How California Homeowners Can Technically Disqualify their Foreclosure Mill Attorney

09 Thursday Oct 2014

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Defense, Fraud, Judicial States, Litigation Strategies, MERS, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

≈ Leave a comment

Tags

California, Mortgage Electronic Registration System, Pro se legal representation in the United States

In this age of fraudulent foreclosures by foreclosure mills, homeowners should be in a position to effectively challenge and disqualify the foreclosure mill Attorneys, if for anything, that can effectively delay your foreclosure and ultimately save your home.

In most foreclosure cases, the existence of conflict of interest is obvious. If you look at your pleadings carefully, you will notice that in most cases, the pleadings will reflect that the Attorney who is representing your purported lender is “also” representing MERS. In other words the law firm is acting as counsel for the lender who initiated this foreclosure proceeding, in conjunction with MERS who is also a defendant in the case. Incredibly the lender’s counsel (who is like a plaintiff – for commencing and prosecuting the foreclosure proceeding), even though it has already acted as counsel for the defendant, MERS, in similar cases! OR representing both the lender and MERS in non judicial foreclosure cases where the homeowner is suing everyone involved in his mortgage loan transaction. By virtue of commencing foreclosure via a MERS purported assignment, the lender has trapped itself. It is only when a homeowner uses such opportunity to bring that to the court’s attention with a “motion to disqualify counsel” will the homeowner take advantage of the situation.

It is fundamental that the same law firm cannot represent a plaintiff and a defendant in the same case.

The purported lender may dispute its representation of MERS, but there is no other explanation for why the purported lender’s own employees prepared the purported assignment and executed it on behalf of MERS. In order words, if the Attorney representation of both parties was not a conflict, then why did the lender’s own employee prepare the purported assignment and sign it for MERS? Even if you case does not involve the an Attorney representing both the lender and MERS, If the homeowner research carefully within your region, you will notice that the same counsel had in the past became the counsel of record for MERS in many other cases active before courts. As such, the Attorney’s status as counsel for the defendant MERS is not reasonably in dispute.

Homeowners should make the arguments that calls into question
the fair administration of justice. To illustrate, the homeowner fear that MERS may institute legal proceedings against him in the future. After all, what is to stop MERS from taking the position, at some point in the future, that it is the owner and holder of the Note and deed of trust.
Where would that leave the homeowner Or the then-owner of the subject property? Or the title insurance company that writes title insurance based on the title that is derived from a foreclosure on the subject property (if a foreclosure is allowed)?

Homeowners should argue that under a myriad of cases, the conflict of interest by which lender’s counsel is operating, couple with the affect that conflict is having on the administration of justice requires its disqualification as counsel. See State Farm Mut. Auto. Ins. Co. v. KA.W., 575 So. 2d 630 (Fla 1991); Koulisis v Rivers, 730 So. 2d 289 (Fla. 4th DCA 1999); Campell v. American Pioneer Savings Bank, 565 So. 2d 417 (Fla. 4th DCA 1990).

To the extent that lender’s counsel disagree with the facts set forth herein, homeowner should argue that the court cannot simply accept the law firm’s version of events as true. Rather, in that event, an evidential hearing is required. To illustrate further, on February 12, 2010, the Second District reversed a summary judgment of foreclosure where the plaintiff bank did not show a proper assignment of mortgage. See BAC Funding Consortium, Inc. v. Jacques, Cas No 2D08-3553 (Fla. 2d DCA 2010). This ruling comes on the heels of the Florida Supreme Court’s recent rule change requiring that all mortgage foreclosure lawsuits be executed under oath.

Other jurisdiction have started noticing the fraud brought upon the Honorable courts, entertained motions to disqualify counsels and have also disqualified counsels based on facts as stated herein. After all, only in recent years have banks and their employees begun drafting assignments in mass quantities in an attempt to “push through” non-judicial and judicial foreclosures. Other jurisdictions, however, have begun catching on to these unseemly tactics. One New York court, for example, after discussing problems with an assignment of mortgage similar to those set forth above, ruled:
“Even if [plaintiff] is able to cure the assignment defect, plaintiff’s counsel then has to address the conflict of interest that exist with his representation of both the assignor of the instant mortgage, MERS as nominee for HSBC Mortgage, and the assignee of the instant mortgage, HSBC….”

HSBC Bank USA, N.A. v. Vazquez, 2009 N.Y. Slip. Op. 51814 (2009); see also Bank of N.Y. v. Mulligan, 2008 N.Y. Slip. Op. 31501 (2008) (The Court is concerned that [the person who signed the assignment] may be engaged in a subterfuge, wearing various corporate hats«´); Deutsche Bank National Trust Co. v. Castellanos, 2008 N.Y. Slip. Op. 50033 (2008) (If he is a Vice President of both the assignor and the assignee, this would create a conflict of interest and render the July 21, 2006 assignment void.´); HSBC Bank, N.A. v. Cherry, 2007 N.Y. Slip. Op.52378 (2007) (The Court is concerned that there may be fraud on the part of HSBC, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from [the person who signed the assignment] describing his employment history for the past three years.)

The situation here is similar to that presented to the First District in Live and Let Live, Inc. v. Carlsberg Mobile Home Props., Ltd., 388 So. 2d 629 (Fla. 1st DCA 1980). In that case, plaintiff’s attorney was the escrow agent for the real estate transaction upon which the lawsuit was based. What he knew or was told at closing was relevant at trial. Id. Deeming him a central figure in the lawsuit, the First District required his disqualification. Id. In so ruling, the court cited ethical considerations promulgated by the Florida Supreme Court in In Re Integration Rule of The Florida Bar, 235 So. 2d 723 (Fla. 1970), including DR 5-102, which provides:

(A) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of his client, he shall withdraw from the conduct of the trial and his firm, if any, shall not continue representation in the trial. (B) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness other than on behalf of his client, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client.

A potent weapon in any lawyer’s arsenal is a motion to disqualify opposing counsel. If used successfully, it stops the opposing party in its tracks and forces an adversary to start over with a new lawyer. And for those on the receiving end of such a motion, it is crucial to know whether it should be granted or rejected. Courts have developed a four-factor test to assess the merits of a disqualification motion, but before we discuss that test, consider the following example.

Assume “Attorney A” is long-time litigation counsel for Widgetco Inc. Widgetco is being sued, and the opposing party deposes one of Widgetco’s employees who is not named as a party in the suit but who has percipient knowledge of the underlying facts of the case. Attorney A defends the deposition of that employee and, at the start of the session, states on the record that he is appearing as counsel for the employee. A year later the employee steals company trade secrets and opens a competing business.

Widgetco then hires Attorney A to sue the former employee for misappropriation of trade secrets and unfair competition. Counsel for the former employee promptly files a motion to disqualify Attorney A on the ground that he has a conflict of interest because he was counsel for the employee during the deposition in the prior case. Is Attorney A out of luck and off the case? Not necessarily.

PERSONAL RELATIONSHIP REQUIRED
To win the disqualification motion, the former employee must first show that he or she was personally represented by Attorney A. In addition, the employee must show a “substantial relationship” between Attorney A’s current and previous representation of the former employee (Brand v. 20th Century Ins. Co., 124 Cal. App. 4th 594, 602 (2004)). An attorney representing a corporation does not automatically have an attorney-client relationship with the organization’s individual constituents (officers, directors, shareholders, employees) (Vapnek, Tuft, Peck & Wiener, California Practice Guide: Professional Responsibility, ¶ 3.90 (The Rutter Group, 2007)). Rather, courts distinguish between a corporate counsel’s representation of corporate officers, directors, and employees “in their representative capacities and the representation of those persons in their individual capacities.” (Koo v. Rubio’s Restaurants, Inc., 109 Cal. App. 4th 719, 732-33 (2003).) As one court has stated, “[G]enerally, there is no individual attorney-client privilege between a corporation’s attorney and individuals within the corporation unless there is a clear showing that the individual consulted the corporate counsel in the officer’s individual capacity.” (Tuttle v. Combined Ins. Co., 222 F.R.D. 424, 429 (E.D. Cal. 2004).)

The preeminent case explaining this distinction is Meehan v. Hopps (144 Cal. App. 2d 284 (1956)), in which long-time corporate counsel represented the corporation in a suit against Stewart Hopps, a former officer and chairman of the board. Hopps moved to disqualify the corporation’s counsel, arguing that he had spent many hours conferring with counsel, and had delivered to counsel memoranda and personal files relating to various legal matters in which the corporation was involved (144 Cal. App. 2d at 287, 290). The court of appeal affirmed the trial court’s denial of the motion to disqualify, holding that “[t]he attorney for a corporation represents it, its stockholders and its officers in their representative capacity” and in no way “represents the officers personally.” (144 Cal. App. 4th at 290; see also Talvy v. American Red Cross, 205 A.D. 2d 143, 150, 618 NYS 2d 25, 29 (N.Y. Ct. App. 1984) (“Unless the parties have expressly agreed otherwise in the circumstances of a particular matter, a lawyer for the corporation represents the corporation, not the employees”).) The court concluded not only that the attorney could act adversely to Hopps, but also that he could use against Hopps any information that Hopps “was required by reason of his position with the corporation to give to that attorney.” (144 Cal. App. 4th at 290.) Thus, as commentators have noted, “[t]he fact that counsel may have learned confidential information about [former officers now adverse to the company] does not disqualify counsel from continuing to represent the corporation.” (Friedman, California Practice Guide: Corporations at ¶ 6:3.2 (The Rutter Group, 2007).) The primary issue, then, on a motion to disqualify a lawyer who previously represented a client’s employee is whether the former employee can establish that he or she had a personal attorney-client relationship with the company’s litigation counsel (Koo, 109 Cal. App. 4th at 729). The rule against representation adverse to a former client does not apply when the relationship of attorney and client has never, in fact, been created between the attorney and the complaining party. (See 1 Witkin, California Procedure at § 151, p. 206 (4th ed. 1996).)

A formal contract is not necessary to establish that an attorney-client relationship exists (Waggoner v. Snow, Becker, Kroll, Klaris & Kravis, 991 F.2d 1501, 1505 (9th Cir. 1993) (applying California law)). On the other hand, the former employee’s mere subjective belief that he or she was personally represented by corporate counsel is not sufficient (Fox v. Pollack, 181 Cal. App. 3d 954, 959 (1986)). Rather, it is the former employee’s burden to prove that the totality of the circumstances reasonably implies an agreement by the company’s lawyer not to accept other representations adverse to the former employee’s personal interests (Responsible Citizens v. Superior Court, 16 Cal. App. 4th 1717, 1733 (1994)).

THE FOUR-FACTOR TEST
A federal court applying California law has cited four factors to use in assessing whether the totality of the circumstances reasonably implies an agreement of personal representation. The four factors are: (1) the nature and extent of the contacts between the attorney and the purported client; (2) whether the purported client divulged confidential information to the attorney; (3) whether the attorney provided the purported client with legal advice; and (4) whether the purported client sought or paid for the attorney’s services (Fink v. Montes, 44 F. Supp. 2d 1052, 1060 (C.D. Cal. 1999)).

Attorney contacts. The first factor of the Fink test involves the nature and extent of the contacts between the attorney and the former employee. California case law does not address whether a corporate lawyer whose sole contact with a corporate employee is to prepare him or her for deposition and/or to defend the employee at deposition is by reason of that contact alone disqualified from representing the corporation in a lawsuit against the employee. However, cases from other jurisdictions generally provide that the corporate attorney is not deemed to represent the employee personally in such circumstances.

For example, in Polin v. Kellwood Co. (866 F. Supp. 140 (S.D.N.Y. 1994)) a former officer of a company met with the company’s lawyers to prepare for his deposition in a lawsuit involving the company. In a later lawsuit against that same former officer, the district court held that the corporate lawyers were not automatically disqualified from representing the company because “[t]he mere fact that a corporate lawyer meets with an employee – or as here, an ex-employee – to prepare for a deposition, cannot make the employee the client of the lawyer.” (866 F. Supp. at 142.)

Also instructive is Spinello Cos. v. Metra Industries, Inc. (2006 Westlaw 1722626 (D. N.J. 2006)), in which the defendant (a former officer) sought to disqualify Spinello’s counsel because he had defended the officer at, and prepared him for, a deposition in a previous lawsuit involving Spinello. The court concluded that no personal attorney-client relationship existed between the company’s counsel and the former officer (2006 Westlaw 1722626 at *6).

Courts have reached a different conclusion when the attorney specifically identifies himself or herself on the record as “counsel for the individual employee” (or the attorney remains silent when the employee identifies the attorney as personal counsel). For example, in Advance Mfg. Technologies, Inc. v. Motorola, Inc. (2002 Westlaw 1446953 (D. Ariz. 2002)), a former employee of Motorola met with Motorola’s counsel to prepare for deposition. At the deposition, when asked by opposing counsel whether he was represented by an attorney, the former employee said he was represented by Motorola’s lawyer. Motorola’s lawyers “remained silent and did not deny or otherwise qualify [the former employee’s] affirmative response.” (2002 Westlaw 1446953 at *1.) The court determined that silence in the face of the potential client’s expressed belief of representation made the belief an objectively reasonable one and, indeed, manifested the attorney’s “implied consent to an attorney-client relationship.” (2002 Westlaw 1446953 at *5.)

Similarly, in E.F. Hutton & Co. v. Brown (305 F. Supp. 371 (D. Tex. 1969)), the district court held that corporate counsel who represented a corporate officer at an SEC investigative proceeding, and at a bankruptcy hearing at which the officer testified, had a personal attorney-client relationship with that officer. Critical to the district court’s finding in E.F. Hutton was the fact that in both proceedings the corporate lawyer made formal appearances as counsel for the individual officer (305 F. Supp. at 386-87). The court noted that though an attorney’s appearance in a judicial or semi-judicial proceeding “creates a presumption that an attorney-client relationship exists between the attorney and the person with whom he appears,” that presumption becomes “almost irrebuttable” when the attorney enters a “formal appearance” for that person (305 F. Supp. at 387, 391-92).

E.F. Hutton and Advance Manufacturing Technologies should be contrasted with Waggoner (991 F.2d at 1506), in which the Ninth Circuit found that no attorney-client relationship existed, in part, because the lawyer was identified as “corporate counsel” both at trial and during a deposition of his client’s former officer.

In addition, in today’s legal world it is not uncommon for depositions to be videotaped and for the videographer to ask for “appearances of counsel,” which are part of the video record (and sometimes part of the sten-ographic record as well). To avoid any confusion, then, corporate counsel defending an employee should always state that he or she is representing the witness in the witness’s capacity as an employee of the company, and not individually. Counsel must also be careful in objecting to document requests served with deposition notices for a client’s employee: Those objections should clearly indicate that they are made on behalf of the deponent as an employee, not as an individual.

Confidential information. The second Fink factor analyzes whether the former employee divulged confidential information to the attorney (44 F. Supp. 2d at 1060). The confidential information to which the Fink court refers concerns the individual employee; it is not confidential information relating to the business of the corporation.

A court will look at whether the confidential information was disclosed to the attorney in a situation in which the employee had an expectation of privacy. In the Spinello case noted above, the court held that the corporate employee had no expectation of privacy in conversations with a corporate lawyer about issues relating to the corporation. It acknowledged that the former employee had conversations with the company lawyer in preparation for his deposition, but observed that the confidential information exchanged was in regard to the company’s business plan. The court then noted that all exchanges were for the benefit of the company, concluding that the employee “had no reasonable expectation of privacy regarding these conversations to the exclusion of … Spinello Companies when they were made and cannot claim they are confidential now.” (See 2006 Westlaw 1722626 at *5.)

Accordingly, a company attorney may consider having a company officer present during preparation sessions for the deposition of a company employee; with the officer present, the employee can have no reasonable expectation of privacy.

Legal advice. The third Fink factor addresses whether the corporate lawyer provided the former employee with legal advice. Again, the court will be looking to see if personal legal advice has been given, apart from legal advice regarding company business. (See Tuttle, 222 F.R.D. at 429 (no attorney-client privilege because employee did not seek legal advice from corporate attorneys “in a personal capacity”); U.S. v. Keplinger, 776 F.2d 678, 700 (7th Cir. 1985), cert. denied, 476 U.S. 1183 (1986) (“Defendants do not dispute the attorney’s testimony that defendants never explicitly sought individual legal advice or asked about individual representation”).)

Obviously, explaining to a witness the rules of a deposition and general practices in responding to questions should not be considered personal legal advice (upon which a later disqualifying motion could be based). Such advice simply protects the company’s interests and is consistent with a finding that the law firm represented the person only as an employee of the company and not as an individual.

If the individual officer or employee is potentially a party to the case, it is much more likely that corporate counsel can be shown to have provided personal legal advice. In such a situation, in which the employee’s personal interests are at stake, a court could easily conclude that the lawyer’s representation of the employee was personal in nature.

Who paid? The fourth and final Fink factor is whether the former employee sought out or paid for the services of the corporation’s attorney. In the usual situation involving the deposition of a corporate employee, the company – not the employee-seeks out representation by the corporate attorney. This is often reflected in the retention agreement. Thus, one court found no attorney – client relationship between company counsel and a former CEO because the engagement letter limited the engagement to the company’s intellectual property matters (Synergy Tech & Design Inc. v. Terry, 2007 Westlaw 1288464 (N.D. Cal 2007)). Typically, the attorney will be compensated by the company and not by the individual. In the Synergy case, the court found no attorney-client relationship, based in part on the fact that the corporation was “billed for or paid for all of the filing fees and expenses” (2007 Westlaw 1288464 at *8). Lawyers representing a corporation should therefore take extra care when defending the deposition of a client’s employee.

Whenever an attorney enters an appearance – whether during a deposition or at the courthouse – care should be taken to make clear the identity of the client, especially if corporate entities and individual corporate employees are involved in the case. One never knows if a corporate client’s employee will turn into an adversary who might seek to have the company’s lawyer removed from a future case.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net

What Homeowners Must Know About “Withrawing Reference” in Bankruptcy Proceeding

30 Saturday Aug 2014

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

≈ Leave a comment

This post is designed to inform homeowners about withrawing reference in Bankruptcy proceedings. Simply put, when a homeowner is already pursing its foreclosure case in the Federal Court, and later files an emergency chapter 13 bankruptcy to protect his/her home from foreclosure. The homeowner in certain cases may opt to pursue the lender via bankruptcy adversary proceeding which is a seperate proceeding from the Chapter 13 automatic stay protection. What usually happens is that the homeowner may opt to use same causes of action as used in the Federal case, to pursue the Bankruptcy adversary proceeding. When this happens, the lender’s attorneys usually files what is known as “Motion for Withdrawal of reference” citing that the causes of actions in Chapter 13 adversary proceedings were the same as the ones in the Federal case, therefore that it would be better to withdraw the references in the Bankruptcy proceeding and remind them back to the Federal proceeding as that would serve best for judicial economy and to avoid multiple payment of damages from two different jusisdictions of the same material facts of causes of action. The Bankruptcy judges with their descretions can then decide, if the causes of action listed in the Bankruptcy proceeding would require the withdrawal of the either “Some of the causes of action or the Entire Adversary proceeding” as filed, since those causes of actions were already included in the Federal proceeding. Or whether some causes of actions in the Adversary proceeding were different and thus require that they remain in the Adversary proceeding for the case to continue in the Bankruptcy forum.

The number of reported cases dealing with motions for withdrawal of the reference appears to be on the rise. Practitioners need to be cognizant of this option and make an early determination as to whether to pursue withdrawal of the reference from the bankruptcy court under 28 U.S.C. §157(d). A well-considered motion to withdraw the reference is an important strategy that may result in a more favorable outcome for targets of bankruptcy litigation.

The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce. In an early case interpreting this statute, the district court in the Southern District of New York examined the historical underpinnings of §157(d) (including a review of Northern Pipeline) and stated that the statute “reflects Congress’s perception that specialized courts should be limited in their control over matters outside their areas of expertise.” American Tel. & Tel. Co. v. Chateaugay Corp., 88 B.R. 582, 583 (S.D.N.Y. 1988).

Section 157(d) has two branches. It vests discretionary (also described as permissive) authority with the district court to withdraw the reference upon a showing of “cause” by the filing of a timely motion. It also mandates the withdrawal of the reference as to proceedings that involve non-title 11 federal laws that regulate or affect interstate commerce or organizations.

A motion to withdraw the reference is filed with the bankruptcy clerk but is decided by the district court in the district where the bankruptcy case arose pursuant to Rule 5011(a). If the district court withdraws the reference, the bankruptcy court is stripped of jurisdiction over the matters for which the reference is withdrawn. Patterson v. Williamson, 153 B.R. 32, 33 (E.D. Va. 1993). Section 157(d) also entitles the district court to withdraw the reference sua sponte, but does not relieve it from the requirement that cause be present for sua sponte permissive withdrawal.

The first step in this inquiry is to determine whether there are nonbankruptcy federal laws at issue in the proceedings. Then it is necessary to determine whether to proceed under discretionary or mandatory withdrawal standards, or both.

Timeliness Is Key
Early recognition of the option of seeking withdrawal of the reference is extremely important because the motion must be “timely” under either a discretionary or mandatory standard. A motion is timely, if brought as promptly as possible, in light of the developments in the bankruptcy proceeding or at the first opportunity. Hupp v. Educational Credit Management Corp., No. 07CV1232 WQH (NLS), 2007 WL 2703151, at *3 (D. Cal. Sept. 13, 2007). A motion to withdraw the reference may be untimely when a significant amount of time has passed since the moving party had notice of the grounds for withdrawing the reference or where withdrawal would have an adverse effect on judicial economy. Id.

In an often-cited case, a district court ruled that a motion to withdraw the reference was untimely when it was filed five months after the bankruptcy petition and only one month after the filed adversary complaint. In re Mahlmann, 149 BR 866, 870 (N.D. Ill. 1993). The court noted that the “the key issue is when the moving party was first aware nonbankruptcy federal laws must be dealt with in resolving the case.” Id. at 869. Of particular significance was the fact that the federal claims existed for some time before the bankruptcy, as evidenced by the movant’s civil action against the debtor related to those claims, which was filed more than eight months before the bankruptcy. Id. at 870. One court has even held that a motion to withdraw the reference should have been filed contemporaneously with the defendant’s answer to an adversary complaint because the presence of “other laws” requiring the withdrawal of the reference was known at that time. See Securities Group 1980, 89 B.R. 192, 194 (M.D. Fla. 1988) (emphasis added). The failure to file constituted a waiver of the right to do so. Id.

The timing of the motion may also be affected by whether a jury demand is being made. A motion to withdraw the reference should generally be filed at the time of an answer containing a jury demand to avoid the outcome in In re HA-LO Industries, where the motion was deemed untimely when the proponent, who filed a jury demand on July 24, 2003, did not move to withdraw the reference until Oct. 28, 2004. 326 B.R. 116 (Bankr. D. Ill. 2005).

While some courts have focused on whether prejudice exists (see In re The Singer Co. N.V., No. 01CV0165 (WHP)), a movant cannot rely on that soft of a standard. A motion to withdraw the reference should be filed as soon as possible after the issues are known and before the bankruptcy court has dealt with those issues.

Permissive Withdrawal
Assuming the motion is timely filed, what factors will persuade a district court to exercise its discretionary authority to grant permissive withdrawal? The definition of “cause” has been left to the courts to decipher; the legislative history is of little help.

An early articulation of the standard for determining cause directed the district court to consider the goals of uniformity in the administration of bankruptcy cases, reduce forum-shopping, foster the economical use of the parties’ resources and expedite the bankruptcy process.

Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 999 (5th Cir. 1985). The Holland case also cautioned that the district court “must keep one eye cocked toward the decision of the Supreme Court in [Northern Pipeline]… Whatever the precise teaching of [Northern Pipeline,] it holds, at a minimum, that Article I bankruptcy courts may not have original jurisdiction over adversary proceedings that do not intimately involve the debtor-creditor relationship and rest solely in issues of state law.”

More recent cases have added to the Holland factors with a focus on whether the proceeding is core or noncore and whether there is a right to a jury trial, while keeping an eye on judicial economy. In re County Seat Stores Inc., No. 01 CIV. 2966 (JGK), 2002 WL 141875, at *4 (S.D.N.Y. Jan. 31, 2002.) The presence of noncore issues are often central to the district court’s consideration of a motion to withdraw the reference and relates closely to judicial economy. In re Enron Corp., 317 B.R. 232, 234 (S.D.N.Y. 2004). Whether an adversary proceeding sought to be withdrawn is core or noncore has been held to be “the most important factor.” In re Coe-Truman Technologies Inc., 214 B.R. 183, 187 (N.D. Ill. 1997). While §157(b)(1) permits bankruptcy judges to hear and determine core proceedings, §157(c)(1) requires a de novo review of such matters by the district court, and only it can enter a final order. Thus, judicial economy is best served by having the district court first determine the issue.

The fact that the bankruptcy court cannot conduct a jury trial on a noncore matter is also sufficient cause for permissive withdrawal. In re Orion Pictures Corp., 4 F.3d 1095, 1101 (2d Cir. 1993). See also In re Daewoo Motor America Inc., 302 B.R. 308, 315 (C.D. Cal. 2003) (“Thus, where there is a right to jury trial in a noncore matter, that factor may weigh heavily in favor of withdrawing the reference so as to give the parties an opportunity for a jury trial in the district court.”). Where an insurance dispute was “entirely severable from the bankruptcy proceedings” and said dispute involved noncore issues, the district court withdrew the reference. In re Comdisco Inc., No. 04 C 5570, 2004 WL 2674398, at *2 (N.D. Ill. Oct. 15, 2004).¹

While cause is not defined in the statute and is a flexible concept, it is not an “empty requirement.” Holmes v. Grubman, 315 F. Supp. 2d 1376, 1381 (M.D. Ga. 2004) (reciting same factors previously described as being applicable in Eleventh Circuit). The moving party bears the burden of demonstrating that both the timeliness and cause requirements of §157(d) have been met. In re Almac’s Inc., 202 B.R. 648, 654 (D. R.I. 1996).

Mandatory Withdrawal
Most courts applying the mandatory withdrawal standard employ a “substantial and material test,” but this phrase has been given a variety of meanings. Some courts utilize this standard in interpreting the term “consideration” under §157(d) and find that mandatory withdrawal is required only if the proceedings cannot be resolved without “substantial and material consideration of nonbankruptcy laws.” In re G-I Holdings Inc., 295 B.R. 211, 221 (D. N.J. 2003).

The Seventh Circuit stated that the substantial and material test really refers to the necessary extent of interpretation of the non-title 11 statute or the court’s necessary analysis of “significant open and unresolved issues” and not the mere application of it. In the Matter of Vicars Ins. Agency Inc., 96 F.3d 949, 954 (7th Cir. 1996). Another court has found the substantial and material test to have been satisfied where the nonbankruptcy federal law at issue (domestic patent law) is central to the outcome of the case. In re Singer Co., 01 Civ. 0165 (WHP), 2002 U.S. Dist. LEXIS 2629, at *8 (S.D.N.Y. Feb. 20, 2002). On the other hand, a district court recently denied a motion to withdraw the reference where the issues of federal law presented (FDCPA and RESPA claims) were routinely considered in bankruptcy proceedings and therefore did not require the court’s substantial and material consideration. Prince v. Countrywide Home Loans, No. 1:08-0058, 2008 WL 4572545, at *2 (M.D. Tenn. Oct. 8, 2008).

The District Court for the Southern District of New York appears to use various iterations of the test. In In re Enron Corp., the court looked to whether the examination of the federal law in question would be more than de minimis in deciding to withdraw the reference. No. 04 Civ. 8177 (RCC), 2004 WL 2711101 at *4 (S.D.N.Y. Nov. 23, 2004). In another case, mandatory withdrawal was warranted where a nonbankruptcy federal statute “arguably conflicts” with the Bankruptcy Code. In re Cablevision S.A., 315 B.R. 818, 821 (S.D.N.Y. 2004). This court has also held that “novel or unsettled questions of nonbankruptcy law” do not need to be present to permit the district court to withdraw the reference. In re Enron Corp., 388 B.R. 131, 139 (S.D.N.Y. 2008). While withdrawal is not mandated when consideration of non-Code law “entails only the straightforward application of settled law to the facts of a particular case,” it is required when a significant interpretation of non-Code statute is needed, when a non-Code issue dominates, or when nonbankruptcy federal law governing the case significantly and materially conflicts with relevant bankruptcy law. In re Chateaugay Corp., 193 B.R. 669, 673 (S.D.N.Y. 1996).

As shown by the foregoing, the substantial and material test can have different meanings. The case most likely to lead to withdrawal of the reference under the mandatory withdrawal provision of §157(d) would involve a non-title 11 federal issue that is central to the determination of the case, not regularly ruled on by bankruptcy courts, and presents either an undecided issue under the non-title 11 law or conflicts with bankruptcy policies.

Conclusion
The statutory resolution under §157(d) to the Northern Pipeline constitutional crisis is less than satisfactory because it leaves much uncertainty as to the jurisdictional limits of bankruptcy courts. Uncertainty is inherent in the absence of a clear definition of “cause” and the “substantial and material” overlay attributed to the mandatory withdrawal standard. We can say that timeliness of the motion is critical and that there is much room for advocacy.

The nonanalytical factors associated with motions to withdraw the reference should be recognized but overcome and a careful judgment made as to whether such a motion is likely to succeed. Contrary to initial inclinations and depending on the issues, the bankruptcy court may be as or better equipped than the district court to decide even a noncore issue. The district court should not be concerned about taking all or part of a case from the bankruptcy court, and the bankruptcy court should not be concerned that §157(d) permits or requires a withdrawal of the reference.

¹ Interestingly, the same court ruled seven months earlier that, despite the fact that a state law insurance question at issue was noncore, withdrawing the reference was not appropriate because judicial economy and efficiency actually would have been hindered by the withdrawal. In re HA 2003 Inc., No. 3 C 9008, 2004 WL 609799, at *3 (N.D. Ill. March 22, 2004).

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

What Nevada Homeowners Needs to Know About Removal of Cases to the Federal Court

30 Saturday Aug 2014

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Defense, Judicial States, Non-Judicial States, Pro Se Litigation, Your Legal Rights

≈ Leave a comment

A 2013 Nevada Supreme Court Certification created a legal dilemma for the Banks and purchasers of deeds of trust.

Removal to U.S. District court may not be an option in residential wrongful foreclosure actions for banks and other purchasers of trust deeds, and their eviction counterparts, after the Nevada Supreme Court’s recent en banc opinion in Chapman v. Deutsche Bank Nat’l Trust Co., 129 Nev. Adv. Op. 34 (May 30, 2013).

Typically, in Nevada, when a residential borrower defaults, the mortgage servicer will initiate a nonjudicial foreclosure. After completing Nevada’s mandatory foreclosure mediation program, the nonjudical foreclosure will proceed to a trustee’s sale. Often, borrowers will continue to improperly occupy the property, forcing the purchaser at the trustee’s sale (typically the bank or servicer) to begin eviction proceedings in state justice court. In response, and in an effort to stay eviction proceedings, borrowers will often file a separate lawsuit in state district court for wrongful foreclosure/quiet title, among other claims.

At this point, if the defendant purchaser of the property can establish diversity or federal question jurisdiction, it will usually seek removal of the borrower’s lawsuit to U.S. District court. The purchaser’s eviction proceedings remain in state justice court and are either completed before the borrower’s lawsuit is adjudicated or the eviction proceedings are stayed pending the outcome of the lawsuit in U.S. District court. In any event, a purchaser could at least rest assured that its lawsuit would proceed in U.S. District court and not be remanded to state court.

Chapman has changed all of that in that it significantly impairs the federal court removal option under this typical scenario. Accordingly, banks and other purchasers of trust deeds will have to alter how they deal with evictions and nonjudicial foreclosures in Nevada to reduce Chapman’s affect.

Chapman is the result of two questions certified to the Nevada Supreme Court by the Ninth Circuit Court of Appeals in Chapman v. Deutsche Bank Nat’l Trust Co., 651 F.3d 1039 (9th Cir. 2011). The Ninth Circuit asked the Nevada Supreme Court:

Is a quiet title action under Nevada Revised Statutes § 40.010, which is premised on an allegedly invalid trustee’s sale under Nevada Revised Statutes § 107.080(5)(a), properly characterized under Nevada law as a proceeding in personam, in rem, or quasi in rem?
Is an unlawful detainer action under Nevada Revised Statutes § 40.255(1)(c) properly characterized under Nevada law as a proceeding in personam, in rem, or quasi in rem?

Id. at 1048.

The Nevada Supreme Court answered these questions by determining that eviction and quiet title actions are both properly characterized as proceedings involving a property interest. To be precise, the Court chose not to make a distinction between in rem and quasi in rem proceedings, but held that eviction and quiet title actions are not in personam. At first glance, this holding seems rather benign, but the practical effects are far reaching because of the typical scenario explained above. If the bank first files an eviction proceeding, and while the eviction process is still open, the borrower files a separate action in state court contesting ownership to the property, under Chapman, removal of the borrower’s action to U.S. District court is prevented under a doctrine known as the prior exclusive jurisdiction doctrine.

Under this doctrine, “when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res.” Marshall v. Marshall, 547 U.S. 293, 311 (2006). Accordingly, where parallel state and federal court proceedings seek to “‘determine interests in specific property as against the whole world’ (in rem), or where ‘the parties’ interests in the property … serve as the basis of the jurisdiction’ for the parallel proceedings (quasi in rem), then ‘the doctrine of prior exclusive jurisdiction fully applies.’” Chapman, 651 F.3d at 1044 (internal citations omitted).

Hence, if an eviction proceeding was first filed and remains open while a second quiet title lawsuit is filed by a borrower, removal of the quiet title action is now precluded in Nevada by the prior exclusive jurisdiction doctrine. If one does remove the second matter, a swift and likely successful motion to remand can now be expected. In order to avoid this situation, and to protect a party’s ability to litigate in U.S. District court, there are a few options worth considering.

First, if a bank has an ongoing eviction proceeding in state justice court, and then is served with a quiet title action in state district court, a trust deed purchaser may move on an expedited basis to transfer the eviction proceeding to where the quiet title action was filed, and then remove to U.S. District court. Because the right to remove is governed by statute, 28 U.S.C. §1441(a), and in the normal case a defendant has only 30 days to remove after being served, 28 U.S.C. § 1446(b), the bank will need to be extra vigilant in moving to transfer the eviction proceeding to state district court and then timely remove the case to U.S. District court. A second option is to voluntarily dismiss the eviction action without prejudice, then remove the quite title proceeding to U.S. District court. The bank can then move in the U.S. District court to evict. In the appropriate case, a trust deed purchaser can initiate a quiet title action in U.S. District court and seek injunctive relief to remove a borrower from the trustee deed purchaser’s property.

The Chapman case will certainly change the way the financial services industry and other purchasers of trust deeds handle eviction proceedings in Nevada. Chapman does not preclude removal, but banks and other purchasers of trust deeds will have to carefully consider the timing and method by which it removes borrowers from property that has been foreclosed upon.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Why Mortgage Foreclosure is on the Rise Again in Nevada

30 Saturday Aug 2014

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Foreclosure Crisis, Judicial States, MERS, Mortgage Laws, Non-Judicial States, State Court, Your Legal Rights

≈ Leave a comment

Recent Study and filing records shows that mortgage notice of default and foreclosure is on the rise in the State of Nevada within the past few months.

Some of the causes of the rise resulted from the Fall 2012 decision where the court upheld MERS in foreclosure proceedings.

The Nevada Supreme Court validates the use of the Mortgage Electronic Registration System, Inc. (MERS), allowing foreclosures to proceed. On September 27, 2012, the Nevada Supreme Court issued Edelstein v. Bank of New York Mellon, 128 Nev. Adv. Op. 48 (Sept. 27, 2012), clarifying and establishing rules affecting the transfer of real property interests. Prior to this decision, judges in Nevada struggled with the effect of MERS as a nominee or beneficiary of a deed of trust. This holding abolishes the repeatedly asserted claim that MERS, as a nominee or beneficiary, invalidates the security interest and prohibits foreclosure. This landmark decision eliminates a major stumbling block faced by lenders and servicers defending wrongful foreclosure claims.

The primary holding of Edelstein establishes that designating MERS as a nominee and beneficiary does not irreparably “split” the promissory note from the deed of trust and, so long as the note and deed of trust are ultimately reunited in the same party, a trustee’s sale can proceed. Edelstein validates MERS’s use and legitimacy for the financial services industry in Nevada. Under Edelstein, the parties in interest have the opportunity to cure potential assignment and transfer irregularities that may have occurred during the life of the mortgage paper, so long as the foreclosing party has possession of both the note and deed of trust upon foreclosure. In owner-occupied residential property, however, a borrower in default may elect to mediate under the state-run foreclosure mediation program. If chosen, the amended foreclosure mediation rules require the beneficiary, or its agent, to bring certified copies of the note and deed of trust and any assignments thereof. See FMR 11. Similarly, after the passage of AB 284, an affidavit accompanying all notices of default filed after July 1, 2011 requires the trustee, beneficiary or agent to verify information concerning the note, deed of trust and assignments. Nevertheless, in a litigation context, Edelstein should prove invaluable in providing the financial services industry with the tools it needs to successfully protect its interests.

The Court noted that planned “separation” of the note and deed of trust does not render either instrument void. Although both the note and deed of trust must be held together in some combination of either the beneficiary and noteholder being the same entity or sharing an agency relationship, nothing requires them to be unified at a time prior. In essence, their being held by different entities as the result of securitization, for example, prior to foreclosure has no effect on a subsequent foreclosure in the name of a holder then in possession of both.

In Edelstein, the Nevada Supreme Court also adopted the Restatement (Third) of Property (Mortgages) § 5.4 (1997), which states that a mortgage note and deed of trust are automatically transferred together, unless the parties agree otherwise. Accordingly, if a foreclosing entity can demonstrate an assignment of either the note or the deed of trust, that alone is sufficient to establish authority to foreclose. Nevertheless, the Nevada Supreme Court found that the deed of trust and note were “split” in this case because at inception, MERS was the “beneficiary” under the deed of trust, while the original lender was the noteholder. Admittedly, this aspect of the holding creates a certain degree of confusion, because the Court also found that MERS was the agent of the holder of the note and, that where an agent of a secured party has actual possession of a note, the secured party has taken actual possession. In light of its express adoption of the Restatement (Third) of Property (Mortgages) § 5.4 (1997) that the security follows the note—and vice versa—the Court certainly could have omitted the notion that the note could be “split” from the deed of trust as a matter of law.

Notwithstanding, Edelstein’s utility remains, because the Nevada Supreme Court’s holding that MERS’s recording of the assignment of the deed of trust containing express language that the deed of trust was assigned “together with the note or notes,” properly transfer both the deed of trust and note to the assignee, here, Bank of New York Mellon. In accepting that language in a recorded assignment as sufficient to affect a transfer of both the deed of trust and note, the burden of proof on a foreclosing beneficiary is substantially minimized. At least, in the non-bankruptcy context, foreclosing beneficiaries and their agents can now rely upon this holding to validate the effectiveness of similar language included in assignments, thus demonstrating a proper assignment of the note through a recorded document, rather than by testimonial evidence.

The Court further clarified the definition of “agency” among lenders, beneficiaries, servicers and trustees, by expressly recognizing various agency relationships. The Court held that MERS, designated as a “nominee,” is an agent for a lender, or its successors and assigns. The Court acknowledged that a servicer is also an agent for the lender or beneficiary and, found that, although helpful, the production of a servicing agreement is not required by Nevada law or the Foreclosure Mediation Program Rules in order to establish a servicer’s authority to foreclose. The Court further confirmed that a trustee is an agent for the lender or beneficiary and, thus, the lender or beneficiary is entitled to enforce a note even when its trustee is in possession of the note. Expressly acknowledging the reality that foreclosure is based on several entities working together as agents, Edelstein is favorable to beneficiaries as it validates these relationships and reduces the burden in establishing these agents’ relationships and authority to act on behalf of the beneficiary.

Although not without certain inconsistencies, the Edelstein opinion overall provides helpful guidance regarding establishing foreclosure authority in defending wrongful foreclosure, quiet title and other real property claims in both consumer and commercial finance litigation and in interrelated non-judicial foreclosure proceedings.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Montana Jury Awarded Homeowner Massive Damages Against US BANK in Mortgage Fraud Case

20 Friday Jun 2014

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Foreclosure Defense, Judicial States, Non-Judicial States, Your Legal Rights

≈ Leave a comment

Tags

Montana

The Gallatin County, Montana District Court has rejected US Bank’s Motion to reduce a punitive damage award assessed against it by a jury, upholding the $5,000,000.00 award as well as the $1M compensatory damages award on the homeowner’s fraud and constructive fraud claims. The case is McCulley v. US Bank, Cause No. DV09-562C (Montana 18th Judicial District Court). The Order denying US Bank’s Motion to reduce the punitive damage award was entered on April 14, 2014.

The facts of this case are beyond shocking. The 22-page opinion sets out how US Bank intentionally lied to the Court and the homeowner about the underlying transaction and the existence of documents, withheld documents, made the homeowner sign three versions of the loan application while lying to the homeowner that she would receive a specific loan, switching the loan at the last minute, and then foreclosing in order to make a profit of over $350,000.00. The Court also found that the homeowner went from a healthy and athletic individual to one who was severely depressed and attempted a near-successful suicide because of the actions of US Bank.

The Court found that all of the factors to uphold the punitive damages award had been satisfied under Montana law, and that the $5M award was well within US Bank’s ability to pay without serious consequences to it given that US Bank’s Form 10-Q filing with the SEC showed that its net worth was $41,552,000.000 (that’s over $42 and a half BILLION dollars), and that US Bank had a net income for the nine months ending 09/30/13 of over $4.26 billion.

It is thus no wonder why the banks fight requests for jury trials with such vigor. They know that if regular people see the kind of fraudulent conduct which the banks engage in that there will be serious consequences.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

What Florida Homeowners Should Expect in “Pro Se” Foreclosure Defense Litigation

12 Thursday Jun 2014

Posted by BNG in Affirmative Defenses, Banks and Lenders, Case Laws, Case Study, Discovery Strategies, Federal Court, Foreclosure Crisis, Foreclosure Defense, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Mortgage Laws, Pleadings, Pro Se Litigation, RESPA, State Court, Title Companies, Trial Strategies, Your Legal Rights

≈ Leave a comment

Tags

Florida

When a Homeowner is approaching foreclosure on his/her property, there are numerous things the homeowner should bear in mind.

(This is Not Intended to be a Legal Advice and Nothing on this Post is to be Construed a Legal Advice).

I. HOMEOWNERS EXPECTATIONS

A. Realistic Expectations – Homeowners Should Expect to See ALL Original Mortgage Closing Documents.

1. Keep the Home – at some point lender will in all probability be entitled to foreclose either for the full amount due, small reduction or large reduction
2. Short Sale – No Buyers/No Money
3. Modify Mortgage – No Mandatory Programs:

Right now there is no program available that will compel a lender to renegotiate a loan, and you cannot force a cram down in bankruptcy. The program Congress passed in July effective Oct. 1, 2008 is a voluntary lender program. In order to be eligible, one must live in the home and have a loan that was issued between January 2005 and
June 2007. The provisions was later amended during the meltdown to include struggling homeowners in past few years. Additionally, the homeowner must be spending at least 31% of his gross monthly income on mortgage debt. The homeowner can be current with the existing mortgage or in default, but either way the homeowner must prove that he/she will not be able to keep paying their existing mortgage and attest that it is not a deliberate default just to obtain lower payments.

All second liens must be retired or paid such as a home equity loan or line of credit, or Condo or Home Owner Ass’n lien. So if the homeowner has a 2nd mortgage, he is not eligible for the program until that debt is paid. And, the homeowner cannot take out another home equity loan for at least five years, unless to pay for necessary upkeep on the home. The homeowner will need approval from the FHA to get the new home equity loan, and total debt cannot exceed 95% of the home’s appraised
value at the time. This means that the homeowner’s present lender must agree to reduce his payoff so that the new loan is not greater than 95% of appraised value. For example, if the present loan in default is $200,000.00 but the home appraises for $150,000.00 the new loan cannot exceed a little over $142,000.00, and the present lender has to agree to reduce the mortgage debt to that amount. You can contact your
current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development: http://www.hud.gov/ As I pointed out above, this is a voluntary program, so the present lender must agree to rework this loan before things can get started.

Also, homeowners should contact the city in which they reside or county to see if they have a homeowner’s assistance program. West Palm Beach will give up to $10,000 to keep its residents from going into default.

Over the years, we have seen FANNIE MAE and FREDDIE MAC announced that they will set aside millions to rewrite mortgage terms so its homeowner can remain in their home. Given the outcome of numerous modification attempts and denials of loan modifications, I do not know whether the terms or conditions for the modification was for the benefit of the lender or the borrower, though any prudent person will conclude it is for the former.

Bank of America, which includes Countrywide, and JP Morgan Chase also announced earlier, that they will set aside millions to rewrite mortgage terms so its home mortgagors can remain in their homes.

4. Stay in the home and try to defeat the foreclosure under TILA RESPA and Lost Note, etc.

II. DEFENDING A MORTGAGE FORECLOSURE

A. Homeowners Should Prepare Themselves for Litigation. (Using Foreclosure Defense Package found at http://fightforeclosure.net

1. Homeowners needed for 4 Events
a. Answer Interrogatories, Request to Produce
b. Homeowner’s Deposition
c. Mediation – Homeowners should understand that mortgage cases like most cases have a high percentage of settling.
d. Trial

2. Cases move slowly even more now because of the volume of foreclosures and the reduction of court budgets.

3. Cases move on a 30/60/90 day tickler system – one side does something the other side gets to respond or sets a hearing.

4. If the Homeowner fails to do any of the above timely or fails to appear for any of the events, he/she may lose his case automatically.

5. Because of the way the system works the Homeowner may not hear from the court for several weeks or months – that does not mean that the court is ignoring the case – that is just how the system works but feel free to call or write and ask questions.

6. If you have a lawyers, keep in contact with the lawyer and advise of changes in circumstances/goals and contact info. If you are representing yourself keep in contact with the court clerk and docket sheet.

7. Home in places like Florida as well as other States should understand that a Foreclosure is – The legal mechanism by which the mortgage lender ends the “equity of redemption” by having a judge determine the amount of debt and a specific date, usually in 30 or 60 days to pay the money, and if not paid by that date, the judge allows the clerk to auction the property. Fla. Stat. §697.02, which changed the old English common law notion that the mortgage gave the lender an interest in the borrower’s land, makes the mortgage a lien against title. Fla. Stat. §45.0315 tells the mortgage lender that the borrower has the right to redeem the property after final judgement of foreclosure, until shortly after the clerk conducts the auction, when the clerk issues the certificate of sale. The client still has legal, recorded title to the property throughout the foreclosure process until the clerk issues the certificate of sale (ends redemption) then the certificate of title (transfers title) 10 days after the clerk’s sale if no objection to sale filed.

8. Deficiency – The judgement will determine the amount of the debt. A deficiency is the difference between the debt owed and the fair market value of the home at the date of the clerk’s sale.

9. Homeowners without Attorneys should knows that the complaint must be answered in 20 days or he/she could automatically lose, unless he/she either files a motion to dismiss with the court or files a motion for leave to extend time to answer “showing good cause” why the answer was not given when due. In either event, the motion needs to be filed before the due date.

B. Read the Summons Complaint, the Mortgage, Note and the Assignments.

1. Check the Summons for proper service and if not prepare a motion to quash.

2. The vast majority of foreclosure complaints are filed by foreclosure factories and will generally have 2 counts – reestablish a lost mortgage and note and foreclose. Fertile area for a motion to dismiss (see the sample motions to dismiss in the package at http://fightforeclosure.net)

3. Homeowners with the foreclosure defense package at http://fightforeclosure.net can be assured that he/she will find a basis to make a good faith motion to dismiss most of the form mortgage foreclosure complaints.

4. Homeowners should endeavor to set the motion to dismiss for hearing 30 days out or so. Otherwise, let the opposing counsel’s office set the hearing.

5. Cannot reestablish a negotiable instrument under Fla. Stat. §71.011 must be Fla. Stat. §673.3091 and person suing to foreclose must have the right to foreclose and reestablish when he files the lawsuit – post lawsuit assignments establish the lender did not own at time of suit unless pre-suit equitable assignment. See: Mason v. Rubin, 727 So.2d 283 (Fla. 4th DCA 1999); National Loan Invest. v. Joymar Ass.,
767 So.2d 549 (Fla. 3rd DCA 2000); State Street Bank v. Lord, 851 So.2d 790 (Fla. 4th DCA 2003). For an example of how far courts will go to find mortgages enforceable see: State Street Bank v. Badra, 765 So.2d 251 (Fla. 4th DCA 2000), Mtg. Elec. Regis. Sys. v. Badra, 4D07-4605 (Fla. 4th DCA 10-15-2008).

C. Answer Affirmative Defenses and Counterclaim

1. A general denial of allegations regarding the lost note is not enough. The foreclosure mill must specifically deny lost note allegations (see forms in the package at http://fightforeclosure.net).

2. Generally speaking Homeowners should be prepared to file a counterclaim with the affirmative defenses because the lender then cannot take a voluntary dismissal without court order and the
SOL (Statutes of Limitation) may expire for the TILA claims. You have more control over the suit, but now you must pay a filing fee for the counterclaim.

3. If Homeowners are not familiar with specific RESPA Yield Spread defense, they can review some of the articles in this blog because in 1995 or so FRB changed the regulations so that made the payment is not automatically a kickback for the referral of business (In my opinion this was the beginning of the mortgage mess we have now). Homeowners using Foreclosure Defense package found at http://fightforeclosure.net will find samples of well structured RESPA Yield Spread premium (YSP) defense within the package.

D. Discovery

1. In order to take more control over the case and shake up things from the beginning, homeowners using the Foreclosure Defense package at http://fightforeclosure.net should send out well constructed foreclosure Interrogatories and Request to Produce with the Answer. Homeowners in certain cases may also serve Notice of Taking P’s Deposition DT. See package for samples and for the wording. That will give Homeowners more control over the case, putting the Foreclosure Mill on its toes from the word go.

2. Usually the lenders firm will call and ask 3 things 1) “What do you really want – an extended sale date?” 2) “Can I have more time to answer discovery?” 3) “Can I have more time to find you a witness?” Answer to 1) “I really want to rescind the purported loan – do you want to agree to a rescission?” 2 & 3) “No problem as long as you
agree not to set any dispositive motion for hearing until a reasonable time after I get the discovery or take the deposition so that I can prepare and I do not incur an expedited deposition fee.”

3. Lender Depositions: There is rarely a need to actually depose the lender because their testimony rarely varies , and it can work to your disadvantage because if you actually take the pre-trial deposition for the lender or his servicing agent, you will have preserved the lender’s testimony for trial. If for some reason the lender cannot appear on the scheduled trial date, he will either take a voluntary dismissal or settle
the case. It is easier for Homeowners to win their cases or forced favorable settlements when the lender’s representative could not appear at the trial or meet up with the court deadlines.

4. Closing Agents depositions: Again, There is rarely a need to actually depose the closing because the testimony rarely varies and you will have preserved the testimony for trial. They either say: 1) “I do not remember the closing because I do hundreds and this was years ago, but it is my regular business practice to do A B and C and I followed my regular practice for this loan.” – the most credible and the usual
testimony; 2) 1) “I remember this closing and I gave all the required disclosures to the consumer and explained all the documents.” Not credible unless they tie the closing to an exceptional memorable event because the closing generally took place years and hundreds of closings earlier and you can usually catch them on cross “So name the next loan you closed and describe that closing” 3) 1) “I remember this closing and I gave the consumer nothing and explained nothing. Rare – though this has happened at one time. You do need the closing file so you can do a notice of production to non-party.

5. Mortgage Broker depositions: Again, there is rarely a need to actually depose the broker because the testimony rarely varies and you will have preserved the testimony for trial. They either say: 1) “I do not remember this borrower because I do hundreds and this was years ago, but it is my regular business practice to do A B and C and I followed my regular practice for this loan.” – the most credible and the usual
testimony; 2) 1) “I remember this borrower and I gave all the required disclosures to the consumer and explained all the documents.” Not credible unless they tie the borrower to an exceptional memorable event. 3) 1) “I remember this closing and I broke the mortgage brokerage laws and violated TILA. Rare – this has never
happened. You do need their application package so do a notice of production to nonparty.

6. Compare the documents in all of the closing packages: Lender’s underwriting, closing agent and mortgage broker. I have seen 3 different sets of documents. One in each package. The key is what was given to the Homeowner at the closing.

7. Homeowner’s deposition – very important if the case turns on a factual issue of what happened at the closing. Homeowner needs to be very precise and sure as to what occurred at the closing.

E. Motions to Strike

1. Lender’s counsel frequently moved to strike the defenses. These motions are generally not well taken, and simply prolong the case. See Response to Motion to Strike.

2. There are two rules for striking a party’s pleadings; one arises under Fla. R. Civ. P. 1.140(f), and the other arises under Fla. R. Civ. P. 1.150.

3. Under Rule 1.140(f): “A party may move to strike . . . redundant, immaterial, impertinent, or scandalous matter from any pleading at any time.” Fla. R. Civ. P. 1.140(f).

4. Under Rule 1.150, a party can move to strike a “sham pleading” at any time before trial. This rule requires the Court to hear the motion, take evidence of the respective parties, and if the motion is sustained, allows the Court to strike the pleading to which the motion is directed. The Rule 1.150(b) Motion to Strike as a sham must be verified and must set forth fully the facts on which the movant relies and may be supported by affidavit.

F. Lender’s Motions for Summary Judgment

1. The lender will no doubt file a motion for summary judgment, usually including the affidavit of a servicing agent who has reviewed the file, many times not attaching the documents that he is attesting are true and accurate. The court should rule that the affidavits are hearsay and lack a foundation or predicate because the affiant is summarizing the legal import of documents usually trust agreements and servicing agreements, without attaching copies. See another post in this Blog that deals with the Summary Judgment memorandum for the legal basis to object to the lender’s summary judgment.

III. TRUTH IN LENDING

A. Overview

1. Congress passed TIL to remedy fraudulent practices in the disclosure of the cost of consumer credit, assure meaningful disclosure of credit terms, ease credit shopping, and balance the lending scales weighted in favor of lenders. Beach v. Ocwen, 118 S.Ct.1408 (1998), aff’g Beach v. Great Western Bank, 692 So.2d 146,148-149 (Fla.1997), aff’g Beach v. Great Western, 670 So.2d 986 (Fla. 4th DCA 1996), Dove v. McCormick, 698 So.2d 585, 586 (Fla. 5th DCA 1997), Pignato v. Great Western Bank, 664 So.2d 1011, 1013 (Fla. 4th DCA 1996), Rodash v. AIB Mortgage, 16 F.3d 1142 (11th Cir.1994). {1}

2. TIL creates several substantive consumer rights. §1640(a)(1) gives consumers actual damages for TIL errors in connection with disclosure of any information. §1640(a)(2)(A)(iii) gives consumers statutory damages of twice the amount of any finance charge, up to $2,000.00 for errors in connection with violations of §1635 or §1638(a)(2) through (6), or (9), and the numerical disclosures, outside of the $100.00 error tolerance. See Beach, 692 So.2d p.148-149, Kasket v. Chase Manhattan Bank,
695 So.2d 431,434 (Fla.4 DCA 1997) [Kasket I,] Dove, p.586-587, Pignato, p.1013, Rodash, p.1144. {2} See also §1605(f)(1)(A). {3}

3. §1635(a) allows a consumer to rescind home secured non-purchase credit for any reason within 3 business days from consummation. If a creditor gives inaccurate required information, TIL extends the rescission right for 3 days from the date the creditor delivers the accurate material TIL disclosures and an accurate rescission notice, for up to three years from closing. Pignato, p.1013 (Fla. 4th DCA 1995) (“TILA permits the borrower to rescind a loan transaction until midnight of the third business day following delivery of all of the disclosure materials or the completion
of the transaction, whichever occurs last.”]. See also: Beach, cases, supra, Rodash, Steele v Ford Motor Credit, 783 F.2d 1016,1017 (11th Cir.1986), Semar v. Platte Valley Fed. S&L, 791 F.2d 699, 701-702 (9th Cir. 1986).

———————————————

{1} All 11th Circuit TIL decisions and pre- 11th Circuit 5th Circuit cases are binding in Florida. Kasket v. Chase Manhattan Mtge. Corp., 759 So.2d 726 (Fla. 4th DCA 2000) (Kasket, II) [11th Circuit TIL decisions binding in Florida]

{2} §1640’s last paragraph has the §1640(a)(2) damage limit: “In connection with the disclosures referred to in section 1638 of this title, a creditor shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 1635 of this title or of paragraph (2) (insofar as it requires a disclosure of the “amount financed”), (3), (4), (5), (6), or (9) of section of this title…”

{3} This subsection provides that numerical disclosures in connection with home secured loans shall be treated as being accurate if the amount disclosed as the finance charge does not vary from the actual finance charge by more than $100, or is greater than the amount required to be disclosed. See also Williams v. Chartwell Financial Services, Ltd., 204 F.3d 748 (7th Cir. 2000). (Over-disclosure can also be a violation under certain circumstances.)

———————————————-

4. HOEPA loans (Also called a §1639 or Section 32 loan.) TIL requires additional disclosures and imposes more controls on loans that meet either the “T-Bill Trigger” or “Points and Fees Trigger” set forth at §1602(aa). §1639, Reg Z 226.31 & Reg Z 226.32, require the creditor for a §1602(aa) loan to give additional early [3 days before consummation] disclosures to the consumer and prohibits loans from containing certain terms [i.e. a prohibition on certain balloon payments]. It also has
a special actual damage provision at §1640(a)(4). (HOEPA can make a lender a TIL creditor for the first HOEPA loan). (The trigger for Florida’s Fair Lending Act is based on the HOEPA triggers. This may affect a larger number of loans and may provided post 3 year rescission. See Fla. Stat. §494.00792(d)).

5. Zamarippa v. Cy’s Car Sales, 674 F.2d 877, 879 (11th Cir. 1982), binding in Florida under, Kasket II, hods: “An objective standard is used to determine violations of the TILA, based on the representations contained in the relevant disclosure, documents; it is unnecessary to inquire as to the subjective deception or misunderstanding of particular consumers.”

6. In 1995, Congress created a defensive right to rescind when a lender sues a consumer to foreclose the mortgage. See §1635(a) & (i)[1995], Reg. Z 226.23(a)(3) & (h) [1996]. The §1635(i) amendment triggers the consumer’s defensive right to rescind when the creditor overstates the amount financed by more than $35.00, or errs in the Notice of Right to Cancel form, and the claim is raised to defend a foreclosure. See also Reg Z 226.23(h).

7. Florida defers to the FRB’s interpretation of TIL and its own regulations. Beach, 692 So.2d p.149, Pignato, p.1013, Kasket, I p.434. The U.S. Supreme Court requires deference to the FRB’s interpretations of the Statute and its own regulations. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 560, 565-570 (1980). TIL is remedial, so courts expansively and broadly apply and interpret TIL in favor of the consumer.
Rodash, p. 1144; Schroder v. Suburban Coastal Corp., 729 F.2d 1371, 1380 (11th Cir. 1984); Kasket II, W.S. Badcock Corp. v. Myers 696 So.2d 776, p. 783 (Fla. 1st DCA 1996) adopting Rodash, p.1144: “TIL is remedial legislation. As such, its language must be liberally construed in favor of the consumer.”

8. Pignato, p. 1013 also holds: “Creditors must strictly comply with TILA. Rodash, 16 F.3d at1144; In re Porter, 961 F.2d 1066, 1078 (3d Cir. 1992). A single violation of TILA gives rise to full liability for statutory damages, which include actual damages incurred by the debtor plus a civil penalty. 15 U.S.C.A. §§1640(a)(1)(2)(A)(i). Moreover, a violation may permit a borrower to rescind a loan transaction, including a rescission of the security interest the creditor has in the borrower’s principal dwelling. 15 U.S.C.A. §§1635(a).” See also the Beach cases.
This is in harmony with W.S. Badcock, p. 779, which holds: “Violations of the TILA are determined on an objective standard, based on the representations in the relevant disclosure documents, with no necessity to establish the subjective misunderstanding or reliance of particular customers.”

B. Assignee Liability

1. §1641(a)(1) and §1641(e)(1)-(2) provides that assignees are liable for §1640(a) damages if the disclosure errors are apparent on the face of the disclosure statement and other documents assigned. Congress statutorily designated the TIL disclosure statement, the TIL notice of right to cancel, and any summary of the closing costs as documents assigned. See §1641(e)(2).

2. §1641(c) provides that assignees are liable for §1635 rescission regardless of the apparent on the face of the “documents assigned” standard for damages claims. Belini v. Washington Mut. Bank, FA, 412 F.3d 17, p. 28 (1st Cir. 2005).

3. You must make sure that you rescind as to the correct “creditor.” See: Miguel v. Country Funding Corp., 309 F.3d 1161 (9th Cir. 2002).

C. Right to Rescind

1. Each consumer with the right to rescind must receive one [1] copy of the correct TIL Disclosure Statement and two [2] copies of a correct Notice of Right to Cancel form. If not, the consumer can rescind for up to 3 years after closing. See: Reg Z 226.23(a)(3), fn 48; Beach v. Ocwen, 118 S.Ct.1408 (1998), aff’g Beach v. Great Western Bank, 692 So.2d 146,148-149 (Fla.1997), aff’g Beach v. Great Western Bank, 670 So.2d 986 (Fla. 4th DCA 1996); Rodash v. AIB Mortgage, 16 F.3d 1142
(11th Cr.1994); Steele v Ford Motor Credit, 783 F.2d 1016 (11th Cir.1986), all binding here under Kasket v. Chase Manhattan Mtge. Corp., 759 So.2d 726 (Fla. 4th DCA 2000) (11th Circuit cases on federal TIL issues are binding on Florida courts).

2. The error must be a “material error” which is defined at Reg Z 226.23 fn 48: “The term “material disclosures” means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total payments, the payment schedule, and the disclosures and limitations referred to in sections 226.32(c) and (d).”

3. A HOEPA loan requires additional disclosures 3 days before consummation. See: Reg Z 226.31(c)(1) (“The creditor shall furnish the disclosures required by section 226.32 at least three business days prior to consummation of a mortgage transaction covered by section 226.32.”). The failure to deliver the HOEPA forms is an additional TIL material disclosure which extends the right to rescind for violations. See: Reg Z 226.23(a)(3): “The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, [fn]48 whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation….” See also fn 48 above.

4. Florida’s Fair Lending Act is based on the HOEPA triggers and appears to adopt TIL right to rescind without the 3 year limit. See: Fla. Stat. §494.00792(d). This theory has not been tested in any appellate court.

5. Most creditor’s closing/underwriting files will have a signed acknowledgment that the consumer received 2 copies of the TIL notice of right to cancel. Under TIL 15 U.S.C. 1635(c) this creates a rebuttable presumption of receipt: “Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is
required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.” Once the consumer’s affidavit or interrogatory answer or deposition stares that the consumer did not receive the 2 notices, this rebuts the presumption of receipt in the acknowledgment and presents a question of fact for trial. See: Cintron v. Bankers Trust Company, 682 So.2d 616 (Fla. 2nd DCA 1996).

6. The critical issue is what did each consumer receive not what is in the creditor’s underwriting or closing file. Make sure that the TIL Right to Rescind form is correctly filled out and the loan closed on the date it purports to have closed. If the lender directs the consumer to deliver the notice of right to cancel form to a post office box, this should extend the right to rescind.

D. Material Errors

1. The TIL Disclosure Statement “Federal Box” will contain the following “material information”. These numbers are taken from the Norwest v. Queen Martin trial memorandum: {4}

Annual Percentage Rate Finance Charge Amount Financed
11.227% $176,073.12 $70,708.16

Total of Payments
$246,781.28

PAYMENTS: Your payment schedule will be:
Number of Payments Amount of Payments When Payments Are Due

Monthly beginning
359 685.52 10/01/99

1 679.60 09/01/29

————————————————

{4} The disclosures are interrelated. If one multiplies the monthly payment amounts by the number of payments, and adds the sums, this equals the total of payments. Adding the finance charge to the amount financed equals the total of payments. The annual percentage rate is the percent of these figures, based on 360 monthly payments, using either the American or actuarial method.

—————————————-

2. At the bottom of the TIL Disclosure Statement, usually just inside the bottom part of the federal box, you will see a place for the creditor to place an “X” next to: “‘e’ means an estimate;” and a second box to place an “X” next to: “all dates and numerical disclosures except the late payment disclosures are estimates.” Estimated disclosures violate TIL.

3. If no Reg Z 226.18(c) required Itemization of Amount Financed (not a material disclosure error) one “work backwards” to determine how the creditor arrived at the TIL disclosures. First, one must deduct the $70,708.16 “amount financed” from the face amount of the note. Lets assume this note was for a $76,500.00 loan. Therefore the creditor had to use $5,791.84 as the total of “prepaid finance charges.” In order
to arrive at the disclosed $70,708.16 “amount financed.” Then one must examine the HUD-1 charges to find the charges that equal the $5,791.84 “prepaid finance charges” to determine the items from the HUD-1 that the creditor included in the $5,791.84 prepaid finance charges to determine if $5,791.84 correct reflects all the prepaid finance charges. See: §1638(a)(2)(A); Reg Z 226.18(b): “The amount financed is calculated by: (1) Determining the principal loan amount or the cash price
(subtracting any downpayment); (2) Adding any other amounts that are financed by the creditor and are not part of the finance charge (usually not applicable); and, (3) Subtracting any prepaid finance charge.”

4. The Norwest/Martin Trial memo has a great deal of detail with respect to the specific charges and violations.

F. Truth in Lending Remedies

1. §1635(b) and Reg Z 226.23(d)(1-4) rescission; and, 2) §1640 damages.

2. Semar v. Platte Valley Federal S & L Ass’n, 791 F.2d 69 (9th Cir. 1986) is the leading case used by virtually all courts to impose TIL’s §1635(b) and Reg Z 226.23(d)(1-4) rescission remedy in a non-§1639, non-vesting case.

3. Semar, interpreted Reg Z 226.23(d)(1) “Effects of rescission: When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.” The Semar, Court accepted the consumer’s rescission formula under Reg Z 226.23(d)(1), added all the “finance charges” listed on the HUD-1, plus the 2 $1,000.00 maximum statutory damage awards ($1,000.00 for the initial error and $1,000.00 for the improper response to rescission, increased to $2,000.00 in 1995),
plus all the mortgage payments made, then deducted this sum from the face amount of the Semar, note to arrive at the net debt owed the creditor.

4. §1640(a)(2)(A)(iii) Statutory Damages $2,000.00 for initial errors and $2,000.00 for the improper response to rescission. See: 15 U.S.C. §1635(g); 15 U.S.C. §1640 (a)15 U.S.C. §1640(g); Gerasta v. Hibernia Nat. Bank, 575 F.2d 580 (5th Cir. 1978), binding in the 11th Circuit under Bonner. (TIL statutory damages available for initial TIL error and improper response to demand to rescind).

5. §1640(a)(1) Actual Damages for any errors: Hard to prove need to establish “detrimental reliance” on an erroneous disclosure.

6. §1640(a)(4) Enhanced HOEPA Damages: §1640(a)(4) enhances the damages: “in the case of a failure to comply with any requirement under section 1639 of this title, an amount equal to the sum of all finance charges and fees paid by the consumer, unless the creditor demonstrates that the failure to comply is not material.”

5. Equitable Modification under §1635(b) and Reg Z 226.23(d)(4). Williams v. Homestake Mortg. Co., 968 F.2d 1137 (11th Cir. 1992) allows for equitable modification of TIL, Burden on lender to prove facts that justify the equitable modification. If not, Florida courts must follow Yslas v. D.K Guenther Builders, Inc., 342 So.2d 859, fn 2 (Fla. 2nd DCA 1977), which holds:

“The statutory scheme to effect restoration to the status quo provides that within ten days of receipt of the notice of rescission the creditor return any property of the debtor and void the security interest in the debtor’s property. The debtor is not obligated to tender any property of the creditor in the debtor’s possession until the creditor has performed his obligations. If the creditor does not perform within ten days of the notice or does not take possession of his property within ten days of the
tender, ownership of the creditor’s property vests in the debtor without further obligation.” [emphasis added].

The 2nd District recently reaffirmed Yslas in Associates First Capital v. Booze, 912 So.2d 696 (Fla. 2nd DCA 2005). Associates, involved a partial §1635(b) and Reg Z 226.23(d)(1-4) rescission because the consumer refinanced with the same creditor, and the refinance included an additional advance of credit. In the Associates, the consumer can rescind only the additional advance. Important here, the Associates,
consumer argued, and the Court agreed that the lender failed to perform a condition precedent to equitably modify TIL by failing to respond to his rescission notice within 20 days, as required by §1635(b) and Reg Z 226.23(d)(2):

“If a lender fails to respond within twenty days to the notice of rescission, the ownership of the property vests in the borrowers and they are no longer required to pay the loan. See § 1635(b); Staley v. Americorp Credit Corp., 164 F. Supp. 2d 578, 584 (D. Md. 2001); Gill v. Mid-Penn Consumer Disc. Co., 671 F.Supp. 1021 (E.D.Pa. 1987). However, because 12 C.F.R. § 226.23(f)(2) provides only a partial right of rescission where there is a refinancing, when the Lender failed to respond to
the notice of rescission within twenty days, ownership of only the property subject to the right of rescission — the $994.01 loaned for property taxes — vested in the Borrowers without further obligation.” Associates, p. 698.

G. Truth in Lending Supplements State Remedies & Both Apply

1. Williams v. Public Finance Corp., 598 F.2d 349, rehearing denied with opinion at 609 F.2d 1179 (5th Cir. 1980), binding here under Bonner, holds that a consumer can get both TIL damages and usury damages because state usury laws and the Federal Truth in Lending Act provide separate remedies to rectify separate wrongs based on separate unrelated statutory violations. The 5th Circuit rejected the creditor’s “double penalty” argument by holding that if it accepted the argument, it would give special lenient treatment to the creditor when his loan violates 2 separate statutes, one state and one federal, designed to remedy 2 separate wrongs:

“Moreover, we eschew an analysis of these statutory cases limited by the
common law doctrines of compensation for breach of contract. These cases involve penal statutes, and we are compelled to enforce their clear and direct commands whether or not they seem to be overcompensating in a contract or tort analysis. There is nothing inherently wrong, excessive, or immoral in a borrower receiving two bounties for catching a lending beast who has wronged him twice — first, by sneaking up on him from behind, and then by biting him too hard. The private attorney general who exposes and opposes these credit wolves is not deemed unduly enriched when his valor is richly rewarded and his vendor harshly rebuked. Nor does the state’s punishment for the usurious bite interfere with Congress’s punishment for the wearing of sheep’s clothing.”

“We have come, or gone, a long way from Shakespeare’s ancient caution, “Neither a borrower, nor a lender be.” In today’s world borrowing and lending are daily facts of life. But that a fact becomes diurnal does not mean it has been cleansed of its dire potential. We still heed the Bard’s advice, but in our own modern way — by strict regulation of the strong and careful protection of the weak and unwary. While the well-intended efforts of our many sovereigns may at times sound more like discordant and competing solos than mellifluous duets, we, as judges, must restrain
our impulse to stray from the score.” Williams, 609 F.2d pg. 359-360.

In case the first opinion was unclear on this point, the Williams, rehearing opinion repeated and reaffirmed its “lending wolf” analysis:

“Noting that the effect of appellants’ argument was to ask for “special lenient treatment to lenders who violate two laws instead of just one,” we rejected the approach to the question proposed by the appellants and defined our inquiry in the following terms:

[W]e think the real question in this case is a relatively standard one of statutory interpretation. More specifically, we think the question is whether Congress intended that the TIL Act would apply to loans which violated state usury laws punishable by forfeiture. At the outset we note that no exception for such loans is made explicitly in the TIL Act. Moreover, since the Act is to be construed liberally to effect its remedial purposes, Thomas v. Myers-Dickson Furniture Co., 479 F.2d 740, 748 (5th
Cir. 1973), we are generally disinclined to read into the Act an implicit exception which benefits lenders at the expense of borrowers. However, the real test of whether this exception was intended or not must start with the question of whether it serves or disserves the purposes of the Act. In this analysis resides the real focus of our decision. The ILA and TIL Act provide separate remedies to rectify separate wrongs.
The ILA limits what a lender subject to its provisions can charge for the use of its money; the TIL Act provisions involved here are designed to penalize and deter an independent wrong arising from nondisclosure. [fn5] We did not believe, and do not believe, that it subserves the purposes of the TIL Act to read into it an implied exception for loans which violate unrelated state usury laws. As we have already said, we do not think it especially unfair or unjust to order two punishments for a
lender who violates two laws. And more to the point, we think it would be directly contrary to the purposes and policies of the TIL Act to excuse a violator from federal penalty simply because he is also liable for a state penalty, especially where that state penalty may often be less harsh than the federal penalty…….”

“…… Appellants petition for rehearing have taken offense at our characterization of lenders who violate the ILA as “credit wolves” and as wearers of “sheep’s clothing” when they also violate the disclosure provisions of the TIL Act. They suggest that such labels have obscured our analysis of the legal issues here. Such most certainly is not the case. Our analysis was and is based on our perception of the proper
construction of the federal and state policies, even though their meshing is not nearly as perfect as we and appellants could wish. Nonetheless, as we read the ILA and the TIL Act, appellants have violated both and are subject to the penalties of both. Although appellants’ predations may be technical and they may feel we have cried “wolf” too readily, the fact remains that as we read the statutes appellants are guilty of the violations charged.” Williams, 598 F.2d pg. 1181-1184.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

How Homeowners Can Effectively Use TILA in their Foreclosure Defense

11 Wednesday Jun 2014

Posted by BNG in Case Laws, Case Study, Federal Court, Foreclosure Defense, Fraud, Judicial States, Legal Research, Mortgage Laws, Non-Judicial States, Pro Se Litigation, Your Legal Rights

≈ Leave a comment

Many homeowners often wonder what is TILA and how it applies to them.

The Truth in Lending Act (TILA) (Subject to Update)

This post is designed to enlighten homeowners about the benefits of TILA in their foreclosure defense.

Some of the things homeowners should be aware of is that, Under TILA, a debtor has a right of rescission as to nonpurchase residential
mortgages that lasts for three days after completion of the transaction or delivery of the disclosure, which ever occurs later. It is required that each debtor receives two copies of the notice of their right of rescission. According to Rodriguez v. U.S. Bank (In re Rodriguez), 278 B.R. 683 (Bankr. D.R.I. 2002), the date of the expiration of the right of
rescission must be filled in. If the notices are not given or other material disclosures are not made, the rescission right is extended from three days to three years from the completion of the transaction. See In re Lombardi, 195 B.R. 569 (Bankr. D.R.I. 1996).

Any extension of the right of rescission beyond the three-year period provided by TILA must come from state law. The Supreme Court in Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998), held that federal law does not provide an extension of more than three years, and that equitable tolling does not apply because the three year limit is a statute of repose, not a statute of limitations. Some states allow rescission in recoupment beyond the TILA’s three-year extension period. See, Fidler v. Cent. Coop.
Bank, 336 B.R. 734 (Bankr. D. Mass. 1998)

TILA §1635(b) provides a three-step rescission process:

1. The debtor must first give notice of the rescission. By invoking rescission, the debtor is relieved of liability for any finance or other charge, and the security interest becomes void.

2. The creditor must return any money paid or property given, including the down payment.

3. The debtor must tender any property received or the value of it.

Courts have considerable discretion concerning the three-step process, and are able to circumvent the process if they see fit. See, Williams v. BankOne, N.A. (In re Williams), 291 B.R. 636 (Bankr. E.D. Pa. 2003); Bell v. Parkway Mortgage, Inc. (In re Bell), 309 B.R. 139, 167 (Bankr. E.D. Pa. 2004).

In the event a court requires that the principal debt be repaid in Chapter 13 bankruptcy, the rescinding borrower/debtor still receives a considerable benefit. In this case, the creditor must reduce the obligation by the amount the borrower has paid through any down payment, closing costs, insurance premiums and by the amount of the finance charges. The obligation to repay only the principal over the life of a Chapter 13 plan is an unsecured claim.

TILA § 1640(a) provides for damage actions for violations of its requirements. In an individual action relating to a closed-end credit transaction secured by real estate or a dwelling, statutory damages of not less than $200 and not greater than $2000 are recoverable. Damages can also be recovered where rescission is available. In cases
dealing with personal property loans, although rescission is not available, the statutory damages are twice the finance charge, with a minimum of $100 and a maximum of $1000. See, Koons Buick Pontiac GMC, Inc. v. Nigh, 125 S. Ct. 460 (2004).

TILA § 1640(e) actions for actual and statutory damages are subject to a one year statute of limitations, measured from the occurrence of the violation. This section also states it, “does not bar a person from asserting a violation of this title in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such
action, except as otherwise provided by State Law.”

Courts recognize that debtors in bankruptcy can assert damages in recoupment by objecting to a creditor’s proof of claim. See, In re Coxson, 43 F.3d 189 (5th Cir. 1995); Roberson v. Cityscape Corp., 262 B.R. 312 (Bankr. E.D. Pa. 2001). Unlike the three-year right of rescission, the statute of limitations for TILA damage actions can be equitably tolled. Fraudulent concealment of a TILA violation is a basis for tolling the
one-year statute of limitations, however, mere failure to make disclosures is not enough. The consumer must prove the creditor concealed the violation and that the consumer exercised due diligence to discover the facts giving rise to the claim. See, Evans v. Rudy-Luther Toyota, Inc., 39 F. Supp. 2d 1177 (D. Minn. 1999).

The Truth in Lending Act requires disclosure of credit terms, applies to most extensions of consumer credit and frequently apply to restructured loans that meet the definition of a refinancing under the Act and Regulation Z. The Truth in Lending Act offers actual damages, statutory damages for some violations, and attorney’s fees. For second mortgage, home equity loans, and some other transactions secured by home,
rescission may be available.

– Citation: 15 U.S.C. §1601, et seq.
12 C.F.R- Part 226 (Regulation Z)

– Liable Parties: Creditor (generally the original lender) Assignee, if violation “apparent on face” of documents

– Actionable Wrongs: Failure to disclose credit information or cancellation
rights

– Remedies: Rescission, unless transaction was for purchase or
construction of home, Actual damages, Statutory damages up to $2,000 (SEE UPDATE PER SUPPLEMENT), Attorney fees

– Limitations: 1 year to rescind under TILA, though limit does not apply to recoupment under state law
1 year to bring damages claim
3 year limitation if used defensively by way of recoupment,
unless effectively brought as a DUTPA claim

Matthews v. New Century Mortgage Corp., 185 F. Supp. 2d 874 (S.D. OH 2002). (An opinion which includes the facts and claims for a typical predatory lending case involving elderly homeowners. Claims include descriptions of TILA, HOEPA, Equitable Tolling, FHA, ECOA, Conspiracy, Fraud, Unconscionability, and Ohio’s Rico Statute.)

Anderson v. Frye, 2007 U.S. Dist. LEXIS 20935. Plaintiff must show each of the following: (1) that she is a member of a protected class; (2) that she applied for and was qualified for loans; (3) that the loans were given on grossly unfavorable terms; and (4) that the lender continues to provide loans to other applicants with similar qualifications,
but on significantly more favorable terms. Citing Matthews,.

In re Nat’l Century Fin. Enters., Inv. Litig., Fed. Sec. L. Rep. (CCH) P94,314 (May 2007) “[W]hile Plaintiff is required to prove the existence of some unlawful act independent of the civil conspiracy itself, that unlawful act does not need to be committed by each of the alleged co-conspirators.” Citing Matthews,.

Regulation Z Sec. 226.20 Subsequent disclosure requirements

(a) Refinancings. A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer. A refinancing is a new transaction requiring new disclosures to the consumer. The new finance charge shall include any unearned portion of the old finance charge that is not credited to the existing obligation. The following shall not be treated as a refinancing:

(1) A renewal of a single payment obligation with no change in the original terms.

(2) A reduction in the annual percentage rate with a corresponding change in the payment schedule.

(3) An agreement involving a court proceeding.

(4) A change in the payment schedule or a change in collateral requirements as a result of the consumer’s default or delinquency, unless the rate is increased, or the new amount financed exceeds the unpaid balance plus earned finance charge and premiums for continuation of insurance of the types described in Sec. 226.4(d).

(5) The renewal of optional insurance purchased by the consumer and added to an existing transaction, if disclosures relating to the initial purchase were provided as required by this subpart.

Commentary to Section 226.20 Subsequent Disclosure Requirements

Paragraph 20(a) Refinancings.

1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties’ contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to
the consumer or on the consumer’s behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one.

– Changes in the terms of an existing obligation, such as the deferral of individual installments, will not constitute a refinancing unless accomplished by the cancellation of that obligation and the substitution of a new obligation.

– A substitution of agreements that meets the refinancing definition will require new disclosures, even if the substitution does not substantially alter the prior credit terms.

1. Annual percentage rate reduction. A reduction in the annual percentage rate with a corresponding change in the payment schedule is not a refinancing. If the annual percentage rate is subsequently increased (even though it remains below its original level) and the increase is effected in such a way that the old obligation is satisfied and
replaced, new disclosures must then be made.

2. Corresponding change. A corresponding change in the payment schedule to implement a lower annual percentage rate would be a shortening of the maturity, or a reduction in the payment amount or the number of payments of an obligation. The exception in §226.20(a)(2) does not apply if the maturity is lengthened, or if the payment
amount or number of payments is increased beyond that remaining on the existing transaction.

Court agreements. This exception includes, for example, agreements such as reaffirmations of debts discharged in bankruptcy, settlement agreements, and post judgment agreements. (See the commentary to §226.2(a)(14) for a discussion of court approved agreements that are not considered “credit.”)

Workout agreements. A workout agreement is not a refinancing unless the annual percentage rate is increased or additional credit is advanced beyond amounts already accrued plus insurance premiums.

Insurance renewal. The renewal of optional insurance added to an existing credit transaction is not a refinancing, assuming that appropriate Truth in Lending disclosures were provided for the initial purchase of the insurance.

This regulation limits refinancing to transactions in which the entire original obligation is extinguished and replaced by a new one. Redisclosure is no longer required for deferrals or extensions.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

What Every Homeowner Should Know About Fair Debt Collection Practices Act (FDCPA)

11 Wednesday Jun 2014

Posted by BNG in Case Laws, Case Study, Federal Court, Foreclosure Defense, Judicial States, Mortgage Laws, Non-Judicial States, Your Legal Rights

≈ Leave a comment

The Fair Debt Collection Practices Act (FDCPA) provides two ways to stop a
debt collector from calling a consumer:

1. If the consumer notifies the debt collector in writing that the consumer refuses to pay the debt or that the consumer wishes the collector to stop calling, the collector must cease calling after one final communication. 15 USC § 1692c(c).

2. If a debt collector knows that the consumer is represented by an attorney and knows or can readily ascertain the attorney’s name and address, the debt collector may not communicate with the consumer unless the attorney fails to respond to communications within a reasonable time. § 1692c(a)(2).

The FDCPA cannot be used to stop direct collections from creditors because it is applicable only to third-party debt collectors.

The FDCPA does not apply to creditors collecting debts on their own behalf, except if they use a name other than their own to do so. “Debt collector” is defined in §1692a(6) as a person who is “collecting on behalf of another” and who “regularly” collects or attempts to collect debts. Lawyers often come under this definition of debt collector. The Supreme Court in Heintz v. Jenkins, 514 U.S. 291 (1995), held that an attorney who regularly uses litigation to collect consumer debts on behalf of a client is a debt collector, subject to the FDCPA. Therefore, lawyers who bring suits on behalf of clients against consumers, seeking payment of debts, need to adopt practices that comply with the FDCPA and this includes “appearance” attorneys.

Section 1692g requires that a debt collector send a written “validation” notice along with the debt collector’s initial communication to the consumer. The notice must contain the following:

– the amount of the debt;
– the name of the creditor;
– a statement that unless the consumer disputes the validity
of the debt within 30 days of receipt of the notice it will be
assumed to be valid, and
– information that verification of the debt will be obtained if
the consumer disputes it.

Debt collectors must convey the validation notice in a legible manner that will be noticed.

Any debt collector that fails to comply with any FDCPA provisions is liable to the consumer for any actual damages and for up to $1000 in statutory damages. 15 U.S.C. § 1692k(a)(1)-(2). The consumer may recover the costs of the action and a reasonable attorney’s fee as determined by the court. Actual damages include compensation for emotional distress. State law requirements for recovery of negligent or intentional infliction of emotional distress are inapplicable. See Maxwell v. Fairbanks Capital Corp., 281 B.R. 101 at 118 (noting that the appropriate standard for judging unfairness of debt collection practices is from the perspective of “the least sophisticated debtor,” suggesting that damages for subjectively-experienced emotional distress could be recoverable even if that distress is greater than what an ordinary debtor might experience).

A debt collector is, “any person who uses an instrument of interstate
commerce or mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). Repossession and the sale of personal property is not a debt collection activity under the FDCPA. Likewise, with respect to non-judicial foreclosure of security interests in houses. See, Bergs v. Hoover, Bax & Slovacek, LLP, 2003 U.S. Dist. LEXIS 16827, at 1 (N.D. Tex. Sept. 24, 2003); Beadle v. Haughey, 2005 WL 300060, 4 (D.N.H. Feb. 9, 2005) It is not clear whether foreclosing on a mortgage constitutes debt collecting activity under the FDCPA. Id. at 4. However, the most recent case to discuss whether proceeding in rem is debt collecting and subject to the FDCPA seems to suggest it is.
Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227 (3d Cir. 2005). In Piper, the law firm subjected itself to the FDCPA by attempting to collect a personal liability and requesting payment to be made directly to the firm instead of to the city. Accordingly, the court stated that “the issue for decision is whether PLA’s communications to Piper were communications by a ‘debt collector’ with a ‘consumer’ in ‘connection with the collection
of a [debt].’” Id. at 232.

The Seventh Circuit determined that a loan servicer was not a debt collector under the FDCPA because it was seeking payment currently due under a superseding agreement. Bailey v. Security Nat’l Servicing Corp., 154 F.3d 384 (7th Cir. 1998).

When Homeowners good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

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

≈ 1 Comment

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…

_________________________________

# 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#.

_____________________________

# 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).

______________________________

# 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.

_____________________________

# 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.

________________________

# 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)#.

_____________________________

# 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.

_______________________________

# 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.

___________________________

# 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#.

_________________________

# 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#.

____________________________

# 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).

____________________________

# 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).

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 Must Know About Appealability and Reviewability of Court Orders and Judgments

16 Thursday Jan 2014

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

≈ Leave a comment

This Post is to guide Homeowners in deciding whether to appeal their cases to the higher courts upon judgment or order.
A. Definitions

The concepts of appealability and reviewability are constitutional limitations on the Court’s power to hear cases. More precisely, appealability rules act to limit the kinds of cases which may be heard by the Court of Appeals. Reviewability rules, on the other hand, limit the issues which the Court may determine once the case is before the Court. Article VI, § 3(b) of the State Constitution prescribes what kinds of orders are appealable to the Court, and article VI, § 3(a) states that in most cases “the jurisdiction of the Court of Appeals shall be limited to the review of questions of law.”

B. Appealability

In addition to the jurisdictional requirements discussed above for appeals as of right and motions for leave to appeal, certain other appealability requirements must be met.

1. Appropriate Court

Action must originate in an appropriate court. For example, the Court lacks jurisdiction to entertain a motion for leave to appeal from an order of the Appellate Division where the appeal to that court was from a judgment or order entered in an appeal from a third court (Matter of Thenebe v Ansonia Assocs., 89 NY2d 858). This jurisdictional problem will arise when an action originates in a court other than Supreme Court, County Court, Surrogate’s Court, Family Court, Court of Claims or an administrative agency or an arbitration. The motion will be dismissed regardless of whether the Appellate Division order is final.

Note: The Court does not have jurisdiction to entertain a motion for leave to appeal from a determination of a court other than the Appellate Division, except in the circumstances specified in CPLR 5602(a)(1)(ii). Regarding appeals as of right, see CPLR 5601.

2. Aggrievement

a. CPLR 5511 states that only an aggrieved party may appeal (see, Hecht v City of New York, 60 NY2d 57, 61). A party may appeal if the order appealed from does not grant complete relief to it. A party which is granted complete relief but is dissatisfied with the court’s reasoning is not aggrieved within the meaning of CPLR 5511 (see, Matter of Sun Co. v City of Syracuse Indus. Dev. Agency, 86 NY2d 776; Parochial Bus Sys. v Board of Educ., 60 NY2d 539, 545).

b. No appeal lies from an Appellate Division order dismissing an appeal from a determination entered upon a default judgment (CPLR 5511; Matter of Lizette Patricia C., 98 NY2d 688).

c. Where the Appellate Division reverses a trial court’s judgment and orders a new trial limited to the issue of damages unless plaintiff stipulates to a reduction of damages, and plaintiff so stipulates, plaintiff is not aggrieved by the Appellate Division order (see, Whitfield v City of New York, 90 NY2d 777, 780 n *; see also, Smith v Hooker Chem. & Plastics Corp., cross mot for lv dismissed 69 NY2d 1029). Similarly, where the Appellate Division reverses and grants a new trial on the issue of damages unless defendant stipulates to an increase in damages and defendant stipulates, defendant’s attempt to appeal to the Court and to argue liability issues will be dismissed for lack of aggrievement (see, Whitfield, supra; see also, Sharrow v Dick Corp., mot to dismiss appeal granted 84 NY2d 976). Note that a party who, as a result of a conditional order, stipulates at the trial or appellate court to a different amount of damages in lieu of a new trial on a cause of action forgoes review of other issues raised by that order, including those pertaining to any other cause of action and, therefore, is not a party aggrieved (see, Batavia Turf Farms v County of Genesee, lv dismissed 91 NY2d 906). Only the non-stipulating party may appeal or move for leave to appeal (Whitfield, supra).

3. Finality — covered in detail in Section VI of this outline.

4. Miscellaneous Appealability Problems

a. Dual Review — Where the same party both appeals to the Appellate Division and appeals to the Court of Appeals, the appeal to the Court will be conditionally dismissed. Where the same party both appeals to the Appellate Division and moves for leave to appeal to the Court of Appeals, the motion will be dismissed outright. Dual review is generally not permitted (Parker v Rogerson, 35 NY2d 751, 753; see also, CBS Inc. v Ziff Davis Pub., lv dismissed 73 NY2d 807). However, where different parties pursue different avenues of appeal or motion before the Court will be permitted to continue (Defler Corp. v Kleeman, 18 NY2d 797).

b. Appealable paper — An appeal will be dismissed where the improper paper is sought to be appealed.

i. No order or judgment — Where appellant/movant seeks to appeal from something other than an order or judgment, the appeal/motion will be dismissed (Matter of Sims v Coughlin, appeal dismissed 86 NY2d 776 [decision]; Matter of Abdurrahman v Berry, lv dismissed 73 NY2d 806 [letter]).

ii. Subsequent Supreme Court order or judgment — CPLR 5611 reads in part “If the Appellate Division disposes of all the issues in the action its order shall be considered a final one, and a subsequent appeal may be taken only from that order and not from any judgment or order entered pursuant to it” (see, American Acquisition Co. v Kodak Electronic Printing Sys., 87 NY2d 1049).

iii. Order of individual Appellate Division Justice — No appeal lies from an order of an individual Justice of the Appellate Division (People ex rel. Mahler v Jablonsky, appeal dismissed 82 NY2d 919).

iv. The finality of an Appellate Division order dismissing an appeal to that court is determined by an examination of the finality of the underlying order (Langeloth Found. v Dickerson Pond Assocs., lv dismissed 74 NY2d 841).

v. No civil motion for leave to appeal or appeal as of right lies directly from the order of the Appellate Term of Supreme Court (Williamson v Housing Preservation and Dev. of City of New York, lv dismissed 82 NY2d 919).

c. Dismissal of Prior Appeal for Failure To Prosecute — A prior dismissal of an appeal for failure to prosecute is a determination on the merits and acts as a bar to a subsequent appeal raising the issues that could have been raised on the prior appeal (see, Bray v Cox, 38 NY2d 350). Thus, the subsequent motion/appeal may be dismissed (see, id.; compare Rubeo v National Grange Mut. Ins. Co., 93 NY2d 750; Faricelli v TSS Seedman’s, 94 NY2d 772 [Appellate Division has discretion to entertain appeal notwithstanding dismissal of prior appeal for failure to prosecute]).

d. Criminal Appeals — Appeals in criminal cases must be taken pursuant to the Criminal Procedure Law, not CPLR 5601 or 5602 (Matter of Newsday, Inc. 3 NY3d 651 [newspaper’s motion to intervene and obtain access to record in criminal case]; People v Blake, appeal dismissed 73 NY2d 985 [CPL 450.15, 460.15 application]; People v Dare, appeal dismissed 74 NY2d 707 [application for writ of error coram nobis]).

e. Corporation Appearance — CPLR 321(a) dictates that a motion or appeal by a corporate party must be filed by an attorney.

f. Mootness — Where the issues presented are no longer determinative of a live controversy, the Court will not entertain an appeal or motion for leave to appeal. The Court cannot entertain the motion or appeal because it cannot give advisory opinions (see, Matter of Hearst Corp. v Clyne, 50 NY2d 707, 713-714). However, the Court may entertain an appeal or motion when each of the three prongs of the mootness exception is satisfied: “(1) a likelihood of repetition * * *; (2) a phenomenon typically evading review; and (3) a showing of significant or important questions not previously passed on, i.e. substantial and novel issues” (id. at 714-715).

C. Reviewability

Once it is determined that an order is appealable, a litigant must consider which issues and orders that arose in the litigation are reviewable by the Court of Appeals.

1. Preservation — Issues Reviewable

a. The Court of Appeals’ power to review lower court rulings made on motions, applications and points of evidence is, in part, limited by statutes and case law requiring that appropriate objections be registered below as a prerequisite to appellate review (see, CPLR 4017, 4110-b and 5501[a][3] and [4]). The Court will, on its own, determine whether an issue has properly been preserved below, whether or not the parties raise the question of preservation (see, Halloran v Virginia Chems., 41 NY2d 386, 393). Counsel bears the responsibility of showing the Court where each issue raised has been preserved in the record.

b. Differences in Appellate Division and Court of Appeals review

The Appellate Division may reach questions of trial error, even if unpreserved, in an exercise of its “interest of justice” jurisdiction (see, Martin v City of Cohoes, 37 NY2d 162, rearg denied 37 NY2d 817, on remand 50 AD2d 1035, appeal dismissed 39 NY2d 740, lv denied 39 NY2d 910). The Court of Appeals, on the other hand, generally may only review questions of law and, therefore, may not review unpreserved error even if the Appellate Division has chosen to do so (see, Brown v City of New York, 60 NY2d 893, 894).

c. Preservation of legal issues and theories

i. As a general matter, appellate courts are reluctant to review legal arguments raised for the first time on appeal. Several policy reasons underlie this rule, such as avoiding unfairness to the other party, giving deference to the lower courts and encouraging the proper administration of justice by demanding an end to litigation and requiring the parties and trial courts to focus the issues before they reach the Court of Appeals (Bingham v New York City Trans. Auth., 99 NY2d 355, 359 [2003]).

Under appropriate circumstances, however, the Court of Appeals may entertain new legal arguments and theories raised on appeal. Those very limited circumstances include: (1) new arguments based on a change in statutory law while the appeal is pending (see, Post v 120 East End Ave. Corp., 62 NY2d 19, 28-29); (2) where the new argument could not have been obviated or cured by factual showings or legal countersteps had the arguments been tendered below (People ex rel. Roides v Smith, 67 NY2d 899, 901); (3) questions of pure statutory interpretation (Matter of Richardson v Fiedler Roofing, 67 NY2d 246, 250). These “exceptions” are narrowly construed.

ii. The general rule requires that constitutional questions be raised at the first available opportunity as a prerequisite to review in the Court of Appeals (see, e.g., Matter of Barbara C., 64 NY2d 866, 868). There is some indication that the Court may make an exception to this doctrine and examine a constitutional issue raised for the first time in the Court of Appeals if the issue implicates grave public policy concerns (see, Park of Edgewater v Joy, 50 NY2d 946, 949, citing Massachusetts Natl. Bank v Shinn, 163 NY 360, 363).

d. Preservation in the administrative agency context

The Court’s reluctance to review new legal arguments is equally applicable in the administrative agency context for policy reasons similar to those discussed above. Thus, arguments which were not raised by a party at the administrative level are considered unpreserved and not reviewable by the Court of Appeals, subject to very limited exceptions (see, Matter of Crowley v O’Keefe, mot to dismiss appeal granted 74 NY2d 780; Matter of Samuels v Kelly, lv denied 73 NY2d 707).

2. CPLR 5501(a) — Review of Prior Nonfinal Orders and Determinations

a. CPLR 5501(a) provides that an appeal from a final judgment brings up for review, among other things:

i. any nonfinal judgment or order which necessarily affects the final judgment, including any which was adverse to the respondent on appeal from the final judgment and which, if reversed, would entitle the respondent to prevail in whole or in part on that appeal (CPLR 5501[a][1]),

ii. any order denying a new trial or hearing which was not previously reviewed by the court to which the appeal was taken (CPLR 5501[a][2]), and

iii. any ruling to which the appellant objected or had no opportunity to object or which was a refusal or failure to act as requested by the appellant, any charge to the jury, or failure to charge as requested by the appellant, to which the appellant objected (CPLR 5501[a][3]).

b. Note that CPLR 5501(a)(1), which applies to prior nonfinal orders and judgments, contains the “necessarily affects” requirement. CPLR 5501(a)(3), which applies to trial rulings, however, does not.

c. For an in-depth discussion of the “necessarily affects” requirement, see Section VII of this outline.

3. Scope of Review

Once it is determined which orders, determinations, and issues are reviewable, the scope of the Court’s review must be considered.

a. Limited to questions of law

As noted earlier, the State Constitution limits the Court’s review powers to questions of law. Questions of fact are not reviewable except in:

i. death penalty cases (CPL 470.30[1]);

ii. Commission on Judicial Conduct matters (see, e.g., Matter of Edwards, 67 NY2d 153);

iii. cases where the Appellate Division reverses or modifies and finds new facts, in which case the Court’s review power is limited as discussed further below (CPLR 5501[b]); and

iv. defamation cases involving a public figure defendant — where the issue concerns whether plaintiff has proven the essential element of actual malice, the Court has a constitutional duty to review the evidence and to “exercise independent judgment to determine whether the record establishes actual malice with convincing clarity” (Prozeralik v Capital Cities Communications, 82 NY2d 466, 474-475, quoting Harte-Hanks Communications v Connaughton, 491 US 657, 659).

b. Questions that are never reviewable

i. An Appellate Division determination whether the trial judge correctly decided a CPLR 4404(a) motion to set aside the verdict as “contrary to the weight of the evidence” is not reviewable (Levo v Greenwald, 66 NY2d 962; Gutin v Frank Mascali & Sons, Inc., 11 NY2d 97, 98-99 [emphasis added]).

However, where a jury verdict has been set aside on the ground that, as a matter of law, the verdict is not supported by sufficient evidence, that determination is reviewable. The relevant inquiry is whether there is any “valid line of reasoning and permissible inferences which could possibly lead rational [people] to the conclusion reached by the jury on the basis of the evidence presented at trial” (Cohen v Hallmark Cards, 45 NY2d 493, 499). Where it is not clear from the Appellate Division writing whether the Appellate Division has set aside a verdict on sufficiency of evidence or weight of evidence grounds in a jury tried case, examine the court’s corrective action. New trial ordered — weight; dismissal of complaint — sufficiency (see, id. at 498). The foregoing analysis cannot be used in bench trial cases because the Appellate Division can render judgment for the appealing party as a matter of fact without the need for a new trial. When, in a jury case, the Appellate Division reverses a judgment entered on a plaintiff’s verdict, on both sufficiency and weight of the evidence grounds, the Court can review whether the legal sufficiency ruling was correct. If the Court disagrees with the Appellate Division and concludes that the verdict is supported by legally sufficient evidence, the Court cannot reinstate the judgment entered on the verdict; instead, it must order a new trial because it cannot disturb the Appellate Division’s weight of evidence determination (Sage v Fairchild-Swearingen, 70 NY2d 579, 588).

ii. A determination of excessiveness (or inadequacy) of the jury’s verdict (Rios v Smith, 97 NY2d 647, 654; Woska v Murray, 57 NY2d 928; Zipprich v Smith Trucking Co., 2 NY2d 177, 188).

iii. An Appellate Division determination to reverse a judgment in a civil action on the basis of unpreserved legal error (Brown v City of New York, 60 NY2d 893). The Court of Appeals has no power to review either the unpreserved error or the Appellate Division’s exercise of discretion in reaching the issue (see, Elezaj v Carlin Constr. Co., 89 NY2d 992, 994).

c. Limited Review

i. Findings of fact that are affirmed by the Appellate Division are only reviewable to determine if there is evidence in the record to support them (Cannon v Putnam, 76 NY2d 644, 651; Morgan Servs. v Lavan Corp., 59 NY2d 796, 797).

ii. In situations where the Appellate Division reverses or modifies and expressly or impliedly finds new facts, the Court of Appeals can determine which of the findings more nearly comports with the weight of the evidence (CPLR 5501[b]; Matter of Y.K., 87 NY2d 430, 432; Loughry v Lincoln First Bank, N.A., 67 NY2d 369, 380).

iii. Provided the lower courts had the power to exercise discretion (Brady v Ottaway Newspapers, 63 NY2d 1031), the Court of Appeals will not interfere with the exercise of that discretion absent an abuse (Herrick v Second Cuthouse, 64 NY2d 692). However, an issue of law will be presented where the Appellate Division in exercising its discretion expressly fails to take into account all the various factors that are properly entitled to consideration (Varkonyi v Varig, 22 NY2d 333, 337). In such cases, the Court can set out the proper factors and, if judgment cannot be rendered as a matter of law, remit the case to the Appellate Division to exercise its own discretion on the basis of all the relevant factors (id. at 338).

Consider these facts: The federal district court grants the defendant’s motion to dismiss and states that the court may amend its order with a more specific statement of grounds for its decision.
However, the court never amends its order. Is the order appealable?
No, answered the 9th U.S. Circuit Court of Appeals in National Distribution Agency v. Nationwide Mutual Insurance Company, 117 F.3d 432 (9th Cir. 1997). The court said: “A district court ruling is not final if the court reserves the option of further modifying its ruling.” Therefore, the plaintiff’s appeal is dismissed.

This is a specific application of the general rule that to invoke federal-appellate jurisdiction, the appellant must timely appeal from an appealable judgment. Price v. Seydel, 961 F.2d 1470, 1473 (9th Cir. 1992). Stating that rule is simple. Applying it, however, presents formidable challenges for the appellate practitioner. Virtually every aspect of the rule is subject to interpretation and debate, and there is little leeway for error. Had the plaintiff in National not appealed, and the order later was deemed a final judgment, the plaintiff’s opportunity for appellate review would have been lost.

In determining whether a judgment or an order is appealable, the practitioner should consider
the following issues:

Is the challenged judgment or order appealable by statute?
Federal appeals courts (other than the Federal Circuit, which has unique jurisdiction) have jurisdiction of appeals from “all final decisions of the district courts.” 28 U.S.C. Section 1291. In addition, they have
jurisdiction over appeals from specified interlocutory orders in injunction, receivership and admiralty cases. 28 U.S.C. Section 1292(a). Appellate courts also have discretion to hear appeals from interlocutory orders when the district court determines, in its discretion, that the order involves a controlling question of law and immediate appeal may materially advance the ultimate termination of the litigation. 28 U.S.C. Section 1292(b).

When a case involves more than one claim or multiple parties, the district court also has the option of entering judgment on all or some of the claims or parties. That judgment is immediately appealable if the district court expressly determines there is no just reason for delay. Fed. R. Civ. P. 54(b).

If the appeal is from a judgment, is the judgment final?
For a judgment to be final — absent any of the exceptions noted above — it must end the litigation on the merits for all claims and all parties.
FirsTier Mortg. Co. v. Investors Mortg. Ins. Co., 498 U.S. 269, 273-74
(1991). For example, a judgment is not final if the court has yet to resolve a claim for prejudgment interest. Pace Communications Inc. v. Moonlight Design Inc., 31 F.3d 587, 591 (7th Cir. 1994). On the other hand, a judgment is final even though the court has not yet determined costs. Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202 (1988).

Moreover, the court’s ruling itself is not an appealable final judgment. The clerk is supposed to enter judgment as a separate document. Fed. R. Civ. P. 58. The mere fact that the court added a seemingly final and dispositive phrase such as “judgment accordingly” to its findings of fact and conclusions of law does not make the order a final judgment.

Whether a ruling is final depends ultimately on its substance. Thus, a ruling entitled a “judgment” may not be final for purposes of appeal where further issues remain to be resolved. Zucker v. Maxicare Health Plans Inc., 14 F.3d 477, 483 (9th Cir. 1994). But a ruling entitled an
“order” may be a final judgment for purposes of appeal where there is no substantive issue left for the court to resolve. United States v. Lee, 786 F.2d 951, 955-56 (9th Cir. 1986).

Although the appeals courts will apply a common-sense interpretation to the finality requirement, Sutton v. Earles, 26 F.3d 903, 906 n.1 (9th Cir. 1994), the parties cannot stipulate to appellate jurisdiction where there is none, Dannenberg v. Software Toolworks Inc., 16 F.3d 1073, 1076-78 (9th Cir. 1994), nor can they create appellate jurisdiction by dismissing unresolved claims and reserving the option of litigating them at some future time, Cheng v. Commissioner, 878 F.2d 306, 310 (9th Cir. 1989)

The finality requirement has only rare exception, usually involving cases in the “‘twilight zone’ of finality.” Gillespie v. United States Steel Corp.
, 319 U.S. 148, 152-54 (1964). In extraordinary circumstances, a federal appeals court will consider an appeal from a seemingly nonappealable ruling where the ruling is “marginally final,” involves an issue of “national significance” and has been “fully briefed and argued.” Service Employees Int’l Union, Local 102 v. County of San Diego, 60 F.3d 1346, 1350 (9th Cir. 1995)

Is the appeal timely?
If notice of appeal is filed either too early or too late, and no
exception applies, the appeal is invalid and cannot be heard. Generally, the prescribed time within which to file notice of appeal is 30 days after entry of the judgment or other appealable order. If the United States or one of its officers or agencies is a party, the prescribed time is 60 days. Fed. R. App. P. 4(a)(1).

Time to appeal is extended to accommodate certain post-judgment proceedings that may affect the judgment. If any party timely files one of several specified post-judgment motions, including a motion for new trial or for judgment as a matter of law, the time for all parties to appeal begins to run from the entry of the order disposing of the post-trial motion. Fed. R. App. P. 4(a)(4). The district court may deem a motion for attorney fees to be in the nature of a motion to amend the judgment and
thus extend the time for appeal. Fed. R. Civ. P. 38. If the post-judgment motion is not timely, the time to appeal is not extended. Cel-A-Pak v. California Agric. Labor Relations Bd., 680 F.2d 664, 666 (9th Cir. 1982).

An appeal filed while one of the specified post-judgment motions is pending is held until the motion is decided; then the appeal becomes effective. Leader Nat’l Ins. Co. v. Industrial Indem.
Ins. Co., 19 F.3d 444, 445 (9th Cir. 1994). When it becomes effective, that appeal still applies only to the original judgment; if the appellant intends to challenge the ruling on the postjudgment motion or any modifications to the judgment, the existing notice of appeal must be amended. Fed. R. App. P. 4(a)(4).

There is some leeway on either side of the prescribed time period for appeal. A notice of appeal is treated as filed on the date of entry, if it’s filed before entry of the appealable order or judgment but after the district court-announced decision. Fed. R. App. P. 4(a)(2). This is a relatively recent liberalization in federal appellate procedure. Previously, a premature appeal was invalid and a new notice of appeal had to be filed at the appropriate time. Schroeder v. McDonald, 55 F.3d 454, 458-60 (9th Cir. 1993). However, even under the present rule, a notice of appeal remains invalid if it’s filed before the court announces the decision that will ripen into an appealable judgment. Kennedy v. Applause Inc., 90 F.3d 1477, 1482 (9th Cir. 1996).

On a motion filed within 30 days after the filing deadline, and on a showing of excusable neglect or good cause, the district court may extend the time for filing a notice of appeal up to 30 days or 10
days from the order’s entry date, whichever occurs later. Fed. R. App. P. 4(a)(5).

The courts abide by strict standards for excusable neglect in failing to file a timely notice of appeal. Oregon v. Champion Int’l Corp., 680 F.2d 1300, 1301 (9th Cir. 1982). An extension to appeal will be granted only in “extraordinary circumstances.” National Industries Inc. v. Republic
Nat’l Life Ins. Co., 677 F.2d 1258, 1264 (9th Cir. 1982). One such circumstance is provided by express rule. The court may reopen the appeal time for 14 days if the aggrieved party files a motion within 180 days of the judgment’s entry or within seven days of receiving notice of the judgment’s entry, whichever is earlier – and if the district court finds that the party didn’t receive notice of the judgment’s entry within 21 days, and no party would be prejudiced. Fed. R. App. P. 4(a)(6)

Yet another wrinkle in the rules for timely filing of federal appeals is that the time begins to run only upon entry of judgment. Fuller v. M.G. Jewelry
, 950 F.2d 1437, 1441 n.4 (9th Cir. 1991). Nevertheless, absent objection, the court can consider an appeal from a judgment that has been
rendered but not entered. Allah v. Superior Court of California, 871 F.2d 887, 890 n.1 (9th Cir. 1989). The appellate court will not engage in the “pointless exercise of dismissing the appeal and waiting for the district court to enter a separate judgment.” Vernon v. Heckler , 811 F.2d 1274, 1276-77 (9th Cir. 1987).

As National demonstrates, despite potential loopholes in the rules of appealability, the practitioner cannot count on extraordinary exceptions or discretionary relief to salvage an unauthorized or untimely appeal. To ensure a timely and valid appeal in federal court, the practitioner must carefully monitor the district court’s actions, diligently follow the rules, and count the days precisely.

A fundamental rule of appellate law is that an appeal only lies from an order or judgment that is appealable. An appellate court does not have jurisdiction to hear the case unless there is an appealable order or judgment.
The following is an overview of appeal-able orders and judgments under California law. Note that judgments and orders issued in federal courts are subject to different rules.

Right to Appeal is Statutory
The right to appeal in California is wholly statutory.
Thus, no appeal may be taken unless there is a statute that expressly allows the appeal. Most of the appeal-able orders and judgments are listed in Code of Civil Procedure §904.1. Some orders are made
appealable by other statutes as well.

The most common type of appealable order is a judgment.
See Code Civ. Proc. §904.1(a)(1). Judgments are generally appealable, except for most interlocutory judgments, judgments of contempt
(they may be reviewed by writ), and judgments in limited civil cases
(appeal is to the superior court).

One Final Judgment Rule

Under the “one final judgment” rule, an appeal from a judgment
can only be from a single, final judgment in the action. The rule is codified in Code of Civil Procedure section 904.1(a), which authorizes an appeal “[f]rom a judgment, except … an interlocutory judgment.” The California Supreme Court has held that this means that the appeal must be “from a judgment that is not intermediate or nonfinal but is the one final
judgment.” Morehart v. County of Santa Barbara, 7 Cal.4th 725, 741 (1994). “Judgments that leave nothing to be decided between one or more parties and their adversaries, or that can be amended to encompass all controverted issues, have the finality required by section 904.1, subdivision (a).” Id. Conversely, a “judgment that disposes of fewer than all of the causes of action framed by the pleadings, however, is necessarily „interlocutory‟ … and not yet final, as to any parties be
tween whom another cause of action remains pending.” Id.

The reason for this rule is to avoid multiple appeals in the same case, which places a huge burden on the courts and the parties.
See id. at 741 n.9. Moreover, if the parties have to wait until a
final judgment is entered, “the trial court may completely obviate an appeal by altering the rulings from which an appeal would otherwise have been taken.” Id. It also gives the appellate court a more comprehensive record. Id

To determine if a judgment is final, courts look to the substance and effect, rather than the form or title. The judgment is considered
final when it ends the litigation between the parties on the merits of the case, and nothing is left to be done other than to enforce the judgment.
See San Joaquin County Dept. of Child Services v. Winn, 163 Cal.App.4th 296, 300 (2008). If the judgment contemplates any future judicial action
— other than simple enforcement of the judgment — essential to determining the rights or responsibilities of the parties, the judgment is not final.

Once a final judgment is entered, the appellate court may generally review any order or ruling made in the proceeding leading up to that final, appealable judgment. See Code Civ. Proc. §906.

Judgments Where There Are Multiple Parties

A judgment is immediately appealable if it terminates the litigation with respect to one or more parties. So, if a plaintiff sues several defendants, and the court dismisses the lawsuit against one of the defendants, the
judgment is final as to that defendant, and plaintiff may appeal the
judgment without waiting for the rest of the case to be resolved.
See Nguyen v. Calhoun, 105 Cal.App.4th 428, 437 (2003). Likewise, if there are multiple plaintiffs, and judgment is entered against some of the plaintiffs but not against others, the plaintiffs against whom judgment was entered may immediately appeal. See Panicov. Truck Ins. Exchange, 90 Cal.App.4th 1294, 1300-1301 (2001). With respect to defendants, there is an exception where the liability of one defendant is intertwined with and dependent on the liability of other defendants and their liability
has not yet been established. See Entertainment, Inc. v. Arthur J. Gallagher & Co., 125 Cal.App.4th 1022 (2005)(liability of insurance agency and insurance company in duty to defend and bad faith action were intertwined, and therefore appeal of dismissal of insurance agency was
premature)

Note that if you file an appeal with respect to one party, but there are claims against other parties remaining in the trial court, it might be prudent to ask the trial court to stay the action until the appeal has been decided.

Other Appealable Orders

Some other types of orders are made appealable by statute. For example, orders made after a final judgment are appealable. Code Civ. Proc. §904.1(a)(2). Other types of appealable orders listed in Code of Civil Procedure section 904.1 include: orders granting a motion to quash service of a summons or granting a motion to stay an action on the
grounds of an inconvenient forum; orders granting a new trial or denying a motion for judgment notwithstanding the verdict; orders granting, discharging or refusing to discharge an attachment; orders granting or dissolving an injunction; orders appointing a receiver; certain orders in partition actions; certain orders issued under the Family and Probate Code; orders directing the payment of sanctions over $5,000; an orders granting or denying a special motion to strike in anti-SLAPP cases.
Certain orders related to arbitration proceedings are also made appealable under Code of Civil Procedure section 1294

Non-Appealable Orders

Any judgment or order that is not expressly appealable by statute is non
– appealable. Many orders that fall into this category. Some of the more common types include: orders overruling a demurrer; orders sustaining a demurrer (an appeal lies from the judgment dismissing the complaint with prejudice); discovery orders; orders denying a motion for a new trial; orders granting a mistrial due to a hung jury; orders directing a verdict (an appeal lies from the judgment issued); orders granting or denying a motion for summary judgment (a judgment following the order granting summary judgment is appealable); tentative decisions; and statements of decision.

Keep in mind that it is the substance and effect, not the form, that governs whether an order is appealable. For example, if a court sustains a demurrer and in the same document dismisses the complaint with prejudice, then that document likely would be considered a final judgment.
But if the court sustains the demurrer without dismissing the complaint,
the order sustaining the demurrer is not appealable.
See City of Morgan Hill v. Bay Area Quality Management Dist., 118 Cal.App.4th 861, 867 n. 3 (2004).

Finally, remember that interlocutory orders may be reviewed after a final
judgment has been entered, so long as the appealing party has preserved his or her arguments on appeal by raising those arguments in the trial court.

Conclusion
Before filing an appeal, a litigant must ensure that the order or judgment he or she wishes to challenge is appealable, or risk dismissal of the appeal. Determining whether an order is appealable is also important
to identify when the time to appeal will expire.

Respondents should also evaluate whether the order being appealed is appealable, and if not, should immediately file a motion to dismiss the appeal. Taking these simple steps at the outset of an appeal can save a party significant time and money in the long run

FightForeclosure.net

~ Your "Pro Se" Foreclosure Fight Solution!

Category Archives: Case Study

How California Homeowners Can Technically Disqualify their Foreclosure Mill Attorney

What Homeowners Must Know About “Withrawing Reference” in Bankruptcy Proceeding

What Nevada Homeowners Needs to Know About Removal of Cases to the Federal Court

Why Mortgage Foreclosure is on the Rise Again in Nevada

Montana Jury Awarded Homeowner Massive Damages Against US BANK in Mortgage Fraud Case

What Florida Homeowners Should Expect in “Pro Se” Foreclosure Defense Litigation

How Homeowners Can Effectively Use TILA in their Foreclosure Defense

What Every Homeowner Should Know About Fair Debt Collection Practices Act (FDCPA)

What Homeowners in Washington Needs to Know About Saving Their Homes

What Homeowners Must Know About Appealability and Reviewability of Court Orders and Judgments

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this: