Wednesday, October 29, 2014

Screwed Over Florida Homeowners Score Trial Court Reversals In Three Cases As Appeals Court Rejects Use Of 'Robo-Witnesses' Giving Inadmissible Heresay To Support Bankster Foreclosures; Cases Now Subject To Dismissal, May Create Statute Of Limitations Problem For Banksters Thinking Of Re-Filing Cases

The South Florida Daily Business Review (via The Real Deal/South Florida) reports:
  • In three cases over two days, the First District Court of Appeal threw out evidence submitted in foreclosure actions and ruled the lenders' witnesses were unqualified.

    In what appears to be a trend, the court said the trial courts in two of the three cases should dismiss the lawsuits altogether in favor of the homeowners.

     The Oct. 13 and 14 decisions are believed to be the first to strike down so-called robo-witnesses in a homeowner's case with a lender as plaintiff, said foreclosure defense attorney Thomas Ice of Ice Legal in Royal Palm Beach.

    The decisions should become effective statewide if the 30-day deadline for filing a motion for rehearing expires without further action by the lender.(1)

    Ice said bank attorneys often come to trial in foreclosure cases with a single witness who lacks first-hand knowledge of the origin and accuracy of the mortgage records they describe.

    "It's the same in almost every single bank case because they are always transferring these loans around. The loan servicers change at least once and very often several times between the time of the loan and the trial," Ice said.

    In the years following the housing crash, Florida courts were flooded with home foreclosure filings. Defense attorneys protested plaintiffs firms were circumventing evidentiary rules by submitting forged assignments and other documents to prove standing. The so-called robo-signing scandal led to an attorney general's challenge in 2010 that forced lenders and servicers to stop filing new foreclosure cases.

    When the banks resumed litigating cases, often under deadline pressures imposed by the chief circuit judges, they often relied on witnesses with limited knowledge of the mortgage documents.

    In August 2013, the Fourth District issued a decision in a case involving a condominium owner and her association (see Yang v. Sebastian Lakes Condo. Ass'n Inc., 123 So. 3d 617 (Fla. 4th DCA 2013)). The owner, Connie Yang, got a reversal against Sebastian Lakes Condominium Association because it didn't lay the proper foundation to admit evidence from an accounting ledger.

    Ice said foreclosure defense lawyers have used Yang's case to argue against unqualified lender witnesses, but judges have repeatedly told them the Fourth District case applied only to homeowner associations, not banks.

    "I didn't realize they had different rules," Ice said facetiously. "That's why I kept waiting for a bank case. We needed a flat-out, on-point bank case."

    'Burdeshaw v. BNY Mellon'

    First District Judge Nikki Ann Clark in Tallahassee wrote the lengthiest opinion, a 17-page ruling against Bank of New York Mellon. In that case, Lloyd and Teresa Burdeshaw of Lynn Haven in Bay County appealed a final judgment of foreclosure by arguing the evidence to support the amount of indebtedness was inadmissible hearsay.

    Clark noted that the bank's witness—loan servicer employee Nancy Johnson of SunTrust Mortgage Inc.—did not know where any information on payments made before SunTrust's acquisition of the account came from. She never testified whether the entries were made at the time of the event; by a person with knowledge; kept in the ordinary course of business; and as a regular business practice—all crucial elements for laying the foundation.

    "BNY Mellon failed to establish any foundation qualifying the printout Ms. Johnson read as a business record and failed to establish any foundation qualifying Ms. Johnson as a records custodian or person with knowledge of the four elements required for the business records exception," Clark said. The Burdeshaw v. BNY Mellon panel included Judges William Van Nortwick and L. Clayton Roberts.

    The panel also found the trial court should have dismissed the case in Burdeshaw's favor years ago because a 2010 motion to dismiss for inactivity was valid. Under judicial rules, a motion or other plea must be filed within 60 days to keep a case active; otherwise, it is subject to dismissal.

    "This case does not present a reason to afford BNY Mellon additional time and another opportunity to prove its case. As the Second District has held, 'appellate courts do not generally provide parties with an opportunity to retry their case upon a failure of proof,' "(2) Clark said.

    Clark's opinion was all the more remarkable because it was one of three issued by the First District in two days that reversed foreclosures and sided with homeowners based on hearsay testimony, said Jeffrey Whitton of Panama City, Burdeshaw's attorney.

    "What I find interesting here is they didn't just vacate and remand, they vacated with instruction to dismiss. If I'm reading the tea leaves, the message here is that district courts are not in the business of giving second chances," Whitton said.

    "I would think the First District was trying to face the problem of some of the quality of evidence involving foreclosure cases. If you just looked at that as a coincidence, three opinions in two days involving a number of different judges, you have to realize there is some trending there," he added.

    Two More Rulings

    Although Clark's was the lengthiest, all of the opinions were detailed. Kiefert v. Nationstar Mortgage, a six-page opinion by Judge Robert Benton II, reversed because the bank witness was only able to establish that its predecessor, Aurora Loan Services LLC, was in possession of the note when the complaint was filed, "not that the note had been endorsed at the time the complaint was filed."

    And in Lacombe v. Deutsche Bank National Trust, an unsigned, the appeals court concluded the bank's witness was "incoherent."

    As in Burdeshaw, the Lacombe court refused to remand the case for the presentation of additional evidence, citing the length of time—more than five years—that Deutsche Bank National Trust Co. had to prepare and instead instructed the trial court to dismiss the case.(3)

    If the First District opinions stand, Ice said foreclosure courts should at last be treating evidence like other courts do.

    Long frustrated with what he sees as a double standard, Ice said judges in medical malpractice and other areas of law would not tolerate the coaching that goes on in foreclosure trials.

    "They're just feeding witnesses with hearsay so that they can regurgitate these magic words in court," Ice said. "That's improper. It's one thing to be trained for the job, to be able to say, 'I'm trained to put these records into the computer when I get a check from the customer.' That qualifies you to testify about the record. But to be told how it works for litigation purposes is the very worst kind of hearsay that there is."

    He added, "If that's enough to get records in, then why have witnesses at all? Just toss these records up on the bench and tell the judge, 'Here, read them.'"

    Austin Brown of Parker & DuFresne in Jacksonville represented the Lacombes.

    Thomas Pycraft of Pycraft Legal Services in St. Augustine represented the Kieferts.
Source: Foreclosure Reversal Issued in Case With 'Robo-Witness'.

Editor's Note: Now that the screwed over homeowners are considered the prevailing parties in these successful appeals, their attorneys are entitled to an award for legal fees, even if the case was taken on a pro bono basis, with the losing banksters being on the hook for picking up the tab to be awarded by the trial judge (go here for earlier posts on prevailing party attorney fees).

Further, to the extent these cases were taken by the attorneys on a contingency fee or pro bono basis, they may also be entitled to apply a contingency fee risk multiplier / enhancement to the amount the trial judge ultimately awards in prevailing party legal fees, serving to increase the total tab to be paid by the losing bankster. See, for example, Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), where Florida's 1st District Court of Appeal ok'd a multiplier of 2.5 in a successful foreclosure defense. Go here for earlier posts on the contingency fee risk multiplier.



(1) Unless and until the Florida Supreme Court addresses this issue, and to the extent there are no conflicting rulings from sister Florida appeals courts, the rulings by Florida's 1st District Court of Appeal in these cases will, upon the expiration of the 30-day period for requesting a re-hearing, be binding, not only on all trial courts within the 1st District, but on all trial courts throughout the state of Florida. See:

Gross v. State, 765 So. 2d 39 (Fla. 2000):
  • A trial court is obligated to follow decisions of the district court of appeal, and where there is no decision on point from the district court for the circuit in question, the trial court is bound to follow precedents of other district courts of appeal. See Pardo v. State, 596 So.2d 665, 666-67 (Fla.1992) ("[I]n the absence of interdistrict conflict, district court decisions bind all Florida trial courts.").
Pardo v. State, 596 So. 2d 665 (Fla. 1992):
  • This Court has stated that "the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court." Stanfill v. State, 384 So.2d 141, 143 (Fla. 1980).

    Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts. Weiman v. McHaffie, 470 So.2d 682, 684 (Fla. 1985).

    The purpose of this rule was explained by the Fourth District in State v. Hayes:

    "The District Courts of Appeal are required to follow Supreme Court decisions. As an adjunct to this rule it is logical and necessary in order to preserve stability and predictability in the law that, likewise, trial courts be required to follow the holdings of higher courts--District Courts of Appeal.

    The proper hierarchy of decisional holdings would demand that in the event the only case on point on a district level is from a district other than the one in which the trial court is located, the trial court be required to follow that decision.

    Alternatively, if the district court of the district in which the trial court is located has decided the issue, the trial court is bound to follow it. Contrarily, as between District Courts of Appeal, a sister district's opinion is merely persuasive."

    333 So.2d 51, 53 (Fla. 4th DCA 1976) (footnote and citations omitted).[See generally Taylor Mattis, Stare Decisis Among and Within Florida's District Courts of Appeal, 18 Fla.St.U.L.Rev. 143, 155-160 (1990).]
See also:

Ansin v. Thurston, 101 So.2d 808 (Fla. 1958), where the Florida Supreme Court made clear that its jurisdiction to hear appeals is extremely narrow, and commented on the finality of the rulings of the lower Florida appellate courts:
  • We have heretofore pointed out that under the constitutional plan the powers of this Court to review decisions of the district courts of appeal are limited and strictly prescribed. Diamond Berk Insurance Agency, Inc., v. Goldstein, Fla., 100 So.2d 420; Sinnamon v. Fowlkes, Fla., 101 So.2d 375.

    It was never intended that the district courts of appeal should be intermediate courts. The revision and modernization of the Florida judicial system at the appellate level was prompted by the great volume of cases reaching the Supreme Court and the consequent delay in the administration of justice. The new article embodies throughout its terms the idea of a Supreme Court which functions as a supervisory body in the judicial system for the State, exercising appellate power in certain specified areas essential to the settlement of issues of public importance and the preservation of uniformity of principle and practice, with review by the district courts in most instances being final and absolute.

    To fail to recognize that these are courts primarily of final appellate jurisdiction and to allow such courts to become intermediate courts of appeal would result in a condition far more detrimental to the general welfare and the speedy and efficient administration of justice than that which the system was designed to remedy.
Johns v. Wainwright, 253 So.2d 873 (Fla. 1971):
  • The District Courts of Appeal were never intended to be intermediate courts. It was the intention of the framers of the constitutional amendment which created the District Courts that the decision of those courts would, in most cases, be final and absolute.

(2) See Wolkoff v. American Home Mortg. Servicing, Inc., ___ So. 3d ___, 39 Fla. L. Weekly D1159, 2014 WL 2378662 (Fla. 2d DCA May 30, 2014).

(3) Inasmuch as Florida's statute of limitations for commencing foreclosure cases is five years (see Sec. 95.11(2)(c), Florida Statutes), I wonder if this means that the mortgage on this home can no longer be foreclosed (ie. Did the homeowner just win a 'free' house???).

Saturday, October 25, 2014

NYC Landlord Tagged With Lawsuit Alleging Discrimination Against Prospective Tenant With Section 8 Housing Voucher

In New York City, the Fair Housing Justice Center recently issued the following announcement of a lawsuit it filed alleging fair housing violations against a Brooklyn landlord:
  • On October 21, 2014, the Fair Housing Justice Center (FHJC)(1) and Barbara S., an African American woman with a Section 8 Housing Voucher, filed a state court lawsuit in Manhattan alleging that the owners and managers of apartment buildings in New York City discriminate against Section 8 Voucher holders in violation of the New York City Human Rights Law. The lawsuit names Carnegie Management, Ditmas Park LLC, and Ditmas Park Two LLC as defendants. Since 2008, the New York City Human Rights Law has prohibited discrimination in housing based on source of income, including rental subsidies.

    In 2012, Barbara S. complained to the FHJC that Carnegie Management refused to rent to her because she has a rental subsidy. In response to her complaint, the FHJC conducted an undercover testing investigation involving two Carnegie properties in Brooklyn, a 65-unit apartment building located at 585-599 East 21st Street and a 48-unit apartment building located 2211 Ditmas Avenue.

    The testing investigation confirmed that agents for the defendants informed renters with Section 8 housing vouchers that they would not be accepted while encouraging renters without rental subsidies to apply for available apartments owned and managed by the defendants.
Source: Landlord Rejects Tenants with Rental Assistance (FHJC Lawsuit Alleges Source Of Income Discrimination).

(1) The Fair Housing Justice Center, Inc. (FHJC) is a regional fair housing organization based in New York City. The FHJC provides a full-service fair housing program to New York City and the seven surrounding New York counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester.

Monday, October 20, 2014

Feds Invoke 'Forfeiture' Move In Effort To Boot Innocent Wife, Kids From $1.9M Boca Mansion Co-Owned With Convicted Insider-Trading, Hedge Fund Hubby While Latter Preps For Nine Year Stay In Can

In New York City, the New York Post reports:
  • The wife of former SAC Capital moneyman Mathew Martoma doesn’t think she should have to give up her luxurious lifestyle just because her husband orchestrated the most lucrative insider trading scheme in history.

    Rosemary Martoma is trying to block the feds from seizing her share of the couple’s assets, including their $1.9 million Boca Raton, Fla., mansion where they moved after he was fired in 2010, and $4 million in bank accounts.

    Mathew Martoma was sentenced to nine years in prison and ordered to fork over $9.3 millionhis take of the $275 million profit his employer, hedge fund SAC Capital, reaped from his illegal trading.

    Rosemary, a former pediatrician, asked the court on Wednesday to set a hearing over her assertion that she should be able keep half of the properties.(1)

    She “agreed to give up her career, and care for the household and children, based on the promise that she would have equal, joint ownership of all income derived from the defendant’s work outside of the household,” her lawyers said in court papers.

    The same lawyers also represent Mathew Martoma and have been paid for by Steve Cohen, SAC Capital’s founder. Prosecutors tried to get Martoma to implicate Cohen without success.

    White-collar defense lawyers debunked her argument. “If one spouse steals money, the other spouse doesn’t get to keep it just because she quit work,” said Michael Bowe of Kasowitz Benson Torres & Friedman.

    Separately, the government on Tuesday opposed Mathew Martoma’s request to stay out of prison on appeal instead of surrendering Nov. 10. The government considers him a flight risk.

Sunday, October 19, 2014

Crackpot Gets Seven Years For Targeting Chicago U.S. Attorney, Other Feds With Billion$ In Bogus Retaliatory Liens Filed Against Their Property; Judge Declares All Illegally Filed Paperwork Null & Void

From the Office of the U.S. Attorney (Fairview Heights, Illinois):
  • After nearly two years, the federal prosecution of Cherron Marie Phillips, a/k/a “River Tali,” ended yesterday with Phillips being sentenced to a seven year prison term, the United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced [].

    Phillips, a 43 year old Chicago native, was indicted back in November 2012 with knowingly filing false maritime liens against the property of a dozen current and former federal employees, including former United States Attorney Patrick Fitzgerald, in retaliation for their involvement in the investigation and prosecution of her brother, Devon Phillips. A jury in Chicago convicted her on 10 of 12 counts in June of this year.

    During the trial, the government presented evidence that from 2006 to 2011, Phillips’s brother, Devon Phillips, had been investigated and prosecuted in the Northern District of Illinois for trafficking cocaine. Cherron Phillips regularly attended his court proceedings and filed documents in the record objecting to the jurisdiction of the court. She filed the liens – each in the amount of $100 billion – in the spring of 2011, several weeks after her brother was sentenced.(1) The existence of the liens wasn’t discovered until later that summer, when one of the victims was attempting a real estate transaction.


    In a written memorandum he filed before sentencing, Judge Reagan noted that Phillips subscribes to the “sovereign citizen” ideology – a belief that the government is operating outside its jurisdiction and that by taking certain prescribed steps, citizens can live in this country without abiding by its laws. It was these “misguided beliefs” and “tortured logic,” he wrote, that formed the basis for her crimes. During the sentencing hearing, Phillips read aloud from a prepared statement and claimed the court did not have jurisdiction over her, prompting Judge Reagan to observe that even now, “she simply doesn’t get it.”


    On a motion from the United States, the court also signed an order from the bench declaring the liens null and void, releasing them, and ordering that they be afforded “no legal force or effect whatsoever.” That order and a copy of the final judgment will be recorded in the public record in Cook County, Illinois, where the liens were originally filed.
For the U.S. Attorney press release, see Sovereign Citizen Who Retaliated Against Federal Officials By Filing False Liens Sentenced To Seven Years In Prison.

(1) See generally,

No 'Sovereign' Immunity For 'Paper Terrorist', Gets Five Years For Taking Revenge Against Over Two Dozen South Jersey Judicial, Police, Municipal Officials By Filing Bogus Retaliatory Liens Against Their Property

In Camden, New Jersey, the South Jersey Times reports:
  • A Wisconsin man who is part of the "Sovereign Citizen" movement and pleaded guilty to threatening nearly 30 judicial, police and municipal officials around South Jersey will lose that sovereignty when he enters prison, authorities announced Wednesday.

    Michael G. Rinderele, 30, of Waukesha, Wisc., was sentenced Oct. 15 to five years in prison by Superior Court Judge Samuel D. Natal in a plea deal on charges of threats and other improper influence in official and political matters and four counts of retaliation against a public official or past public officials.

    Rinderle admitted to financially threatening a Voorhees Township Municipal Court judge via email in connection with traffic tickets issued to Rinderle's common-law wife, Joann Ellis, according to prosecutors.

    Prosecutors say Rinderle went on to file fraudulent commercial liens against the judge and 27 other public officials in Voorhees and Winslow Township, including court staff of police personnel.

    Rinderle was also ordered to pay more than $600 in fines and to have no contact with his victims or their families.

    Prosecutors say members of the Sovereign Citizen movement — who claim to be outside the realm of statutory law — commonly use bureaucratic processes to engage in "paper terrorism" as a form of harassment.(1)
Source: 'Sovereign Citizen' to serve 5-year prison term for threats to South Jersey officials.

(1) See generally,

Saturday, October 18, 2014

Philly DA Pinches Lawyer, Two Funeral Directors, Three Others In Alleged Scheme To Hijack Title To Dead Widow's Home, Car; Estate Fleeced While Victim Lays Buried In Pauper's Grave

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • The anonymous caller who dialed the Philadelphia District Attorney's Office last year had a disturbing tale to tell: A woman was dead, and someone was trying to steal her home and Buick LeSabre.

    That tip led to a yearlong grand jury investigation that culminated Thursday with charges against six men - including a lawyer, a real estate agent, and two funeral directors - who prosecutors say schemed to steal the dead South Philadelphia woman's rowhouse and car.

    "The facts in this case are disturbing and extremely sad," District Attorney Seth Williams said. "It's hard to believe that people would steal a dead woman's house and personal property."

    The six men - Andrew Kaufman, Romanoff Quarles, Vincent Marciano, Marvin Kimble, Antoine Turay, and Damion Rivers - were charged with conspiracy, theft, receiving stolen property, forgery, and perjury. All were either arrested Thursday or expected to surrender, Williams said.

    He credited the caller, whose tip about the thefts sparked an investigation by the Public Corruption Task Force of the District Attorney's Office. "I would like to thank the concerned resident who contacted my office to report their suspicions," Williams said. "Too often, we don't listen to gut instincts, and in this case, not only was it right, it helped uncover an elaborate criminal conspiracy."

    As authorities outlined it:

    Dorothy Kennedy lived with her husband, Frank, in their Marshall Street rowhouse for almost 40 years before he died in 2008.

    In 2010, Dorothy Kennedy died at age 79, leaving no heirs or will, but a well-kept home with a concrete front yard and shade tree out front.

    The 2005 LeSabre, still in the name of her husband, was parked out back.

    With no heirs to claim the property, it would, by law, go to the state.

    But, according to the grand jury report, Quarles, 43, who lived around the corner on Johnson Street, decided he wanted the house instead.

    According to the report, his lawyer, Kaufman, 56, of Cherry Hill, then devised "a scheme that would allow Quarles to unlawfully exploit the system."

    Kaufman told Quarles to apply to become administrator of the estate. To do so, the lawyer said, Quarles would need to represent - falsely - that he had supported Kennedy before her death.

    So Quarles obtained old calendars and marked them to make it seem that he had been regularly running errands for Kennedy. Kaufman said it would help if Quarles collected Kennedy's body from the morgue and buried her, the report said.

    Enter Kimble and Turay.

    Kimble, 57, who had once owned a funeral home at 53d and Vine Streets, directed Quarles to Turay, who owns the Turay Memorial Chapel in North Philadelphia.

    Turay buried Kennedy for $1,400, but gave Quarles a bill saying the burial cost $7,000. Quarles used the bill in a court petition to become administrator of Kennedy's estate.

    Kennedy was buried in a pauper's grave.

    The group then enlisted the help of Marciano, 63, a South Philadelphia real estate broker, who organized a sham sale of the home.

    Quarles, records show, took ownership of the home in 2012.

    And finally, there was Rivers, who used his family's West Philadelphia auto business to help transfer the car title to Quarles.

    To complete the transaction for the car, Quarles forged Frank Kennedy's signature five years after he had died.

Friday, October 17, 2014

Ex-Con Pinched For Allegedly Using Phony Deed To Hijack Title, Possession Of Elderly Woman's Vacant NYC Home

In Laurelton, Queens, the New York Post reports:
  • He may soon be living for free ­behind bars.

    The ex-con who allegedly filed a fake deed to steal an elderly woman’s Queens home was arrested Tuesday in Housing Court, where he was brazenly fighting eviction.

    Darrell Beatty, 49, was charged with grand larceny and criminal possession of stolen property for allegedly illegally transferring the deed of a Laurelton home into his name and moving in with his two sons.

    The Post on Sunday reported the alleged scheme, which could send Beatty to prison for more than 15 years.

    It was sweet relief for Jennifer Merin, whose family bought the house in 1930. “I heard the words, ‘You’re under arrest,’ and I [thought], ‘Thank God,’ ” said Merin, who saw sheriffs take Beatty into custody in a hallway. “I think I almost fainted with joy at that moment. I have really been waiting to hear those words for so long. I hope he is put away for a long time.”

    Beatty allegedly filed a deed transfer in March listing himself as the owner of the three-bedroom ­Tudor, which had been empty for a decade with Merin living in Manhattan, prosecutors said Tuesday.

    He listed the previous owner as Edith Moore, but nobody by that name has ever owned the property, said Queens DA Richard Brown.

    Merin still had many of her family’s prized possessions in the home, which Beatty piled up in a heap in the garage. She first realized the home was ­being illegally occupied when her water bill spiked in late May. “This woman’s home — her sanctuary filled with the memories of three generations — was allegedly taken from her with the filing of a phony deed,” Brown said.

    Merin’s Russian and Ukrainian grandparents moved into the row house on 141st Avenue in 1931 and raised three children there, including Merin’s mom.“The house was maintained basically as a sanctuary to my family,” Merin told The Post, adding that she paid insurance, taxes and utility bills on the property and would visit every few months.

    “The arrest is, in part, resolution. Obviously it doesn’t get me my house back, it doesn’t get me any of my belongings back,” Merin said. “But at least it gives me a sense of that there is some kind of right­eousness in our city and that people are working on making justice prevail.”

    Beatty was arraigned at Queens Criminal Court and held on $29,000 bail Tuesday.
Source: Ex-con arrested for filing fake deed to steal woman’s home.

For an earlier story, see The extraordinary ‘theft’ of a woman’s NYC home.

For the Queens District Attorney press release, see Queens Man Charged With Filing Fake Deed And Stealing Family Home From Elderly Woman (If Convicted The Defendant Faces Up To 15 Years In Prison).

Sunday, October 12, 2014

Ohio Supremes Use Procedural Grounds To OK Improperly Commenced Foreclosure By Standing-Lacking Lender "Even If A Plaintiff’s Assertion Of Standing Was Patently False"; Homeowners' Failure To Challenge Lower Court Ruling On Bankster's Standing On Direct Appeal Fatal To Their Effort To Undo Foreclosure Judgment; State High Court Dissenters: Majority "Goes To Great Lengths To Preserve A Void Judgment ... Creates Uncertainty In Foreclosure Cases That Will Operate In Favor Of Careless Banks While Eroding The Rule Of Law In Ohio"

From a recent Opinion Summary from Justia US Law:
  • Bank of America, N.A. filed a complaint in foreclosure against George and Bridget Kuchta, claiming to be the holder of a promissory note and assignee of the mortgage. The trial court granted summary judgment to the bank and entered a decree of foreclosure in its favor.

    The Kuchtas moved to vacate the summary judgment and decree of foreclosure, arguing that the bank lacked standing to commence the action because it did not prove ownership of the note and because the mortgage assignment was fatally flawed. The trial court denied the motion. The court of appeals reversed, holding that standing is a jurisdictional matter and that Bank of America’s alleged lack of standing would warrant relief from judgment.

    The Supreme Court reversed, holding that a lack of standing cannot support a motion for relief from judgment, and lack of standing does not render a judgment void for lack of subject matter jurisdiction.(1)
Source: Bank of Am., N.A. v. Kuchta.

For the ruling, see Bank of Am., N.A. v. Kuchta, No. 2014-Ohio-4275 (October 8, 2014).

Editor's Note: The following Ohio non-profit legal services firms joined to file a "friends of the court" brief with the Ohio Supreme Court urging support for the homeowners' position in this case:

(1) From the majority opinion:

    {¶ 25} An allegation that a plaintiff fraudulently claimed to have standing may not be asserted as a ground for vacating the judgment under Civ.R. 60(B)(3). Further, lack of standing is an issue that is cognizable on appeal, and therefore it cannot be used to collaterally attack a judgment. And although standing is required in order to invoke the jurisdiction of the court over a particular action in foreclosure, lack of standing does not affect the subject-matter jurisdiction of a court of common pleas.

    For these reasons, we answer the certified question in the negative and hold that lack of standing cannot support a Civ.R. 60(B)(3) motion for relief from judgment, even if a plaintiff’s assertion of standing was patently false.

    We further hold that lack of standing does not render a judgment void for lack of subject-matter jurisdiction. We therefore reverse the judgment of the Ninth District Court of Appeals and reinstate the judgment of the Medina County Court of Common Pleas, denying the Kuchtas’ Civ.R. 60(B) motion.

From the dissenting opinion:
  • O’NEILL, J., dissenting.

    {¶ 26} I dissent. I would affirm the Ninth District’s decision to remand this case to the trial court for application of Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, 979 N.E.2d 1214. While it is axiomatic that Civ.R. 60 (B)(3) is not a substitute for appeal, it is nonetheless clear that in this matter, Bank of America simply lacked standing to invoke the jurisdiction of the common pleas court under Schwartzwald in the first place. I disagree with the majority’s reasoning that the lack of a justiciable controversy between the parties does not affect the subject-matter jurisdiction of the court. That is a proposition that threatens the very foundation of our judicial system. Courts exist to resolve real controversies between real parties in interest. Nothing more.

    {¶ 27} At the trial court level, the Kuchtas, who appeared pro se, unequivocally asserted that the bank did not have standing to file the complaint in foreclosure. It was error for the trial court to allow the proceedings to go forward, but go forward they did. The Ninth District, having read this court’s recently released decision in Schwartzwald, correctly found that the Kuchtas’ Civ.R. 60(B) motion contained sufficient allegations of operative facts to warrant a hearing, citing State ex rel Richard v. Seidner, 76 Ohio St.3d 149, 151 666 N.E.2d 1134 (1996), and correctly remanded the case to the trial court for application of Schwartzwald. Bank of Am. v. Kuchta, 9th Dist. Medina No. 12CA0025-M, 2012-Ohio-5562. It was an abuse of discretion for the trial court to deny the Kuchtas a hearing on their Civ.R. 60(B)(3) motion for relief from judgment.

    {¶ 28} More than once in Schwartzwald, we stated that standing is a jurisdictional requirement. Schwartzwald at ¶ 22, 24, 27, and 38. This court unanimously agreed that it is fundamental that a party commencing litigation must have standing to sue in order to present a justiciable controversy and invoke the jurisdiction of the common pleas court. Id. at ¶ 41. This court repeatedly emphasized that standing must exist at the time of filing of the complaint, id. at ¶24, 25, and that lack of standing cannot be cured by postfiling events, such as the receipt of an assignment of the claim or by substitution of the real party in interest. Id. at ¶ 26, 27, 37, 38, and 41.

    {¶ 29} But in this case, the majority holds that Bank of America’s lack of standing to initiate the foreclosure action at the time of filing of the complaint has “does not affect the subject-matter jurisdiction of the court in which the party is attempting to obtain relief.” Majority opinion at ¶ 23.

    {¶ 30} What does this rule mean in practical terms? Does it mean that if the defendant in any given case fails to challenge standing on appeal, then the standing issue is forfeited in favor of the party who did not have standing to invoke the jurisdiction of the common pleas court in the first place?

    {¶ 31} The majority’s reliance on Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, 806 N.E.2d 992, is misplaced at a minimum. Rather, application of Pratts to this case demands exactly the opposite outcome. Pratts was a habeas action stemming from a capital case in which, after waiving his right to a jury trial, Pratts submitted his guilty plea to a single judge rather than a three-judge panel as required by statute. Pratts at ¶ 2-3. The Pratts court determined that the statutory errors committed by the trial court did not divest the court of its
    subject-matter jurisdiction. Id. at ¶ 36.

    {¶ 32} There was no dispute in Pratts that the case was properly commenced in the common pleas court. However, that is precisely the issue in this case, since this case was not properly commenced. On June 1, 2010, the date Bank of America filed the complaint, it was not the holder of either the mortgage or the note. The assignment of the mortgage was not complete until at least June 10, 2010. Thus, on the date the complaint was filed there was no injury, and
    therefore as a matter of law no justiciable controversy, between Bank of America and the Kuchtas. See also Schwartzwald at ¶ 28. As a result the court was without jurisdiction to consider—much less rule on—this complaint. Any judgments the trial court rendered on this complaint were void and subject to attack at any time. Pratts at ¶ 11.

    {¶ 33} The Ninth District got this case right when it concluded that the Kuchtas’ Civ.R. 60(B)(3) motion contained sufficient operative facts to warrant a hearing and remanded the case to the trial court for application of Schwartzwald. Instead of affirming the Ninth District, this court goes to great lengths to preserve a void judgment. And in so doing, it undermines this court’s own rule in Schwartzwald and creates uncertainty in foreclosure cases that will operate in favor of careless banks while eroding the rule of law in Ohio. I dissent.

    PFEIFER, J., concurs in the foregoing opinion.

Monday, October 06, 2014

Federal Appeals Court Kiboshes 'Rogue' Chapter 7 Trustee's Attempt To Use Bank's Failure To Record 1st Mortgage As Basis For Short-Circuiting Bay State's Homestead Exemption & Sell Home Out From Under Non-Defaulting Homeowner In Bankruptcy

From a recent post from
  • A chapter 7 trustee sought to avoid an unrecorded first mortgage and to preserve the lien for the benefit of the bankruptcy estate. In response, the debtor sought confirmation that if the trustee was successful, he would not be able to sell the mortgaged property without first foreclosing in accordance with state law. The bankruptcy court and bankruptcy appellate panel ruled in favor of the trustee and against the debtor, and the debtor appealed to the 1st Circuit.(1)

    The debtor owned a home that she valued at $223,500 in her bankruptcy schedules. She was entitled to claim a $500,000 homestead exemption. She granted a first mortgage to secure a loan of $200,000 and a second mortgage to secure a loan of $31,000. The first mortgage was never recorded. The debtor was not in default and continued to make payments on the mortgage loans during the bankruptcy.

    Generally an unrecorded mortgage can be avoided under Section 544 of the Bankruptcy Code by a trustee exercising the rights of a bona fide purchaser of real estate under state law. And an avoided transfer is preserved under Section 551 for the benefit of the bankruptcy estate. (The purpose of preserving an avoided lien is to avoid giving junior lien holders a windfall.)

    In this case it was clear that the trustee was entitled to avoid the first mortgage and to preserve the lien for the benefit of the bankruptcy estate. What was not clear was what this meant. In particular, the trustee contended that he was entitled to sell the property in order to liquidate the value of the preserved mortgage interest.

    The 1st Circuit began by noting that Section 363 (regarding bankruptcy sales) does not authorize a trustee to sell exempt property. A trustee also generally does not sell property solely for the benefit of secured creditors. Rather, a trustee will sell property only where the value exceeds both secured liens and a homestead exemption – i.e., there is “equity” available for distribution to the bankruptcy estate.

    Given that (1) there was no residual equity after deduction of the $500,000 homestead exemption (much less the secured claims), and (2) the mortgagees were precluded from foreclosing due to the lack of a default, it was clear that if the first mortgage had not been avoided, the trustee would not have been able to sell the property and the debtor would have retained possession of her home.

    However, the trustee argued that he should be able to sell the property in order to realize the value of the mortgage interest. The trustee did not suggest that the preserved mortgage freed up equity by eliminating secured debt that must be satisfied, since regardless of the secured debt, there was no equity left after the $500,000 homestead exemption. His argument was also not based on a foreclosure sale of the home using the mortgage, since there was no default. Rather, the trustee’s argument was that the preserved mortgage itself created equity in the home for the bankruptcy estate, which could support a sale by the trustee.

    According to the 1st Circuit, the flaw in the trustee’s argument was that only the preserved lien rights became part of the bankruptcy estate, not ownership of the underlying property. The trustee ended up with the same rights in the collateral as the mortgagee had. A mortgage does not give a right to immediate ownership but only a right to foreclose if there is a default. The trustee could sell the mortgage interest, but did not have the ability to sell the underlying property.

    Although preserving a mortgage means that the trustee will get the benefit of the mortgage position from any sale, that does not mean that it creates equity that justifies a forced sale of the property by the trustee. The preserved mortgage “cannot double as the unsecured equity triggering the trustee’s sale powers under §363.”

    The court found that its decision was not only the best reading of the Bankruptcy Code, but also complied with its sense of fairness. It was not appropriate to punish the debtor for the lack of diligence by the banks that failed to record the mortgage.

    The bottom line: Preservation of a lien “entitles a bankruptcy estate to the full value of the preserved lien – no more and no less.” The trustee’s choice was to sell the mortgage, claim first proceeds from a sale, or wait to exercise the rights of a mortgagee in the event of a default. Accordingly the 1st Circuit reversed the lower courts.

    Although there are numerous cases that address avoidance, there are far fewer decisions that address the aftermath of avoidance, including the mechanics of preserving a lien for the benefit of the estate. As illustrated by this case, the consequences of preservation are not always self-evident.
Source: Strong Arm Powers: What Can Be Done With An Avoided Lien?

For the court ruling, see DeGiacomo v. Traverse (In re Traverse), 753 F.3d 19 (1st Cir. 2014).

Go here for a friend of the court" brief in support of the homeowner, filed by the National Consumer Bankruptcy Rights Center and the National Association of Consumer Bankruptcy Attorneys

Go here for other posts involving 'rogue' Chapter 7 trustees.


(1) In a unanimous decision, the 3-judge appeals panel opens its ruling by summarizing in a nutshell what the Chapter 7 Trustee tried to pull, attempting to use a bank's failure to record its first mortgage as the basis for selling a home out from under a bankrupt homeowner and give her the boot, despite the fact that the homeowner was not in default in her mortgage payments, and despite the fact that she was entitled to homestead exemption protection under Massachusetts law:
  • In 2005, six years before filing a petition for Chapter 7 bankruptcy, Virginia Traverse secured a loan with a mortgage on her home. In the years before her bankruptcy and continuing since filing her petition, Traverse has remained current on all mortgage payments on the property.

    Because Traverse's home is subject to a homestead exemption under Massachusetts law, in these circumstances the Bankruptcy Code would ordinarily allow Traverse to pass through bankruptcy in possession of her home.

    Yet because Traverse's bank failed to record the mortgage with the appropriate registry, the bankruptcy trustee contends that his power to avoid and preserve the mortgage justifies him in selling Traverse's home as property of the bankruptcy estate. The bankruptcy judge and Bankruptcy Appellate Panel accepted the trustee's view. We reverse.
The bad news in this case was that the Chapter 7 Trustee actually persuaded two lower courts to go along with his argument that the home should be sold out from under the now-no-longer-screwed over homeowner; the good news is that the homeowner apparently had the wherewithal to take the case to a Federal Appeals Court, which responded with a "No Sale!" and promptly reversed the lower courts.

In conclusion, it merits noting that two national non-profit consumer bankruptcy advocacy organizations, the National Consumer Bankruptcy Rights Center ("NCBRC") and the National Association of Consumer Bankruptcy Attorneys saw fit to jump into the fray by filing a friend of the court" brief in support of the homeowner, reflecting the significance of this litigation, not only for homeowners filing for bankruptcy in Massachusetts, but for similarly situated homeowners in other states, particularly those providing its residents with generous state homestead exemptions (ie. Florida, Texas, Iowa, Kansas, Oklahoma, South Dakota, Minnesota, among others come to mind). See, generally:
Go here for links to other cases where the NCBRC has filed "friend of the court" briefs on in support of consumers in bankruptcy, and here for links to the briefs.

Friday, October 03, 2014

Philly Feds Bag Six in Probe Alleging Group Peddled Bogus Sale Leaseback Arrangements To Homeowners Facing Foreclosure In Scam To Strip Their Home Equity Out From Under Them

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • An indictment was filed yesterday charging six people, including a couple and their daughter, in a wide-reaching mortgage fraud conspiracy in which the defendants allegedly stripped the equity from the homes of desperate homeowners facing foreclosure, announced United States Attorney Zane David Memeger. The scheme caused losses to mortgage lenders of approximately $3.8 million.(1)

    Silver Buckman, 36, of Cherry Hill, NJ, her parents, Vincent Foxworth, 69, and Cynthia Foxworth, 63, of Turnersville, NJ, Danette Thomas, 52, of Pennsauken, NJ, Byron White, 44, of Pennsauken, NJ and Franklin Busi, 46 of Sicklerville, NJ, are charged with conspiracy to commit bank fraud and wire fraud. Some of the defendants are also charged with bank fraud and wire fraud.

    According to the indictment, the defendants engaged in a scheme in which they offered to help financially-vulnerable individuals save their homes from foreclosure or obtain money from the equity in their homes and, instead, defrauded the homeowners and mortgage lenders. Buckman owned and operated Fresh Start Financial Services (“FSFS”), in Mount Laurel, NJ and was an employee of American Home Lending as well as a mortgage broker for American One Mortgage (“AOM”). Her father is an experienced Realtor.

    Between October 2006 and November 2009, Buckman and her co-defendants allegedly targeted financially vulnerable homeowners and represented to them that they could improve their credit, save their homes from foreclosure, or provide them with money through Buckman’s lease buyback program.

    The homeowners were told that “investors” would be used to temporarily refinance their homes and that they could repurchase the homes in one year, or once they regained their financial footing. The defendants also allegedly induced the homeowners into signing documents related to the sale and lease of their homes by their representations that the homeowners would remain on the title to their homes, that the equity from their homes would be placed into an individual escrow account in their names, and that new mortgages would be paid from the escrow accounts to establish their timely payment histories.

    According to the indictment, in order to carry out the scheme, Buckman recruited Vincent Foxworth and Cynthia Foxworth and others to be straw borrowers. White also recruited a straw borrower. Ultimately, Buckman and Busi submitted false financial and employment information about the straw borrowers to mortgage lenders. Once lenders agreed to fund the mortgage loans, Buckman and some of the other defendants allegedly prevented the homeowners from receiving the settlement proceeds and did not put money into escrow accounts for the homeowners. Instead, the defendants distributed the proceeds amongst themselves.

    Buckman used the majority of the proceeds due the homeowners to pay the fees due the straw borrowers, the down payments on behalf of the straw borrowers in subsequent transactions to further the scheme, and her personal expenses. She used only a fraction of the homeowners’ monies toward the payment of the mortgages obtained by the straw borrowers for the homeowners’ homes and thereby caused the loans to go into default.

    If convicted, the defendants face an advisory sentencing guideline range of at least 87 to 108 months in prison plus restitution.

    The case was investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service and is being prosecuted by Assistant United States Attorney Anita Eve.
For the press release, see Indictment Charges Six New Jersey Residents In Multimillion-Dollar Mortgage Fraud Scheme.


(1) A few years ago, the U.S. Attorney's Office in Philadelphia took a novel approach in prosecuting a similar type of sale leaseback, equity stripping racket. This press release (if link expires, go here) describes the approach taken in that case:
  • At the time of indictment, the U.S. Attorney's Office Civil Division filed a verified complaint and temporary restraining order to help the original homeowners save their homes. The complaint and temporary restraining order sought novel relief that would bring all the individuals and entities that have a stake in the homes before the Court in an orderly process by which the damage caused by the defendants' alleged fraud could be mitigated.

    In 2011, U.S. District Court Judge Michael Baylson approved conversion of the temporary restraining order into an injunction that stopped foreclosures and evictions that were related to the alleged fraud, and that set forth the details of the mediation process.
See Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes for the earlier blog post.


For those contemplating bringing civil lawsuits in these types of cases in Pennsylvania, see Pennsylvania B'kruptcy Court Voids Sale Leaseback Scam; Victimized Homeowners' Continued Possession Leads To Invalidation Of Subsequent Deed, Mortgage for a post on a recent U.S. Bankruptcy Court case in Philadelphia which could provide a roadmap for one way in which a sale leaseback, equity stripping foreclosure rescue scam can be undone or unwound, invalidating both the initial title transfer (that was coupled with a contemporaneous leaseback of the premises with a repurchase option) by the victimized homeowner to the foreclosure rescue operator, as well as subsequent conveyances to others.

Other Resources:

See Foreclosure Rescue Scams (a chapter in a longer publication from the National Consumer Law Center) for a lawyer's guide to making a case on behalf of a victimized homeowner in attempting to void or set aside an abusive real estate transaction.

See the National Consumer Law Center's Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams for an extensive report on this type of home equity ripoff.