. Only pending actions commenced by the beneficiary to seek satisfaction of the obligation secured by the deed of trust operate as a bar to nonjudicial foreclosure. The trustee must be properly appointed and be appointed before the trustee has authority to act. When an eager trustee “jumps the gun” the actions are equally void.

F. ADDITIONAL STATUTORY REMEDIES

1. Confirmation of Sale Price.

Many states (but not Washington) require confirmation that the nonjudicial sale resulted in a fair value to the debtor. Below is listed the states that have adopted fair market value statutes#. Fair market value statutes are usually used to limit deficiency judgments to the difference between the fair market value and the debt. Failure to confirm the sale within the statutory period is usually a bar to a deficiency. For example, in Georgia the court must be petitioned for a confirmation of the sale if a deficiency judgment is sought.

2. Redemption in Nonjudicial Foreclosures.

Approximately one-half of the states allow for redemption after foreclosure, although not Washington. Some states allow redemption after a nonjudicial sale. See Minnesota Statutes Annotated § 580 et seq. Generally, the grantor can remain in possession during the redemption period, rent the property (retaining the rents) and/or sell the property (or sell the redemption rights).

G. RAISING DEFENSES IN THE UNLAWFUL DETAINER (EVICTION) ACTION

________________________________

# Arizona: Ariz. Rev. Stat. Ann. §33-814(A) (1989).
California: Cal. Civ. Code §580a (1989); Id. §726 (1989); Kirkpatrick v. Stelling, 36 Cal. App.2d 658, 98
P.2d 566, appeal dismissed, 311 U.S. 607 (1940); Risenfeld, California Legislation Curbing Deficiency
Judgments, 48 Calif. L. rev. 705 (1960). See infra, California jurisdictional summary in Part 1.
Georgia: Ga. Code Ann. §§44-14-161, -162 (1989).
Idaho: Idaho Code §§6-108, 45-1512 (1988).
Michigan: Mich. Comp. Laws Ann. §§600.3170, .3280 (1989).
Nebraska: Neb. Rev. Stat. §76-1013 (1989).
Nevada: Nev. Rev. Stat. §40.457 (1988).
New Jersey: N.J. Stat. Ann. §2A:50-3 (1989).
New York: N.Y. Real Prop. Acts Law §1371 (McKinney 1979 and Supp. 1990).
North Carolina: N.C. Gen. Stat. §45-21.36 (1988).
North Dakota: N.D. Cent. Code §32-19-06 (Supp. 1989).
Oklahoma: Okla. Stat. tit. 12, §686 (1990).
Pennsylvania: Pa. Stat. Ann. tit. 12 §§2621.1, .6 (Purdon 1967).
South Dakota: S.D. Comp. Laws Ann. §§21-47-16, -48-14 (1989).
Utah: Utah Code Ann. §57-1-32 (1989).
Washington: Wash. Rev. Code Ann. §61.12.060 (1989).
Wisconsin: Wis. Stat. §846.165 (1988).

In Washington, RCW 61.24.060 specifies that the purchaser at a trustee’s sale is entitled to possession of the property on the 20th day following the sale. If the grantor or person claiming through the grantor refuses to vacate the property, the purchaser is entitled to bring an action to recover possession of the property pursuant to the unlawful detainer statute, RCW 59.12. Ordinarily, parties in possession will not be allowed to raise some defenses in the unlawful detainer action that could have been raised prior to the trustee’s sale#. In most states defenses in an eviction action are severely limited. Despite these early cases restricting defenses in unlawful detainer, e.g. Peoples National Bank v. Ostander, 6 Wn. App. 28 (1971), a more recent case, Cox v. Helenius, 103 Wash. 2d 208 (1985), allowed defenses to be raised that the sale was void because of defects in the foreclosure process itself. In fact, Cox v. Helenius was initially a unlawful detainer action in the King County Superior Court. In Savings Bank of Puget Sound v. Mink, 49 Wn. App. 204 (1987), Division One of the Court of Appeals, held that a number of defenses raised by the appellant (Truth-in-Lending violations, infliction of emotional distress, defamation, slander, etc.) were not properly assertable in an unlawful detainer action but ruled that:

However, in Cox v. Helenius, supra, the Supreme Court recognized that there may be circumstances surrounding the foreclosure process that will void the sale and thus destroy any right to possession in the purchaser at the sale. In Cox, the Court recognized two bases for post sale relief: defects in the foreclosure process itself, i.e., failure to observe the statutory prescriptions and the existence of an actual conflict of interest on the part of the trustee…

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# People’s National Bank v. Ostrander, 6 Wn. App. 28, 491 P.2d 1058 (1970). See, however, Crummer v. Whitehead, 230 Cal. App. 2d 264 (1964) contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989); MCA, Inc., v. Universal Diversified Enterprises Corp., 27 Cal. App. 3d 170 (1972). contra declined to follow by Eardley v. Greenberg, 160 Az.518, 774 P.2d 822 (Az.App. Div. 1 1989) But in a bankruptcy proceeding, defenses may be raised after the sale if the debtor is in possession.

B. The Deed of Trust Act must be construed strictly against lenders and in favor of borrowers.

Washington law is similarly clear that the Deed of Trust Act, being non-judicial in nature and without the scrutiny by courts until the unlawful detainer stage, is strictly construed against lenders and in favor of borrowers. Queen City Savings and Loan v. Mannhalt, 111

In order to avoid the jurisdictional and other problems that arise when trying to litigate claims in the unlawful detainer action, it is recommended that a separate action be filed to set aside the trustee’s sale and that the two actions be consolidated.

H. DAMAGES FOR WRONGFUL FORECLOSURE

There is a damage claim for the tort of wrongful foreclosure. The claim may also exist as a breach of contract claim. See, Theis v. Federal Finance Co., 4 Wn. App. 146 (1971); Cox v. Helenius, supra.

III. DEFENDING JUDICIAL FORECLOSURES

A. INTRODUCTION

The same range of defenses is generally available to the borrower in both nonjudicial and judicial foreclosures. Defenses may include fraud or misrepresentation, violations of Truth-in-Lending, violations of usury statutes, violations of other consumer protection acts, or failure to comply with applicable regulations when the government is the lender, insurer, or guarantor. Other defenses, however, are unique to judicial foreclosures and must be raised affirmatively. Most rights are set forth in statutes and they must be asserted in compliance with the particular requirements of the law. The judicial foreclosure statutes are set forth below#.

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# Alabama: Ala. Code §§6-9-140 to 150; 164; 35-10-2 to 35-10-12; (1977).
Alaska: Alaska Stat. §§90.45.170 to .220 (1991).
Arizona: Ariz. Rev. Stat. Ann. §§33-721 to 33-728 (1991).
Arkansas: Ark. Code Ann. §§18-49-103 to 106 (1987).
California: Cal. Civ. proc. §§725a to 730.5 (West 1991).
Colorado: Colo. Rev. Stat. Ann. §§38-38-101 to 38-38-111 (West 1991).
Connecticut: Conn. Gen. Stat. Ann. §§49-24 to 49-31 (West 1991).
Delaware: Del. Code Ann. tit. 10 §§5061 to 5067 (1991).
D.C.: D.C. Code Ann. §45-716 (1981).
Florida: Fla. Stat. Ann. §702.01 (West 1992).
Georgia: Ga. Code Ann. §§9-13-140; 44-14-48 to 44-14-49; 44-14-184; 187; 189 (1991).
Hawaii: Haw. Rev. Stat. §§667-1 to 667-7 (1991)
Idaho: Idaho Code §§6-101 to 6-103; 45-1502 to 45-1503 (1991).
Illinois: Ill. Ann. Stat. Ch. 10, para. 15-1404; 15-1501 to 15-1512 (Smith-Hurd 1987).
Indiana: Ind. Code Ann. §32-8-11-3 (Burns 1980)
Iowa: Iowa Code Ann. §654.18 (West 1992).
Kansas: Kan. Stat. Ann. §60-2410 (1990).
Kentucky: Ky. Rev. Stat. Ann. §§381.190; 426.525 (Michie 1991).
Louisiana: La. Code Civ. Proc. Ann. art. 2631 (West 1992).
Maine: Me. Rev. Stat. Ann. tit. 14, §§6321 to 6325 (West 1991).
Maryland: Md. Real Prop. Code Ann. §7-202 (1988).
Massachusetts: Mass. Gen. Laws Ann. ch. 244, §1 (West 1992).
Michigan: Mich. Comp. Laws Ann. §§600.3101 to 600.3130 (West 1992).
Minnesota: Minn. Stat. Ann. §§581.01 to 581.12 (1992).
Mississippi: Miss. Code Ann. §§89-1-53; 89-1-55 (1972).
Missouri: Mo. Ann. Stat. §§443.190 (Vernon 1992).
Montana: Mont. Code Ann. §§71-1-222; 232; 311; 25-13-802 (1991).
Nebraska: Neb. Rev. Stat. §§25-2137 to 25-2147 (1991).
Nevada: Nev. Rev. Ann. Stat. §§40.430; 40.435 (Michie 1991).
New Hampshire: N.H. Rev. Stat. Ann. §§479:19 to 479:27 (1991).
New Jersey: N.J. Stat. Ann. §2A:50-2 (West 1991).
New Mexico: N.M. Stat. Ann. §§39-5-1 to 39-5-23; 48-7-7 (1991).

New York: N.Y. Real Prop. Acts Law §§1321; 1325 to 1355 (McKinney 1992).
North Carolina: N.C. Gen. Stat. §§45-21.16; 45-21.17; 45-38 (1991).
North Dakota: N.D. Cent. Code §32-19-01 to 32-19-40 (1992).
Ohio: Ohio Rev. Code Ann. §2323.07 (Anderson 1984).
Oklahoma: Okla. Stat. Ann. tit. 12, §686 (West 1992).
Oregon: Or. Rev. Stat. §§88.010 et seq. (1989).
Pennsylvania: Pa. Stat. Ann. tit. 21, §§274; 715; Pa. Rules Civ. Proc. Rules 1141 to 1150; 3180 to 3183;
3232; 3244; 3256; 3257.
Rhode Island: R.I. Gen. Laws §34-27-1 (1984).
South Carolina: S.C. Code Ann. §§15-7-10; 29-3-650 (Law Co-op 1990).
South Dakota: S.D. Codified Laws Ann. §§21-47-1 to 25; 21-48A-4 (1991).
Tennessee: Tenn. Code Ann. §21-1-803 (1991).
Texas: Tex. Prop. Code Ann. §§51-002; 51.004; 51.005 (West 1992).
Utah: Utah Code Ann. §§78-37-1 to 78-37-9 (1986).
Vermont: Vt. Stat. Ann. tit. 12, §4528 (1991).
Virgin Islands: V.I. Code Ann. tit. 28, §531 to 535 (1991).
Virginia: Va. Code Ann. §§55-59.4; 55-61 (Michie 1981).
Washington: Wash. Rev. Code Ann. §§61.12.040; 61.12.060 (West 1992).
West Virginia: W. Va. Code §§55-12-1 to 55-12-8 (1991).
Wisconsin: Wis. Stat. Ann. §§846.01 to 846.25 (West 1991 (Repealed).
Wyoming: Wyo. Stat. §§1-18-101 to 1-18-112 (199).

B. HOMESTEAD RIGHTS

If the plaintiff’s complaint seeks possession of the property at the sheriff’s sale and the homeowner wishes to remain on the premises during the redemption period, then the homeowner should plead the existence of homestead rights in the answer so as not to waive them. State, ex rel., O’Brien v. Superior Court, 173 Wash. 679, 24 P.2d 117 (1933); State, ex rel., White v. Douglas, 6 Wn.2d 356, 107 P.2d 593 (1940).

C. UPSET PRICE

Some states authorize the court to establish an upset price (or minimum bid amount) in a foreclosure sale. In Washington, RCW 61.12.060 authorizes the court where a deficiency is sought, in ordering a sheriff’s sale, to take judicial notice of economic conditions and, after a proper hearing, fix a minimum or upset price for which the mortgaged premises must be sold before the sale will be confirmed. If a depressed real estate market justifies seeking an upset price, then the mortgagor should request in the answer that one be set. See, McClure v. Delguzzi, 53 Wn. App. 404 (1989). Some states give this power to the courts with any sale without reference to any other valuation method. See e.g. Kan. Stat. §60-2415(b) (1988); Mich. Comp. Laws Ann. §600.3155 (1919). The court has great discretion in arriving at and setting an upset price if the statute fails to specify the method to be used in calculating the price. There is always the danger that in the absence of statutory standards, the power to set the upset price will be abused#.

D. DEFICIENCY JUDGMENTS

A deficiency judgment results when the amount for which the property is sold at the sheriff’s sale is less than the amount of the judgment entered in the foreclosure action. A deficiency judgment in connection with a foreclosure is enforceable like any other money judgment. If the mortgage or other instrument contains an express agreement for the payment of money, then the lender may seek a deficiency judgment. See RCW 61.12.070. In Thompson v. Smith, 58 Wn. App. 361 (1990), Division I, held the acceptance of a deed in lieu of foreclosure triggers the anti-deficiency provisions of the Deed of Trust Act, 61.24.100. The procedural requirements for obtaining a deficiency judgment vary, but must be strictly adhered to or the right will be lost. In general, an action must be brought within a statutorily set amount of time following the foreclosure sale. For example, California Civ. Proc. Code § 726 (Supp. 1984) (three months); N.Y. Real Prop. Acts. Law § 1371 (2) (McKinney 1979) (ninety days); and Pennsylvania Stat. Ann. tit. 12, section 2621.7 (1967) (six months). Many states also have time limits for the completion of the execution of a deficiency. Maryland Rules, Rule W75 (b)(3) (1984) (three years); and Ohio Rev. Code Ann. § 2329.08 (Anderson 1981) (two years on land with dwelling for two families or less or used as a farm dwelling). Some states have longer redemption periods when a deficiency is sought. e.g. Wisconsin (6-12 months); Washington (8-12 months).

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# See Michigan Trust Co. v. Dutmers, 265 Mich. 651, 252 N.W. 478 (1933).

E. REDEMPTION RIGHTS

Approximately one-half of the states have statutes that give a borrower the right to redeem the property after the foreclosure sale. This right has specific statutory time limits. The time period for redemption varies from thirty days to three years after the foreclosure sale. Strict compliance with the statutory requirements is mandatory.

Under Washington law, if the lender seeks a deficiency judgment or if the mortgage does not contain a clause that the property is not for agricultural purposes, then the redemption period is one year from the date of the sheriff’s sale. See RCW 6.23.020.

If the lender does not seek a deficiency judgment and the mortgage contains a clause that the property is not being used for agricultural purposes, than the redemption period is eight months. Id.

There is no statutory redemption period if there is a structure on the land and the court finds that the property has been abandoned for six months prior to the decree of foreclosure. See RCW 61.12.093. This section is not applicable to property that is used primarily for agricultural purposes. RCW 61.12.095.

The purchaser at the sheriff’s sale, or the purchaser’s assignee, must send notice to the judgment debtor every two months that the redemption period is expiring. Failure to give any of the notices in the manner and containing the information required by statute will operate to extend the redemption period. RCW 6.23.080.

Any party seeking to redeem must give the sheriff at least five days written notice of the intention to apply to the sheriff for that purpose. RCW 6.23.080(1). The amount necessary to redeem is the amount of the bid at the sheriff’s sale, interest thereon at the rate provided in the judgment to the time of redemption, any assessment or taxes which the purchaser has paid after circumstances, other sums that were paid on prior liens or obligations. RCW 6.23.020.

Redemption rights are freely alienable and a property owner can sell the homestead during the redemption period free of judgment liens. Great Northwest Federal Savings and Loan Association v. T.B. and R.F. Jones, Inc., 23 Wn. App. 55, 596 P.2d 1059 (1979). This is an important right and is often overlooked. For example, in VA loans the sale price is very low because the VA deducts its anticipated costs of holding and resale. Therefore, the property can be redeemed for that amount. There, lenders routinely advise debtors to move out at the beginning of the period, which they do not legally have to do.

The debtor can sometimes rent the property and the rents retained during the redemption period.

F. POSSESSION AFTER SALE

If the homeowner exercises his redemption rights and there is a purchaser in possession, then the homeowner can apply for a writ of assistance to secure possession of the property anytime before the expiration of the redemption period. If the homeowner has no right to claim a homestead or is not occupying the property as a homestead during redemption period, then the lender can apply for a writ of assistance at the time of the foreclosure decree to obtain possession of the property. A writ of assistance is similar to a writ of restitution and is executed by the sheriff. The purchaser at the sheriff’s sale normally has no right to possession until after receipt of a sheriff’s deed#.

G. POST FORECLOSURE RELIEF

A foreclosure can be vacated under rules allowing vacating judgments, e.g. F.R.Civ.P 60(b); See also Godsden & Farba, Under What Circumstances Can a Foreclosure Sale be Set Aside Under New York Law, New York State Bar Journal (May 1993).

IV. MISCELLANEOUS ISSUES

A. BANKRUPTCY

Bankruptcy has a significant impact on real estate foreclosures and is beyond the scope of this outline. Under section 362 (a) of the Bankruptcy Code, filing any of the three types of bankruptcy stays all foreclosure proceedings. See 11 U.S.C.A. § 362 (a)(4); Murphy, The Automatic Stay in Bankruptcy, 34 Clev.St.L.Rev. 597 (1986). A stay has been held to apply to a possessory interest after foreclosure to allow a challenge to the validity of the foreclosure in an adversary action in bankruptcy court. In re Campos, No. 93-04719 (W.D. WN-B.Ct, Order of July 9, 1993). The stay applies to both judicial and nonjudicial foreclosures and it also applies whether or not the foreclosure was begun before the bankruptcy. See 11 U.S.C.A. § 362 (a). The only notable exception to the automatic stay is for foreclosures brought by the Secretary of HUD on federally insured mortgages for real estate involving five or more units. See 11 U.S.C.A. § 362 (b)(8).

A trustee in a bankruptcy may also undo a foreclosure as a fraudulent transfer if a creditor gets a windfall. See II U.S.C. §547 and §548, within 90 days or within one year if an “insider” forecloses#.

A portion of the equity under state or federal law may be protected from creditors, although not from secured creditors.

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# Norlin v. Montgomery, 59 Wn.2d 268, 357 P.2d 621 (1961). The mortgagee’s right to possession of the property is not lost through default or abandonment. overruled on other grounds. Howard v. Edgren, 62 Wn.2d 884, 385 P.2d 41 (1963).

B. WORKOUTS (DEED IN LIEU)

A deed is sometimes given by a mortgagor in lieu of foreclosure and in satisfaction of a mortgage debt. Such a workout “is subject to close scrutiny in an effort to determine whether it was voluntarily entered into on the part of the mortgagor under conditions free of undue influence, oppression, unfairness or unconscientious advantage. Further the burden of proving the fairness rests with the mortgagee.” Robar v. Ellingson, 301 N.W.2d 653, 657-658 (N.D.1981) (insufficient threshold evidence of oppression or unfairness to trigger mortgagee’s burden of proof). Courts also tend to find the deed in lieu of foreclosure to be another mortgage transaction in the form of an absolute deed. Peugh v. Davis, 96 U.S. (6 Otto) 332, 24 L.Ed. 775 (1877). See also, Noelker v. Wehmeyer, 392 S.W.2d 409 (Mo.App.1965). When a mortgagee takes a deed in lieu there is the possibility that the conveyance will be avoided under bankruptcy laws. It should be noted that if other liens have been created against a property after the time of the original mortgage, the deed in lieu will not cut off those liens. See Note, 31 Mo.L.Rev. 312, 314 (1966). A deed in lieu should contain a comprehensive agreement regarding any deficiency claims, etc.

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# See Durrett v. Washington National Ins., 621 F.2d 201 (5th Cir. 1980); cf. In re Madrid, 725 F.2d 1197 (9th Cir. 1984). Compare state fraudulent conveyances statutes, e.g, RCW 19.40.031.

C. LENDER LIABILITY

It is possible to use theories of lender liability to assist in successfully negotiating a workout, or an avoidance of foreclosure. This principally occurs in commercial foreclosures but there are some strategies that apply to the residential setting. This may involve persuading the lender that failing to reach a workout agreement may result in a claim against the lender, absolving the borrower from liability on the loan and/or granting an affirmative judgment against the lender. Some of the useful theories of lender liability are breach of agreement to lend, breach of loan agreement, failure to renew term note/wrongful termination, promissory estoppel, lender interference, and negligent loan management. Some of the common law defenses for a borrower are fraud, duress, usury and negligence. Further, because banks are so closely regulated, a borrower should also explore statutory violations. For a detailed treatment of workouts, see Dunaway, supra, (Vol. 1, Chapter 4B)#.

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# See also, Penthouse International v. Dominion Fed. S&L, 665 F. Supp. 301 (S.D. N.Y. 1987, rev. 855 F.2d 963 (2nd Cir. 1988); Joques v. First National, 515 A.2d 756 (Md. 1976); KMC v. Irving Trust, 757 F.2d 752 (6th Cir. 1985); Douglas-Hamilton, Creditor Libilities Resulting From Improper Interference with Financially Troubled Debtor, 31 Bus. Law J. 343 (1975).

D. MOBILE HOME FORECLOSURES

Generally, mobile homes are repossessed under Article 9-503 of the Uniform Commercial Code, and are beyond the scope of this outline. Many states limit deficiencies in purchase money security agreements and/or allow reinstatement. There are many abuses in the sales of mobile homes and the various consumer protection laws (and usury laws) provide a fertile source of potential defenses. See generally, Unfair and Deceptive Practices, National Consumer Law Center (2nd ed.), paragraph 5.4.8.

E. TAX CONSEQUENCES OF FORECLOSURE

Although beyond the scope of this outline, there are tax consequences when property is foreclosed, particularly in commercial transactions.

First, a foreclosure or deed in lieu of foreclosure is treated as a sale or exchange. Treas. Rep. 1-001-2; Rev. Ruling 73-36, 1973-1 CB 372. The amount realized (gained) is the greater of the sales proceeds or the debt satisfied. Parker v. Delaney, 186 F.2d 455 (1st Cir. 1950). When debt is cancelled (such as by an anti-deficiency statute), a gain may be generated. IRS Code §61(a).

Second, when home equity debt plus purchase debts exceeds the value of the property, a taxable gain can be generated. Finally, if the debtor is “insolvent” when the foreclosure occurs, §108(a)(1)(A) of the IRS Code excludes income (gain) to the extent the debtor is insolvent. This is complicated and a tax expert should be consulted to analyze any potential tax bite upon foreclosure. See generally, Dunaway, supra, for a detailed analysis of the tax consequences of foreclosure.

V. THE GOVERNMENT AS INSURER, GUARANTOR OR LENDER

A. INTRODUCTION

There are a variety of federal home ownership programs that may provide special protections for homeowners who are faced with the prospect of foreclosure. These protections generally apply regardless of whether the security divide used is a mortgage or deed of trust. The programs range from home loans insured by the Department of Housing and Urban Development (HUD) or guaranteed by the Veteran’s Administration (VA) to programs such as the Farmer’s Home Administration (FmHA) home ownership program where the government acts as a direct lender. The procedures which must be followed by loan servicers and applicable governmental agencies are described below. Also, Fannie Mae published in 1997 a Foreclosure Manual for loan services, which outlines various workouts and other loss mitigation procedures.

When the government controls the loan (or the lender) its actions are subject to the protection of the due process provision of the Fifth Amendment to the U.S. Constitution#. This calls into question the use of nonjudicial foreclosure as there is no opportunity to be heard and notice is usually deficient or, at best, minimal.

B. HUD WORKOUT OPTIONS

1. Applicability

Homeowners who have a HUD insured mortgage or deed of trust may be eligible for relief through the HUD foreclosure prevention program. HUD regulations also require that lenders meet certain servicing responsibilities before proceeding with foreclosure. Regulations for loss mitigation are found at 24 C.F.R. Sec. 203.605.

2. Procedure when the Homeowner is in Default

a. Delinquency Required for Foreclosure.

The servicer shall not turn the action over for foreclosure until at least three full monthly payments are unpaid after application of any partial payments. 24 C.F.R. Sec. 203. The servicer is required to send a HUD brochure on avoiding foreclosure to the borrower informing them of their right to seek various alternatives to foreclosure.

The servicer must allow reinstatement even after foreclosure has been started if the homeowner tenders all amounts to bring the account current, including costs and attorney fees. 24 C.F.R. Sec. 203.

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# See Vail v. Brown, 946 F.2d 589 (8th Cir. 1991); Johnson v. U.S. Dept. of Agriculture, 734 F.2d 774 (11th Cir. 1984); United States v. Murdoch, 627 F. Supp. 272 (N.D. Ind. 1985); Boley v. Brown, 10 F.3d 218 (4th Cir. 1993).

b. Forbearance Relief.

The homeowner may be eligible for special forbearance relief if it is found that the default was due to circumstances beyond the homeowners’ control. 24 C.F.R. Sec. 203. The homeowner and the lender are authorized to enter into a forbearance agreement providing for:
i. Increase, reduction, or suspension of regular payments for a specified period;

ii. Resumption of regular payments after expiration of the forbearance period;

iii. Arrangements for payment of the delinquent amount before the maturity date of the mortgage or at a subsequent date.

Suspension or reduction or payments shall not exceed 18 months under these special forbearance relief provisions.

c. Recasting of Mortgage.

HUD has the authority to approve a recasting agreement to extend the term of the mortgage and reduce the monthly payments. 24 C.F.R. Sec. 203.

HUD’s actions may be declared unlawful and set aside if the court finds it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See Federal National Mortgage Association v. Rathgens, 595 F. Supp. 552 (S.D. Ohio 1984); Butler v. Secretary of Housing and Urban Development, 595 F. Supp. 1041 (E.D. Pa. 1984). See, generally, Ferrell v. Pierce, 560 F. Supp. 1344 (N.D. Ill. 1983).

In Brown v. Kemp, 714 F. Supp. 445 (W.D. Wash. 1989) the court found HUD’s decision for an assignment program application to be informal agency action and thus reviewable under the “arbitrary” and “capricious” standard.
Failure to follow servicing requirements or comply with the HUD assignment regulations or handbook provisions may also constitute an equitable defense to foreclosure#.

C. THE VA HOME LOAN PROGRAM

1. Applicability

Homeowners who have a VA guaranteed mortgage or deed of trust may be eligible for relief through a VA recommended forbearance program or “refunding” of the loan. Regulations promulgated at 38 C.F.R. Sec. 36.4300, et seq., and VA servicing handbooks establish a policy of forbearance when a loan is in default. The VA is reluctant to enforce these regulations against lenders.

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# See, Bankers Life Company v. Denton, 120 Ill. App. 3d 676, 458 N.E.2d 203 (1983); Brown v. Lynn, 385 F. Supp. 986 (N.D. Ill. 1974); GNMA v. Screen, 379 N.Y.S.2d 327 (1976); Cross v. FNMA, 359 So.2d 464 (1978); FNMA v. Ricks, 372 N.Y.S.2d 485 (1975); contra, Robert v. Cameron Brown Co., 556 F.2d 356 (5th Cir. 1977); Hernandez v. Prudential Mortgage Corporation, 553 F.2d 241 (1st Cir. 1977).

2. Forbearance Relief

Lenders are officially encouraged to grant forbearance relief for mortgagors who default on their loans due to circumstances beyond their control. Lender’s Handbook, VA Pamphlet No. 26-7 (Revised) and VA Manual 26-3. These rights should be pursued with the lender immediately.

3. Refunding Loans

The Veteran’s Administration is authorized to “refund” loans when borrowers meet certain criteria. Refunding the loan is when the VA pays the lender in full and takes an assignment of the loan and security in cases where the loan is in default. The VA then owns the loan and the veteran makes payments to the VA directly. Although 38 C.F.R. Sec. 36.4318 authorize refunding, the regulations are much more vague than those promulgated in connection with the HUD assignment program.

4. Judicial Review

The VA decision to deny assignment of a VA loan is committed to agency discretion within the meaning of the federal Administrative Procedures Act, 5 U.S.C. Sec. 701(a)(2), and is not reviewable. Rank v. Nimmo, 677 F.2d 692 (9th Cir. 1982).

The courts have ruled that a borrower has no express or implied right of action in federal court to enforce duties, which VA or lenders might have under VA publications with respect to forbearance assistance. See, Rank v. Nimmo, supra; Gatter v. Nimmo, 672 P.2d 343 (3rd Cir. 1982); Simpson v. Clelend, 640 F.2d 1354 (D.C. Cir. 1981). But, see, Union National Bank v. Cobbs, 567 A.2d 719 (1989) (failure to follow VA Handbook an equitable defense).

Failure to follow VA publications, however, may be an equitable defense to foreclosure under state law. See, Simpson v. Cleland, supra.

5. Waiver of Debt/Release of Liability

Federal statutes, VA regulations and guidelines require the VA to waive a deficiency (or indemnity) debt, after a foreclosure, when equity and good conscience require it. 38 C.F.R. §1.965(a)(3). The VA is reluctant to follow its own regulations and must be pressed. The Court of Veterans Appeals (CVA) reverses over 50% of denial of waivers – an astonishing measure of the VA’s failure to follow clear federal law! See The Veterans Advocate, Vol. 5, No. 10, P. 93 (June 1994). The VA urged its regional offices to avoid CVA rulings until forced to retract this directive. See The Veterans Advocate, supra. The VA also ignores the six-year statute of limitations when demanding payment. 28 U.S.C. 2415.

Secondly, the VA can determine that the claimed debt is invalid, such as when the veteran is eligible for a retroactive release of liability. This occurs when the VA would have released the veterans when the property was sold to a qualifying purchaser who assumes the debt. 38 U.S.C. 3713(b); Travelstead v. Derwinski, 978 F.2d 1244 (Fed. Cir. 1992).

The VA has the burden to determine whether the veteran should be released.

6. Deficiency Judgments and VA Loans

It is the policy of VA to order an appraisal prior to a judicial or nonjudicial foreclosure sale and to instruct the lender to bid the amount of the appraisal at the sale. This “appraisal” is always below fair market value and includes the VA’s anticipated costs of holding and liquidating the property. 38 U.S.C. 3732(c); 38 C.F.R. §36.4320. Ordinarily, on pre-1989 laws, VA will not waive its right to seek a deficiency judgment in a judicial foreclosure and will reserve its right to seek a deficiency against a borrower, even in the case of a nonjudicial foreclosure of a deed of trust, notwithstanding the anti-deficiency language of RCW 61.24.100. On loans made after 1989 changes in the VA program, deficiencies are not sought.

Although, United States v. Shimer, 367 U.S. 374 (1960) appears to authorize this VA deficiency policy, the Washington non-judicial deed of trust foreclosure procedure which retains judicial foreclosure and preservation of the right to seek a deficiency judgment as an option, seems to make United States v. Shimer, distinguishable.

In United States v. Vallejo, 660 F. Supp. 535 (1987), the court held that the VA must follow Washington foreclosure law, including the anti-deficiency provisions of the Deed of Trust Act as the “federal common law”. This ruling was subsequently followed in a class action, Whitehead v. Derwinski, 904 F.2d 1362 (9th Cir. 1990), wherein the VA has been permanently enjoined from collecting $63 million in claims and ordered to repay millions in illegally collected deficiencies. This issue of the application of various state laws as to federally insured loans is not clear, as the Ninth Circuit overruled Whitehead in Carter v. Derwinski, 987 F.2d 611 (9th Cir. – en banc – 1993). Subsequent decisions still create doubt as to whether United States v. Shimer, supra, is still good law#.

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# See, United States v. Yazell, 382 U.S. 341 (1966); United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Ellis. 714 F.2d 953 (9th Cir. 1983); United States v. Haddon Haciendas Co., 541 F.2d 777 (9th Cir. 1976).

At the very least, if the lender is instructed by the VA to preserve the right to seek a deficiency against the borrower, then the lender should be required to foreclose the deed of trust judicially as a mortgage.

D. RURAL HOUSING SECTION 502 LOANS

1. Applicability

The Rural Housing Service (RHS) formerly, the Farmer’s Home Administration, is authorized to grant interest credit and provide moratorium relief for homeowners who fall behind on their loan payments due to circumstances beyond their control. Regulations for moratorium relief and interest credit are found at 7 C.F.R. Sec. 3550 et seq and must be complied with prior to foreclosure. United States v. Rodriguez, 453 F. Supp. 21 (E.D. Wn. 1978). See, 42 U.S.C. §1472. All servicing of RHS loans is handled at the Centralized Servicing Center in St. Louis, MO (phone: 1-800-793-8861).

2. Interest Credit

If a homeowner falls behind on his RHS loan because of circumstances beyond his or her control, then RHS has the authority to accept principal only and waive the interest payments. Although RHS is supposed to use this remedy before considering moratorium relief, it rarely does.

3. Moratorium Relief

If a homeowner falls behind in loan payments because of circumstances beyond his or her control, RHS may suspend payments or reduce payments for six months. Moratorium relief may be extended for additional six-month segments up to a total of three years#.

Once a homeowner has been granted moratorium relief, RHS cannot grant it again for five years. If a homeowner cannot resume payments in three years from when moratorium relief began, then it will begin foreclosure proceedings.

After moratorium relief has been extended, the homeowner can make additional partial payments to catch up the delinquent amount or, the loan can be reamortized. RHS will restructure the loan, 7 U.S.C. 2001.

4. Waiver of Redemption and Homestead Rights

Form mortgages used by RHS purported to waive the homeowner’s redemption rights and homestead rights in the event of foreclosure. It is questionable whether such a waiver is enforceable#.

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# See generally, Note, Agricultural Law: FmHA Farm Foreclosures, An Analysis of Deferral Relief, 23 Washburn L.J. 287 (Winter 1984); Newborne, Defenses to a FmHA Foreclosure, 15 NYU Review of Law and Social Change, 313 (1987).

5. Homestead Protection
See, 7 U.S.C. 2000.
6. Lease/Buy-Back
See, 7 U.S.C. 1985 (e).

VI. RESOURCES

The following treatises are excellent sources of basic information about all aspects of the foreclosure process. Dunaway, The Law of Distressed Property (4 volumes – Clark Boardman Co. 1994 and suppls.; Nelson & Whitman, Real Estate Finance Law (West 3rd Ed. 1994); Bernhardt, California Mortgages and Deed of Trust Practice, (3rd ed. 2000 University of Calif.), Repossessions and Foreclosures (4th ed. 2000) National Consumer Law Center. See also, Fuchs, Defending Non-Judicial Residential Foreclosures, Texas Bar J (November 1984).

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# See, United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979); United States v. Haddon Haciendas, 541 F.2d 777 (9th Cir. 1976); United States v. MacKenzie, 510 F.2d 39 (9th Cir. 1975); United States v. Stadium Apts., Inc., 425 F.2d 358 (9th Cir.), (1970), cert. den. 400 U.S. 926, 91 S. Ct. 187 (1970); Phillips v. Blaser, 13 Wn.2d 439, 125 P.2d 291 (1942).

How Homeowners In Judicial States Can Save Their Homes

10 Saturday May 2014

Posted by BNG in Federal Court, Judicial States, Litigation Strategies, Pro Se Litigation, State Court, Your Legal Rights

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This Post details what home owners in Judicial States Needs to Know in Order to Effectively Defend their Homes from Foreclosure.

JUDCIAL STATE LIST: CONNECTICUT (CHECK YOUR NOTE AND MORTGAGE REQUIRES 2 WITNESSES ASIDE FROM NOTARY/LAWYER) DELWARE-FLORIDA- ILLINOIS – INDIANA-KANSAS-KENTUCKY-LOUISIANA-MAINE-MARYLAND-MASSACHUSETTS-NEBRASKA-NEW JERSEY- NEW MEXICO-NEW YORK-NORTH DAKOTA-OHIO-PENNSYLVANIA-SOUTH CAROLINA-VERMONT

#1 HOMEOWNER SERVED WITH COMPLAINT BY MAIL , CERTIFIED AND THEN SHERIFF OR PROCESS SERVER. IF A RENTAL PROPERTY TENANT WILL RECEIVE NOTICE BEFORE HOMEOWNER.

COMPLAINT WILL STATE WHO PLAINTIFF IS WHAT THE DEBT IS AND WHY THE DEFAULT SHOULD BE ALLOW THE LENDER TO FORECLOSE AND TAKE THE PROPERTY. ALSO NOTICE WILL BE POSTED IN LOCAL PAPER (REQUIRED) USUALLY IT’S A TWO COUNT COMPLAINT CLAIMING THEY HAVE THE RIGHT TO FORECLOSE AND ARE THE OWNER OF THE MORTGAGE AND NOTE AND OR THE NOTE IS LOST AND OR HAS BEEN DESTROYED.

STEP ONE: MAKE SURE TO CHECK AND SEE IF THE COMPLAINT IS VERIFIED OR NOT. (MEANING THE COMPLAINT CONTAINS A STATEMENT UNDER PENALTY OF PERJURY THAT THE FACTS ARE TRUE AND CORRECT. IF IT DOES NOT THEN ITS NON VERIFIED. FEBRUARY OF 2013 FLORIDA SUPREME COURT RULES THAT ALL FORECLOSURE COMPLAINTS MUST BE VERIFIED. EASY DISMISSAL IF ITS NOT.. (VIDEO COMING SOON TO SHOW EXAMPLE OF ALLEGED VERIFIED COMPLAINT AND UNVERIFIED ORDER TUTORIAL EXAMPLE. )

STEP TWO:

CHECK YOUR MORTGAGE DOCS FOR MERS. (VIDEO TUTORIAL COMING SOON) LOOK FOR MIN# USUALLY ON FIRST PAGE TOP OR BOTTOM OF MORTGAGE.

IF IN FACT IT’S A MERS MORTAGE GO TO THEIR SITE AND SEE IF WHO YOU HAVE BEEN PAYING MATCHES THE PLAINTIFF SUING YOU. SEND MERS MILESTONES DOCUMENT IN DOC FILES TO MERS. SOMETIMES NO MIN# WILL BE SHOWN OR MENTION OF MERS SO GO TO MERS SITE AND RUN PROPERTY ADDRESS ALSO RUN NAME AND SOCIAL RUN EACH WAY IT GIVES YOU AS OPTIONS.. YOU WILL BE SURPRISED OFTEN YOU WILL FIND YOUR LOAN THERE EVEN WHEN NOT SHOWING AS MERS ON LOAN DOCS. http://WWW.MERs-servicerid.org

Most of the time Mers will NOT answer this will only help you moving forward.

Remember you are your own Private Investigator so take notes and leave no rock unturned! If No response from Mers send a second request! This will build your case! Keep in mind whether or not you have been served start this process of building your case now! Do NOT wait til you are served.

IMPORTANT! While you are doing these steps you should be challengeing your Lender/Servicer through the credit bureaus as well as keepsing track of all phone calls, log date time etc.. and keep track of all paperwork! Including monthly statements and offers from lender/servicer.

Step Three

By now you should have completed the above steps ( do not skip anything)

As this will help you to build your offense. Credit bureaus is KEY remember FDCPA rules can help you to win against your lender.

QWR is an important tool in your offense use it and use It wisely!

Under the “Real Estate Settlement Procedures Act” Section 6, it specifies safeguards for consumers of loan servicers. Section 6 describes the QWR. It establishes a legally mandated communication protocol between you and your lender. The Loan servicer cannot ignore your request. If it is written and you have proof that you submitted it to them, the law requires that the loan servicer responds to these inquiries within 20 days and tell you that they received it, if that is all they can tell you. Within 60 ays they need to give a full explanation and answer all questions. If they fail to respond document it!!

You need to use QWR for formal requests of information that cannot be made by phone with customer service reps. Examples as follows:

Learn who actually owns your loan: More than likely the company your are sending your mortgage payments to is just a servicer.
Don’t forget to do MERS milestones request!
Ask for a Copy of your promissory NOTE and mortgage along with all transfers. Aka assignments.
Ask for your payment history
Request a detailed explanation of fees and special charges. You want an itemization and justification of all the fees. Most time lenders will back down as they know the charges are bogus.
Most loans have TILA and RESPA violations
Request special handling of reports – ask for a report on who they are reporting regarding missed payment and argue they should NOT be reporting.
If you get back a lame answer form the loan Servicer on your QWR, Immediately follow it “The answer your provided was incomplete and inconclusive etc.. “ This carries legal consequences to the servicer that could pay you very well!
Remember the Mortgage Servicer MUST acknowledge receipt of the QWR within 20 days and respond to complaint within 60 days. They cannot igonore this written request! Non-compliance with the Act leave the lender open to private law suits for 3 years after its inability to respond to QWR.
Section 20 of Mortgage.. read it learn it!! “SALE OF NOTE;CHANGE OF LOAN SERVICER; NOTICE OF GRIEVANCE” this clause specifally states “The NOTE or partial interest of the NOTE (together with this Security Instrument) can be sold one or more times without PRIOR notice” Meaning the lender by law must have notified you and any successor servicers orlender must have must also notify you whenever the loan has been sold or transferred! Without prior NOTICE is not to be interpreted as NO NOTICE. (Section 20 Tutorial example video coming)

This means the lender MUST notice you with a letter with new owners name and information. You must also receive a hello letter from the new servicer. Failure to do this is failure of a Condition Precedent, meaning a contractual obligation the lender or servicer must accomplish prior to foreclosing. It’s a great defense and I will give you more details later!

The Strategy is to Hit them from all sides NOT just one.. dispute with credit bureaus, MERS (if applicable) and the servicer. You have to think like ninja and leave no way out for the lender.. hit them quick fast and hard!

STEP FOUR:

YOU HAVE BEEN SERVED

IF YOU DO NOTHING YOUR HOME CAN GO TO SALE IN AS LITTLE AS 20 DAYS AFTER YOU ARE SERVED. USUALLY 30 DAYS LATER
IF YOU FOLLOW THE INSTRUCTIONS BEING GIVEN , THE BANK MAY BE UNABLE TO SET THE SALE FOR A VERY LONG TIME
MORTGAGE COMPANY MAY NEVER BE ABLE TO SET A FORECLOSURE SALE, BECAUSE THE REALITY IS FORECLOSURE CASES ARE VERY DIFFICULT EVEN FOR LENDERS TO WIN IF YOU TAKE THE PROPER STEPS AND OFTEN THE COURTS WILL FORCE TH LENDER TO MODIFY YOUR LOAN.
USING THIS SYSTEM THE LENDERS WILL HAVE A VERY DIFFICULT TIME WINNING THEIR CASE IF THEY CAN AT ALL.
BY FILING A COUNTERSUIT, THE LENDER CANNOT PROCEED WITH FORECLOSURE UNTIL YOUR SUIT IS SETTLED.
KEEP AN EYE ON ACTION AGAINST YOUR PROPERTY AT THE COUNTY LEVEL MOST OFTEN YOU CAN VEIW EVERYTHING ONLINE.. REMEMBER THE BANKS ARE SLIPPERTY AND THEY WILL FABRICATE SO KEEP AN EYE ON THEIR FILINGS AND MAKE SURE YOU ARE RECEIVING NOTICE AND SERVICE. IF NOT YOU BETTER BE TAKING ACTION.
OFTEN HOMEONWERS ARE NEVER PROPERTY SERVICED AND THEN THE CLERK DEFAULTS THE HOMEONWER ASSUMING PROPER SERVICE AND NOTIFICATION HAS BEEN GIVEN
IF YOU HAVE BEEN SERVED MAKE SURE ON THE 20^TH DAY YOU FILE MOTION FOR ENLARGMENT OF TIME, MOTION TO DISMISS THE COMPLAINT (MEAN WHILE GATHER YOUR INFO FROM MERS IF APPLICABLE CREDIT BUREAUS AND SERVICER/LEDER. ALONG WITH MOTION YOU MUST FILE A NOTICE OF DISPUTE
MOST FORECLOSURES THE PLANTIFF SUING IS NOT THE ENTITY YOU ARE PAYING. NOW START SETTING THEM UP FOR OTHER VIOLATIONS AND BUILDING A STRONG FOUNDATION AND OFFENSIVE STRATEGY.
MOST INFO YOU WILL GATHER WILL CONFLICT AND THAT WHAT YOU WANT! AGAIN KEEP GREAT RECORDS.. THIS IS KEY
MOST COURTS ARE SO INUNDATED THAT JUST FILING A MOTION CAN PROLONG YOUR CASE 6 MONTHS OR MORE DEPENDING ON YOUR COURT. USE THIS TIME WISELY TO BUILD YOUR CASE AND GATHER YOUR INFORMATION.
YOU WANT TO DELAY ANSWERING THE COMPLAINT FOR AS LONG AS YOU CAN. WHEN YOU FINALLY ANSWER THE COMPLAINT YOU WANT TO HIT THEM WITH A COUNTER SUIT THE WILL STOP THEM DEAD IN THEIR TRACKS.

ROCKET DOCKET – FLORIDA SPECIFIC

Foreclosure Rocket Dockets are Unconstitutional. Most of the arguments are made within the transcript below, but THEE MOST important requirement is that the elected judges, who are theoretically accountable to the electorate, be the ones making the hard decisions to foreclose. Accountability is an important element missing in the current regime.

We must assert our rights or they will be forever waived. If we do NOT object in court to lack of due process , jurisdiction, and the right to be heard in a meaningful way, the de facto court system will do whatever it pleases!

EVERY JUDGES FIRST DUTY BEFORE ASSUMING OFFICE IS TO SWEAR AN OATH TO UPHOLD AND PROTECT THE CONSTITUTION AND THEIR STATE CONSTITUION.

TWO THINGS:

1. Get a certified copy from the Secretary of State to match the oath taken with the prescribed Civil Procedures for the state in question. If it does not match, and the prescribed oath clearly states WHICH oat a judge to be must take, then the requirement has NOT been met and the judge is acting in a purely de facto capacity the MUST be challenged BEFORE proceeding in court.
2. Submit the certified copy of the oath of office as evidence into the record, showing the judge that his or her sworn obligation, and again demand due process rights.

File your motion and get a hearing! As far as can be seen these retired judges being brought in to do foreclosures are NOT judges anymore! The key word retired means they are NO longer judges! If they refuse to remove the case you can personally sue the judges, many are in the process of doing this already!

What Homeowners Needs to Know About Summary Judgment Motions

06 Tuesday May 2014

Posted by BNG in Appeal, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pleadings, Pro Se Litigation, Your Legal Rights

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Many times pretender lenders rush to the court towards the beginning of a litigation to furnish worthless pieces of papers with a dubious affidavit in hopes of convincing the court that they have everything necessary to lay claim on a Homeowner’s property.

If you find yourself in a lawsuit from your lender, you could be served with a motion for summary judgment, which is a request to end a case without a trial. A motion for summary judgment filed by an opposing party claims that you cannot prevail in the case because there is no legal dispute or your claim is without merit or a defense. Failure to respond to a motion for summary judgment can result in your case being dismissed or a judgment being rendered against you.

What Does a Motion for Summary Judgment do?

A motion for summary judgment asks the court to dispose of all or some of the issues related to your case. A motion that disposes of all issues is called a final summary judgment. A motion that only disposes of some issues is called a motion for partial summary judgment. A motion for partial summary judgment can eliminate, or narrow, the issues that are not in dispute. The case continues only on the remaining disputed issues.

What Documents are Required to File a Motion for Summary Judgment?

Generally, a motion for summary judgment should include supporting documents from the case such as declarations, affidavits, depositions, admissions, answers to interrogatories, along with a statement of facts in support of the motion. Filing a motion also requires a supporting memorandum of points and authorities, which are the legal support for the motion such as cases or statutes. The other side must receive a copy of the motion and notice of the day the hearing is to be held on the motion. The exact format and timing of summary judgment motions are determined by your state’s rules of civil procedure.

Filing an Opposition to a Motion for Summary Judgment

If a motion for summary judgment is filed against you, you must file an opposition to the motion for summary judgment showing that there are issues of fact in dispute. A response must be in writing and include the same supporting documents as a motion for summary judgment. The opposition to the motion for summary judgment should also include a statement of facts showing the dispute and supporting documents.

Your response should include a supporting memorandum of points and authorities. Prior to filing your response, consult Pleadings and Practice for the appropriate format and Points and Authorities for case law supporting your position. When you file your motion or opposition to the motion for summary judgment with the court, you will need to include a proof of service verifying the date your documents were mailed to the opposing party or their attorney.

Other Requirements for Filing a Motion for Summary Judgment or Response

Whether you are filing a motion or response, you will need to look in Pleading and Practice at the law library for the appropriate format for your motion or response. You will also need to consult Points and Authorities to find case law supporting your position. Because of the overlap in local rules and state law, it would be advisable to have an attorney prepare and file the motion for summary judgment or the opposition to the motion for summary judgment. They can make sure that your evidence and arguments are properly presented to the court.

What Happens after the Court Receives the Motion for Summary Judgment and Response?

After the court receives the original motion for summary judgment and your response, the court will review the motions and allow both sides to argue their positions. Most rules of civil procedure will not allow live testimony at a summary judgment hearing. If there are any issues in dispute, the motion for summary judgment will be denied. Failure to comply with any rules of procedures can also result in a denial of a motion or a response. If a motion for final summary judgment is granted, the decision can be appealed. If a motion for partial summary judgment is granted, you will have to wait until the lawsuit is finished to appeal the court’s decision.

Getting Further Help With Summary Judgment

If a motion for final summary judgment is granted, the decision can be appealed. If a motion for partial summary judgment is granted, you will have to wait until the lawsuit is finished to appeal the court’s decision. In either case, Homeowners should learn what procedures and timelines apply in your motion for summary judgment case to perfect your right to appeal an adverse decision.

What HomeOwners Needs To Know for (Pro Se) Self Representation

06 Tuesday May 2014

Posted by BNG in Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pro Se Litigation, State Court, Your Legal Rights

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Many struggling homeowners whose mortgage is under the water, also find themselves in double dilemma due to high cost of legal representation.

The Banks that caused the mortgage breakdown problems also have all the money in the world to higher costly Attorneys to help them intimidate homeowners in order to cover their fraudulent activities and steal your homes right under your nose. However, it takes a willing and courageous mind to stand firm and fight the lenders to the finish. Why do you need to fight this good fight? because your survival and your future especially (the equity in your home) is at stake. Don’t let criminals steal them away from you.

The court system can be confusing and it is a good idea to get a lawyer if you can afford one. The law, the proofs necessary to present your case, and the procedural rules governing cases in the Law Division, Civil Part are complex. Since valuable claims or potentially heavy judgments may be at stake, most litigants appearing in the Law Division, Civil Part usually
have a lawyer, but some don’t due to the ridiculous amounts of legal fees Attorneys charges for representation.

For Homeowners who could not afford an Attorney, what you need is courage and strength like a LION! to successfully fight and win your case. While it may appear stressful when you don’t know how to begin the fight, once you learn how the court system works and the procedures and follow the rules and instructions, you will successfully challenge and win your foreclosure case. You need to pursue the Banks from the point of strength , not from weakness. Once you show them that you know what they know and will fight them with everything you got, just watch and see them slightly backing away and looking for opportunities to settle your case and modify your loan which they had refused to do for months.

If you are being sued by the Bank, and you have no knowledge at all about the legal procedures, you might want to contact your insurance company to see if it might provide a lawyer for you. Most likely, your opponent will be represented by a lawyer. For a start, you may contact the legal services program in your county to see if you qualify for free legal services. Their telephone number can be found in your local
yellow pages under “Legal Aid” or “Legal Services”.

If you do not qualify for free legal services and need help in locating an attorney, you can contact the bar association in your county. That number can also be found in your local yellow pages. Most county bar associations have a Lawyer Referral Service. The County Bar Lawyer Referral Service can supply you with the names of attorneys in your area willing to handle your particular type of case and will sometimes consult with you at a reduced fee.

There are also a variety of organizations of minority lawyers throughout any given State, as well as organizations of lawyers who handle specialized types of cases. Ask your county court staff for a list of lawyer referral services that include these organizations. Bear in mind that it is not always easy to obtain a free lawyer as the profession of law is a complex one.

It is recommended that you make every effort to obtain the assistance of a lawyer, at lease for some form of guidance if you don’t know how the legal procedures works, but if you are a Homeowner who cannot afford a lawyer, and cannot afford to lose your home, (THEN WHAT YOU NEED IS COURAGE AND STRENGTH), even if you don’t have prior experience in legal procedure. The Pro se package at http://www.fightforeclosure.net has numerous step by step guides how the legal system works and if your are willing to follow simple instructions, you can successfully challenge and defend your home without a lawyer.

If you decide to proceed without an attorney, these materials explain the procedures that must be followed to have your papers properly filed and considered by the court. These materials do not provide information on the law governing your claims or defenses; information on how to conduct pretrial discovery; information on alternative dispute resolution procedures, such as arbitration or mediation, that may be available or required in your case; information on the kinds of evidence you
need to prove your claims or defenses at trial; or information on other procedural and evidentiary rules governing civil law suits. These types of information as well as pleadings for effective challenge of your foreclosure case can be found in our foreclosure defense package which can be found http://www.fightforeclosure.net

For Homeowners who represents themselves, there are few things you need to bear in mind.

WHAT YOU SHOULD EXPECT IF YOU REPRESENT YOURSELF

While you have the right to represent yourself in court, you should not expect special treatment, help, or attention from the court. The following
is a list of some things the court staff can and cannot do for you. Please read it carefully before asking the court staff for help.

The following is what you need to know about how the court works.

WHAT COURT STAFF CAN DO!
— Court Staff can tell you what the requirements are to have your case considered by the court. — We can give you some information from
your case file.
— Court Staff can provide you with samples of court forms that are available.
— Court Staff can provide you with guidance on how
to fill out forms.
— Court Staff can usually answer questions about court deadlines.

WHAT COURT STAFF CANNOT DO!

— Court Staff cannot give you legal advice. Only your lawyer can give you legal advice.
— Court Staff cannot tell you whether or not you should bring your case to court.
— Court Staff cannot give you an opinion about what will happen if you bring your case to court.
— Court Staff cannot recommend a lawyer, but can provide you with the telephone number of a local lawyer referral service.

— Court Staff cannot talk to the judge for you about what will happen in your case.
— Court Staff cannot let you talk to the judge outside of court.
— Court Staff cannot change an order issued by a judge.

RECOMMENDATIONS:

KEEP COPIES OF ALL PAPERS!
Make and keep copies of all completed forms and documents related to your case.

DEFINITIONS OF SOME OF THE WORDS USED IN THE COURT.

Pro Se: Pro se means by oneself. A pro se litigant represents him or herself in court without the aid of counsel.

Brief: A brief is a written argument submitted to the court in which you present the facts and the history of your case and the legal argument supporting the request you have made to the court in your motion.

Calendar Motion: A calendar motion asks the court for a ruling related to the scheduling or timing of your case, such as a motion for more time to file papers. Before filing a calendar motion, the moving party must try to resolve the matter with the other party(ies) in the case.

Certification: A certification is a written statement you make when you file your papers with the court in which you state that all the information contained in the papers is true to the best of your knowledge.

Discovery Motion: A discovery motion asks the court for a ruling on some phase of the discovery process such as a motion for more specific answers to interrogatories, a motion to compel depositions. Before filing a discovery motion, the moving party must try to resolve the matter with the other party in the case.

Docket Number: The docket number is the number the court assigns to your case so that it may be identified and located easily. Once you have a docket number, you must include it on all your communications with the court.

Motion: A motion is an application to the court for a specific order or ruling to be made in favor of the person making the motion (the movant).
Motion Day: Courts hear motions on specified days in some jurisdiction, it is usually on (Tues or Fridays) on the court calendar called motion days. While in other Jurisdiction, the motion days can fall on any day, so please check your local jurisdiction when filing your motions. A schedule of the court’s motion days can be obtained from the court staff or on Internet at the Judiciary’s website.

Movant or Moving Party: The movant or moving party is the person who is bringing the motion.

Notice of Motion: A notice of motion is the form used to inform the court and all opposing parties that the moving party is seeking a specific ruling or order from the court.

Oral Argument: Oral argument refers to the appearance in court by the parties to present their positions to the judge in person. Either side may request oral argument, but the decision on whether there will be oral argument is up to the judge. If oral argument is not requested by either of the parties or the judge, the motion will be decided “on the papers.”

Proof of Mailing: Proof of mailing is the form in which you provide the dates and the method you used to give the other parties copies of the papers that you filed in court.

Proposed Form of Order: A proposed order is a form that the judge can use to either grant or deny the relief sought in the motion. Every motion must be accompanied by a proposed form of order.

Return date: The return date is the date on which the court will consider the motion. If you request oral argument, you must appear before the judge. If no oral argument is requested, the matter will be decided “on the papers.” That is, the judge will decide the motion on what has been submitted in the moving papers and in the opposition papers, without having anyone appear in court.

Summary Judgment: A motion for summary judgment asks the court to resolve the case in the moving party’s favor without a trial because there is no dispute over the facts of the case and the law supports the moving party’s position.

Response in Opposition Motion: This is type of Motion an opposing litigant needs to file in response to the motion for summary judgment. The purpose of filing this response is to tell the court that there are “genuine issues of material fact”, in dispute which requires that the opponent’s motion for summary judgment should not be granted as a matter of law.

In certain Jurisdiction, the opposition motion can be called by certain names, but Pro se litigants should ensure that the caption motion they are filing indicates either the phrase “response in opposition to Motion to Summary Judgment” or “Objection to Motion to Summary Judgment”, this is to ensure that the Court understands that you are opposing such Motion otherwise, it might be granted by default without an opposition in place, which will automatically end your case unless you appeals that final judgment.

STEPS TO TAKE TO RESPOND TO A MOTION

STEP 1: COMPLETE THE CERTIFICATION IN OPPOSITION TO MOTION AND CERTIFICATION OF SERVICE. In some jurisdictions, it is called (FORM A).

The Certification in Opposition to Motion tells the court the reasons why you object of the ruling requested by your adversary and why the court should deny the request. Fill in the required information.

You must indicate whether you want to waive oral argument and let the judge decide the motion on the papers or not. If you request oral
argument you must tell the court why you think it is necessary. Note: The judge makes the decision on whether there should be oral argument. The judge may request it even if neither party asked for it. Similarly, the
judge may deny the request for oral argument. The Certification of Service tells the court the date on which you mailed the copies of your response to your adversary.

STEP 2: PREPARE YOUR RESPONSE FOR MAILING.
Checklist: You will need the following items:
___ The original of your Certification in
Opposition to Motion for filing in court. If you want the court to return a copy stamped “filed,” you should include a copy and a stamped self-
addressed envelope or take a copy with you to the Clerk of Courts when you are filing it to have the second copy stamped.
___ One copy of the Certification for each party to the lawsuit.

STEP 3: MAIL THE CERTIFICATION IN OPPOSITION TO MOTION TO YOUR ADVERSARY AND ANY OTHER PARTY TO THE LAWSUIT.

Check with your local rules to ensure what the time of service is. In some jurisdictions, you must serve your adversary no later than 8 days before the specified return date of the notice of motion (10 days if it is opposition to a motion for summary judgment). IT IS IMPORTANT THOUGH TO CHECK TO ENSURE WHAT YOUR LOCAL RULES INDICATES AS TO HOW MANY DAYS YOU HAVE FOR SERVICE.

While some court rules do not require you to send your papers by certified mail, it is suggested that you send your certification by regular and certified mail, return receipt requested. You will then have the green card when it is returned to you as proof of service.

STEP 4: MAIL OR DELIVER THE CERTIFICATION TO THE COURT. You may deliver your papers to the court in person or you may mail them. The court address is usually available on line at their website.
If you mail the papers, we recommend that you use certified mail, return receipt requested.

Mail or deliver to the court the original of the Certification. If you want the court to return a copy marked “filed” to you, include a copy of the certification along with a self-addressed, stamped envelope. Remember to sign everything you file with the court with Original “Ink Pen” impression before filing. (Photocopies are usually not accepted for filing unless, you sign it again in front of the clerk with “ink pen” impression).

FightForeclosure.net

~ Your "Pro Se" Foreclosure Fight Solution!

Monthly Archives: May 2014

How California Pro Se Homeowners and/or their Attorneys Can Effectively Respond to Interrogatories

What Homeowners Needs to Know About Proof of Claim in Bankruptcy Proceedings

How Homeowners Can Effectively Challenge Lender’s Proof of Claim in Bankruptcy Adversarial Proceedings

What Homeowners in Washington Needs to Know About Saving Their Homes

How Homeowners In Judicial States Can Save Their Homes

What Homeowners Needs to Know About Summary Judgment Motions

What Documents are Required to File a Motion for Summary Judgment?

Filing an Opposition to a Motion for Summary Judgment

What Happens after the Court Receives the Motion for Summary Judgment and Response?

Getting Further Help With Summary Judgment

What HomeOwners Needs To Know for (Pro Se) Self Representation

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What Documents are Required to File a Motion for Summary Judgment?

Filing an Opposition to a Motion for Summary Judgment

What Happens after the Court Receives the Motion for Summary Judgment and Response?

Getting Further Help With Summary Judgment

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