Foreclosure Not A Basis For Tenant Evictions In San Francisco

In California, a story in San Francisco Bay Guardian serves as a reminder that, within the city of San Francisco, it's illegal for a bank or broker or anyone else to evict a tenant just because the ownership of a building changed hands, including an ownership change due to foreclosure.

• [I]n an effort to promote tenant-rights awareness, the Assessor-Recorder's Office will be circulating letters to inform tenants when a landlord has received a 'Notice of Default' — the precursor to a foreclosure.

• "According to San Francisco law," the letter says, "it is illegal for the new owner to ask you to leave without just cause or shut off your utilities." Since most of the renters who have been evicted by this latest ruse don't speak English, the letter is being circulated in English, Spanish, and Chinese.

***

• The law may seem confusing, and in some cities, a foreclosure may mean the tenants have to go. But that's not the case in San Francisco. The city's rent ordinance requires "just cause" for eviction — and a change of ownership, no matter the cause, is not in itself a just cause.

• The San Francisco Rent Board's literature makes that clear: "The Court of Appeal held in Gross v. Superior Court (1985) ... that foreclosure, like any other sale, is not a just cause for eviction under the Rent Ordinance and provides no basis to force the tenant to leave."

For the story, see Don't leave your home (A foreclosure can be tough on tenants — but it shouldn't lead to eviction). SkimmingKappaRent

New Bay State Law Requires "Just Cause" Before Booting Renters From Foreclosed Properties

In Boston, Massachusetts, Harvard Law School News reports:

• Groundbreaking legislation originally drafted by students from the Harvard Legal Aid Bureau (HLAB) to protect tenants from losing their homes after foreclosure was signed into law on August 7 by Massachusetts Governor Deval Patrick ’82, former president of HLAB. [...] The new law, if applied appropriately, will be a very important tool in keeping people in their homes and protecting neighborhoods from falling into decay, says [HLAB Director and Clinical Professor of Law David] Grossman. “It provides rights to tenants that no law in Massachusetts has for years,” he says. “It could solve the problem that’s plagued our communities and cost us thousands of hours trying to solve in a less-efficient fashion, through litigating against banks in court.”

***

• HLAB students drafted what is considered the heart of the bill, a critically important “just cause” section that prohibits banks from evicting tenants from foreclosed-on properties unless the tenant fails to pay rent, harms the property, or otherwise gives “just cause” for eviction. It is believed to be the first “just cause” law in the country pertaining specifically to tenants in foreclosed-on properties.

• In addition, the bill imposes a longer pre-foreclosure period on banks that don’t make a good-faith attempt to restructure loans with homeowners, and it criminalizes mortgage fraud. It also provides property tax exemptions for purchasers of foreclosed properties.

For the story, see Massachusetts enacts landmark foreclosure protections drafted by Harvard Law School students.

Rights Of California Tenants Facing Foreclosure Evictions Depend On What City They Live In

A recent column in the Los Angeles Times on tenants being forced from their rented homes as a result of their landlords being foreclosed on contained this excerpt:

• State officials said that under California law, existing rental agreements are essentially wiped out when a property is foreclosed upon. All that's required is that a tenant be given at least 30 days' notice that he or she is being evicted.

• But those officials also said that state law can be trumped by local rent-control statutes, which often provide tenants with more far-reaching protections. These "just cause" provisions of many municipal rent-control laws limit the ability of landlords to evict tenants, even those on month-to-month leases. They also include cases in which ownership of a property changes hands, such as a foreclosure.

• "Tenants cannot simply be evicted," insisted Adam Radinsky, who heads Santa Monica's consumer protection unit. "There's no question about that."

• Actually, it depends on where you live. Cities with "just cause" provisions include Los Angeles, San Diego, Santa Monica, Thousand Oaks, West Hollywood and Glendale. However, not all "just cause" provisions are created equal. San Diego's requires that a tenant occupy a property for at least two years before the provision takes effect. Glendale's allows an eviction to proceed if the landlord plans to remove the property from the rental market or have a relative move in. Moreover, not all rental properties may fall under a city's rent-control protections. In such cases, state law would probably apply, which would allow a foreclosure-related eviction to go ahead. "In that case, the tenant may be in a really lousy position," said Al Shelden, chief of consumer law in California Atty. Gen. Jerry Brown's office. "There may not be many rights to begin with."

For more, see Shadow victims of the mortgage crisis: renters (if link expires, try here).

See also, KCBS Channel 2, Los Angeles: Money 101: Tenants Caught In Foreclosure.

Go here for other posts referencing California municipal "just cause" eviction laws.

For posts involving rent / equity skimming landlords who pocket rent and allow homes to go into foreclosure, see Tenants Unwittingly Renting Homes In Foreclosure I , II , III , IV , and V. equity skimming unwittingly epsilon

California Appeals Court Upholds Oakland's "Just Cause" Tenant Protection Law

From the Office of the City Attorney, Oakland, California:

• On Tuesday, March 3, City Attorney John Russo announced that the city has prevailed in a 6-year lawsuit filed by landlords seeking to overturn Oakland’s strong tenant protection law – the Just Cause for Eviction Ordinance [Measure EE].(1) A decision last week by the California Court of Appeal upholds the Just Cause ordinance and affirms the right of tenants to receive significant damages and attorney fees from landlords who break the law.

• "Oakland has been hit with waves of illegal evictions as a result of the foreclosure crisis," City Attorney Russo said. "Some banks and their agents have routinely violated the law by evicting good tenants from foreclosed apartments and homes without cause."

For the rest of the Oakland City Attorney's press release, see Oakland’s Tenant Protection Law Upheld by Appeals Court.

For the ruling of the California Appeals court, see Rental Housing Association of Northern Alameda County v. City of Oakland.

(1) Measure EE is codified at Oakland Municipal Code chapter 8.22.300 et seq. SkimmingKappaRent

Oakland Settles Suit Charging Lender, Subsidiaries, Real Estate Agents With Illegal Foreclosure Evictions

From the Office of the City Attorney for Oakland, California:

• A City of Oakland lawsuit accusing JPMorgan Chase Bank of wrongfully evicting tenants from foreclosed homes has been settled. The lawsuit was one of five filed by the city in recent months accusing banks, their subsidiaries and several local real estate agents of violating an Oakland law that protects tenants from unjust evictions.(1)

• In February and March of this year, Oakland’s Neighborhood Law Corps filed the lawsuits against JPMorgan Chase and Fidelity National Financial, along with their subsidiary companies and the local agents who are paid to remove tenants from properties the banks have acquired through foreclosure.

• Tenants in foreclosed homes and apartments provided numerous examples of improper eviction notices served by those agents. Oakland’s "Just Cause" ordinance allows landlords to evict tenants for specific reasons such as failing to pay rent or damaging property. However, foreclosure is not a "just cause" for eviction under the city’s law.

• JPMorgan Chase agreed to a settlement that includes a $35,000 payment to the city. The settlement also includes an example of a legal notice that banks can use to determine the occupancy of a foreclosed property in Oakland. "Evictions resulting from the foreclosure crisis continue to cause extraordinary hardship for working families here in Oakland and across California," City Attorney John Russo said. "I congratulate JPMorgan Chase and other defendants for quickly stepping up to settle these lawsuits and for recognizing the law in Oakland. We hope these settlements send a strong message to other banks and agents who do business in our community."

• Russo also praised real estate agents Joseph McNulty and Percy Cheung, the first defendants to agree to settlements.(2) The City Attorney’s Office is in settlement negotiations with other defendants named in the complaints.

For the Oakland City Attorney press release, see Oakland reaches settlement with JPMorgan Chase on eviction lawsuit.

Go here for other posts on illegal foreclosure evictions in violation of Oakland, California's Just Cause Ordinance.

(1) For more from the Oakland City Attorney's Office on these illegal foreclosure eviction lawsuits, see:

• Press Release: Oakland City Attorney sues major banks, local agents to stop illegal evictions and abuse of tenants’ rights;
• Lawsuit against: JPMorgan Chase, Chase Home Finance, EMC, etc.,
• Lawsuit against: Fidelity National Financial, etc.,
• Lawsuit against: Keller Williams, etc.,
• Lawsuit against: Session Real Estate,
• Lawsuit against: Smart Choice Realty, etc.
• Examples of Wrongful Eviction Notices,
• City Attorney's Guideline for Tenants' Rights in Foreclosed Housing.

(2) According to a San Francisco Chronicle report, Joseph McNulty will pay $3,000 and Percy Cheung of Smart Choice Realty will pay $2,500, said Alex Katz, spokesman for City Attorney John Russo.

Tenant Beats Down Bully Bank In Illegal Foreclosure Eviction Attempt; Lender, Law Firm Prey On Renters Unable To Assert Rights: Housing Advocate

In Hayward, California, Gabe Treves, Program Coordinator for Tenants Together, California's Statewide Organization for Renter's Rights, writes in News Blaze:

• Tenants renting a home in Hayward, CA, successfully defended themselves against an illegal eviction lawsuit brought by HSBC Bank. The tenants prevailed in the lawsuit this week and will be able to stay in their homes indefinitely. Under Hayward's just cause for eviction law, blatantly violated by HSBC, a landlord must have a specified reason to evict a tenant, and foreclosure is not recognized as a legitimate basis for evicting a tenant.

***

• In October, the McHenry's were served with an eviction lawsuit, called an unlawful detainer, by HSBC's attorneys at the Endres Law Firm, a Sacramento-based law firm notorious for helping banks illegally evict tenants living from foreclosed properties. The eviction lawsuit was in direct violation of the city's just cause for eviction ordinance. [...] McHenry contacted the Endres Law Firm to demand that it honor the city ordinance and dismiss the unlawful detainer action. The firm would not even give the courtesy of a response. As McHenry tells, "I called the Endres Law Firm repeatedly and demanded that they honor my rights under the city ordinance and dismiss the eviction, but they wouldn't even respond. Meanwhile, I was getting scary court notices that the eviction was moving forward to trial."

***

• Hayward is one of 15 cities in California with just cause eviction ordinances which, among other things, offer protection to tenants in foreclosure situations. However, as the incident with the McHenry's reveals, banks are all too willing to ignore these laws.(1)

For the story, see Hayward Tenants Fights off Bank Eviction after Foreclosure.

(1) According to Treves, "HSBC Bank and the Endres Law Firm knew that what they were doing was illegal, and that's why they wouldn't respond to all the inquiries. Clearly, their strategy is to prey on tenants who don't know their rights or who don't have the means or time to assert them. Despite the local law, they tried to bully the McHenry out of her home. But she asserted their rights, held her ground, and beat the bank."

Tenant Intimidation Continues In SF As Renters In Rent-Controlled Foreclosed Buildings Often The Targets Of Illegal Eviction Attempts

In San Francisco, the San Francisco Chronicle reports:

• [S]ome renters are being told that if their landlord defaults on the mortgage during this foreclosure crisis, they must move out - even if they've been making their rent payments on time. The fact is, in San Francisco that is simply not true.

• "Tenants in rent-controlled buildings in San Francisco are protected by the need for a 'just cause' for eviction," said Darlene Wolf, executive director of the rent board. "And foreclosure is not just cause."

• To make that point, the assessor's office will send letters to tenants in buildings that are in default. The letter will say, "According to San Francisco law, it is illegal for the new owner (typically the bank that has foreclosed on the loan) to ask you to leave without just cause or shut off your utilities." The hope is that the letter will help stop the unsavory practice of intimidating tenants into vacating.

For more, see Renters' eviction notices often illegal in S.F.

For other posts involving the problems tenants face in homes in foreclosure, go here, go here, go here, go here, go here, and go here. ThetaTenantRentSkimming

Broker Intimidation Used To Illegally Harass Tenants Out Of Foreclosed Homes, Says Oakland Lawsuit

In Northern California, The Oakland Tribune reports:

• The city of Oakland filed suit Monday in Superior Court against [Walnut Creek's Tri-County Properties licensed real estate broker Craig] Jarvis, accusing him of forcing tenants from foreclosed properties through intimidation and harassment. Oakland City Attorney John A. Russo said Jarvis' citing of the Civil Code was bogus while the City's Just Cause Ordinance expressly forbids eviction of tenants from a property that has been foreclosed. Jarvis could not be reached for comment. The attendant who answered his phone said he was "in court on eviction hearings."

***

• Russo estimated at least 10 families were treated in similar ways. He said the bigger concern, however, is how many other real estate brokers are doing the same thing — pushing tenants out so lenders can dispose of their foreclosed properties more quickly. "This is the worst type of bottom feeding," from which real estate and mortgage brokers and banks win tremendous profits, said Russo.

• The suit accused Tri-City Properties of engaging in practices that put honest practitioners at a competitive disadvantage. It cited Jarvis' violations including intimidating tenants to take paltry "cash for keys" offers that do not reflect the actual cost of the move for the tenant; turning off tenants' heat and electricity; refusing to return tenants' phone calls in reply to notices to vacate; refusing requests for information about the foreclosure or the identity of the new property owner; claiming to have instituted eviction proceedings against the tenant or threatening to do so if they do not comply with his demands; and citing incorrect legal authority to lend an aura of legitimacy to his demands.

• Russo urged Oakland tenants so threatened as well as homeowners who risk foreclosure to call the Oakland City Attorney's hot line: 510-BE-ALERT or 510-232-5378.

For more, see Suit: Broker harassing Oakland tenants (City alleges 10 families may have been intimidated) (if link expires, try here).

See also, San Francisco Chronicle: Oakland sues landlord, claims illegal evictions.

Go here for posts on illegal evictions in violation of the "just cause" ordinance (Prop EE).

California AG Starts Probe In Effort To Ensure That Tenants In Foreclosed Houses "Aren't Rousted From Their Homes In Violation Of The Law!"

From the Office of the California Attorney General:

• Attorney General Edmund G. Brown Jr. [] launched an investigation aimed at protecting the rights of the "forgotten victims" of the housing market collapse -- the tens of thousands of tenants facing eviction from buildings that have been foreclosed by banks.

• "Tenants who live in properties in foreclosure are the forgotten victims of the collapse of the housing market," Brown said. "We'll fight every step of the way to ensure they aren't rousted from their homes in violation of the law." As a part of his investigation, Brown [] sent letters to 24 banks, loan servicers, private investors, and law firms demanding information about whether they are complying with federal, state, and local laws regarding foreclosed properties and their treatment of tenants.

• More than 20 housing rights and public interest groups from across California have petitioned the Attorney General to take action, citing a "pattern of illegal conduct" and tenant harassment by banks, real estate agents and lawyers attempting to speed up evictions so that foreclosed properties can be sold.

***

• In his letter, Brown requires banks, loan servicers, private investors and law firms to provide information by July 19 about their policies and procedures when dealing with foreclosed properties and current tenants. It specifically asks the recipients to outline how they "promote or preserve tenancies after foreclosure".

• In May 2009, the federal government enacted the "Protecting Tenants at Foreclosure Act" giving tenants new protections, such as the right to stay in their homes for at least 90 days after receiving an eviction notice. While state and local laws also contain strong protections, unlawful evictions and harassment of tenants continue.(1)

For the California AG press release, and the text of his letter to the 24 alleged evil-doers, see Brown Investigates Whether Tenants' Rights Are Violated in Foreclosures.

For more on foreclosures and the rights of tenants, see National Law Center on Homelessness & Poverty: Staying Home: The Rights of Renters Living in Foreclosed Properties.

(1) According to the California AG, the rights of tenants in foreclosed homes and apartments include:

• Tenants cannot be required to move out of their homes for at least 90 days following an eviction notice.
• Tenants can insist on staying until the end of their leases. The only exception occurs when the new owner of a single-family home wants to move in.
• Tenants can require banks and their agents to put all communication in writing.
• Tenants are not obliged to accept "cash for keys" money to move out sooner than the law prescribes.
• Harassment, such as improper entry into a person's home, shutting off water and lights, or changing the locks without a court order is illegal.
• The above rights extend to tenants living in government-subsidized Section 8 housing, who may also have additional protections under state and local laws.

In addition, the state Attorney General points out that if a California city has a "just cause for eviction" law, a landlord must have a specific reason to evict a tenant, and foreclosure may not be recognized as a legitimate basis for eviction. Tenants should check local ordinances.

According to the California Attorney General's office, sixteen cities in California have just cause for eviction ordinances: Berkeley, Beverly Hills, East Palo Alto, Glendale, Hayward, Los Angeles, Maywood, Oakland, Palm Springs, Richmond, Ridgecrest, San Diego, San Francisco, Santa Monica, Thousand Oaks, and West Hollywood.

Oakland Tenant Walks Away With $4K Settlement, Over A Year Of Free Rent In Battle Against Lender & Its Illegal Foreclosure Eviction Attempt

In Oakland, California, Beyond Chron reports the story of one tenant's battle against a foreclosing mortgage lender and its attempt to carry out an illegal eviction, despite the city's Just Cause Ordinance, which, with exceptions, prohibits a lender from doing so. He ultimately sought out the assistance of the local non-profit law firm Eviction Defense Center to fight the lender:

• [H]ughs said that his experience with the Center was user-friendly, unlike the rest of the legal system; he paid $40 for a consultation and to file papers, and it cost him $90 to go to court. Considering all the money he was saving while on rent strike, the minimal fees seemed worth it. Hughs first approached the Eviction Defense Center on Nov. 20, 2008. The Center filed a demand for a jury trial, and on Feb. 6 they represented him at a court appearance. A week later, Hughs got his settlement: After a year and a half of maintaining his home and living rent-free, he promised to leave the property within 30 days in exchange for $4,000.

For the story, see Oakland Resident Squats Bank-Owned Home.

(1) Reportedly, the Eviction Defense Center does not represent prior owners who have been foreclosed on, only tenants, who are protected by Oakland’s Just Cause Ordinance. According to executive director Anne Omura, many attorneys who represent banks are from out of county and are unfamiliar with local laws, the story states. When they do know the laws, they reportedly try to circumvent them. Numerous real estate agents and law firms are said to be on watch lists for continually filing lawsuits with no legal merit. Or for using intimidation. “Banks hire aggressive and often times unscrupulous agents who will bang on the door and threaten [tenants],” Omura said, “and a lot of people don’t know their rights and end up getting displaced.” RentSigmaSkimming

Washington Mutual, Countrywide Accused Of Illegally Booting Oakland Tenants In Foreclosed Homes

In Oakland, California, KGO-TV Channel 7 reports:

• Renters in the East Bay have been forced out of their homes because the owners of those homes have defaulted on their loans. One Oakland grandmother is facing eviction by Washington Mutual bank even though it's illegal in Oakland to force out a renter for any reason other than just cause.

***

• Since 2002, when Oakland passed Prop EE, it's been illegal for a landlord to evict a tenant unless they have just cause and a foreclosure [doesn't] change that. The East Bay Community Law Center in Berkeley is trying to help [one tenant] and dozens of others keep their homes. [...] Oakland doesn't know how many of these illegal renter evictions are going on, but City Attorney John Russo says he's put banks and eviction agencies on notice.

***

• WaMu returned our calls to say that although their attorney's names appear on all the eviction notices that [one tenant] received the loan belongs to Countrywide.

For more, see WaMu kicks out renters. equity skimming unwittingly epsilon

SF To Consider Expanding Rent Regulation Coverage To All Residences; Renting Out House To Tenant Could Become Iffy Proposition For Homeowners

In San Francisco, California, the San Francsico Chronicle reports:

• San Francisco's Board of Supervisors is getting ready to vote on a proposal that would make it difficult and costly - in some cases, impossible - for property owners who have rented out their homes to move back into them.

• At issue is a proposal by Supervisor John Avalos that would extend certain eviction protections to tenants living in residences built after 1979. Avalos and tenants' rights advocates characterize the proposal, which is expected to come up for a key committee hearing today, as a matter of fairness for tenants living in relatively modern buildings, which are not covered by the city's most stringent rent regulations. They suggest it could be particularly helpful to tenants in condominiums that are facing foreclosure.

For more, see Landlords could be locked out.

For story update, see S.F. tenants' victory likely to be short-lived:

• Tenant advocates got a win at the San Francisco Board of Supervisors Tuesday with initial approval of a plan to extend eviction protections to rental housing built within the past 30 years - but the victory is expected to be short-lived. Mayor Gavin Newsom plans to veto the legislation, according to spokesman Joe Arellano, and the board, which voted 7-4, was one vote shy of securing a veto-proof majority.

(1) According to the story, the city's sweeping rent control laws of 1979 included provisions that allowed evictions only when a landlord could establish "just cause," which includes nonpayment of rent, illegal activity in the residence and other breaches of lease. Owners who want to move into their own homes must pay relocation benefits of $5,000 per adult tenant - and an additional $3,300 to households with children, the story states. Even then, a challenge to the landlord's "just cause" can reportedly add thousands of dollars in legal fees or settlement costs - or, if the tenant is elderly, disabled or catastrophically ill, he or she might not be able to be evicted at all. "In San Francisco, it's easier for a camel to pass through the eye of a needle than for a homeowner to move into his home," said Bart Murphy, a rent board commissioner. But, reportedly, those rules only apply to units that existed when the 1979 rules were passed.

Ohio Supreme Court Slams Brakes On Liability Insurer's Attempt To Automatically Deny Coverage To Landlord Sued By Prospective Tenant For Alleged Discrimination Under Fair Housing Act

From a recent article appearing in the insurance industry publication, Claims Journal:

• [T]he Ohio Supreme Court recently considered application of the inferred-intent doctrine(1) in a federal fair housing discrimination lawsuit. Granger v. Auto-Owners Ins., 144 Ohio St.3d 57, 40 N.E.3d 1110 (Ohio 2015).
  
  In Granger, the insured [ie. the landlord] owned various rental properties. Those properties were insured by Auto-Owners Insurance Group with a primary dwelling policy that included landlord-liability coverage and a second umbrella policy. The primary policy was issued by Auto-Owners Mutual Insurance Company and the second policy was issued by Owners Insurance Company.
  
  Both policies covered personal injuries. However, the definition of what constituted a “personal injury” differed between the policies. The primary policy defined “personal injury” in terms of causes of action, i.e., libel, slander, defamation, false arrest, invasion of privacy, wrongful eviction, etc. The definition of “personal injury” contained within the umbrella policy was broader in scope. The umbrella policy definition included reference to particular types of damages rather than only particular types of causes of action. The broader definition of “personal injury” in the umbrella policy included within the definition “humiliation.”
  
  The insured refused to rent one of the insured properties because the proposed renter was African-American and had a six year old son who would be living with her at the property. It was determined that the insured had discriminated against the tenant on the basis of familial status and race in violation of 42 U.S.C. 3604 and R.C. 4112 .02(H). Part of the damages sought by the putative tenant was emotional distress.(2)
  
  The umbrella policy also contained an intentional act exclusion. Specifically, the policy excluded coverage when “the personal injury … was expected or intended.” Auto-Owners asserted that the exclusion was applicable. Auto-Owners argued that “discriminatory intent is inferred as a matter of law for purposes of an intentional act exclusion under an umbrella policy of insurance on a claim for pre-leasing housing discrimination.” 144 Ohio St.3d at 64, 40 N.E.3d at 1117.
  
  Auto-Owners was seeking application of the inferred-intent doctrine. Under the inferred-intent doctrine, “when there is no evidence of direct intent to cause harm and the insured denies the intent to cause any harm, the insured’s intent to cause harm will be inferred as a matter of law in certain instances.” Auto-Owners argued that it could be inferred as a matter of law from the nature of the insured’s act—pre-leasing housing discrimination—that the insured intended to cause the putative tenant’s personal injuries and, therefore, the exclusion applied.
  
  The Ohio Supreme Court in Granger disagreed.
  
  Previously, the Ohio Supreme Court had rejected the “substantially certain” test in inferred-intent cases. 144 Ohio St.3d at 65, 40 N.E.3d at 1118. Under the “substantially certain” test, any harm that was substantially certain to result from an intentional act would fall under the intentional act exclusion of the policy.
  
  The Ohio Supreme Court adopted a different test for application of the inferred-intent doctrine. Under Ohio law, “the doctrine of inferred intent applie[d] only in cases in which the insured’s intentional act and the harm caused [were] intrinsically tied so that the act [had] necessarily resulted in the harm.” 144 Ohio St.3d at 65, 40 N.E.3d at 1118.
  
  The Ohio Supreme Court then found that humiliation was not so intrinsically tied to pre-leasing discrimination that the insured’s act necessarily resulted in the harm suffered by the putative tenant.
  
  While acknowledging that emotional distress damages were available under the law to victims of housing discrimination, the Court found that such damages were not automatically awarded.
  
  Therefore, the Court remanded the case to the trial court so that the trier of fact could determine whether the insurance company was able to demonstrate that the insured intended to cause humiliation to the putative tenant without the benefit of the inferred-intent doctrine removing that burden of proof.

For the article, see Ohio High Court Rejects Inferred-Intent Doctrine in Fair Housing Discrimination Case.

For the court ruling, see Granger v. Auto-Owners Ins., 144 Ohio St.3d 57, 40 N.E.3d 1110 (Ohio 2015).

See also, Landlord Owed Defense In Bias Row, Ohio High Court Says (may require subscription; if no subscription, TRY HERE, then click the appropriate link for the story).

------------------------

(1) In Ohio, the inferred-intent doctrine is a judicially-created rule that liability insurers often rely on when attempting to wiggle their way out of providing coverage denying coverage to a policy holder when the insurer claims that the conduct of an insured that gives rise to harm was as a result of an intentional act, thereby triggering the intentional act exclusion in the insurance policy (which allows the insurer to deny coverage).

The court describes the inferred-intent doctrine as follows:

• Under the inferred-intent doctrine, "when there is no evidence of direct intent to cause harm and the insured denies the intent to cause any harm, the insured's intent to cause harm will be inferred as a matter of law in certain instances." Campbell, 128 Ohio St.3d 186, 2010-Ohio-6312, 942 N.E.2d 1090, ¶ 9, citing Gearing v. Nationwide Ins. Co., 76 Ohio St.3d 34, 36, 665 N.E.2d 1115 (1996), paragraph one of the syllabus.

(2) A summary of the facts that led up to the landlords' lawsuit against the insurance company (including a description of their alleged conduct that triggered the fair housing lawsuit against them), as roughly abstracted from the court ruling, follows:

1. In June, 2010, the prospective tenant ("Kozera") first made contact with the landlord.
   .
2. After being discouraged by the landlord from applying for a vacant apartment available for rental on the subject premises, a four-unit property in Akron, Ohio, Kozera contacted the Fair Housing Contact Service, Inc. ("FHCS"), a local, independent non-profit fair housing organization, which investigated her housing discrimination claims by using trained testers to interact with the landlord ("Granger").
   .
3. One tester inquired about the property by e-mail, and Granger replied, "Truely [sic] a lovely and large apartment and in a very well keep [sic] apartment house. No pets or children."
   .
4. Granger later sent an additional e-mail to the same tester, stating, "Yes it is still available as I am selective as to who [sic] I rent to and I run a background check on any possible tenant, just so you know. It is an adult apartment house so it is quite [sic] and very will keep [sic] with no children or pets permitted."
   .
5. He sent a proposed lease to at least one tester; one of its terms was "No children or pets are permitted—period."
   .
6. Further, FHCS related that Granger told only an African-American tester that he ran background checks on prospective tenants because "he didn't want a rapist in the building"; he did not make the same comment to a Caucasian tester.
   .
7. Based on information from Kozera and the testers, FHCS contended that Granger had discriminated against Kozera, an African-American, on the basis of familial status and race in violation of 42 U.S.C. 3604 and R.C. 4112.02(H).
   .
8. In March, 2011, (nine months after her initial contact with the landlord), Kozera, along with FHCS, filed a fair housing lawsuit in federal court against Granger and one, Steigerwald, (Granger's partner/co-landlord), individually and in their capacities as trustees of the trust that held title to the subject rental property).
   .
9. Kozera claimed that she had "experienced out of pocket costs and emotional distress as a result of Defendants' conduct"; FHCS alleged that it had "expended its resources and was harmed in its mission by Defendants' conduct."
   .
10. In May, 2011 (two months after getting hit with the fair housing lawsuit), Granger and Steigerwald forwarded the lawsuit to their insurance agent, who then contacted the insurance company, seeking coverage under one of the policies, including the providing of a legal defense to the fair housing lawsuit (ie. the insurer's "duty to defend"),
    .
11. A month later, citing various reasons, the insurer denied coverage on one of the policies; they immediately requested coverage under their second policy (the umbrella policy), but they never heard back from the insurer,
    .
12. On July 11, 2011, Granger and Steigerwald settled the federal case with Kozera and FHCS for $32,500. Separate payments went to the two plaintiffs: $5,000 to Kozera and $27,500 to FHCS.
    .
13. On July 22, 2011 (less than two weeks thereafter), the landlords, Granger and Steigerwald, sued the insurance company (unfortunately for the insurance agency and the individual insurance agent, they too got roped into the landlord's lawsuit) for claims relating to the insurer's failure to provide coverage.

Landlord Joins His Tenants In Lawsuit Accusing Town Of Conducting Unconstitutional Program Of Rental Home Inspections; Renter Family w/ Five Kids Don't Want "Strange Men Coming In & Poking Around" Without First Articulating Legitimate Probable Cause Of Possible Violations

In Pottstown, Pennsylvania, the PhillyVoice reports:

• The Pennsylvania Constitution, a document older than the country's founding papers, is being violated in Pottstown, according to a couple who enjoys their privacy.
  
  Dottie and Omar Rivera have sued the Montgomery County borough, and cited at the top of the civil lawsuit is Article 1, Section 8 of the document that protects people in their houses from "unreasonable searches and seizures."
  
  The gist of the Riveras' complaint: the local government wants to inspect their rental home to ensure housing-code compliance, but they've allegedly given no specific reason for wanting to do so.
  
  In 2015, Pottstown approved new rules requiring biennial inspections of every rental unit, with every unit subjected to an inspection before Dec. 31, 2017.
  
  According to the lawsuit, before a scheduled inspection of the Riveras' home earlier this month, the couple wrote a letter to Keith Place, director of licenses and inspections, informing him they wouldn't voluntarily allow the borough to come inside and look around. They’d need to get a warrant.
  
  So Pottstown did. In its request for a search warrant to inspect the Riveras' two-story, colonial home, the borough cited compliance with the 2015 ordinance as its only probable cause.
  
  The warrant was granted by a Montgomery County judge despite no evidence of potential housing code violations, the suit claims.
  
  When asked for comment, a spokesperson for the borough referred PhillyVoice to its attorney, who said she does not comment on pending litigation.
  
  "The only people who are invited into that home are family, friends and the landlord when something needs to be fixed. That's it." – Rob Peccola, attorney for the Riveras
  
  Rob Peccola, an attorney with the Institute for Justice,(1) which is representing the Riveras, paints those administrative warrants as free passes for the local government to enter homes without probable cause.
  
  "Oftentimes the warrant application will just say inspection pursuant to whatever code," but without "showing that anything is wrong with the home, or that there's any suspicion whatsoever," Peccola told PhillyVoice.
  
  The Riveras have lived in Pottstown their whole life, and have rented from their current landlord, Stephen Camburn, for about five years. Peccola said they don't have anything to hide, but they have five kids at home, and don't want "strange men coming in and poking around."
  
  "The only people who are invited into that home are family, friends and the landlord when something needs to be fixed," Peccola said "That's it."
  
  (Camburn, by the way, is on his tenants' side. He's listed as a plaintiff in the lawsuit, and said in a video from IFJ that people are entitled to their privacy.)
  
  SEEKING A STATEWIDE RULING
  
  What's even more concerning, according to Peccola, is the lack of restrictions on who can accompany inspectors — for example, a police officer without a warrant of his or her own.
  
  "There's nothing stopping them from coming in, finding evidence and using that evidence against them," he said.
  
  Peccola went out of his way to note that the plaintiffs have no issue with inspections if there is legitimate probable cause of possible violations, or if the tenants or landlord request the inspection.
  
  The suit, which names Place and the borough as defendants, seeks to deem the rental inspection laws unconstitutional, force Pottstown to provide more traditional probable cause to obtain future warrants, and damages of one dollar.
  
  Place didn't respond to a request for comment on more general questions regarding rental inspections.
  
  When the new ordinance was passed in 2015, Place did respond to landlords who criticized the regulation saying renters were being treated differently than homeowners, who aren't subject to inspections.
  
  Place said landlords are "running a business" and need licensees that require inspections just like any other business, according to The Pottstown Mercury.
  
  The Riveras and the IFJ will be seeking an outcome similar to a recent federal ruling in Ohio(2) that deemed the city of Portsmouth's rental inspection law — which "authorizes warrantless administrative inspections" — unconstitutional.
  
  IFJ is shooting for a breakthrough by way of a statewide decision with its lawsuit, filed in the Court of Common Pleas of Montgomery County.
  
  The Pennsylvania Supreme Court uses other states' supreme court opinions as a factor when hearing cases, but one hasn't been delivered on the issue of mandatory rental inspections in any of the other 49 states.
  
  A favorable ruling in the state's highest court would effectively nix other laws in municipalities like Reading and Lancaster that allow for administrative warrants as means to inspect a rental property, Peccola said.
  
  "The goal is to get it to the Pennsylvania Supreme Court, because they get the last word on this."

For the story, see Lawsuit challenges legality of Pottstown's rental inspections (Couple sues Montgomery County borough, alleging practice violates state Constitution).

For the lawsuit, see Rivera, et al. v. Borough of Pottstown, et ano.

-----------------------

(1) The Institute for Justice is an Arlington, Virginia-based non-profit, 501(c)(3) public interest law firm (with five other offices located across the nation in Florida, Minnesota, Texas, Arizona and Washington state) that litigates issues relating to, among other things, private property rights.

(2) See Baker v. City of Portsmouth, Case No. 1:14cv512 (S.D. Ohio, West. Div. 2015).

Banksters Prohibited By Local Law From Evictions Apply Pressure Anyway In Effort To Drive Tenants From Foreclosed Homes: Bay Area Renter Advocates

In San Francisco, California, the San Francisco Bay Guardian reports:

• Alma Sierra has been living in her home at 490 Athens for three years. Sierra, her nine year old son, and two other mothers with their children share a rental unit. They have diligently paid their rent, and her son goes to school across the street. But last year, US Bank foreclosed on the small-time landlords that owned the property- now, the tenants face eviction.
  
  
• “We’re three single mothers with children. We don’t have the means to just up and leave,” Sierra, a part-time domestic worker, told me through a translator from Causa Justa, an organization that works for tenants’ rights. Their worked helped pass the Just Cause eviction policy for which the organization is named last year.
  
  
• Under city law, a landlord needs one of 14 reasons to justly evict a tenant. The reasons include failure to pay rent and trashing the property, as well as owner move-in and Ellis Act evictions. But the foreclosure crisis has brought on a wave of bank-owned properties. These are tricky situations legally; banks generally want to sell the property, a task made more difficult if there are pesky tenants living there.
  
  
• “The banks want to get rid of the tenants. The realtors for the banks always tell them they can get more money if there aren’t any tenants in it. Because that way they would have to do an owner move-in eviction,” said Tommi Mecca, a long-time tenants’ rights advocate in the city.
  
  
• According to Mecca, US Bank has been pressuring the three families to leave the building, although no eviction papers have been filed yet. The Guardian is awaiting calls back from US Bank representatives.

***

• “It can take many months, in some cases longer, to actually sell property,” said Sarah Shortt, an organizer with the SFHRC. “So in the meantime the bank is the landlord and they haven’t been responsible in lending or as landlords. They tend to disregard tenants’ rights and trample over the needs and concerns of renters.”
  
  
• Even when tenants are made aware that the property they live in has been sold back to bank, it can often be difficult to determine who to turn to for repairs, complaints, or even the right address for rent checks. “One of the things we see a lot of is, the bank acquires the property and then they’re just MIA. Tenants come to us and say, we don’t know who owns our building, where to pay rent, who to ask to fix leaky ceiling. We help them research to find who owner is,” said Shortt.
  
  
• These situations often end with buy-outs, in which the bank pays the tenants to leave the property. The amount ranges, but according to Mecca, it can often be insubstantial. “They start at $1,000, $3,000, something really insulting. And it’s only if tenants walk in somewhere like [the SFHRC] that we tell them, wait a minute, your tenancy is worth so much more than that.”

For more, see Why three families, who never missed a rent payment, may face eviction.

See also: Foreclosed tenants tell bank: Let us stay!:

• A U.S. Bank branch in the Mission District was the site of a different kind of anti-foreclosure protest April 26, as three families who are tenants in a foreclosed building, accompanied by some 100 supporters, demanded the bank collect their rent and let them stay in their homes.

Florida Supremes: Foot-Dragging Bankster Waited Too Long In Attempt To Vacate Unfavorable Defective Judgment Against It In Quiet Title Action Initiated By Condo Association, Saying Defect Rendered Judgment Merely Voidable, Not Void; Ruling Leaves Lender With Worthless Mortgage, HOA With Free & Clear Apartment

In Tallahassee, Florida, the Daily Business Review reports:

• In a setback for mortgage lenders, the Florida Supreme Court on Thursday ruled the Bank of New York Mellon Corp. waited too long to try to vacate an adverse judgment in a title dispute following foreclosure.
  
  The case pitted BNY Mellon against Condominium Association of La Mer Estates Inc. and raised the question of whether a judgment becomes void—treated as if it never existed—or is voidable if based on a complaint with no cause of action.
  
  "The failure to state a cause of action is a procedural irregularity and does not render a judgment void—just voidable," La Mer attorney Michael David Heidt of the Law Office of Gable & Heidt in Hollywood, said after the ruling.
  
  The case dates back to February 2011 when the Hallandale Beach condo association won a second default judgment on a complaint to quiet the bank's title on a La Mer unit.
  
  The association gained control of the unit after the former owner defaulted on the mortgage. It obtained a final foreclosure judgment in July 2009, but the mortgage securing the condominium unit was assigned to BNY Mellon before the foreclosure sale. The association was the only bidder at the sale and received a certificate of title to the condo.
  
  "Concerned about the continuing unpaid monthly assessments, the association wrote to the bank offering to convey to it the title to the condominium, but the bank did not respond," Justice James Perry wrote in the 6-1 ruling.
  
  Chief Judge Jorge Labarga and Justices Barbara Pariente, Peggy Quince, Charles Canady and Ricky Polston concurred. Justice Fred Lewis dissented.
  
  The association filed a complaint to quiet title to the property and won two default judgments.
  
  The bank took no action for more than 18 months until it was well past the deadline for challenging the judgment. It August 2012, BNY Mellon moved to vacate the quiet title judgment, arguing the order was void because the association's complaint failed to state a cause of action. BNY Mellon argued the deadline that applied to other grounds for relief did not apply because the order was void.
  
  The bank maintained it possessed a superior title interest and the Hallandale Beach association had not proven otherwise.
  
  The circuit court found the order was void and vacated it, but the Fourth District Court of Appeal sided with the condo association, denying BNY Mellon's motion to vacate.
  
  The high court found the lack of a cause of action rendered the judgment voidable rather than wiping it out. It also found the bank had proper notice and enough opportunity to raise a challenge.
  
  "Because we agree that the default judgment was voidable … the default judgment could not be collaterally attacked one and one-half years later when BNY Mellon finally decided to respond," Perry wrote.
  
  Lewis insisted the case involved a non-existent cause of action and maintained the majority was setting a "dangerous precedent."
  
  Randolph Liebler, Tricia Julie Duthiers and Joshua Robert Levine of Liebler Gonzalez & Portuondo in Miami represented BNY Mellon. They did not respond to requests for comment by deadline.

Source: This Florida Supreme Court Ruling is a Setback for Mortgage Lenders in Foreclosure Cases.

For the court ruling, see Bank of New York Mellon, etc. v. Condominium Association of La Mer Estates, Inc., No. SC14-1049 (Fla. September 17, 2015).

Unwitting Tenants Being Left Holding The Bag In Home Foreclosures

Given the high rate of foreclosures in California, The San Jose Mercury News recently ran a story of how these foreclosures are affecting unwitting California tenants who find themselves being required to leave a rented home that they have dutifully paid rent on throughout the period of their occupancy. Some of the highlights from the story:

1. Nearly 9,500 California properties were sold in foreclosure auctions in August, according to ForeclosureRadar.com. Of those, 44 percent were not owner-occupied, the company said.
2. [M]any renters don't know the whole story [about the foreclosure of the home they are renting] until they're being informed by a bank's agent that they need to move in 30 days or face eviction.
3. [One real estate agent] said she has seen cases where landlords rented property to new tenants just before the home's foreclosure auction date, collecting a deposit and rent "knowing that the house would be gone in two weeks," she said. "It's unbelievable what people do, unbelievable."
4. In most cases, once a property has been foreclosed upon and the ownership changes, tenants' leases are wiped out, and they must vacate within 30 days (60 days if they've lived in the property more than one year).
5. Tenants in San Jose rent-controlled units would get 90 or 120 days, depending on how tight the rental market is.
6. Another exception is in rent-controlled units in cities with "just cause" eviction laws that do not list foreclosure as one of the causes for eviction, such as Berkeley, East Palo Alto, Hayward, Oakland and San Francisco (see Some Foreclosing Lenders Conducting Illegal Tenant Evictions In Oakland).
7. Many tenants don't know that lenders newly in possession of foreclosure properties will typically offer "cash-for-keys" payments of $1,000 or more to tenants who agree to vacate in about two weeks and leave the property clean, said Sean O'Toole, founder of ForeclosureRadar.com. The payments save lenders the time and expense of evictions, and also some cleaning costs. Tenants still have the right to recover their deposits from their former landlords.

For more, see Renters left hanging after foreclosures.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. equity skimming unwittingly delta

F'closures Also Affect Dearly Departed; Loved Ones' Final Resting Place Anything But Peaceful As Pending Sale Of Troubled Cemetary Worries Families

In Madison, Indiana, WDRB-TV Channel 41 reports:

• Grandview Memorial Gardens Cemetery gained attention for water-logged graves and will now go to the highest bidder. The auction is just the latest problem for Grandview, that has many folks wondering what will happen to all of their loved ones.



• Pictures are all Hazel Wilkerson has of her late husband Fred who died October 22nd. "It will be three months Sunday," says Wilkerson, a secretary at the Madison Airport. She worked alongside her husband, a pilot, for many years. "We'd been married 45 years when he passed away."



• He is buried next to his mother at Grandview. Hazel already has her plot next to Fred. But their final resting place is anything put peaceful. "I just wonder what's going to happen," wonders Wilkerson.



• She's wondering because next month the cemetery is going on the auctioning block. Grandview's history is bogged down in controversy. Bodies were exhumed several years ago to fix problems with water logged graves. The actual owner is still in dispute with lawsuits dating back to 2006.



• "I just don't know. That's up to a judge to decide," says Jim Holt. He thought he sold the cemetery years ago to Keith Mefford and wants nothing to do with it now as it goes up for auction. "When Mefford stopped making his payments to me, then I stopped making the payments to the bank."



• The bank then filed foreclosure against the cemetery. Holt says he knows of two interested parties.



• Hazel Wilkerson just hopes the highest bidder holds this sacred ground in high regard. "Somebody's going have to take it over that's going to take care of it cause it's not really been taken care of like it should be." "The sheriff plans to auction off the cemetery on February 23rd.

Source: Troubled Madison cemetery will go to the highest bidder.

Expiring Statute Of Limitations In Foreclosure Cases A Growing Headache For Banksters?

In Miami, Florida, The New York Times reports:

• In September, Susan Rodolfi celebrated an unusual anniversary: five years of missed mortgage payments.
  
  She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.
  
  Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.
  
  The reason, lawyers for homeowners argue, is that the cases have dragged on too long.
  
  There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.
  
  Wanda Darden, at home in Riverdale, Md. Her mortgage has bounced among three loan servicers, leading to increasing mix-ups. “I either get conflicting answers or no answer at all,” she said.
  
  However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.
  
  
  ***
  
  [T]he laws in places like Florida could prove to be a wild card. In a state where “hanging chads” helped decide the 2000 presidential election, a legal technicality could help settle the state’s foreclosure crisis.
  
  Lawyers for homeowners in Florida contend that lenders have five years to file for foreclosure after a homeowner defaults, normally after several months of missed payments, and the mortgage is “accelerated,” meaning that the bank says that the debt is due all at once. Banks say they have many more years to file for foreclosure, arguing that the five-year clock resets every time a homeowner misses a monthly payment — regardless of when the mortgage was accelerated. Some Florida judges have agreed.(1)
  
  The statute of limitations does not halt a foreclosure case that is continuing in court. But in some Florida courts, homeowners’ lawyers have argued that once a foreclosure is dismissed even for technical reasons, the lender cannot refile a new foreclosure to seize the home if the statute of limitations has passed. Still, the lender has some recourse: It can keep a lien on the house that must be paid off if the property is ever sold.
  
  The issue is now before the Florida Supreme Court.

For more, see Foreclosure to Home Free, as 5-Year Clock Expires.

Thanks to Deontos for the heads-up on this story.

(1) In an analogous case, involving the application of the statute of limitations when challenging (on unconscionability grounds) an escalation clause in a 99-year ground/land lease that became enforceable every five years, a Florida appeals court held that the statute of limitations for commencing such a challenge began at the time of the first escalation, and that the statute of limitations does not reset each time the escalation clause became effective (ie. every five years). See Garden Isles Apartments No. 3, Inc. v. Connolly, 546 So.2d 38 (Fla. 4th DCA 1989):

• The subject escalation clauses were first enforced in 1975 and 1976 respectively. Contrary to appellants' argument that a new cause of action arose each time a new five-year escalation clause became effective, we hold that the cause of action in this case accrued at the time of the first escalation and that the complaint filed in 1986 was well beyond the applicable five-year statute of limitation periods which commenced in 1975 and 1976.

If the theory applied by the Florida appeals court in the Garden Isles case has any applicability to the statute of limitations in mortgage foreclosure cases, one may reasonably argue that the cause of action for commencing a foreclosure action accrues at the time of the first default, and that a new cause of action does not arise each time a homeowner misses a monthly payment. Just a thought.

Illinois Appeals Court To Another Empty-Headed Trial Judge In Another Reversed Foreclosure: Lower Court Proceeding "Essentially Amounted To Summary Judgment By Ambush," Your "Explanation Is Inconsistent With Established Binding Precedent;" We've Covered This Issue At Least Six Times In The Last Two Years!

From a recent client alert from the law firm Maurice Wutscher:

• The Illinois Appellate Court, First District, recently reversed a trial court’s ruling that lack of standing in a mortgage foreclosure case was not an affirmative defense.(1)  The Court further remanded the case to allow the borrowers to take discovery, which the Court held was improperly denied by the trial judge. [...]
  
  A mortgagee filed a foreclosure action, alleging that the borrowers failed to make payments when due. In response, the borrowers filed an answer, which included affirmative defenses of alleged lack of standing and alleged lack of capacity to sue.
  
  At the hearing on the mortgagee’s motion to strike the borrowers’ affirmative defenses, the trial judge stated that “a claim or assertion that plaintiff cannot maintain a cause of action is not an affirmative defense under any definition of affirmative defense.” The judge further stated that “[a challenge to standing] doesn’t say this plaintiff has a cause of action, but [the defendant] can avoid the effect of that cause of action by some other affirmative matter. That’s what an affirmative defense does.” The trial judge continued, “what you’re saying is this plaintiff doesn’t have a right to sue. That’s a basis for dismissal, not an assertion of a defense.”
  
  The trial judge reasoned that lack of standing might be an “affirmative matter,” but that “it just simply is not an affirmative defense.” Accordingly, the trial judge struck the defenses from the borrowers’ answer with prejudice and did not grant leave to replead.
  
  Shortly thereafter, the mortgagee filed a motion for summary judgment which was granted, and an order of foreclosure and an order of possession were entered in favor of the mortgagee. The borrowers appealed.
  
  On appeal, the Appellate Court noted that the Illinois Supreme Court has made clear that a challenge to standing in a civil case is an affirmative defense. Greer v. Illinois Housing Development Authority, 122 Ill. 2d 462, 508 (1988).
  
  Over the past two years, the Appellate Court noted that it has held on at least six occasions that the assertion of lack of standing in a foreclosure action is an affirmative defense that not only can be raised in an answer, but must be, or else is waived. See e.g., Aurora Bank FSB v. Perry, 2015 IL App. (3d) 130673, ¶ 18.(2)
  
  Thus, the Appellate Court held that the trial judge’s ruling was inconsistent with established, binding precedent, and that the trial judge erred by striking the borrowers’ affirmative defense for lack of standing as a matter of law.
  
  Even though striking the affirmative defense was clearly erroneous, the Appellate Court noted it still had to determine whether the trial judge erred in granting summary judgment in the mortgagee’s favor. The Court noted that it is mortgagee’s burden in a mortgage foreclosure case to make out a prima facie case that it is entitled to enforce the underlying instrument. However, the foreclosure defendant has the opportunity to rebut that showing.
  
  Here, the Appellate Court held that the borrowers were denied that rebuttal opportunity, as they never had an opportunity to explore their defenses in discovery. As the Court put it, “the events leading up to the trial court’s ruling essentially amounted to summary judgment by ambush.”
  
  Although the trial judge’s decision to not let the borrowers pursue any claim for lack of standing beyond the pleading stage was an error of law, the more concerning issue for the Appellate Court was that the trial judge then prevented the borrowers from taking any discovery on their defenses, or getting a clear evidence of the mortgagee’s right to enforce the note.
  
  Specifically, mortgagee’s motion for summary judgment was supported by the affidavit of a vice president for loan documentation (“Affiant”). In her affidavit, Affiant asserted that she had reviewed various records that supported her averments. However, none of the records were attached to her affidavit.
  
  As the Court noted, Ill. S. Ct. R. 191(a) requires that affidavits submitted in support of motions for summary judgment “shall have attached thereto sworn or certified copies of all documents upon which the affiant relies[,]” and requires that Affiant identify and certify the records forming the basis of the attestations.
  
  The Appellate Court further noted that, despite the borrowers’ attempts to obtain the records relied upon by Affiant, none of the records were provided prior to the trial judge when ruling on the mortgagee’s motion for summary judgment. Moreover, after granting the mortgagee’s motion for summary judgment, the trial judge then granted the mortgagee’s motion to strike the borrowers’ outstanding discovery requests and notice of deposition of Affiant.
  
  According to the Appellate Court, the cumulative effect of the affirmative defense being improperly stricken, the denial of the borrowers’ requests for discovery, and the mortgagee’s failure to produce the required evidentiary records, resulted in the borrowers being denied the opportunity to defend.
  
  As the Appellate Court reasoned, to uphold the trial court’s action would require a conclusion that supplying a note indorsed in blank is sufficient to defeat any fathomable defense that a borrower may have to standing, and that no set of facts could entitle a borrower to any relief under those circumstance. Supplying a note in blank, however, is only prima facie evidence of ownership that could potentially be rebutted.
  
  Accordingly, the Appellate Court reversed the trial court’s judgment and held that, on remand, the borrowers were entitled to take discovery on their challenge to the mortgagee’s standing and to replead their affirmative defense if necessary.

Source: Illinois Appellate Court reverses trial court ruling on foreclosure standing.

For the court ruling, see U.S. Bank, N.A. v. Kosterman, No. 1-13-3627 (1st Dist. August 18, 2015).

---------------------------

(1) Cook County Judge Darryl Simko presiding.
(2) On this point, the appeals court stated:

• ¶ 10 The Illinois Supreme Court has made clear that a challenge to standing in a civil case is an affirmative defense. Greer v. Illinois Housing Development Authority, 122 Ill. 2d 462, 508 (1988).
  
  So the trial judge's explanation is inconsistent with established, binding precedent. Plaintiff nevertheless claims that a challenge to standing is not an affirmative defense in a foreclosure case. Within just the past two years, we have explained on at least six occasions that the assertion of lack of standing in a foreclosure action is an affirmative defense that not only can be raised in an answer, but must be, or else it is waived. See Aurora Bank, 2015 IL App (3d) 130673, ¶ 18; Beal Bank v. Barrie, 2015 IL App (1st) 133898, ¶ 39; Bank of America, N.A. v. Adeyiga, 2014 IL App (1st) 131252, ¶¶ 59-63; US Bank, National Ass'n v. Avdic, 2014 IL App (1st) 121759, ¶ 34; Rosestone Investments, LLC v. Garner, 2013 IL App (1st) 123422, ¶¶ 24, 28; Parkway Bank & Trust Co. v. Korzen, 2013 IL App (1st) 130380, ¶ 24.
  
  Accordingly, the trial court erred by striking defendants' affirmative defense for lack of standing as a matter of law.