Friday, July 04, 2014

Maine Supremes: Despite Lender's Sufficient Proof Of Its Status As Holder Of Note, Its Failure To Prove Ownership Of Mortgage Proves Fatal To Its Standing To Proceed With Foreclosure Action; Indicates That Mortgage May Not Always Follow The Note

A recent ruling by the Maine Supreme Court involving a foreclosure action serves as a reminder that, at least under the state law of Maine, the principle that the "mortgage follows the note" apparently does not necessarily apply where the foreclosing party merely proves its status as holder of the promissory note. Consequently, a foreclosing party in Maine must prove both:
  • its status as "holder" of the promissory note, and
  • its ownership of the mortgage securing the promissory note
in order to establish its standing to foreclose.

From a recent Opinion Summary:
  • Scott Greenleaf executed a promissory note to Residential Mortgage Services, Inc. (RMS). That same day, Greenleaf signed a mortgage on property securing that debt. The mortgage listed RMS as the lender of the debt and Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for the lender.

    MERS subsequently assigned its interest in the mortgage and note to Countrywide Home Loans Servicing, LP (BAC). BAC then merged with Bank of America, N.A. (Bank). Five years later, the Bank instituted foreclosure proceedings against Greenleaf. The district court entered a judgment of foreclosure in favor of the Bank.

    Greenleaf appealed, arguing that the Bank lacked standing to foreclose on the property.

    The Supreme Court agreed with Greenleaf and vacated the judgment, holding (1) the Bank proved its status as the holder of the note but failed to establish its ownership of Greenleaf’s mortgage;(1) and (2) because the Bank failed to satisfy two of the Higgins foreclosure requirements, the Bank was not entitled to a judgment of foreclosure in any event.
Source: Opinion Summary: Bank of Am., N.A. v. Greenleaf.

For the court ruling, see Bank of America, N.A. v. Greenleaf, 2014 ME 89 (ME. July 3, 2014).

Representing the homeowner were Thomas A. Cox, Esq.,(2) Portland, Maine, and John D. Clifford IV, Esq., Clifford & Golden, PA, Lisbon Falls, Maine.

Filing a joint "friend of the court" brief in support of the homeowner's position in this case were Yale University Law School's Jerome N. Frank Legal Services Organization,(3) New Haven, Connecticut, and the National Consumer Law Center, Boston, Massachusetts.

(1) From the court's ruling:
  • The interest in the note is only part of the standing analysis, however; to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage.

    Unlike a note, a mortgage is not a negotiable instrument. See 5 Emily S. Bernheim, Tiffany Real Property § 1455 n.14 (3d ed. Supp. 2000). Thus, whereas a plaintiff who merely holds or possesses—but does not necessarily own—the note satisfies the note portion of the standing analysis, the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage. See Harp, 2011 ME 5, ¶ 9, 10 A.3d 718.

    In Wilk, for example, Deutsche Bank was able to satisfy the note portion of the analysis by establishing that it was the holder of the note. 2013 ME 79, ¶ 10 & n.3, 76 A. 3d 363. In its attempt to establish its interest in the mortgage, Deutsche Bank produced a series of mortgage assignments from the original lender leading to OneWest Bank, and then from One West to Deutsche Bank. The purported assignment from OneWest to Deutsche Bank, however, was dated two weeks before OneWest had acquired the mortgage from its predecessor. Id. ¶ 12. Notwithstanding Deutsche Bank’s adequate interest in the note, we vacated the judgment of foreclosure because Deutsche Bank failed to introduce any evidence that it owned the mortgage. Id. ¶ 22.
(2) Thomas Cox is Volunteer Program Coordinator at Maine Attorneys Saving Homes, a joint project of the non-profit law firm Pine Tree Legal Assistance ("PTLA") (which provides free legal help to Maine people with low incomes), and the Maine Volunteer Lawyers Project (a part of PTLA which coordinates the volunteer efforts of Maine attorneys and community members to help people of low income navigate the civil justice system.

(3) Yale University Law School's Jerome N. Frank Legal Services Organization links law students with individuals and organizations in need of legal help who cannot afford private attorneys.

Thursday, June 12, 2014

Lowlife Lawyer/Church Pastor Gets Six Years For Swindling Multi-Million Dollar Harlem Apartment Building Out From Under Elderly Widow; NYC Feds Frog-March Felon Away To Prison While Weeping Wife, Kids Watch; Deportation To Nigeria May Be Next For Foreign National

In New York City, SaharaReporters reports:
  • A former Brooklyn-based civil attorney, and Pastor of the Deeper Life Bible Church, Ifeanyichukwu Eric Abakporo, was [] in federal court in New York sentenced to six years in a United States prison in a case of defrauding banks, mortgage lenders, property owners, and property buyers.

    Mr. Abakporo was immediately remanded into custody by presiding U.S. District Court Judge, Shira A. Scheindlin. His wife and two children wept openly in the courtroom. He was led away in handcuffs.

    In addition to the six-year mandatory sentence, Abakporo will more than likely face deportation to Nigeria after serving his sentence, with the likelihood of a three-year supervisory probation release waved.

    His co-defendant, Latanya Pierce, received a lighter, 30-month sentence. In her closing statement, Pierce said she felt like the “biggest fool in the world.”

    The legal fate of Abakporo and Pierce was never in doubt. They were convicted in a wide-ranging series of illegal transactions in New York City over a nine-year stretch, dating back to 2003.

    Following the sentencing procedures, neither prosecuting attorneys nor the attorneys defending the two would offer comments to SaharaReporters.

    As Abakporo was away in handcuffs, his wife and two children wept openly in the courtroom.
Source: Deeper Life Bible Church Pastor, Eric Abakporo, Sentenced To Six Years For Real Estate Fraud.

For earlier stories, see:

Tuesday, June 10, 2014

'Disability Dog' Takes $300K Bite Out Of Rogue Condo Association For Jerking Around His Wheelchair-Bound, Reasonable Accomodation-Seeking Owner In Violation Of Fair Housing Act

In Davie, Florida, The Miami Herald reports:
  • Calling the behavior of a Davie condominium association “absurd” and “unreasonable,” a federal judge has ordered a Davie condominium to allow a disabled resident to keep her service dog.

    The two-year dispute will carry a hefty price tag for the Sabal Palm Condominiums: $300,000.

    Deborah Fischer, a retired Broward art teacher who was diagnosed with multiple sclerosis in 2000, was sued by Sabal Palm Condominiums after her dog, Sorenson, moved into her apartment in November 2011. Fischer, who uses a wheelchair and has limited use of her arms and hands, needs Sorenson to pick things, up, open and close doors and retrieve items from counter tops.

    “Sabal Palm got it exactly — and unreasonably — wrong,” U.S. District Judge Scola wrote in his order. “This is not just common sense — though it is most certainly that.”

    The condominium complex in Davie’s Pine Island Ridge neighborhood does not allow pets over 20 pounds and demanded medical records and other information to prove that Fischer needed Sorenson — a 5-year-old Labrador-golden retriever mix — to help her. Saying Fischer didn’t provide the proper documentation, the condo association sued, said the woman’s attorney, Matthew Dietz of Miami.

    Fischer, along with her husband, Larry, counter-sued, saying the condo board’s demands violated the federal Fair Housing Act, or FHA.

    Scola agreed with Fischer, and gave the condo board a serious verbal lashing in his 30-page order.(1)

    That the condo association “turned to the courts to resolve what should have been an easy decision is a sad commentary on the litigious nature of our society,” Scola wrote in a March 19 order. “And it does a disservice to people like Deborah who actually are disabled and have a legitimate need for a service dog as an accommodation under the FHA.”

    In their arguments, board members suggested that, even if Fischer needed a service dog, she could have gotten by with an animal that did not weigh more than the Sabal Palm’s 20-pount limit. But, Scola wrote, such a dog would not have been able to meet Fishcer’s needs. Sorenson, the judge ruled, was a “reasonable accommodation” to Sabal Palm’s requirements.

    “That a blind person may already have a cane, or that he or she could use a cane instead of a dog in no way prevents the blind person from also obtaining a seeing-eye dog as a reasonable accommodation under the FHA,” Scola wrote. “A contrary result is absurd.”

    After Scola ruled in the Fischers’ favor, Dietz said he negotiated the $300,000 settlement with the attorney representing Sabal Palm, Karen Nissen.

    Nissen did not return calls or an e-mail Tuesday. David Rosinsky, the attorney representing Marvin Silvergold, who was the board president at the time and was sued individually, said the case was “amicably resolved.” A summary judgment against Christopher Trapani, who was the attorney of the association at the time, was denied. Trapani could not be reached for comment.

    Fischer said the dispute started in November 2011, when she brought Sorenson home after getting him from Canine Companions for Independence, a nonprofit group that provides service dogs for people with disabilities. She had sent the complex’s association a letter notifying them that she would be getting a service dog. For five months, Fischer went back and forth with the association.

    “I have an obvious disability,” she said. “I just couldn’t believe how hard they were making it.”

    Fischer said Sorenson quickly became an important part of her life. He helped her do things she couldn’t do for herself — such as turning the lights in her apartment on and off, picking up TV remotes from coffee tables or counters, or scooping up keys from the floor. The retriever allowed her to perform routine tasks without bothering her husband.

    In all, Sorenson can recognize 40 separate commands, Fischer said.

    “He has made my life so much better,” she said.

    But as the litigation dragged on in court, Fischer said, the drama began to overwhelm her. She had lived in the complex for more than a dozen years, and, suddenly, people she had lived near for years were adverse parties to a lawsuit.

    “It was very difficult to deal with,” she said.

    Fischer’s lawyer said the facts were clear: “This is one of the worst cases like this that I’ve seen,” said Dietz, who specializes in civil rights and disability lawsuits. “It is obvious that the service dog would help her.”

    Dietz said a new board has since been elected and the rules have changed. He hopes the case will help others become more sensitve to the needs of disabled people.

    Fischer agreed, saying she hopes no one has to go through what she went through.

    “I am finally free of the questions, investigations and litigation,” she said. “We are at the point where we can have some peace of mind and finally move forward.”
Source: Davie woman with banished service dog gets $300,000 condo settlement (A Davie condo resident with MS will receive $300,000 from her Davie complex after she was told she couldn’t keep her service dog in her unit).

For the court ruling, see Sabal Palm Condominiums of Pine Island Ridge Association, Inc., v. Fischer, Case No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014).

(1) Judge Scola prefaced his ruling by acknowledging that, while the case before him was not such a case, "[t]here is some reason to be skeptical of requests to keep a dog as an accommodation for a disability in certain cases, particularly cases where the dog assists the disabled person by rendering emotional support."

See Fake Service Dogs, Real Problem or Not? and Disability Dog Scams for more on the possible use of fake service dogs and fake identification by individuals to obtain special access to housing, public places or airports/airlines for their animal.

See, generally:
Go here and go here for earlier posts on service animals and the Fair Housing Act.

Thursday, May 22, 2014

Loan Modification Deals That Leave Homeowners Bound & Gagged Grow More Widespread, Preventing Borrowers From Bad-Mouthing Banksters Or Suing Them In Court For Future Misconduct

Reuters reports:
  • Joseph and Neidin Henard thought they had finally fixed the mortgage that was crushing them.

    In January, the couple reached a settlement with every company that had a stake in the mortgage on their house in Santa Cruz, California, a deal that would have slashed their monthly payment by almost 40 percent to $3,337. It was the end of a process that started with their defaulting in 2009.

    But when they saw the final paperwork for their settlement, they found that Ocwen Financial Corp, the company that collected and processed their mortgage payments, had added an extra clause: they could not say or print or post anything negative about Ocwen, ever.

    The Henards' experience was not unusual. Mortgage payment collectors at companies including Ocwen, Bank of America Corp and PNC Financial Services Group are agreeing to ease the terms of borrowers' underwater mortgages, but they are increasingly demanding that homeowners promise not to insult them publicly, consumer lawyers say. In many cases, they are demanding that homeowners' lawyers agree to the same terms. Sometimes, they even require borrowers to agree not to sue them again.

    These clauses can hurt borrowers who later have problems with their mortgage collector by preventing them from complaining publicly about their difficulties or suing, lawyers said. If a collector, known as a servicer, makes an error, getting everything fixed can be a nightmare without litigation or public outcry.
  • Attorneys for lenders and servicers say consumer lawyers are overstating the importance of these clauses. Banks are looking to avoid being sued again for the issues resolved in the settlement, but understand they may be sued if they are responsible for a future wrong, said Martin Bryce, a partner with Ballard Spahr in Philadelphia who specializes in consumer finance and banking.

    Bryce acknowledges that the language is ambiguous - under the waivers, homeowners often give up the right to sue on claims "whether existing now or to come into existence in the future."
  • Clauses preventing future disparagement and lawsuits first started appearing after the housing crash, but they have grown more widespread in the last six months, said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington.

Saturday, May 17, 2014

Lender Ordered To Swallow $200K 'Cramdown' On Home Loan Modification In Chapter 13 Bankruptcy Case Despite Fact That Loan Was 1st Mortgage On Borrower's Primary Residence

In Miami, Florida, the Daily Business Review reports:
  • Even though a Miami man made money renting part of his duplex, a judge ruled in his favor and lowered the debt on his residential mortgage by nearly $200,000 in a Chapter 13 bankruptcy case.

    The question wasn't whether the duplex was Luis L. Ramirez's primary residence, U.S. Bankruptcy Judge A. Jay Cristol wrote in an April 7 order. It was whether the multifamily home on Northwest 26th Street met the legal test that allowed the modification of a first priority mortgage.

    "If you're using the home as part of an investment, then there's more of a risk to the lender," said Jacqueline Ledon, staff attorney at Legal Services of Greater Miami Inc.,(1) the nonprofit that filed the motion on Ramirez's behalf. "Primary residences are less risky. Most people will do whatever it takes to save the roof over their head."

    The bankruptcy code typically bans the modification of interest rates, principal and other terms on residential first priority mortgages.

    But in a case that hinged on how the court would treat a duplex where the homeowner rented part of the property, Cristol ruled in the homeowner's favor and allowed the mortgage modification.

    For "bankruptcy purposes the inquiry is not whether the property is the debtor's primary residence," Cristol wrote.

    "Rather the inquiry is whether the property is solely the borrower's primary residence. Where the borrower resides in one unit and rents out the other unit of a duplex, the property is not solely the borrower's primary residence and as such the mortgage is subject to modification."

    The question was whether lender Lansdowne Mortgage LLC expected Ramirez to occupy the full two-unit building.

    Landsdowne argued it did. Its attorneys at Herron Ortiz in Miami objected to Ramirez's third amended Chapter 13 bankruptcy plan that proposed monthly payments of $718 plus interest and a final balloon payment of interest and $66,094 in the 60th month. The mortgage company rejected the proposal, saying it feared Ramirez would renege on the new terms in the 59th month.

    In its proof of claim for a first priority residential mortgage at a Jan. 29 evidentiary hearing, the lender told the court it viewed the mortgage transaction as "providing the borrower with a residence."

    But Ramirez's attorneys disagreed.

    "There are extensive examples throughout the case law that say you can modify the mortgage with a duplex because it's not solely the borrower's primary residence,"(2) Ledon said. "In most cases a single borrower can't occupy both units."

    For Cristol, an omission in the mortgage documents was a key factor in deciding whether the anti-modification provision applied.

    "The creditor responds that the mortgage does not actually contain a borrower-occupancy provision and suggests the rider was simply an error," Cristol wrote.

    The Legal Services attorneys argued the error was on Landowne's part because the lender drew up the contract. And in the end, that omission cost the Miami mortgage company about $200,000.

    In his ruling, Cristol permitted the cramdown, ordering Landsdowne to refinance the property and reduce the debt to $100,000—based on the lender's appraisal of the house—down from $297,087. Ramirez now has five years to repay the loan.

    "The court further finds that to the extent any ambiguity exists as to the applicability of the rider deleting the borrower-occupancy provision, such ambiguity is construed against the creditor as drafter of the mortgage contract," Cristol wrote.

    After the housing crash, Cristol supported a change in bankruptcy law that would have allowed judges to reduce the principal on first mortgages on single-family homes, something that was possible until 1979. Bankruptcy judges already have the power to cut second mortgages and credit card debt. The legislation failed.
For the story, see Lender's Mistake Costly, Leads To $200,000 Mortgage Reduction.

For the court order, see In re Ramirez - Order Confirming Chapter 13 Plan.

Go here for In re Ramirez - Debtor's Response To Creditor Objection To Confirmation.

(1) Legal Services of Greater Miami Inc. is the largest provider of broad-based civil legal services for the poor in Miami-Dade and Monroe Counties in Florida. Each year it provides free civil legal services which benefit more than 30,000 members of the community who have nowhere else to turn for help- women, children, seniors, veterans returning from combat, people with disabilities, low wage workers and the homeless who have problems in the areas of tenants’ rights, homeownership, health, income maintenance, employment, special education, tax and consumer rights, according to its website.

(2) In its order, the court noted:

  • As a preliminary matter, the Court notes that the cases permitting modification of residential mortgages secured by multiunit-properties are legion. In re Zaldivar, 441 B.R. 389, 390 (Bankr. S.D. Fla. 2011) (collecting cases). A totality of the circumstances test, analyzing the facts of each case, is used to determine whether a cramdown is permissible. Id. Specifically, the Court looks to the predominant character of the mortgage transaction: [...].

Tuesday, April 08, 2014

Unwitting Real Estate Owners Get Roped Into Co-Owner's Bankruptcy Proceeding As Chapter 7 Trustee Seeks Court Approval For Sale Of Entire Jointly-Owned Property, As Opposed To Just Debtor's Interest

From a recent post from by attorney Vicki R. Harding, Esq.:
  • A chapter 7 debtor owned real estate jointly with three other people as tenants in common. The chapter 7 trustee sought court approval to sell the entire property, as opposed to just the debtor’s tenant in common interest.

    The debtor and his wife listed a 50% interest in real estate described as “125.8 acres rough land” in their bankruptcy schedules. The chapter 7 trustee and the debtors settled a dispute regarding claimed exemptions in the property and agreed to liquidate the non-exempt portion for the benefit of the estate.

    Section 363(h) of the Bankruptcy Code provides that if a bankruptcy estate has an undivided interest in property as a tenant in common, the trustee can sell the interests of both the estate and any co‑owner if (and only if):
(1) partition in kind of such property among the estate and such co-owners is impracticable;

(2) sale of the estate’s undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co‑owners;

(3) the benefit to the estate of a sale of such property free of the interests of co‑owners outweighs the detriment, if any, to such co-owners; and

(4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power.

In this case two of the three other co‑owners consented to a sale and stipulated that the trustee was entitled to sell the entire property pursuant to Section 363(h). However, the remaining co‑owner (Simons) objected.

The trustee and Simons stipulated to various facts and agreed that “the only issue remaining under §363(h) is whether the Real Property is capable of partition or must be sold as a whole.” However, the court took issue with this characterization of the issue. In particular, it pointed out that if the trustee did not prevail, the result would not be to partition and sell the property, but rather the trustee’s request would be denied, leaving him with the right to sell the debtor’s undivided interest as a tenant in common.

The court decided that the parties had stipulated that factors 3 and 4 were met. Although their characterization of the question suggested that they were focusing only on factor 1, the court felt compelled to consider both factors 1 and 2 since it was not entirely clear what they intended.

On the issue of whether partition was “impracticable”:

[P]racticable is not a synonym for possible; nor is it a synonym for practical. Its meaning falls between the two concepts of possibility and practicality, and incorporates both ideas – something that is not only possible, but also feasible and sensible.

The trustee had the burden of proof, and his only witness clearly did not impress the court. The witness described the property as “rough, rock, and hilly land with no improvements.” According to him, the property could not be divided without affecting his estimated value. However, he gave no indication of the reduction in value nor the basis for these conclusions. (Apparently his testimony was based on a “drive-by” of the property, and he neither walked the property nor had any knowledge of the topography other than a brief view from an adjacent property and a review of an aerial map.)

In response, Simons testified as a fact witness that the property had been in her family for several generations, its only value was timber, and an old logging road evenly divided the property that would allow for a fair partition. The court determined that the trustee did not establish that partition was impracticable.

Considering the issue of whether a sale of an undivided interest would bring significantly less than a sale of the entire property, there was very little information to consider. The range of the only values available in the record led to a maximum difference of ~$6,500. The court concluded that the record did not contain proof that a sale of the tenant in common interest would bring significantly less, nor did the small change in value support a finding that partition was impracticable.

A more interesting argument was the trustee’s attempt to use a state statutory presumption of indivisibility. Although bankruptcy courts frequently look to state law to decide issues, in this case the court held that the question of whether a partition was practicable was a matter of federal and not state law.

The court further commented that it appeared the parties agreed that either the property should be sold as a whole or it should be partitioned. However, partitioning property is not an option under Section 363(h): the trustee either sells all of the interests in the property as provided in Section 363(h), or sells only the debtor’s undivided interest. Notwithstanding the desire of the parties, the court’s judgment was simply that the trustee failed to prove that the elements of Section 363(h) were met, and consequently he was not entitled to sell the property free of Simons’ interest.

The court’s decision to apply federal law to determine whether partition was practicable, while leaving the partition process to state law, could lead to a catch-22 where a trustee is not able to sell all of the co-owners’ interests based on federal law, but also is not able to partition the property under state law.

A co‑owner that is not familiar with bankruptcy would likely be surprised that the bankruptcy court can order the sale of its interests as well as the debtor’s interests. However, it is worth noting that a trustee (or debtor in possession) does not automatically have that right.

Source: Potential Sale of Jointly Owned Property: Practicable Partition Is Somewhere Between Possible and Practical.

For the court ruling, see Higgason v. Brown (In re Brown), 506 B.R. 446 (Bankr. E.D. Ky. 2014).

Monday, April 07, 2014

Court OKs NY Woman's Use Of Divorce Settlement To Buy Home From Son-In-Law, Then File Bankruptcy & Claim Homestead Exemption To Stiff Her Now-Fired Divorce Attorney Out Of $93K In Legal Fees

In Buffalo, New York, the New York Law Journal reports:
  • A Buffalo woman who used a divorce settlement to buy a condominium from her son-in-law— then filed bankruptcy allegedly to avoid paying her divorce lawyer—can use a homestead exemption to shield her assets, a Buffalo bankruptcy judge has held in a case of first impression.

    Western District Judge Michael Kaplan rebuffed HoganWillig's allegations that its former client tried concealing assets to skirt a nearly $93,000 legal bill, noting that as the client's former divorce counsel, the firm "knew every penny of her financial affairs."

    The ruling potentially puts law firms on different, and less stable, footing than other creditors.

    "She hid nothing from anyone, HoganWillig least of all," Kaplan wrote in In re Wrobel, 12-13001. "The firm's effort to argue that it should be treated as, or represents, some other unsecured creditor of the debtor—a creditor who actually might argue surprise and deception—is rejected."

    However, while Kaplan allowed Krystyna Wrobel to claim a homestead exemption, he expressed concern about the possible "insider" transaction and left a lien on the property in place. If Wrobel sells the condominium in the next three years, or her son-in-law returns the money she gave him for the property, HoganWillig may be able to assert a claim.

    The case turned on an analysis of 11 U.S.C. §522 (o) of the Bankruptcy Code, which was enacted in 2005. Under that provision, if a debtor disposes property "with the intent to hinder, delay or defraud" a creditor, the homestead exemption is reduced accordingly.

    Here, Wrobel was living in an apartment owned by her estranged husband and had retained HoganWillig to represent her in what became a lengthy divorce proceeding. At some point, Wrobel fired HoganWillig and hired a different lawyer, who settled the divorce. Wrobel became the apartment building's owner in the settlement.

    When HoganWillig learned that its former client was about to sell the building, and would net about $100,000, the firm went to state court in an unsuccessful attempt to prevent her from using the funds to buy a homestead. Wrobel in turn bought a condominium from her son-in-law; a year later, she filed for bankruptcy and claimed a homestead exemption.

    HoganWillig, which is holding a $92,377 judgment against Wrobel, accused its former client and her current lawyer of scheming to convert non-exempt assets into exempt assets in an attempt "to hinder, delay or defraud" the firm, as that phrase is contemplated in §522(o). While acknowledging the law tolerates bankruptcy exemption planning as a financial device, the firm asked the court to determine "when it is that a pig becomes a hog."

    But Wrobel's current attorneys with the firm Dennis Gaughan in Hamburg said HoganWillig is trying to "bully" a "relatively unsophisticated Polish immigrant" to extract an exorbitant fee from a client in her 60s who works part time as a $20,000-a-year hospital housekeeper. The attorney, Christopher Tyrpak, said Wrobel made no attempt to conceal assets and argued she should not be denied the homestead exemption.

    Kaplan said the dispute centers largely on how §522(o) impacts bankruptcy planning, but with several "twists and turns," agreed with Tyrpak.

    The judge said it "once was clear" that a debtor could convert non-exempt property to exempt property before filing bankruptcy. But Kaplan said that changed in the wake of a few notorious cases where wealthy debtors moved to states with unlimited homestead exemptions to keep their money away from creditors, and Congress responded with the "hinder, delay or defraud" provision.

    Kaplan said there is no Second Circuit authority on applying that provision in the framework of a bankruptcy planning, and no state law that addresses the situation that arose in the Wrobel matter. He said courts have adopted a "smell test" to determine if a debtor had engaged in an inappropriate transaction.

    Here, Kaplan said, HoganWillig's assertion that the debtor concealed assets "borders on sanctionable conduct." He said Wrobel "openly and notoriously acquired the homestead" and rejected HoganWillig's claim that her actions constituted "badges of fraud" and established that the transaction was a sham.

    "The badges of fraud bespeak 'hiding,' 'absconding,' 'avoiding, 'sharp dealing,' etc.," Kaplan wrote. "The natural question is 'Who exactly is it who was victimized by such evil actions?' Certainly not HoganWillig, and no one else is complaining."

    Tyrpak said the ruling clarifies the law in the Second Circuit.

    "I think it is significant because it provides a basis for interpreting §522(o), at least in the Second Circuit, and it adopts a significant portion of the holdings of other circuits that have already answered this question," Tyrpak said.

    Cheryl-Lane Bechakas of HoganWillig represented her firm. Steven Cohen, who runs the firm's litigation department, said HoganWillig will seek leave to appeal to the district court.

    "Judge Kaplan's decision is very, very dangerous," Cohen said. "He is making new law here. What he is saying is that a law firm is not a creditor in the same category of other creditors."

    Cohen said that if the ruling stands, law firms will be understandably reluctant to represent some clients because there would be an almost sure-fire way to cheat lawyers out of their earned fees.

    "Certainly, we went into this with our eyes open and the understanding that there were non-exempt assets we could use for our fees, and [that] encourage[d] us to sink the amount of time and effort into this case that we did," Cohen said. "What his honor has said is, 'I don't care what you and your client talked about. I don't care whether these assets are exempt. I don't care if §522(o) prohibits a debtor from hiding this money in a transaction with a son-in-law. You're a law firm so you don't get paid.' That is troubling."
Source: Judge Permits Homestead Exemption to Shield Assets.

For the court ruling, see In re Wrobel, Case No. 12-13001, (Bankr. W.D.N.Y. March 28, 2014).

Friday, August 16, 2013

Bay State Homeowner Ordered To Demolish Newly-Constructed Home Over Zoning Violations After Discovery That Town Issued Building Permit In Error; Family Estimates Losses Close To $500K

In Rockland, Massachusetts, MyFoxBoston reports:
  • A Rockland man claims he was given the green light to build his three-bedroom house, but now he's being ordered to tear it down because of an alleged mistake made by the town.

    In 2010, Robert Del Prete reportedly purchased a lot at 320 Concord St. in Rockland from his father and uncle to make it useful. The land to the back of it, their old farm, was sold to make a golf course, and other family members live next door.

    "As far as the building inspector was concerned it was a grandfathered lot and he gave us the permit," Robert Del Prete told FOX 25.

    Del Prete and his wife Sheree say they sunk approximately $400,000 into building the home on the lot and even had a buyer lined up for the property.

    The potential buyer told the Del Pretes they were going to use the home to house adults with disabilities; however, around that same time, the town told the Del Pretes they gave the permit in error.

    And now, about three years after getting building and occupancy permits, the town is threatening to tear down the Del Prete's house and says Building Inspector Thomas Ruble shouldn't have issued the permits in the first place.

    Rockland town officials say the Del Pretes are in violation of zoning laws because they're about 3,700 square feet shy of the minimum buildable lot size in town.

    The lot also needs an extra 12 ½-feet of road frontage to comply with the law; however, Del Prete claims his abutter refuses to sell him the land.

    "The land doesn't comply for area. It didn't comply for frontage. And the property was not grandfathered," Rockland Town Administrator Allen Chiocca said.

    The Del Pretes estimate their losses on the home total about half a million dollars with legal bills. They've lost their business and they were forced to move into the Concord Street house after their personal home went into foreclosure.

    The town says they created their own hardship.

    The matter will be back in housing court later in August.

Court Nixes Ex-Wife's Belated Attempt To Invoke California's $100K Homestead Exemption To Justify Pocketing Tax Refund Proceeds That Victims Of Convicted, Ponzi-Scheming Ex-Hubby Were Entitled To

In Monterey, California, The Monterey Herald reports:
  • When convicted embezzler Jay Zubick signed over all his assets to the victims of his $16 million Ponzi scheme in 2007, the agreement meant every penny, a judge ruled Friday.

    Judge Lydia Villarreal rejected a bid by Zubick's ex-wife to retain a $43,000 income tax refund she had received before Zubick's conviction.

    Suzanne Zubick, who was unaware of her husband's crimes and has since divorced him, reasoned that she signed over her Monterra house under duress and without knowing she had the right to invoke a statutory "homestead exemption." The exemption would have allowed her to keep $100,000 of the proceeds from the house's sale.

    Villarreal said the time for her to claim the exemption would have been in 2007 and the tax refund belongs to Jay Zubick's 29 victims.
  • She said her life was turned upside down by the discovery of her husband's deceit. In one day, she went from believing her husband was dying to knowing he was a thief. She received telephone calls threatening her children, whose schools had to take measures to protect them.

    On the advice of her husband's criminal attorney, the Zubicks signed over all assets, including the Monterra house. They were allowed to take only the clothes on their backs and one change of clothing. The investors denied a request for the children's beds.

Ex-Michigan High Court Justice Begins Prison Time At West Virginia's "Camp Cupcake" For Role In Using Short Sale Shuffle On Underwater Home To Hide $1M+ In Assets From Bank; Stay Expected To Be 9-10 Months On 366-Day Sentence

In Detroit, Michigan, The Detroit News reports:
  • Former state Supreme Court Justice Diane Hathaway arrived at a federal prison in West Virginia on Tuesday to serve one year and a day for bank fraud, a crime critics said brought shame to the state’s highest court.

    Hathaway, 59, is the latest celebrity inmate at the prison in Alderson, W.Va., dubbed “Camp Cupcakebecause of its mountainous setting and long list of perks, including access to washers, dryers, microwave ovens, hair dryers, curling irons and cosmetology areas where inmate-to-inmate pedicures and manicures are allowed.
  • The 366-day sentence will allow Hathaway to get time off for good behavior, meaning her time in custody likely will be nine to 10 months. A Federal Bureau of Prisons spokesperson confirmed the former justice’s arrival at the prison.

    Prosecutors said Hathaway engaged in an elaborate two-year fraud scheme involving a Grosse Pointe Park home. She pleaded guilty in January to one count of felony bank fraud, eight days after she resigned from the bench.

    Prosecutors said Hathaway hid assets worth more than $1 million and misled a bank while negotiating a short sale. A short sale is when the lender allows the sale of a home that is worth less than the amount owed.

Thursday, August 15, 2013

Religious Congregation Sues Its Treasurer For Allegedly Draining $1.1M+ Of Equity In Church Property With Multiple Mortgages, Diverting Proceeds For Personal Use While Allowing Loan Collateral To Be Lost In Foreclosure Sale

In Las Vegas, Nevada, Courthouse News Service reports:
  • A Lutheran church sued its treasurer, claiming he embezzled $1.1 million - some of which he spent to buy land from a distant monastery.

    Amazing Grace Lutheran Church, of Las Vegas, sued Gregory R. Olson and Wells Fargo Bank, in Clark County Court. The church claims it hired Olson as its treasurer in May 2005, and he was embezzling before he'd been there a year.

    "From January 3, 2006 to September 18, 2009, defendant Olson without plaintiff Lutheran Church's approval, drew several checks from the account of plaintiff Lutheran Church in the amount of $1,123,279.84 for his own personal use," the complaint states.

    The church claims Olson took out five mortgages against church property without its permission and without notifying it.

    It claims that Olson was involved in a lawsuit about a property he had defaulted on, and he used some of the embezzled money to pay his legal expenses. He also bought a 2.5-acre parcel of land and told Amazing Grace he used his own money, according to the complaint.

    The church claims it lost title to its property through foreclosure, thanks to Olson's embezzlement.

    To top it off, Olson bought land from a monastery with the stolen money, according to the complaint.

Ex-Pastor Charged For Allegedly Using Short Sale Scam To Screw Financially Strapped Homeowner Out Of Nearly $150K While Leaving Existing Mortgage Unpaid

In St. Petersburg, Florida, The Tampa Tribune reports:
  • The former pastor of a south St. Petersburg church who also founded a foreclosure-prevention company was booked into the Pinellas County Jail this week, accused of swindling nearly $150,000 from a Palm Harbor woman who no longer could afford to live in her house.

    Demetrius Antonio Lewis, 38, of Wesley Chapel, was charged with grand theft and money laundering. Bail was set at $200,000.

    Lewis once was the pastor at the Grand Central Progressive Missionary Baptist Church, 1401 18th Ave. S., but it has been years since he officiated there, parishioners say. Records show he also incorporated a business called Help Is Here Foreclosure Prevention and Credit Repair, though state records show the company as inactive.

    The charges against Lewis are just his most recent brush with the law.

    Last year he was charged with tax fraud after investigators maintained he received and cashed fraudulent tax refund checks issued in the names of eight different people.

    And the year before that, he was accused of taking part in a real estate scam in which authorities say he and an accomplice rented vacant properties they did not own.

    In the Pinellas case, Lewis had an alleged accomplice, Eric Leroy Green, the head of the south St. Petersburg charity Everyone’s Youth United, court records state.

    Green was arrested in June on the same charges leveled against Lewis, in what was the latest spin in the charity’s downward spiral. Everyone’s Youth United lost most of its funding in 2008.

    On Wednesday, in a telephone interview, Green distanced himself from Lewis, portraying himself as a victim of one of Lewis’s schemes.

    “We just happened to be in the trail that he, you know, rode down and used us after coming up with one of his schemes ... and unfortunately implicated us as we now know.”

    According to court documents, Green told Pinellas sheriff’s Detective David Kavanagh the two men’s financial arrangement was set in motion after he discussed Everyone’s Youth United’s financial turmoil with Lewis.

    The victim was Dorothea Giordano, who by 2010 no longer could afford to live at her house at 2492 Glenpark Road in Palm Harbor, court documents show. A close friend of Giordano’s, Jack Dvorak, agreed to buy it from her but allow her to continue living there.

    Giordano had been introduced to Lewis, who identified himself as an expert in real estate short sales, and who offered to broker the sale.

    As the deal was progressing, the pastor communicated with a Safety Harbor title company, Online Title Services, which was run by real estate agent Cheryl Slaughter, the court documents state. He introduced a woman to Slaughter as a representative of Giordano’s bank, Allied Home Mortgage.

    The woman, identified as Tamkea Womack, sent Slaughter an email indicating Allied had approved the short sale, as long as the amount to settle the mortgage was $143,500, the documents state.

    The money was to be disbursed to an entity called EYU Inc. EYU was represented as an investor, but is the acronym for Everyone’s Youth United, the documents state.

    After the money changed hands on Sept. 27, 2010, Allied Home Mortgage told Slaughter the woman and the company she supposedly was representing, M Caster Home Finance, were not affiliated with Allied, and the money had been improperly disbursed, the documents state. Slaughter called the sheriff’s office.

    After the $143,500 was transferred, Green wrote checks totaling more than $10,000 — a check for an employee for $1,000 and a check of $9,700 for Construction Specialties, which is owned by his mother, records show.

    He also arranged for his mother to deposit $60,000, telling her the money was a payment to Everyone’s Youth United for a fair he had put on for an organization. Green put the money in his personal account, according to investigative records. Green also got a cashier’s check of $59,000 for Lewis, the documents state.

Lehigh Valley Man Faces Forgery, Theft/Securing Execution Of Documents By Deception, Other Charges For Allegedly Ripping Off His 93-Year Old Uncle Of $200K+ Cash/Other Assets; Suspect Allegedly Abused POA To Drain Bank Accounts, Home Equity With HELOC While Since-Foreclosed Victim Was Confined In Nursing Home

In Lehigh Valley, Pennsylvania, The Express Times reports:
  • A Pen Argyl man is charged with 17 counts of theft and related crimes for depleting the life savings of his 93-year-old uncle by using power of attorney and converting property and money for his personal use, according to the Lehigh County’s District Attorney’s Office.

    Scott Lee Bartholomew, 52 of the 100 block of Acker Street, is accused of stealing more than $200,000 from his uncle, Wilbur B. Stiles, authorities said. The crimes happened from January 2006 to June 2012, the district attorney’s office said.

    Because he lost his home to foreclosure and his life savings, police said, Stiles is living in a veterans center in the Scranton, Pa., area.

    Bartholomew is being held in Lehigh County Prison in lieu of 10 percent of $200,000 bail.
    An investigation by South Whitehall Township police, with help from the Institute for Protective Services at Temple University, alleged that a minimum of $217,498 had been diverted from Stiles to Bartholomew, authorities said.

    According to an affidavit filed by South Whitehall police Sgt. Michael A. Sorrentino, Sorrentino conducted numerous interviews with agencies and individuals since December 2012 when investigators learned Bartholomew was acting with power of attorney for Stiles.

    Bartholomew did not make the required payments of $6,050 for the care of Stiles from March 2011 to April 2011, while Stiles was a resident of Cedarbrook Nursing Home in South Whitehall, officials said.

    Bartholomew gained control of Stiles’ finances and directed money from Stiles’ accounts to make unauthorized purchases of vehicles, Internet items and gaming purchases, authorities said.

    They allege Bartholomew made cash withdrawals, paid legal fees of an acquaintance, paid tax bills for property not owned by Stiles, and paid for cellphones and cellphone plans not used for Stiles.

    Additionally, police said, Bartholomew used the money on meals and entertainment for himself and others, and operational fees as an owner/operator of a sole proprietorship trucking company. None of it was reimbursed to Stiles’ accounts, police said.

    Investigators allege that Bartholomew converted Stiles’ savings account, insurance policy, retirement income, real estate, motor vehicles, personal property and savings bonds for Bartholomew’s personal use.

    Bartholomew also obtained a home equity line of credit and converted about $133,526 for his personal use, according to police. They also said almost $89,973 was taken from Stiles’ checking account.

    Bartholomew is alleged to have used the equity in Stiles’ residence for his personal gain. The property ultimately was placed into foreclosure, authorities said.

    Bartholomew was charged with four counts of theft by unlawful taking, three counts of theft by deception, five counts of receiving stolen property, one count of theft by failure of to make required disposition of funds and one count of access device fraud -- all third-degree felonies.

    He is also charged with one count of forgery and two counts of securing execution of documents by deception, police said.

Saga Continues For Maine Family Victimized By State Bureaucrats Who Allegedly Used Conservatorship Proceedings To Move In & Hijack Possession, Then Unload, Waterfront Home, Other Assets At Fire-Sale Prices Of Man Who Was Involuntarily Admitted To State-Run Psychiatric Facility While Giving Beloved Pet Date With 'The Euthanizer'

In Rockland, Maine, the Bangor Daily News reports:
  • The sale of a Rockland man’s waterfront home in Owls Head by the state for less than half its value was only the beginning of a nightmare that has seen an undetermined amount of valuable personal items sold for little in return, according to attorneys working on the case.

    “You couldn’t have dreamed this up,” said attorney David Jenny.

    Jenny, who lives in Owls Head and Maryland, is referring to the case that involves the sale of property belonging to William T. Dean Jr. and his sister Claire Dean Perry of Liberty.

    Dean was hospitalized in 2012 at the state-run Dorothea Dix Psychiatric Center in Bangor. He has since been released and lives in a group home in Camden, according to Jenny, who is a longtime friend of both siblings.

    Jenny said that the state has taken a man who had more than $650,000 in assets and virtually assured that he will he become a ward of the state because of its management of his estate.

    Attorney Cynthia Dill, who represents the sister in a lawsuit against the Maine Department of Health and Human Services, said in her legal career she has never seen a case like this.

    Not only does Dill say the state illegally sold the home owned by William Dean at 9 Castlewood Lane in Owls Head, but that it has since hired an auction company to sell the remaining family belongings and has done it with few records to show what has happened to the items or the money received from the sales.

    The Deans’ parents in 1972 bought the Castlewood Lane home, which has since been a place for family outings. Claire Dean Perry had been living in the Owls Head home while her brother resided at 298 Broadway, Rockland, which had been their parents’ primary residence and owned by the Deans since 1957.

    The state obtained conservatorship of Dean’s finances in September 2012, four months after he was involuntarily admitted to the state-run mental health hospital. When the state learned that back taxes were owed on both properties — $5,192 on the Owls Head home and $2,329 on the Rockland property — it sought and received permission from the Penobscot County Probate Court to sell the properties for a fair market price in order to cover those costs.

    An affidavit filed Sept. 5, 2012, in probate court by Janice Archer, a licensed social worker for DHHS who was Dean’s caseworker, stated that there was already a buyer interested in the Owls Head property. The name of the interested party was not listed and a call to Archer early Wednesday has not been returned.

    Claire Dean Perry was kicked out of the house and the locks changed, Dill said.

    Perry and other family members, however, contested the move by the state, saying they could raise the money to prevent both properties from going into foreclosure for nonpayment of the approximately $7,500 in property taxes.

    The state, however, moved ahead quickly and sold the Owls Head waterfront property to James Taylor of Danvers, Mass., and Owls Head for $205,000, less than half the $476,840 value placed on it by the town.

    The human services department moved the date of the sale up by a day to Jan. 9, knowing that the family was going to court the following day to block the transaction, Jenny said.

    The Owls Head property consists of nearly 1 acre with 100 feet of ocean frontage and a two-story, 1,000-square-foot home.

    After selling the Owls Head property, the state turned to disposing of the Rockland home. The state had reached an agreement with a party that was willing to pay $65,000 for the Rockland property that was assessed at $177,200 — again less than half its value. Dill said the potential buyers backed out after learning of the family’s looming legal challenge.

    The state surrendered its conservatorship in March. On Aug. 1, the probate court appointed Dean’s cousin, Pamela Vose of Union, as conservator over his remaining properties.

    But Jenny and Dill said that after the sale of the Owls Head home and before the change in conservatorship, there was a fire sale of possessions owned by both Dean and Perry for reasons they cannot understand.
  • Dill also noted that when state officials took control of Dean’s properties, they had his beloved cat, Caterpillar, euthanized without asking family members if they could care for the animal.