How Florida Homeowner’s Counsels Can Effectively Use Stay of Proceedings to Delay Monetary Restitution Judgments after Foreclosure Pending Appeal or Wrongful Foreclosure

01 Friday Jan 2016

Posted by BNG in Foreclosure Defense, Litigation Strategies, Pleadings, Pro Se Litigation, State Court, Trial Strategies

≈ Leave a comment

Tags

Counsels, Florida Homeowners, Foreclosure Pending Appeal, Judgments after Foreclosure, Monetary Restitution, Stay of Proceedings, wrongful foreclosure

What are your options should a money judgment be entered against your client? Aside from payment, there is appeal. But how do you stop the execution of the judgment during the appeal? What are your options if the order is one not solely for the payment of money, or is not a final order? A stay is a tool that the court uses to manage litigation and protect the rights of parties during appeals. This article discusses the use of stays in Florida’s state court system.

Stays Involving Appellate Review

Stays are commonly sought by the losing party either to maintain the status quo during interlocutory appeals or to suspend the execution of money judgments. To determine your options after an order or final judgment has been entered against your client, start with Fla. R. App. P. 9.310. This rule controls all proceedings in the Supreme Court and the district courts of appeal, and all proceedings in which the circuit courts exercise their appellate jurisdiction over decisions of the county courts, “notwithstanding any conflicting rules of procedure.”¹

First, you will see Rule 9.310 applies only to orders that are appealed. Stays of orders that are not appealable are not controlled by this rule. Second, this rule divides the universe of appealable orders into those that are judgments solely for the payment of money and all others. The rule opens with the following prescription applicable to all those other orders: “A party seeking to stay a final or non-final order pending review shall file a motion in the lower tribunal, which shall have continuing jurisdiction, in its discretion, to grant, modify, or deny such relief. A stay pending review may be conditioned on the posting of a good and sufficient bond, other conditions, or both.”

Let’s take apart this dense language and examine its pieces.

First, the trial court, the “lower tribunal,” has the power to stay its own orders.² That makes sense. Florida’s constitution creates the right to appeal orders of various kinds in art. V, §4(b)(1). The party’s right to appeal an order would be empty if orders and judgments could not be stayed pending review.

With limited exception, the decision to grant, modify, deny, or craft the conditions of a stay is a discretionary act entrusted to the trial court, but the discretion is not unfettered. No matter whether the judgment is one for the payment of money, declaratory, or injunctive relief, the lower tribunal cannot require an appellant to file a supersedeas bond as a precondition of the appeal.³ The right to appeal is guaranteed by the state constitution and may not be abridged by a trial court. Rule 9.310(f) gives the appellate court the power to review a trial court’s stay order when an appeal has been commenced. This, too, makes sense. The subject matter of the appellate court’s jurisdiction could be mooted if the parties’ legal positions were inexorably altered by the execution of the judgment before the appeal was concluded.

A wide range of orders is subject to appellate review, and all those orders are subject to Rule 9.310. This includes final orders, the appealable nonfinal orders listed in Fla. R. App. P. 9.130, and orders reviewable by way of petition for writ of certiorari, prohibition, or mandamus.

Final orders end the trial court’s labor in an action, and they come in many forms. They may be money judgments, declaratory judgments, or decrees. They can all be stayed. Nonfinal orders that may be immediately appealed, and, therefore, that may be stayed by the operation of Rule 9.310, include orders that concern

• Venue;

• Injunctions;

• The determination of the jurisdiction of the person;

• The determination of the right to immediate possession of property, including orders pertaining to writs of replevin, garnishment, or attachment;

• The determination of the right to immediate monetary relief or child custody in family law matters;

• The determination of the entitlement of a party to arbitration, or to an appraisal under an insurance policy;

• Workers’ compensation immunity;

• The certification of a class;

• Immunity in a civil rights claim arising under federal law;

• Whether a governmental entity has taken action that has inordinately burdened real property;

• The appointment of a receiver.

A stay during the appeal of a nonfinal order may be necessary because “[i]n the absence of a stay, the trial court may proceed with all matters, including trial or final hearing,” provided that no final order may be entered until the appellate proceedings are concluded, pursuant to Rule 9.130(f). Finally, Rule 9.310 empowers the trial court to stay its nonfinal orders that are immediately reviewable by way of a petition for writ of certiorari, prohibition, or mandamus. If the circumstances of your case warrant the filing of such a petition, then they likely would justify the entry of a stay of the challenged order pending appellate review.

Asking the Trial Court for a Stay Pending Appellate Review
If your client’s situation requires a stay of the order while the appellate court reviews it, then you need to fashion a motion for stay and file it with the trial court. The trial court’s order or judgment is not stayed by the mere filing of a notice of appeal or petition for writ of certiorari,⁴ and, except for money judgments, a stay pending appeal is a matter entrusted to the trial court’s discretion.⁵ The trial court has the continuing jurisdiction to grant your stay, to lift it, or to modify it. The trial court may impose conditions, and it may alter those conditions in its discretion for the duration of the appellate proceedings.⁶

There are limits to the trial court’s discretion. The trial court cannot require, as a condition of the stay, the payment of the judgment holder’s attorneys’ fees.⁷ Only when fees are otherwise recoverable by contract or statute may the trial court condition a stay on the payment of attorneys’ fees in the event the appellant fails to prevail on appeal.

When to Move for a Stay — Timing Is Important

Rule 9.310(a) requires you to file a motion, and the language implies the motion be in writing. In practice, however, strict compliance with the rule may be unworkable. The trial court may issue an order granting relief to your opponent within a time frame shorter than would accommodate the filing and setting of a motion to stay. If you find yourself at a hearing and the judge rules against your client, and you conclude the ruling would cause substantial, irreparable injury to your client, then move ore tenus for a stay. Be sure to get a ruling on the record. Promptly get a written order.

Better yet, be prepared. If you know the hearing may result in an order that your client would appeal, file a conditional motion for stay. Notice it for hearing. Bring alternative proposed orders granting and denying your motion for stay. Head to court and argue for the best outcome, but be prepared to deal with the worst. If the trial court grants immediate relief against your client, then argue your motion for stay then and there. If the trial court denies your motion to stay, make sure you get the ruling on the record and a written order from the court. This will perfect your right to apply to the appellate court for a stay.

Remember, the rule provides for a stay only if you seek appellate review of the order. If you obtain a stay order, but you do not ultimately pursue an appellate remedy, then the authority supporting the stay provided by Rule 9.310 would end. Your opponent would have a very good argument to dissolve the stay that you have obtained because the court’s authority to do so, under this rule, ended on the last day you had to file your notice of appeal or your petition. An order from the lower tribunal staying the effect of its judgment or order is a nullity unless a notice of appeal or petition is actually filed.⁸

What Justifies Stay of Order Pending Appellate Review

The trial court’s wide discretion in crafting a stay is an invitation to be creative in your request for a stay. The remedy you request must suit your client’s needs, of course. The trial court anticipates that you will suggest a stay that does so. But it will more readily grant your request if the conditions in your proposed stay do no harm to your opponent and do not unduly delay the proceedings. Reasonable conditions may include that you file your notice of appeal or petition promptly, perhaps faster than permitted by the appellate rules; that other aspects of the litigation proceed unabated; or that you protect property, documents, or evidence in your possession from spoliation.

To obtain a stay from the appellate court, you should demonstrate that your client will likely prevail on appeal, and your client will suffer some substantial injury if the order is not stayed.

The appellate court applies this standard when deciding whether to issue a stay order.⁹ Following this outline makes for a strong argument in the trial court as well. The checklist for your motion to stay should include:

• Informing the trial court that it is empowered by Rule 9.310 to stay the order it has just entered;

• Notice to the court that you intend to file a notice of appeal or petition and the date you intend to file;

• A summary of the legal and factual grounds for the appeal;

• A discussion of the harm that will befall your client should the stay not be granted;

• Evidentiary support in the form of affidavits from your client attesting to any facts justifying the stay;

• A discussion of the effect of the stay on the progress of the case and specific proposals to keep other parts of the case moving forward;

• A demonstration that the stay will not harm your opponent.

A stay motion with these elements would be compelling. The affidavit can be used to authenticate papers, letters, emails, or other documents that you submit in support of your motion. Documents that are unauthenticated are generally not admissible, and the court may find they have no evidentiary weight.¹⁰

Finally, move for relief promptly and get a ruling as soon as possible. Although there is no time frame for making a motion to stay set within Rule 9.310, time does matter, and earlier is better than later. Waiting for weeks to ask for a stay undercuts your argument that the order imposes a substantial burden or injury on your client.

If Trial Court Denies Request for a Stay, Ask the Appellate Court

Rule 9.310 gives the trial court the power to issue or deny stays, but it also gives the appellate court the power to review those rulings. You must apply to the trial court first, though.¹¹ If the lower tribunal refuses to grant the motion to stay, then review is sought in the appellate action by motion.¹² The appellate court will review the lower tribunal’s order for an abuse of discretion.¹³ The trial court is presumed to know the case well, and the question to stay usually involves a mixture of fact and legal questions that the trial court is well-suited to decide.

Your appellate motion for stay should be filed as soon as possible, preferably as soon as your appellate case is commenced. To determine what should be included in your motion to the appellate court, consider what would convince the appellate judges that your client deserves a stay. First, they will need to see your trial court motion and the order denying it. They will need a succinct statement of the facts that apprises them of the nature of the appellate case and a discussion of the course of proceedings. They will need to know the legal question that you will ask them to resolve. To warrant issuance of a stay, for the purpose of preserving the status quo during the appellate proceeding, the movant must demonstrate a likelihood of success on the merits and the likelihood that harm would result if the stay were not granted.¹⁴

You will need to provide the appellate court an appendix of documents from the trial court file that includes the order on appeal, the pertinent hearing transcripts, and the moving and opposition papers related to the stay order. Include a progress docket report from the trial court. Take care to bind the documents with tabs or, better yet, number the pages. Mind the specific court’s requirements for submissions of appendices. You’ll find each district court’s requirements set out on their websites. If you have a question, call the clerk’s office at the appellate court.

Watch your timing. An appellate court cannot consider a motion if no appellate case has yet been commenced. Therefore, the notice of appeal or the filing of the petition must coincide with or precede your filing of the appellate motion to stay. Only once the appellate court establishes its own case are you free to file your motion. Filing a motion in the appellate court does not automatically suspend any order of the trial court, so be aware of your time limitations. If the motion is time-sensitive, say so in the motion, and inform the appellate court of the deadline by which you must act.

When Does the Stay End?

If the order is a final judgment, your stay will remain in effect until the conclusion of all appellate proceedings. Appellate proceedings typically conclude when the appellate court issues its mandate. The appellate clerk issues the mandate 15 days after the court issues its decision or “as may be directed by the [appellate] court.”¹⁵ So, if you intend to try an appeal to the Supreme Court, then you must consider whether to ask the appellate court to withhold issuance of its mandate until the Supreme Court either rejects your jurisdictional papers, or takes jurisdiction of the case and completes its review.¹⁶ Alternatively, you may ask the trial court to issue a new stay pending completion of Supreme Court proceedings.

Stays Not Involving Appellate Review

A trial court is invested with the power to stay the effect of any of its interlocutory orders, even if they are not appealable.¹⁷ But that power is not established by Rule 9.310. Rather, it is part of its inherent power to manage the case. The trial court may grant or deny a stay, and it can craft unique conditions for the stay and modify them as a case management tool. Whether it does so, and what conditions it imposes, is a matter for its broad discretion.¹⁸ If your client is on the receiving end of such a stay and objects to it, you may seek appellate review of that stay. But the jurisdiction of the appellate court to do so is not established by Rule 9.310(f), and review is not by motion. Instead, the appellate court reviews the trial court’s stay order by means of a petition for writ of certiorari. By demonstrating to the appellate court that the trial court’s stay has substantially curtailed some important right of your client, you can establish the appellate court’s jurisdiction to review the order. You’ll need to show the order departs from the essential requirements of law (meaning the order lacks a legal or factual basis), and you’ll need to show the stay causes a serious, irreparable injury to your client, one that cannot be remedied on appeal from the final judgment.¹⁹

What to Do with a Judgment Solely for Payment of Money

Trial courts have the power to stay execution of money judgments on a showing of “good cause” pursuant to Fla. R. Civ. P. 1.550(a). This is a discretionary decision, of course. But an automatic stay of a money judgment can be obtained under Fla. R. App. P. 9.310(b). This appellate rule requires the filing of a “good and sufficient bond” issued by a surety company authorized to do so in Florida. Rule 9.310(b) sets the amount of the bond as the principal amount of the judgment, plus two years of interest calculated at the statutory rate.²⁰ Filing the bond dispenses with the need for filing a motion or obtaining a court order.²¹

Pursuant to Rule 9.310(b)(2), the state, or a public officer in their official capacity, or a board, commission, or other public body seeking review, is entitled to a stay without bond in most circumstances. The right is not absolute, but if you represent a government entity or official, you must keep this valuable right in mind.

A “good and sufficient bond” is one that is issued by an insurer authorized by the Office of Insurance Regulation to do so in Florida. A bond is commonly obtained through a commercial insurance broker. Brokers can be useful intermediaries to guide you through this process. The Office of Insurance Regulation maintains a website listing the scores of sureties authorized to conduct such business in Florida.²² Beware that unless you represent a substantial, established corporation, surety companies generally require posting 100 percent collateral in the form of an irrevocable letter of credit or a cash deposit.

A proper bond will contain the following elements: It will identify the surety, the principal, and the judgment holder, who is the obligee. The face of the bond will recite the surety’s undertaking to be bound to the court for the amount of the judgment, plus the two years of statutory interest up to the amount of the bond. The usual condition stated by the surety on the face of the bond is that if the judgment is satisfied or reversed on appeal, then the bond becomes void. The bond will be signed by both the principal and the surety.

The original bond is filed with the trial court under a notice of filing bond prepared by the lawyer. It is upon the filing of the bond that the automatic stay takes effect. If execution proceedings have already commenced, the filing of the bond does not act to undo the orders or negate the motions already filed or adjudicated. The filing of the bond at that late point only stays further execution.²³

This procedure secures the judgment holder’s ability to collect its principal and interest, and it preserves the judgment creditor’s right to appeal. Beware that an automatic stay under this rule may, under certain conditions, be dissolved.²⁴ In general, though, the discretion of the court to modify the terms of a bond is extremely limited. The lower tribunal may not increase or decrease the amount of the bond as set out in the rule or otherwise prejudice the creditor’s realistic chances of recovery at the conclusion of the appeal.²⁵ When the appellate proceedings are concluded and the judgment is paid or reversed, be sure to obtain a written order from the trial court declaring that the bond is void, and the surety’s obligation is released.

Conclusion

The effective litigator will know how to use stays to the client’s advantage. Stays can be used to limit the effect of an order or stop the execution of a judgment. Trial courts have wide discretion in whether to grant or deny a stay and what conditions to put on a stay. Your client needs you to know how to obtain stays from the trial and appellate courts when their judgment day comes.

¹ Fla. R. Jud. Admin. 2.130.

² Holman v. Ford Motor Co., 239 So. 2d 40, 43 (Fla. 1st D.C.A. 1970) (“It seems well settled that interlocutory judgments or orders made during the progress of a case are always under the control of the court until final disposition of the suit, and they may be modified or rescinded upon sufficient grounds at any time before final judgment.”).

³ Fitzgerald v. Addison, 287 So. 2d 151 (Fla. 2d D.C.A. 1973).

⁴ Thames v. Melvin, 370 So. 2d 439 (Fla. 1st D.C.A. 1979).

⁵ Eicoff v. Denson, 896 So. 2d 795, 799 (Fla. 5th D.C.A. 2005) (affirming decision of trial court to deny motion to stay a judgment that restrained homeowner from violating restrictive deeds pending appeal).

⁶ Fla. R. App. P. 9.310(a).

⁷ City of Coral Gables v. Geary, 398 So. 2d 479 (Fla. 3d D.C.A. 1981).

⁸ State v. Budina, 879 So. 2d 16 (Fla. 2d D.C.A. 2004).

⁹ Perez v. Perez, 769 So. 2d 389 (Fla. 3d D.C.A. 1999).

¹⁰ Fla. Stat. §90.901 (“Authentication or identification of evidence is required as a condition precedent to its admissibility.”).

¹¹ Mitchell v. Leon County School Board, 591 So. 2d 1032 (Fla. 1st D.C.A. 1991).

¹² So. Fla. Apartment Ass’n v. Dansyear, 347 So. 2d 710 (Fla. 3d D.C.A. 1977).

¹³ Fla. R. App. P. 9.310(a). The lower tribunal has “continuing jurisdiction, in its discretion, to grant, modify, or deny such relief.”

¹⁴ Perez v. Perez, 769 So. 2d 389 (Fla. 3d D.C.A. 1999).

¹⁵ Fla. R. App. P. 9.340(a).

¹⁶ Fla. R. App. P. 9.310(e).

¹⁷ Holman v. Ford Motor Co., 239 So. 2d 40, 43 (Fla. 1st D.C.A. 1970) (“It seems well settled that interlocutory judgments or orders made during the progress of a case are always under the control of the court until final disposition of the suit, and they may be modified or rescinded upon sufficient grounds at any time before final judgment.”).

¹⁸ REWJB Gas Invs. v. Land O’ Sun Realty, Ltd., 643 So. 2d 1107, 1108 (Fla. 4th D.C.A. 1994) (granting stay of eviction proceedings pending determination of declaratory judgment action on terms of lease).

¹⁹ Verlingo v. Telsey, 801 So. 2d 1009, 1010 (Fla. 4th D.C.A. 2001).

²⁰ Fla. Stat. §55.03; Florida Department of Financial Services, Statutory Interest Rates, http://www.myfloridacfo.com/aadir/interest.htm (statutory rate of interest).

²¹ Wintter & Cummings v. Len-Hal Realty, Inc., 679 So. 2d 1224 (Fla. 4th D.C.A. 1996) (entry of court order is not necessary for bond to become effective as supersedeas bond); Fla. Coast Bank of Pompano Beach v. Mayes, 433 So. 2d 1033 (Fla. 4th D.C.A. 1983), petition for review dismissed, 453 So. 2d 43 (rule applies when the only relief granted is for payment of money).

²² Florida Office of Insurance Regulation, Company Directory, http://www.floir.com/companysearch (search the list of authorized lines of business for sureties).

²³ Freedom Insurors, Inc. v. M.D. Moody & Sons, Inc., 869 So. 2d 1283 (Fla. 4th D.C.A. 2004).

²⁴ Mitchell v. State, 911 So. 2d 1211 (Fla. 2005).

²⁵Platt v. Russek, 921 So. 2d 5 (Fla. 2d D.C.A. 2004); see also PS Capital, LLC v. Palm Springs Townhomes, LLC, 9 So. 3d 643 (Fla. 3d D.C.A. 2009) (bond must be in the amount set forth in the rule).

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

How Homeowners in Foreclosure Can Find Legal Help

30 Thursday Oct 2014

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

≈ 1 Comment

Tags

Legal Aid, Legal Aid by State, Legal Assistance, Legal Help, Pro Bono

If you are homeowner in foreclosure faced with a situation that needs legal attention, you basically have Two Options: handle the matter yourself or seek professional legal help.

Representing yourself in a legal proceeding may hold some initial appeal due to the cost of hiring a lawyer or your interest in taking control of the situation.

Before you decide to handle a legal matter yourself, however, you need to evaluate yourself to see whether you can are ready to handle the matter and whether you have access to the resources you will need to succeed.

While our program is designed to assit homeowners in pro se litigations, if you are considering handling the matter yourself, be forewarned that a seemingly simple issue can quickly grow complex if you are not well versed with the legal system. For this simple reason, we are publishing this post to assist homeowners who may not be familiar with the legal system even if they wish to use our program to fight their case. The legal resources contained within our program can also help Attorneys practicing in other areas, help a homeowener fight his/her foreclosure case, saving valuable research time as time is of the essense.

In most situations homeowners will be better off hiring a lawyer, who will assess the merits of your case, explain your options, and help you achieve the best result.

If you decide to seek professional legal help, you can hire a lawyer directly or, depending on your situation, request legal assistance from a nonprofit legal assistance organization such as Legal Aid or the Citizen Media Law Project.

Nonprofit Legal Assistance

Many lawyers and legal organizations provide pro bono work. In common usage pro bono refers to volunteer work done for the public good. In the legal field, lawyers who do pro bono work take cases for those who are disadvantaged and unable to secure legal assistance. Additionally, legal advocacy organizations (organizations that take on cases) usually provide pro bono representation for their clients.

There are a number of nonprofit institutions and other organizations that may be able to represent you or provide other legal assistance. Should the organization offer to represent you in court, you will be in the enviable position of enjoying free legal work done by lawyers passionately committed to the underlying causes of your situation. Note that these lawyers may be working on your individual case because they want to break new legal ground or advance the law in a particular way to benefit society as a whole. Thus, you will want to make your individual goals clear to them. More often than not, they will share your goals and you’ll be able to forge ahead.

THESE ARE THE LIST OF NONPROFIT LEGAL ASSISTANCE ORGANIZATIONS BY STATE

Nonprofit Legal Assistance Organizations in Arizona

The following organizations provide legal assistance to individuals and organizations in Arizona:

Nonprofit Legal Assistance Organizations in California

The following organizations provide legal assistance to individuals and organizations in California:

Nonprofit Legal Assistance Organizations in Florida

The following organizations provide legal assistance to individuals and organizations in Florida:

Nonprofit Legal Assistance Organizations in Georgia

The following organizations provide legal assistance to individuals and organizations in Georgia:

Nonprofit Legal Assistance Organizations in Illinois

The following organizations provide legal assistance to individuals and organizations in Illinois:

Nonprofit Legal Assistance Organizations in Indiana

The following organizations provide legal assistance to individuals and organizations in Indiana:

Nonprofit Legal Assistance Organizations in Massachusetts

The following organizations provide legal assistance to individuals and organizations in Massachusetts:

Nonprofit Legal Assistance Organizations in Michigan

The following organizations provide legal assistance to individuals and organizations in Michigan:

Nonprofit Legal Assistance Organizations in New Jersey

The following organizations provide legal assistance to individuals and organizations in New Jersey:

Nonprofit Legal Assistance Organizations in New York

The following organizations provide legal assistance to individuals and organizations in New York:

Nonprofit Legal Assistance Organizations in North Carolina

The following organizations provide legal assistance to individuals and organizations in North Carolina:

Nonprofit Legal Assistance Organizations in Ohio

The following organizations provide legal assistance to individuals and organizations in Ohio:

Nonprofit Legal Assistance Organizations in Pennsylvania

The following organizations provide legal assistance to individuals and organizations in Pennsylvania:

Nonprofit Legal Assistance Organizations in Texas

The following organizations provide legal assistance to individuals and organizations in Texas:

Nonprofit Legal Assistance Organizations in the District of Columbia

The following organizations provide legal assistance to individuals and organizations in the District of Columbia:

Nonprofit Legal Assistance Organizations in Virginia

The following organizations provide legal assistance to individuals and organizations in Virginia:

Nonprofit Legal Assistance Organizations in Washington

The following organizations provide legal assistance to individuals and organizations in Washington:

OTHER LEGAL ASSISTANCE SERVICE LINKS BY STATE

http://www.ptla.org/legal-services-links

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

How Homeowners Can Effectively Handle Subpoenas Duces Tecum

30 Thursday Oct 2014

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

≈ Leave a comment

Tags

Pro se legal representation in the United States, Subpoena Duces Tecum

When homeowners fighting foreclosure are challenged with Foreclosure Mill Attorneys to produce him/herself for deposition or for production of documents via subpoenas, there are few things the homeowner should bear in mind concerning subpoenas.

Responding to Subpoenas

You’ve received a document that might be a subpoena. Your immediate reaction may be shock and a desire to immediately obey its request. As with anything legal, it’s best not to act on impulse but to carefully consider the options before you. While you will likely need to comply, there are times when a court will agree to modify the subpoena’s request or even to terminate it entirely. This guide cannot give you legal advice about your situation and you should contact a lawyer for specific legal advice. However, this post should be able to answer the preliminary questions you may have about how best to respond.

1. What is a subpoena?

A subpoena is a legal order commanding the person or organization named in the subpoena to give sworn testimony at a specified time and place about a matter concerned in an investigation or a legal proceeding, such as a trial. A subpoena duces tecum substitutes the requirement of your appearance to testify with a requirement that you supply specific physical material in your possession. A deposition subpoena means that your sworn testimony will be taken during a phase of the trial process known as discovery, and will likely occur at a lawyer’s office.

Subpoenas may be issued by the following people involved in the legal case associated with the subpoena:

the judge presiding over the legal proceedings
the clerk of the court where the lawsuit has been filed
a private lawyer representing one of the parties in the lawsuit
a government lawyer such as the Attorney General or District Attorney

(Note that the Attorney General and District Attorney can issue a subpoena during an investigation, before initiating a legal case).

Given that a subpoena is an order to produce yourself and/or tangible items in a very specific legal setting, it is imperative that you take it seriously. Failure to comply with a subpoena can have serious consequences. However, you do have certain options in how best to respond.

2. Did you receive a subpoena?

You’ll first want to determine precisely what you’ve received. Review the documents to see whether it is a subpoena duces tecum, to access material in your possession.

Subpoenas come in several flavors, and you may need someone trained in the law to help you determine what type of legal document you’ve received, if you are not quite familiar with legal documents. However, a subpoena contains certain distinguishing characteristics. Look carefully at the document for:

the full name of a court in the document’s title, or letterhead
the word “Subpoena” in bold in the top third of the document
the words “you are commanded to report,” or a similar variation
your name
a specific date, time and location for you to appear or for you to provide the requested materials
in some cases, the penalty for non-compliance will be included

Subpoenas are not necessarily filed with the court, so if you have doubts about the document you’ve received, ask a lawyer or call the person who signed the document and ask if they have in fact sent a subpoena. (An address and or telephone number should follow the signature.)

3. Accepting a Subpoena vs. Complying with a Subpoena

Once you’ve determined that you have received a subpoena, you may feel that you want to contest the subpoena because you believe that it is invalid or unreasonable. You can still do so despite having received the subpoena (which in most cases arrived by registered mail, or by a person delivering it to you and requesting your signature). Acceptance of the subpoena does not constitute your assent to comply with it. However, if you object to the terms of the subpoena, then you must inform the court about your decision to challenge it.

4. Inconvenient Date & Cost of Travel

As long as you are not one of the parties in the case and you have to travel an appreciable distance, your transportation costs should be covered and you should be given an attendance fee. The costs and fees are set according to the rules of the court named in the subpoena. Generally, in a civil case you should receive the cash or check before you have to appear. After you testify in a criminal case, you should receive an attendance fee and travel reimbursement.

If appearing at the time and place specified by the subpoena is of great inconvenience, call the person who issued the subpoena, and he may be able to reschedule your appearance to a more convenient date. However, keep in mind that postponement may not be an option because a court date has been set for the trial and cannot be moved. If so, and if you would suffer extreme hardship from having to appear, consult a lawyer who may be able to help.

5. Filing an Objection to a Subpoena

The subpoena will require that you either appear, or produce documents or other material, at a specific time and location. If you want to inform the court of your objections you will need to file a Motion to Quash. Typically, a Motion to Quash contains a request to the court asking to modify or terminate the subpoena based on certain objections, and a memorandum explaining how the law supports the objections.

You should not wait until the date specified to make your objection known to the court. There are many valid reasons to object, the most common being:

Improper service

The law requires that you receive (were “served”) with the subpoena in a specified way. Requirements for service vary according to jurisdiction, and the subject is too complicated to address in this guide. You may want to consult with an attorney or perform your own legal research to understand whether service was proper. However, this is usually not a strong objection because in all likelihood you will merely be served once again.

Scope of Request

If you believe the subpoena you’ve received requests information or material that would be difficult to gather, you may be able to challenge it. Should the court agree with your objections, it may nullify the subpoena. More likely, the court will limit the scope of the subpoena, set a more reasonable deadline for you to deliver the materials, and, if a voluminous amount of documents have been requested, the court may also require the other party to compensate you for making the necessary copies of each document. (Note: you should not have to create anything new for a subpoena request; the request should only be for existing material within your possession.)

It is important to note two things here: the court does not usually monitor who and what is subpoenaed, and under rules of trial procedure, a party to a lawsuit is permitted to send a subpoena to anyone he thinks might have material useful for his case. Additionally the material doesn’t even have to relate to the subject of the lawsuit. A party is entitled to request materials it thinks might have the potential to lead to relevant information concerning the subject matter of the case. Thus, unsurprisingly, many subpoenas are drafted to be broad in scope, and in some cases, to have a short deadline.

Confidential Material

If the subpoena requires that you turn over confidential documents, or testify about confidential matters, like the identity of an anonymous source, do not immediately comply with the request. The law recognizes the importance of protecting certain communications and grants them a privileged status for purposes of a lawsuit.

For example:

* Certain states have enacted “shield” laws protecting journalists and others from being compelled to testify about information collected during the newsgathering process, including the disclosure of anonymous sources.

* Both state and federal law prevents certain professionals, like doctors and lawyers, from being forced to testify or submit documents about their patients or clients.

* Both state and federal law grant close relatives immunity from testifying in certain situations.

* Certain provisions are designed to protect homeowners in foreclosure as well.

Because these protections vary according to each jurisdiction you will need to consult a lawyer, or perform your own legal research, to see whether any apply to your situation.

In matters involving criminal offenses you’ll need to be aware of:

Self-incrimination

The Fifth Amendment of the U.S. Constitution protects an individual from being forced to testify against himself when such testimony could result in criminal liability.

In some cases, law enforcement authorities use a subpoena to a build a case against the subpoena recipient before pressing charges. If you think that you may be the focus of a criminal investigation, or worry about incriminating yourself when you testify, do not comply with the subpoena without first consulting a lawyer.

6. Hiring a Lawyer

If you haven’t already made a decision at this point, you should decide whether you want to hire a lawyer. If the request is straightforward and you’re comfortable with supplying the requested information, you may not need a lawyer’s services. However, you will almost always be better off having a lawyer protecting your interests, even if you think you have nothing to hide. You may mischaracterize a situation and make yourself vulnerable to a lawsuit or criminal charges, and if so, will find it hard to rebut the testimony given under oath.

For homeowners without legal knowledge, before contacting a lawyer, write down everything you know about the situation, including: when and how you received the subpoena, the nature of the actions that triggered the subpoena, and any relevant interactions you’ve had with either party of the lawsuit. The act of writing the summary allows you to:

record events you may later forget
evaluate your position and figure out your next steps
focus your conversation with a lawyer (should you wish to consult with one)
launch your own legal research
potentially determine the subpoena’s validity

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

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;

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;

How Homeowners in Bankruptcy Can Benefit Using Adversary Proceeding

18 Friday Jul 2014

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

≈ Leave a comment

Homeowners in foreclosure who suspects fraud in their mortgage loan transaction may opt to use the Bankruptcy Adversary Proceeding to pursue their pretender lenders.

An adversary proceeding is filed and prosecuted by a plaintiff against a responding defendant. The procedural rules and requirements for adversary proceedings are set forth in the Federal Rules of Bankruptcy Procedure. Local rules of court may provide additional sources of guidance and instruction.

Procedurally, an adversary proceeding commences through filing of a complaint by the plaintiff. The complaint is served upon the defendant, who must respond to allegations of the complaint by filing an answer. There are filing and service fees required of the plaintiff to initiate an adversary proceeding. A case number is assigned to the matter once the court receives the plaintiff’s filed complaint. The parties often engage in written and other types of discovery, such as depositions prior to the adversary proceeding being set for trial.

Adversary proceedings may be filed by the debtor, creditors, trustee (standing or panel), or U.S. Trustee’s Office. A creditor might file an adversary proceeding to lodge an objection to a debtor receiving a discharge. Creditors may also bring adversary proceedings to seek an exemption of the debt owed to them by the debtor from a debtor’s pending discharge because the debt was the by-product of fraud, hindering conduct, malfeasance, willful injury, malicious injury, or personal injury. Creditors may seek a dismissal of the bankruptcy or loss of discharge for debtor due to bad faith in the conduct of debtor.

There are many Reasons Homeowners May Wish to File Adversary Proceeding

Debtors bring adversary proceedings against creditors for violations of automatic stay protections when creditors pursue collection remedies against debtors despite bankruptcy code’s prohibitions. Debtors bring adversary proceedings to seek hardship discharges from student loans and to attempt to strip, avoid, or extinguish liens

Trustees file adversary proceedings to protect their interests. A standing trustee might file an adversary proceeding against a debtor to expose inaccurate bankruptcy filings or fraudulent records. Trustees file adversary proceedings against creditors to avoid preferences or fraudulent transfers in instances where a creditor received funds or property from debtor inappropriately, and the trustee seeks to undo the transaction and recoup funds. The U.S. Trustee files adversary proceedings to compel debtors in Chapter 7 to convert to Chapter 13 if there is bad faith in the filing, ineligibility for liquidation, and/or an ability to repay creditors through a plan. U.S Trustees also bring suits to dismiss debtor cases filed in abuse of the bankruptcy system

In many ways, adversary proceedings are like other civil lawsuits. It is the trustee’s job to make sure all assets are collected and creditors are treated equally and fairly. There are many situations that may give rise to an adversary proceeding, but some of the more serious reasons are accusations of fraud by an administrator or creditor or violations of the bankruptcy rights by creditors.

Because adversary proceedings are unusual and require a significant amount of legal work, the client’s attorney fees are not included in the normal price of a bankruptcy. As a result, homeowners can either hire an Attorney that will handle the Adversary Proceeding side of the Bankruptcy who will then be included in the Bankruptcy plan for payment of his fees, or the homeowner may represent themselves in the Adversary Proceeding.

The most common use of adversary proceedings is where the Debtor sues one of their creditors for violating their bankruptcy protection. Examples include wage garnishments or repossessions after the case is filed or continued debt-collection efforts by the creditor after becoming aware of the bankruptcy. While the debtor generally does not have an obligation to pay attorney fees out-of-pocket, the damages received in the case are usually given over to the Trustee for the benefit of the creditors and the violating creditor pays the attorney fees. It is not like “winning the lottery” but adversary proceedings are effective in penalizing creditors who trample on the rights of our clients.

While rare, the Trustee of your bankruptcy case may wish to file a fraudulent transfer proceeding if you transferred money or property within the two years before you filed for bankruptcy. Or, the Trustee can file a preferential transfer adversary complaint if you repaid any creditor to whom you were not related more than $600 during the 90 days before bankruptcy. Similarly, this type of complaint may be filed if you repaid a relative more than $600 during the year before filing for bankruptcy.

A trustee or a creditor may file a complaint to initiate adversary proceedings to deny your discharge if there is an allegation that you incurred a debt fraudulently or filed for bankruptcy fraudulently. Examples of fraud include lying in the information on your bankruptcy petition or lying to the trustee or judge during hearings. Someone who does these things can be convicted of fraud, have his or her discharge denied, or be sentenced to prison. The administrator also can ask the court to deny your discharge if they allege you did not comply with court orders.

People often file an adversary proceeding related to a home during bankruptcy. For example, a landlord may file a complaint asking to lift a stay so that he can evict a tenant if the tenant is using illegal drugs on the property or otherwise endangering it.

People seeking Chapter 13 bankruptcy also can file an adversary proceeding related to mortgages on a home. If you have multiple mortgages, of which one or more junior mortgages are not fully secured by the property, you can ask the court to strip the mortgages that are not secured. To qualify, the home must be worth less than the senior mortgage. For example, if a debtor has a house worth $150,000 and owes $151,000 on their first mortgage and $30,000 on their second mortgage, the second mortgage may be stripped because there is no equity in the house for it to attach to. On the other hand, it is all-or-nothing. If a $150,000 home has a $149,000 first mortgage, then there is some equity for the second mortgage to attach to so it will not be stripped. If the court agrees, it will strip the junior mortgages and treat them as unsecured claims, like medical or consumer debt.

If you own a nonexempt property with somebody else, and a trustee needs to sell it to pay off creditors, the trustee can file an adversary complaint to sever your interests. This action can force the co-owner of your property to sell the property.

If it is true that you are looking to file a bankruptcy eventually then it might be the time now to move forward with it. If your home continues to rise in price you will eventually have equity in your home again. But this equity in your home could create problems for your bankruptcy filing. If the equity rises past your ability to protect it with the allowable bankruptcy exemptions then your home may be in jeopardy if you file bankruptcy. This is because the trustee could take it and sell it for the equity in it. If you move quickly before this happens then you can usually protect your equity.

Now, Let’s Look at How Adversary Proceedings are Handled in Various Chapters of Bankruptcy

1) Adversary Proceedings In Chapter 13

Most adversary proceedings in a personal bankruptcy filed under any chapter of the Bankruptcy Code involve questions of dischargeability. Most adversary complaints are filed by creditors challenging the discharge of a specific debt or the entire discharge. A few are filed by debtors, usually to obtain a determination of the dischargeability of tax debts or student loans.

11 U.S.C. § 523(a) contains the complete list of nondischargeable debts in personal Chapter 7, 11, and 12 bankruptcies. However, the list does not apply to debtors that are not individuals, typically businesses.

Chapter 13, which is only available to individual debtors because of § 109(e), has an interesting complication because there are two ways to get a Chapter 13 discharge(1): under § 1328(a) after plan completion, and under § 1328(b) if the debtor successfully moves the court for a hardship discharge without having completed the plan.

The list of exceptions to discharge in §523(a) applies to the § 1328(b) hardship discharge because of §1328(c)(1). However, the list of nondischargeable debts in a § 1328(a) discharge is found in § 1328(a), and does not include some of the § 523(a) exceptions.

For example, debts for willful and malicious harm to property are dischargeable in a § 1328(a) discharge (cp. § 523(a)(6) and § 1328(a)(4)). There is another important difference between the wording of § 523(a)(6) and § 1328(a)(4): § 523(a)(6) refers to “willful and malicious” whereas §1328(a)(4) refers to “willful or malicious.” Therefore, while the object of the harm is narrower in § 1328(a)(4), the burden of proof is less stringent.

Other types of debts that are dischargeable under § 1328(a) are noncriminal fines (cp. § 523(a)(7) and § 1328(a)(3); e.g., in California parking penalties are civil rather than criminal penalties pursuant to Cal. Veh. Code § 40203.5), and the kinds of debts listed in § 523(a)(10)-(19).

In particular, debts incurred as part of a separation agreement or divorce decree that are not domestic support obligations are dischargeable in a § 1328(a) discharge. This fact alone leads to acrimonious Chapter 13 litigation— though not always in the form of an adversary proceeding.

One final note on dischargeability: if a debtor is in a Chapter 13 and then converts to Chapter 7, any debts incurred during the pendency of the Chapter 13 case are dischargeable in the Chapter 7 — subject, of course, to § 523(a) — because of § 348(b) combined with § 727(b)

___________________________________________

(1) A Chapter 13 debtor must satisfy the debt ceilings of 11 U.S.C. § 109(e) to be eligible to file. And a Chapter 13 debtor who has had a previous relatively recent bankruptcy is not eligible for a discharge at all.See§ 1328(f) for details

________________________________________

II. Debtor Initiated Adversary Proceedings

Fed. R. Bankr. Proc. 4007(a) states: “A debtor or any creditor may file a complaint to obtain a determination of the dischargeability of any debt.”

A. Chapter 7

Chapter 7 debtors rarely have the resources to fund an adversary proceeding, so debtor – initiated adversary proceedings are rare. Therefore, unless the case is done on a pro bono basis, or a wealthy friend or relative pays the costs and fees, an adversary proceeding is unlikely, even if it is warranted. It is for this reason that there are not very many student loan or tax dischargeability actions filed.

Of course, if the debtor’s debts are not primarily consumer debts — for example, they may be mostly tax debts, which are not consumer debts (see, e.g., In re Westberry , 215 F.3d 589, 591 (6th Cir. 2000))— then § 707(b) is inapplicable to the case. This is what underlies the occasional high income Chapter 7 filings. Then the debtor may have the resources to fund the litigation.

High income Chapter 7 cases usually involve high tax liabilities. As the IRS and the Franchise Tax Board (or whatever taxing authority you have in your state) may assert that the tax is nondischargeable, a debtor – initiated dischargeability action may be in order. As trust fund tax liabilities are never dischargeable, the focus of such actions is on income tax and the three – part dischargeability test that follows:

1. Due Date Of The Return

First, the debtor must file the bankruptcy papers more than three years after the date the tax return was due — with extensions. For example, if the tax year in question is 2007, then the date the tax return was due, with extension if the debtor took one, was October 15, 2008. Therefore, to satisfy this requirement the debtor cannot file the bankruptcy papers before October 16, 2011. Notice that this requirement does not focus on whether the debtor actually filed the return, just on when the return was due.

2. Filing Date Of The Return

Second, the debtor must have actually filed a legitimate, non – fraudulent return for the tax year in question at least two years before filing the bankruptcy papers. Continuing with the previous example, for the debtor to be able to file bankruptcy papers on October 16, 2011, the debtor must have filed the return no later than October 15, 2009. It should be noted that if the IRS files a “substitute for return” on behalf of the taxpayer because the taxpayer never filed a return, then this requirement cannot be satisfied.

3. Date Of Tax Assessment

Third, the IRS cannot have assessed the tax liability during the 240-day window immediately prior to filing the bankruptcy papers. Thus, in the previous example, for the debtor to file bankruptcy papers on October 16, 2011 the IRS cannot have assessed the tax after February 18, 2011. This particular requirement can be problematic because the 240 – day clock is tolled during an offer in – compromise, plus 30 days, and during any time in which a stay of proceedings against collections in a prior bankruptcy was in effect, plus 90 days. In applying this third requirement, one determines the applicable chronology by reviewing the tax transcript available from the IRS.

Other factors can come into play. For example, some years ago there was a debtor who had lived in a county in Texas that was declared a disaster area. As a result , the IRS granted a filing extension. Therefore, it is important to do a thorough analysis prior to filing the petition to ensure that a given tax is dischargeable

B. Chapter 13

Chapter 13 debtor initiated dischargeability actions are also rare because the debtor’s disposable income is usually consumed by plan payments. However, in a 100% plan where the debtor still has money left over, a dischargeability action may be warranted.

1. Student Loan Dischargeability Actions

A Chapter 13 debtor will almost certainly fail the so – called Brunner test (see In re Brunner, 46 B.R. 752, 753 (S.D.N.Y., 1985) (Aff’d by 831 F.2d 395 (2d Cir.1987)), and applied by the Ninth Circuit in In re Pena, 155 F. 3d 1108 (9th Cir. 1998)), so a Chapter 13 student loan dischargeability action will probably result in sanctions under Fed. R. Bankr. Proc. 9011.

2. Income Tax Dischargeability Actions

The difference in income tax dischargeability between the § 1328(a) and § 1328(b) discharges lies in the first and third requirements listed above. These requirements do not have to be met in a § 1328(a) discharge because § 1328 (a)(2) does not include §523(a)(1)(A) within its ambit. This simplification in the analysis may make a debtor-initiated action worth filing, especially if the liability is large and the proof of claim asserts nondischargeability status. However, it’s probably best to use an objection to the proof of claim rather than an adversary proceeding.

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

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.

What Homeowners Needs to Know About Summary Judgment Motions

06 Tuesday May 2014

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

≈ Leave a comment

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

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

What Does a Motion for Summary Judgment do?

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

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

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

Filing an Opposition to a Motion for Summary Judgment

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

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

Other Requirements for Filing a Motion for Summary Judgment or Response

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

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

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

Getting Further Help With Summary Judgment

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

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

How Homeowners Can Effectively Use TROs to Save Their Home from Foreclosure

20 Monday Jan 2014

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

≈ 1 Comment

How hard it is to fight a foreclosure depends to a great extent on where you live. If your state requires the foreclosing party to sue you (this is called judicial foreclosure), then it’s easier (and less expensive) to jump into the existing lawsuit. If, in your state, foreclosures proceed without court supervision (nonjudicial foreclosure), then you’ll have to bring your own lawsuit—a more worky and costly process.

Because nonjudicial foreclosures proceed outside of court, you’ll have to file a lawsuit to get a judge’s attention. And you’ll have the burden of proof because you want the judge to stop a proceeding—the foreclosure—that is already authorized by the mortgage.

Fightforeclosure will provide extremely helpful guidance if you choose to do this yourself, or you may hire a lawyer if you wish at a more costly price. Unfortunately, litigation in which an attorney’s services are used is always expensive when you have the burden of proof. So unless the lawyer thinks you have a very good case, you may not want to bother with a lawsuit. If the only basis for your challenge is that the foreclosing party made a technical procedural violation, you’ll probably gain only a few weeks of delay even if you win, but if you follow the well crafted causes of auction in fight Foreclosure defense package, you have a better chance of stopping foreclosure in its tracks.

To get your day in court to challenge a nonjudicial foreclosure, you must sue the lender and the foreclosing agent (typically, the trustee). In the lawsuit, you ask the court to enjoin (stop) the foreclosure proceedings until a judge can hear your reasons as to why the foreclosure shouldn’t proceed.

In this kind of lawsuit, you typically ask the court for three things, in this order:

a temporary restraining order
a preliminary injunction, and
a permanent injunction.

Your application for a temporary restraining order (TRO) must convince the judge that you will suffer “irreparable injury” if the judge doesn’t stop the foreclosure immediately. Because you will lose your home if the foreclosure is allowed to proceed, most courts accept that a foreclosure causes irreparable injury.

TROs are typically granted without a formal notice or hearing, which means the foreclosing party may have only a day or two of notice in which to prepare a response. If no response is filed, the judge may well grant the TRO, but require you to post a bond to protect the foreclosing party from economic harm in case you lose. A bond can be costly, assuming you can get one at all. You might be able to get the bond requirement waived if your income is low enough.

Getting the Bond Requirement Waived

The court may grant a waiver if:

* the delay required by the lawsuit will not cause unreasonable harm to the lender

* the validity of your mortgage is in question (for example, the deed was not properly acknowledged or recorded), or

* the lender’s interest in pushing ahead with the foreclosure can be protected by some other method, such are requiring you to make reasonable monthly payments during the course of the lawsuit.

The TRO will typically last until the date set for a hearing on whether the court should issue a preliminary injunction—which would stop the foreclosure pending a full trial on the matter. A hearing on the preliminary injunction is typically held between ten days and two weeks after the TRO is issued.

At the preliminary injunction hearing, the court will review each party’s paperwork—essentially the same paperwork submitted in a judicial foreclosure hearing, described earlier. At this hearing, the court must decide whether or not:

* you are likely to prevail at a trial, and

* the injury that you would suffer from the foreclosure outweighs the injury that the foreclosing party is suffering by not getting paid (called balancing the equities).

If the judge decides these issues in favor of the foreclosing party, the TRO will end, and your lawsuit will be dismissed.

But if the judge decides these issues in your favor, then the judge will issue a preliminary injunction. The preliminary injunction may order the foreclosing party to take corrective action—for example, by issuing a new pay-off statement and giving you a chance to reinstate the mortgage. Or it may simply keep the TRO in effect.

Because it often takes a year or two to bring a case to trial on a permanent injunction, getting a preliminary injunction is pretty much equivalent to a victory for you. Typically, the foreclosing party will either attempt to reach a settlement with you, drop the current foreclosure and begin from scratch, or meet any conditions laid down by the court and then go back into court asking that the injunction be lifted.

The burden is on you to prove that the foreclosing party didn’t comply with state laws or the terms of the deed of trust. You meet this burden with the documents you file—typically, declarations or affidavits from you and various witnesses that establish the facts you believe entitle you to stop the foreclosure. For example, if you contest the accuracy or legality of the fees the foreclosing party required you to pay to reinstate the mortgage, you would attach a sworn statement to your application for a TRO or preliminary injunction, setting out the facts as you know them.

If the foreclosing party produces documents that contradict yours, then you will need to convince the judge at the preliminary injunction stage that you deserve to have the foreclosure put on hold until you can produce your full case at trial. Because most preliminary injunction hearings don’t involve live witnesses, your paperwork may have to carry the day.

Consider Recording a Lis Pendens

Instead of seeking a TRO or preliminary injunction to delay the foreclosure sale until you can have a hearing, consider recording a “lis pendens” and filing a regular civil complaint attacking the foreclosure. A lis pendens is a simple document providing notice to the world that title to the property is a subject of litigation. As long as it is on record, any sale of the property can be undone if your lawsuit succeeds, because the buyer had notice of the controversy. Also, no title company will insure title to property subject to a lis pendens.

Due Process Suffers in Nonjudicial Foreclosures

When attempting to foreclose on your house, the lender must comply not just with your state’s laws and the terms of your deed of trust. It must also comply with the due process requirements of the United States Constitution.

In the foreclosure context, this means:

* You must receive adequate notice of the proceedings that may cause you to lose your house;

* You must have an opportunity to question the legality of the foreclosure proceedings before a neutral magistrate.

By agreeing to a nonjudicial foreclosure (as a practical matter, you have no choice) when you get a loan, you give up a fundamental due process right: the right to an evaluation of the foreclosure’s legality by a neutral magistrate before a foreclosure sale. To challenge a nonjudicial foreclosure in court and come out successful, you almost certainly will needs a well crafted package like Fightforeclosure.net package. Because people facing foreclosure are almost always strapped for cash, lawyers are often unaffordable. For that reason, for many people, the ability to file an action in court challenging a foreclosure is only theoretical. Is the entire nonjudicial foreclosure scheme even constitutional? I don’t think it is, but the courts say otherwise.

How Homeowners Can Effectively Defend Their Foreclosure

07 Tuesday Jan 2014

Posted by BNG in Affirmative Defenses, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, MERS, Non-Judicial States, Pleadings, Pro Se Litigation, RESPA, Trial Strategies, Your Legal Rights

≈ Leave a comment

If you have found yourself in an unfortunate situation of having to challenge a foreclosure lawsuit. Before you file your answer, I recommend that you have the Plaintiff’s attorney verify your debt. The Fair Debt Collection Practices Act, or FDCPA for short, states that any borrower undergoing a foreclosure proceeding against them has the opportunity to question the amounts owed, as long as the request for verification is made within thirty days of the Complaint being filed. It is very important to act quickly. The FDCPA verification letter does more than just verify the amount of money you owe; it also acts like a pause button to the foreclosure action.

The Plaintiff’s attorney may not proceed with the foreclosure until they verify your debt by sending the FDCPA debt verification letter to the same address where you were originally served, or to a different address that you specify. The production and mailing of this letter usually takes about a month, so you just bought yourself thirty days just by mailing a letter to the Plaintiff’s attorney. In this game, time is more valuable than money. Any stall tactics we can successfully implement are priceless.

If you’ve been served with a foreclosure lawsuit or expect one in the near future, it’s essential to know what foreclosure defenses may be available to help you dismiss, delay or win your case.

Because foreclosure laws differ from state to state and sometimes county to county within each state, we strongly urge you to hire a lawyer in your area to handle the case if at all possible. Whether you hire an attorney or defend your own foreclosure lawsuit, the more you know the more likely you’ll succeed so learn all you can about the foreclosure phases in your state as well as possible foreclosure defenses applicable to your situation.

Types of Foreclosure Defenses

There are six general categories of foreclosure defenses, also known as “affirmative defenses” in Florida and other states – defective service of the lawsuit documents, loan closing related defenses, breach of contract, standing/chain of title issues, fraud and misrepresentation and “catch all” defenses that may protect your rights if other defenses fail.

Once you identify your foreclosure defenses, you’ll either list them in the Answer to Your Foreclosure Lawsuit, as part of a Motion to Dismiss before filing your answer or as grounds for a counterclaim against the bank. Depending on the foreclosure defense involved, you may be able to use a combination of two and even all three of these options.

1. Defective Service of Process

In Judicial Foreclosure states which require the use of the court system to process foreclosures, the lawsuit itself and a summons must be personally delivered to you by a licensed process server. Referred to as “service of process”, there will be at least two documents involved consisting of the actual lawsuit and a summons for each defendant with instructions when and where to respond.

If the process server makes several legitimate but unsuccessful attempts to serve you, they’ll simply serve you by publishing notice of the lawsuit in the local newspaper so its generally better to accept the papers than hiding and hoping it goes away. The process server only gets paid if you get served so don’t expect them to give up and it’s safer to know what’s going on than missing important court deadlines because you never saw the legal notice in your newspaper.

Although it sounds pretty basic, sloppy paperwork and fraudulent practices have once again conspired to make this an important foreclosure defense for homeowners who were never served or served improperly. Defective service of process obviously includes instances when you were never served despite living in the property, but can also be when the process server didn’t take all the state required steps to find you, served a minor or the house next door, files false affidavits in court about who they served and when, forged signatures or backdated documents and a host of similar intentional and unintentional actions that may justify dismissing the lawsuit.

If this defense applies to you, it may be grounds for a motion to dismiss the foreclosure lawsuit and/or part of your answer to the lawsuit as an affirmative defense. Consult with an attorney in your area familiar with the local requirements for process servers if possible and include the defense as part of your lawsuit answer by stating something similar to “As a first affirmative defense, the service of process was defective.” This is just an example that should be modified in accordance with the local pleading rules for each county and state to make sure you meet the local requirements.

2. Loan Closing Related Defenses

There are several related foreclosure defenses we’ve grouped under this category that arise from federal disclosure requirements under the Truth in Lending Act(“TILA”)and the Real Estate Settlement Procedures Act(“RESPA”).

Each of these federal laws were created to help consumers by forcing lenders to disclose the material terms of your loan including the actual dollar amount of all finance charges over the life of your loan, a good faith estimate of potential closing costs provided to you prior to closing, an explanation of your three day right to cancel the entire loan transaction and other essential disclosure requirements that may result in the actual rescission of your loan documents under certain circumstances.

Because this is a very technical area requiring expertise in evaluating your HUD-1 closing statement and related documents that is beyond the scope of this discussion, we strongly suggest that you retain an attorney or experienced realtor to help you analyze your loan documents and determine if violations exist. If you suspect that there are deficiencies, there are several critical steps that must be taken to protect your rights including sending a “Notice of Rescission” to your lender before the lender corrects the defects.

3. Breach of Contract

Breach of Contract is one of the strongest foreclosure defenses available to homeowners and investors and may also be grounds for a motion to dismiss or counterclaim against the bank. Although the specific allegations can be similar to those made in other foreclosure defenses, breach of contract claims should almost always be used as a stand alone defense if sufficient facts exist.

Without providing a seminar on contract law, there are three basic elements to every breach of contract claim-a valid contract, breach of some obligation imposed by that contract, and damages specifically resulting from the breach itself. For example,your obligation as borrower under the contract (the loan documents) is to make timely payments of the amount you’ve agreed to pay, while the bank must also comply with its contractual requirements.

One of the most frequent breaches by the bank is purchasing “forced placed” insurance that is either unnecessary, overly expensive or both. The damage from the breach is your inability to make monthly payments because of the higher insurance costs and as a result, you would not have breached your obligation to make monthly payments if the bank hadn’t first breached its obligations by forcing you to pay more than your contract requires.

Other possible breaches by the bank include failing to comply with its own underwriting requirements in giving you loan terms that were unfair or not supported by your income. By offering no interest or adjustable rate loans that later skyrocketed upwards, balloon payments due in the midst of an economic crisis or even providing too much money for a loan they knew you couldn’t afford, the bank breached its contractual obligations in many respects.

Finally, additional examples include breach of the disclosure requirements in RESPA or TILA discussed above or failing to provide adequate notice of default and its intent to accelerate the payment requirements as specified in paragraph 22 or 23 of most mortgages.

No matter where you allege the breach of contract – in a motion to dismiss, answer or counterclaim – you need to be very specific about the facts. Thus, breach of contract as a defense in your answer should read something like “As a third affirmative defense, the bank breached the contract by purchasing forced place insurance that was either unnecessary or too expensive” or ” by failing to provide proper notice of its intent to accelerate the loan as required by paragraph 22/23 of my mortgage.”

Of course modify these examples to reflect your specific circumstances and to comply with local court rules and procedure. Even if you decide not to hire an attorney to defend your case, you can always hire a lawyer for an hour or two to help you meet local requirements.

4. Lack of Standing/Defective Chain of Title

Ask homeowners who owns their mortgage and most will confidently tell you its the company they pay each month. However, the answer is much more complicated as the original loan was almost certainly transferred several times since closing and at best you’re likely paying the loan servicing company not the original owner.

The importance of this defense – called “lack of standing” or “defective chain of title” – can’t be overstated as several courts have found fraudulent, backdated and inadequate loan documents in many cases and have actually dismissed foreclosure lawsuits with prejudice as a result. Lack of standing to sue and/or not owning the loan documents can be the grounds for a motion to dismiss, an affirmative defense in your answer or the basis for a counterclaim against the bank.

There are at least three important documents to review before deciding if this defense can help you – the mortgage or deed of trust, the promissory note and any assignments involved in transferring the loan from one bank to another. The current owner of your loan must have physical possession of each of these original “wet ink” documents and every transfer must be properly endorsed on the documents and recorded in the county where the property is located together with payment of recording and doc stamp fees. Finally, make sure the current assignment was dated prior to the the date the foreclosure lawsuit is filed with the court.

With the huge number of mortgages transactions, many banks have no idea where the original documents are, most failed to properly record each transfer or assignment and in too many situations actually forged or backdated documents in an effort to meet legal requirements. In fact a recent Reuters investigation involved a random review of foreclosure files from five different states and found more than 1000 questionable mortgage assignments, promissory notes with missing or faulty endorsements and foreclosure lawsuits containing multiple inaccurate facts.

During the early stages of the foreclosure crisis, the bank’s strategy of filing lawsuits without proper documentation worked well and many people unnecessarily lost their homes as a result. However, recent court decisions have refused to endorse these illegal bank schemes and have required compliance with basic evidence standards instead. To proceed with foreclosure lawsuits, most courts now require proof that the banks have physical possession of the original documents and further require evidence to show how they got the documents and that the chain of title is not defective.

A couple of additional issues to watch out for are any cases involving “MERS” as the plaintiff in your foreclosure lawsuit and whether or not a loan servicing company has authority from the mortgage owner to file suit and confirming that the owner even has authority to do so. MERS stands for the “Mortgage Electronic Registration System” banks created in an attempt to hide mortgage transactions from public scrutiny and avoid paying recording fees for each transfer. Most courts have finally decided that MERS has no standing to sue homeowners so be sure to raise any and all defenses related to this issue.

For more information on MERS and the illegal and fraudulent actions of banks and lenders involved in the foreclosure fiasco, we strongly recommend an excellent site by Greg Hunter called USA Watchdog.com which contains numerous interesting and well researched articles on the subject overall.

As you can see from this very brief discussion, lack of standing and figuring out who owns your mortgage is both an important defense and complicated subject. As a result, we strongly urge you to retain an attorney to handle your case if these issues arise or at minimum consult with a lawyer for a couple of hours to help you focus on the right issues and discuss strategies to get documents the banks refuse to provide.

When raising this issue as an affirmative defense in your answer, it should read something like “As a fourth affirmative defense, the plaintiff lacks standing to sue as a result of a defective chain of title and related issues.” As always, modify this example to reflect your specific circumstances and to comply with local court rules.

5. “Catch All” Foreclosure Defenses

“Catch All” foreclosure defenses refer to procedural devices and general defenses to make sure you raise all possible issues that may help you and/or to supplement other applicable defenses that are missing one or more of their required elements.

The first defense in this category is called “failure to state a claim upon which relief can be granted” and the second is “the failure to comply with conditions precedent.”

The failure to state a claim upon which relief can be granted is similar in concept to the breach of contract and lack of standing defenses raised above and generally addresses deficiencies in the required documentation and whether or not the plaintiff is the actual owner of your loan and has the right to sue you. The defense can be used as grounds for a motion to dismiss or as an affirmative defense in your answer, but is rarely used to support a counterclaim against the bank. Even though the defense may overlap with other applicable defenses, it’s almost always worthwhile to list as an additional affirmative defense.

The second “catch all” defense is the failure to comply with conditions precedent and covers issues ranging from the failure to provide proper and timely notice of default and the bank’s intention to accelerate your loan payments and/or failing to properly attach the required documents to the foreclosure lawsuit. Again, it’s almost always worthwhile to list this as an additional affirmative defense to cover areas you may have missed.

6. Fraud and Misrepresentation Foreclosure Defenses

The final category of defenses addressed in this article are fraud and misrepresentation by the bank, the loan servicing company or the mortgage broker on behalf of the bank. Although this defense may be right on point for many of the improper actions by the bank, the pleading requirements are much more difficult for anything related to fraud and thus require far more detail than the defenses raised above.

This doesn’t mean you shouldn’t use this defense if sufficient grounds exist, but be prepared to state the exact nature of the fraud or misrepresentation, when it occurred and in what context as well as any additional information you may have. Because many of these issues require discovery and review of bank documents you may not have at the time you respond to the foreclosure lawsuit, courts may dismiss your defense until you have more information. Remember you can always amend your answer at a later date once you have the necessary information, so make sure you have enough evidence initially before deciding to include this as a defense. The idea is not to throw everything in and hope something works as the bank and courts will see through this strategy and minimize your credibility even though legitimate defenses exist.

Your affirmative defense should read something like “As a sixth affirmative defense, the bank is guilty of fraud and misrepresentation in the following manner” and then include the facts necessary to support your allegations. If possible, meet with an attorney to help you identify any potential fraud and help comply with local court pleading requirements.

FightForeclosure.net

~ Your "Pro Se" Foreclosure Fight Solution!

Category Archives: Pleadings

How Florida Homeowner’s Counsels Can Effectively Use Stay of Proceedings to Delay Monetary Restitution Judgments after Foreclosure Pending Appeal or Wrongful Foreclosure

How Homeowners in Foreclosure Can Find Legal Help

Nonprofit Legal Assistance

THESE ARE THE LIST OF NONPROFIT LEGAL ASSISTANCE ORGANIZATIONS BY STATE

Nonprofit Legal Assistance Organizations in Arizona

Nonprofit Legal Assistance Organizations in California

Nonprofit Legal Assistance Organizations in Florida

Nonprofit Legal Assistance Organizations in Georgia

Nonprofit Legal Assistance Organizations in Illinois

Nonprofit Legal Assistance Organizations in Indiana

Nonprofit Legal Assistance Organizations in Massachusetts

Nonprofit Legal Assistance Organizations in Michigan

Nonprofit Legal Assistance Organizations in New Jersey

Nonprofit Legal Assistance Organizations in New York

Nonprofit Legal Assistance Organizations in North Carolina

Nonprofit Legal Assistance Organizations in Ohio

Nonprofit Legal Assistance Organizations in Pennsylvania

Nonprofit Legal Assistance Organizations in Texas

Nonprofit Legal Assistance Organizations in the District of Columbia

Nonprofit Legal Assistance Organizations in Virginia

Nonprofit Legal Assistance Organizations in Washington

How Homeowners Can Effectively Handle Subpoenas Duces Tecum

Responding to Subpoenas

How California Homeowners Can Technically Disqualify their Foreclosure Mill Attorney

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

How Homeowners in Bankruptcy Can Benefit Using Adversary Proceeding

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

What Homeowners Needs to Know About Summary Judgment Motions

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

Filing an Opposition to a Motion for Summary Judgment

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

Getting Further Help With Summary Judgment

How Homeowners Can Effectively Use TROs to Save Their Home from Foreclosure

Getting the Bond Requirement Waived

Consider Recording a Lis Pendens

Due Process Suffers in Nonjudicial Foreclosures

How Homeowners Can Effectively Defend Their Foreclosure

Share this:

Nonprofit Legal Assistance

THESE ARE THE LIST OF NONPROFIT LEGAL ASSISTANCE ORGANIZATIONS BY STATE

Nonprofit Legal Assistance Organizations in Arizona

Nonprofit Legal Assistance Organizations in California

Nonprofit Legal Assistance Organizations in Florida

Nonprofit Legal Assistance Organizations in Georgia

Nonprofit Legal Assistance Organizations in Illinois

Nonprofit Legal Assistance Organizations in Indiana

Nonprofit Legal Assistance Organizations in Massachusetts

Nonprofit Legal Assistance Organizations in Michigan

Nonprofit Legal Assistance Organizations in New Jersey

Nonprofit Legal Assistance Organizations in New York

Nonprofit Legal Assistance Organizations in North Carolina

Nonprofit Legal Assistance Organizations in Ohio

Nonprofit Legal Assistance Organizations in Pennsylvania

Nonprofit Legal Assistance Organizations in Texas

Nonprofit Legal Assistance Organizations in the District of Columbia

Nonprofit Legal Assistance Organizations in Virginia

Nonprofit Legal Assistance Organizations in Washington

Share this:

Responding to Subpoenas

Share this:

Share this:

Share this:

Share this:

Share this:

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

Filing an Opposition to a Motion for Summary Judgment

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

Getting Further Help With Summary Judgment

Share this:

Getting the Bond Requirement Waived

Consider Recording a Lis Pendens

Due Process Suffers in Nonjudicial Foreclosures

Share this:

Share this: