Saturday, June 05, 2010

New Florida Law Allows HOAs To Grab Tenants' Rent From Maintenance Fee-Delinquent, Landlord-Owned Units Without Need To Go To Court

In Tallahassee, Florida, the Sarasota Herald Tribune reports:
  • Gov. Charlie Crist signed into law a measure Tuesday that will allow Florida's beleaguered condominium associations to go after up to twice the amount of delinquent dues owed them. Condo associations had previously been limited to six months' worth in most cases. When the law takes effect on July 1, associations also will be able to deny owners who owe money access to pools or other common-ground amenities. [...] The new law is another government effort to help Florida's condo associations recover from a years-long slide in revenue from dues, plummeting unit values and declining occupancy rates as foreclosures ran rampant in the wake of the real estate downturn.


  • The deflation of the market also was felt most strongly in the condo market, which has been hit by waves of defaults. Investors walked away from units bought at inflated prices and stopped paying dues. Association advocates claim that many banks have been slow to complete foreclosures to avoid having to pay back dues and maintenance costs, leading to a downward spiral.

  • "For condominiums and homeowner associations struggling with very high delinquencies, this will allow them to collect rent from tenants in delinquent units and homes without having to go to court," said Donna D. Berger, executive director of the Community Advocacy Network. "For failed condominium conversion projects, this will hopefully encourage investment in these communities."

For the story, see Florida condo associations get power in dealing with foreclosures.

Residents In 76-Unit, Foreclosure-Plagued Condo Complex Temporarily Dodge The Boot Over Unpaid Water Bill; Get 30 Days To Cough Up $4,500

In Margate, Florida, the South Florida Sun Sentinel reports:
  • Dozens of residents at the Atlantic Palms condominium complex are getting a reprieve — even though it may be for just one month — from being evicted over an unpaid city utility bill. With a 3-2 vote, Margate city commissioners Wednesday night agreed not to turn off the complex's water service for 30 more days, expecting residents to eventually pay the water bill.

  • More than 60 of the 76 units at Atlantic Palms, at 400 NW 65th Ave., are in different stages of foreclosure, and the homeowners association can't afford to pay, city officials said. If commissioners hadn't stepped in, Atlantic Palms residents would have been forced to leave their homes next week because of health concerns from lack of water. Atlantic Palms has paid about $3,000 so far and is expected to pay about $4,500 by July 2, said City Manager Frank Porcella.

For the story, see Margate condo residents get reprieve from eviction over unpaid water bill.

Condo Resident Pays Price For Neighbor's F'closure Walkaway; Leak In Empty Unit Spurs Mold Problem; Told To Take A Hike After Calling Owner, Bank, HOA

In Fort Myers, Florida, WINK News reports:
  • A new foreclosure crisis: damage left behind putting other homes at risk of foreclosure, too. Jan Swanson thought she'd live in her home the rest of her life. But a few weeks ago, she discovered something unsettling: a bad smell. When her neighbor walked away from his condo unit, somehow, water leaked out saturating everything and leaving behind evasive mold. "So this is what's right next door to me," Jan told Call for Action as she pointed out the mold growing in the home next to her.

  • That same wall where the mold is growing is shared by her unit. Jan told WINK NEWS she worries, "It will eat up this townhouse since I have the greatest connection with the townhouse behind me that flooded, mine is going to be the first one to go." Once the mold enters her home, Jan says she'll have no choice, but to walk. "It's kind of an overwhelming loss," said Jan, "With the economy I'm really not working. I haven't had a full time job since July and now I'm looking at losing my property and it's depressing."(1)

For more, see Foreclosed homes putting others at risk.

See also, WZVN-TV Channel 7: Homeowners forced to pay for neighbors' violations.

  • Swansen said she knew it wouldn't be too long before the growing mold appeared in her home too. So she called the homeowner, his mortgage company and her homeowners association. "Everyone who got back to me said, ‘This is your problem,'" she said.

(1) First time homebuyers, retirees looking to downsize, rookie real estate investors and others may want to hang on to these stories and reread them periodically if considering the purchase of a condo.

"Chocolate Factory" Apartment A Mold-Plagued, Toxic Rat Hole, Says Couple In $1M Suit; Persistent Breathing Problems, Toddler's Rashes Among Claims

In Brooklyn, New York, the New York Post reports:
  • This was no sweet deal. A couple paying nearly $3,000 a month to live in the posh Chocolate Factory development overlooking the Brooklyn Navy Yard says their so-called luxury apartment is plagued with toxic mold and vermin -- and building management refuses to do anything about it. Jonathan Mairs, a media consultant for a finance firm, and his acupuncturist wife, Momoko Uno, claim they suffered persistent trouble breathing in their 1,500-square-foot loft with Manhattan skyline views. Their daughter, Jun, 3, has had rashes and stomach problems, they say.

  • When they hired their own air-quality expert in April, tests found three different kinds of mold in the walls in the apartment that also became overrun with mice and rats, they claim. "This is supposed to be a luxury building," Uno said. "This is not luxury." Mairs, 38, and Uno, 37, said they had no choice but to file a $1 million lawsuit in Brooklyn Supreme Court.

Source: Luxe apt. a 'toxic rat hole'

City Gives Dozens Of Families Immediate Boot From Deteriorating Rental Complex In Foreclosure, Then Condems Premises For Dilapidated Conditions

In Tucson, Arizona, KVOA-TV reports:
  • Dozens of Tucson families are forced to find a new place to live after an entire apartment complex is suddenly shut down. It's the Vista Sierra Apartments on Ft. Lowell, and it's not only shut down, but the city quickly condemned it. Jimmy Hernandez is one the few residents still living there. He said, "We didn't have any heat, the pool was always filthy and dirty. The water lines were either leaking or broken. The heaters and AC never worked." And those are just part of the problems the owners said eventually led to foreclosure.


  • Despite slapping the condemned tag on the complex, the city did step up and help distribute section 8 vouchers. Olga Osterhage, the Deputy Director of the Tucson Housing and Community Development Department said, "We did our part just trying to get info out to make sure people there qualified for section 8 vouchers and that there wouldn't be a hold up on our side."

For more, see Apartment complex gets shut down.

Failed Attempt At Evading Local Rent Control Law By Booting Tenants Paying Below-Market Rates Leaves Bay-Area Landlord's Empire On Thin Ice

In San Francisco, California, the San Francisco Bay Guardian reports:
  • Nearly four years after City Attorney Dennis Herrera filed suit against Frank and Walter Lembi and their dizzying array of companies affiliated with CitiApartments for "an outrageous pattern of corporate lawlessness," the powerful and notorious San Francisco landlords have watched their empire crumble.

  • The Lembi empire consisted of more 300 apartment buildings in San Francisco at its peak. Four Lembi subsidiaries that owned 16 buildings filed for Chapter 11 bankruptcy in February. Twenty Lembi properties were taken over by Lennar spin-off LNR in late May; another 24 buildings are slated to be foreclosed in early June; 51 were deeded back to UBS bank in lieu of foreclosure early last year; and still others are now held by court-appointed receivers and managed by Laramar, an unaffiliated property-management company.

For more, see Triumph of tenacity (The Lembi empire teeters after tenants resisted a business plan based on forcing them out).

Jury Hammers Real Estate Broker In Scam Using Unwitting Straw Buyers, Stolen Identities To Fleece Lenders Of $17.5M+

From the Office of the Orange County, California District Attorney:
  • [R]eal estate broker [Kathy Chen, 49, of Westminster,] was convicted [] of conspiring with her boyfriend and his brother to commit $17.5 million in real estate fraud by purchasing 35 properties using stolen identities and intentionally defaulting on loans in order to steal the loan money. [...] Chen’s boyfriend, Richard Salgado Gonzalez, 60, and his brother, Daniel Gonzalez, 57, face the same charges and sentence as Chen. Fugitives Richard and Daniel Gonzalez have outstanding arrest warrants. Both may currently be living in Puerto Vallarta, Mexico.


  • She conspired with her then-boyfriend, Richard Gonzalez, and his brother, Daniel Gonzalez, to commit over $17.5 million in fraud by using the identities of unsuspecting or unqualified victims to obtain mortgage loans for the purchase of multiple properties. Chen and her co-defendants recruited these victims in order to hide their own identities. These victims often spoke little or no English, were unemployed or had limited incomes, and had no intention of ever residing in or repaying any loan on properties in their names.


  • [T]he defendants obtained 47 fraudulent loans from 13 lenders on 35 properties in excess of $17.5 million through the use of the fraudulently obtained identities. [...] The defendants used the fraudulently obtained personal and credit information of some of the fake buyers, including a 92-year-old woman, on several occasions without their knowledge or consent.


  • They fabricated loan applications to reflect higher incomes for the fake buyers, forged the fake buyers’ names and signatures on various deeds and loan documents, and forged seals and notary stamps on a variety of notarized documents and deeds.

For the Orange County DA press release, see Broker Convivted Of Conspiracy With Boyfriend And His Brother To Commit $17.5 Million In Real Estate Fraud By Purchasing Homes Using Stolen Identities And Intentionally Defaulting On Loans (Co-defendant boyfriend and brother have warrants for their arrest).

Friday, June 04, 2010

Two Attorneys Placed On Inactive Status As Cal. State Bar Alleges Lawyer-Renting Racket, Upfront Fee Loan Modification Ripoffs In Seperate Actions

In San Francisco, California, Metropolitan News Enterprise reports:
  • The State Bar Court has ordered attorneys Eric D. Johnson of Los Angeles and Mark A. Shoemaker of Long Beach placed on involuntary inactive enrollment over accusations of loan modification misconduct, the State Bar said yesterday. State Bar Court Judge Richard Honn, in separate actions, concluded that the conduct of Johnson and Shoemaker posed a “substantial threat of harm” to their clients or the public, and ordered the enrollments under Business and Professions Code Sec. 6007.


  • According to the State Bar, Johnson associated with several non-attorney legal organizations, lending his name and status as an attorney to a firm offering bankruptcy filing and assistance, a business handling forensic audits and loan modifications, and two other loan modification companies.


  • Shoemaker, whose case was investigated and prosecuted with the help of the California Department of Real Estate, has owned and operated a loan modification business called Advocate for Fair Lending since 2008. Shoemaker “used Advocate and his status as an attorney to convince cash-strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure,” Honn wrote. Shoemaker, however, “often did little to nothing to help these clients,” Honn said. “In fact, many of these homeowners were worse off after retaining [Shoemaker’s] services.”(2)


  • In addition to the involuntary inactive enrollments of Johnson and Shoemaker, the State Bar said its Office of Chief Trial Counsel has obtained the resignations of 13 attorneys involved in loan modification misconduct since creation of the Loan Modification Task Force in April 2009. Five loan modification trials are pending, the State Bar said, and another 2,000 active investigations related to loan modification are being conducted.

For the story, see State Bar Court Places Local Attorneys on Inactive Status.

For The State Bar of California press release, see Two more loan foreclosure lawyers placed on involuntary inactive enrollment.

(1) Reportedly, Honn cited cases in which homeowners were promised that their homes would not be foreclosed but the homeowners lost them anyway after having made significant payments to the non-attorney companies. According to the story, Johnson “lacked control and failed to supervise” any of the organizations with which he was associated, Honn wrote. “This lack of control and failure to supervise consequently led to, among other things, the unauthorized practice of law, misrepresentations and client harm.”

(2) Shoemaker contended that he was merely the president of Advocate and did not represent any Advocate clients in a legal capacity, but Honn rejected the argument, the story states. “Advocate’s clients were also [Shoemaker’s] clients,” he wrote. “An attorney cannot use a power of attorney form to absolve themselves of the ethical mandates they have sworn to uphold.”

Arizona AG Files Suit Against Firm For Allegedly Deceptive Loan Modification Services; Says Victims May Number In The Thousands

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard has filed a lawsuit against Discount Mortgage Relief and Mortgage Relief, LLC, (DMR/MR), based in Scottsdale, and its owners for engaging in allegedly deceptive loan modification services. The Attorney General’s Office also secured a Temporary Restraining Order that prevents DMR/MR from charging or receiving money for loan modification services and from advertising its services. [...] According to court documents, the number of victims may number in the thousands.


  • The lawsuit alleges that at least since July 2009, DMR/MR deceived consumers into paying thousands of dollars for mortgage loan modification services by misrepresenting the company’s ability to help them obtain mortgage relief and save their homes, thereby violating the Arizona Consumer Fraud Act.(1) Consumers allegedly paid DMR/MR between approximately $1,350 and $5,000 for loan modification services and were guaranteed results by the company.

For the Arizona AG press release, see Terry Goddard Files Lawsuit against Loan Modification Company,Obtains Temporary Restraining Order to Protect Homeowners.

See also, Courthouse News Service: Arizona Alleges Brazen Foreclosure Scam.

For the lawsuit, see State of Arizona v. INQB8, LLC, et al.

(1) The allegations include:

  • Misleading consumers into believing they were pre-qualified and guaranteed to receive a loan modification through the company’s services.
  • Falsely promising favorable results and telling consumers that any foreclosure proceedings against their homes would stop once they hired the company.
  • Misrepresenting that the company used attorneys to negotiate consumers’ loan modifications.
  • Falsely stating that they were associated with or acting on behalf of the government and associated with or acting on behalf of the consumer’s lender.
  • Falsely stating that the company was “FBI certified”.
  • Misrepresenting the nature of the company’s loan modification services by referring to them as forensic loan documentation audits or analyses.
  • Falsely promising consumers that they would receive a refund of fees if the company failed to get them a loan modification and failing to return fees to some consumers who decided not to hire the company and never signed a contract.

NY Man Gets 7 Yrs For Swiping $6M In Escrow Cash Due To Existing Lien Holders In R/E Deals; Ran F'closure Bailout Racket Targeting Strapped Homeowners

From the Office of the U.S. Attorney (New York City):
  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that IRSHAD RAMZAN, a/k/a "Tony," a former mortgage broker who supervised the operations of Queens-based Platinum Funding, was sentenced to seven years in prison for his roles in a scheme to steal over $6 million in the proceeds of home mortgage loans issued by various banks for the purchase of residential properties, which funds were supposed to be used to pay off existing mortgages on the properties, and in another scheme to obtain home mortgage loans from banks under false pretenses by arranging straw purchases of those homes,(1) thereby generating tens of thousands of dollars in unwarranted fees for RAMZAN and Platinum Funding.

For the U.S. Attorney press release, see Mortgage Broker Sentenced In Manhattan Federal Court To Seven Years In Jail For Stealing Over $6M In Mortgage Loan Proceeds.

(1) In this scam, Ramzan tricked homeowners who were having problems making payments on existing home loans (in what presumably were sale leaseback, equity stripping deals), often to the point of facing foreclosure, to sell their houses to so-called "straw purchasers." In doing so, Ramzan misrepresented the nature of these "bailout" transactions to the lenders that financed these transactions and, thereby, defrauded these lenders, the press release states.

Feds Tack On Five Individuals, Firms To List Of Targets In Ongoing Civil Suit Against Alleged Foreclosure Rescue Racket Peddling Forensic Audits

The Federal Trade Commission recently announced:
  • The Federal Trade Commission has named several new defendants and added new charges concerning so-called “forensic audits” to its lawsuit against an operation that allegedly bilked homeowners who were trying to lower their mortgage payments. The action is part of an ongoing crackdown on scams that target consumers who are behind in their mortgage payments or at risk of foreclosure.(1)


  • According to the FTC’s amended complaint, the new defendants, along with Smith and Gromann, offered “forensic audits” – checking a homeowner’s loan documents for law violations that would give them leverage in negotiating with lenders to obtain a loan modification or a “short sale” (sale of a house for an amount less than the mortgage balance). Their ads stated, “We have found that between 80-90% of all loans that we have audited have some form of rights violations.” They collected $995 in advance for each audit even though an audit was unlikely to assist in negotiations with lenders, the complaint alleges.

For the FTC press release, see FTC Broadens Case Against Mortgage Relief Scheme; Charges That 'Forensic Audits' Were Unlikely to Help Homeowners.

See Federal Trade Commission v. The Debt Advocacy Center, LLC, et al. for links to available court documents in this case.

(1) According to their press release, the FTC has added as defendants Bradford R. Geisen; Maurice Jackson; Patrick Butler; Credit Services Alliance Inc.; and CreditLawGroup, a law firm run by two of the original defendants, John W. Smith and Glenn E. Gromann. The original defendants also included The Debt Advocacy Center LLC; Smith, Gromann & Davidson P.A.; and Kevin McCormick.

State's Attorney Targets Foreclosure Rescue Rackets With Dedicated Unit In Prince George's County

In Upper Marlboro, Maryland, WUSA-TV Channel 9 reports:
  • Foreclosures are robbing people of their American dream. Mortgage fraud is such a big player in these losses that Maryland created a criminal unit, housed in Prince George's County, just to track down these housing predators.


  • The stories behind the losses lead the county to create the Mortgage Foreclosure Fraud Division. They go after the people who peddle too-good-to-be-true schemes. "There are promises about getting people out from mortgage debt entirely, instantly. You know, give us the deed, we'll give it back," says [Prince George's County State's Attorney Glenn] Ivey.


  • "Whenever you have a community that is laced with foreclosures, that means it's a breeding ground for foreclosure scammers," says Assistant State's Attorney April Richardson. Richardson is leading the charge against the companies that orchestra mortgage fraud schemes. She says scammers entice homeowners by telling them they can clean up their credit and keep them in their homes. "When you truly look at the documents, you'll see that the scammer would just take title and then turn around and refinance the house and take all of the equity out," says Richardson.


  • Prince George's County leaders and other officials will try to "Knock Out Mortgage Fraud" on June 12th. They plan to go door to door to educate people about the signs of fraud, in areas that are open targets.

For the story, see On The Trail Of Mortgage Fraud.

Foreclosure Scam Prevention Day Coming Up In Chattanooga

In Chattanooga, Tennessee, WDEF-TV Channel 12 reports:
  • Each day, an average of six Chattanooga homeowners face foreclosure. As the number of homeowners who need help keeping their homes increases, so does the number of foreclosure prevention scams. To arm area homeowners with information to prevent them from becoming victims of foreclosure scams, Chattanooga Neighborhood Enterprise (CNE) will kick off a community outreach initiative, Foreclosure Scam Prevention Day, on Tuesday, June 8.

For more, see CNE to Commerate Foreclosure Scam Prevention Day.

Thursday, June 03, 2010

Operator Of Loan Modification Racket Cops Plea; Admits To Clipping 300+ Homeowners Seeking Foreclosure Help Out Of Over $900K, Say San Diego Feds

From the Office of the U.S. Attorney (San Diego, California):
  • Glenn Steven Rosofsky pleaded guilty [] to a superseding information charging him with one count of conspiracy to commit wire fraud and money laundering, one count of money laundering, and one count of filing a false tax return, announced Karen P. Hewitt, U.S. Attorney for the Southern District of California. [...] These criminal charges stemmed from Rosofsky's operation of a fraudulent telemarketing operation in San Marcos, Calif.

  • In his guilty plea Rosofsky admitted that in approximately April 2009, he and Michael Trap (who previously pleaded guilty) began operating a loan modification business using the names "Nations Housing Modification Center" and "Federal Housing Modification Department" (NHMC), in an effort to fraudulently sell loan modification services to homeowners who were delinquent on their monthly mortgage payments. Rosofsky admitted that he, Trap and others used false and fraudulent statements and representations to induce customers to purchase loan modification services from NHMC.(1)


  • The staff of telemarketers at NHMC's offices in San Marcos used a script provided by Rosofsky and others to make similar false and misleading statements to potential customers. Relying on such misrepresentations, over 300 homeowners paid between $2,500 and $3,000 to NHMC between April and July 2009, resulting in over $900,000 in customer funds to be transferred to NHMC's bank accounts in the Southern District of California.

For the U.S. Attorney press release, see Owner of Fraudulent Mortgage Loan Modification Scheme Pleads Guilty to Conspiracy, Money Laundering and Tax Charges.

(1) Among the misrepresentations made to customers, according to the press release, were claims that NHMC had "attorneys" and "forensic accountants" on staff to deal with the loss mitigation departments of banks on behalf of NHMC's customers, that NHMC had achieved an "extremely high success rate for homeowners that met the Nations Home Affordable Modification Program guidelines," and that NHMC was located on "Capitol Hill" in Washington, D.C. In fact, as Rosofsky admitted, NHMC did not have attorneys or forensic accountants on staff, it did not have a high success rate of modifying loans, it had no connection with the U.S. Treasury Department's "Making Home Affordable" program, and its only presence in Washington, D.C., was a rented post office box. These false claims were made in solicitation letters that were mailed throughout the country to individuals behind on their mortgage payments and encouraged struggling homeowners to call a toll-free number to purchase NHMC's loan modification services.

TX Nat'l Guard To Help Officer, Wife In Effort To Reclaim Title To F'closed Free & Clear $300K Home Sold Over $800 HOA Debt While Away On Active Duty

In Frisco, Texas, WFAA-TV published a follow-up story on its report on servicemember Capt. Michael Clauer and his wife, May, who recently lost their free and clear home in a foreclosure sale over unpaid fees of $800 owed to their homeowners' association while he was away on active duty in Iraq.
  • When the warning letters sent via certified mail by the HOA came back unclaimed, it foreclosed on the Clauers' home and sold it at auction.(1) After that, May Clauer failed to sign for the certified letters saying she had six months to get the home back, under the law. The $300,000 property — which the Clauers owned free and clear — sold for $3,500 in back dues and real estate fees. "Selling a house for less than two percent — a little over one percent of what its value is — it seems harsh," Capt. Clauer said.

  • But the attention the Clauers are getting is not just from the public on the Internet. Lawmakers — both state and federal — have offered help, and so has the Texas National Guard. It is now providing legal advice in the Clauers' lawsuit to keep their home.(2)

For the story, see National Guard vows to 'not leave behind' officer who lost home to HOA.

See also, Soldier fighting to keep house (While the former Dubuquer was on active duty in Iraq, the homeowners' association foreclosed on his Texas home because of $800 in late dues).

In an earlier post on this story, see Active Duty Texan Returns Home To Find $300,000, Free & Clear Residence Sold Out From Under Him By HOA Over $800 Unpaid Fee.

(1) A case can be made here that, when the certified mailings were returned undelivered, an obligation was triggered upon the homeowners' association to take further action to try to provide effective notice to the homeowners before selling their home.

In Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006), a case involving the loss of a home in a government tax sale, the U.S. Supreme Court held that when mailed notice of a tax sale is returned undelivered, constitutional due process required that the foreclosing party in that case take additional reasonable steps to attempt to provide notice to the owner before selling the property. Public Citizen Litigation Group successfully represented the homeowner in this case.

For the Public Citizen press release in this case, see U.S. Supreme Court Ruling Is Major Victory for Due Process Rights; State Did Nothing to Notify Owner of Tax Sale After Mail Was Returned Undelivered (Public Citizen Represented Man Whose House Was Seized).

Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers.

(2) The Clauers have set up a fund to help them pay for defending their property. Contributions can be sent to:

Clauer Legal Defense Fund
c/o Plains Capital Bank
1629 Hebron Parkway
West Carrollton, TX 75010

Resistance Against Sloppy Lenders, Foreclosure Mills Mounts As More Homeowners Retain Attorney Help To Challenge Legal Actions & Live "Rent Free"

Buried in a recent story in The New York Times is this excerpt on the effort of one Central Florida attorney in connection with providing foreclosure defense representation to homeowners facing the loss of their homes:
  • [Attorney Mark P. Stopa] sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender. Even if you haveno defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

  • About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

  • Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

Source: Owners Stop Paying Mortgages, and Stop Fretting.

Wednesday, June 02, 2010

Mess Caused By Sloppy Lenders, Foreclosure Mills Deepens In Florida As Ambiguity In Recent State High Court Ruling Adds Confusion To Legal Process

In Central Florida, the Sarasota Herald Tribune reports:
  • An attempt to fix the sloppy legal work plaguing thousands of foreclosure cases in Florida has been ineffective, and has now caused a legal mess of its own. The Florida Supreme Court got tough on attorneys for banks and lenders in February, responding to stories of homeowners losing their property based on shoddy or incomplete paperwork. The incomplete filings also wasted judicial resources and clogged up the courts.

  • To combat that, a new rule enacted by the high court requires the attorney or bank filing a foreclosure to verify -- under penalty of perjury -- that the allegations and paperwork are accurate when a residential property is at stake. But attorneys have not followed the rule. Some contend they do not have to, arguing that the Supreme Court said the rule was not in effect yet.


  • A court-sanctioned review of hundreds of residential foreclosure filings in Sarasota and Manatee counties -- unofficially dubbed "Stop the Slop" -- found that nearly all the lawsuits lacked basic documentation. Of the 52 cases in the first round of review in Sarasota, all lacked the new verification requirement or other proof the bank is entitled to take the property, an attorney who reviewed the cases says. Backed by local Chief Judge Lee Haworth, who served on the state task force that recommended the new rule, judges in Manatee and Sarasota counties used the new rule to throw out dozens of foreclosure complaints in the past month.

  • But Miami attorney [Gerald] Richman, who represents banks and lenders, contacted Haworth last week and told him he and the other judges were jumping the gun. The confusion results from the wording of the Supreme Court's ruling. [...] The confusion sent Haworth backpedaling last week, after Richman said his client would appeal the tossing of the cases. Haworth temporarily suspended that part of the "Stop the Slop" program Friday, saying he was not alone in having questions.


  • Foreclosure defense attorneys had already pointed to Haworth's "Stop the Slop" program as an example that should be followed across the state. Haworth said he will continue policing foreclosure documents aside from the Supreme Court verification requirements.

For the story, see Legal mess over foreclosures deepening.

Use Of "Homemade Mortgage Modifications" Reduces Some Borrowers' House Payments To $0; "Free Rent" Approach To Loan Obligations May Be On Upswing

In St. Petersburg, Florida, The New York Times reports:
  • A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

  • This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.


  • While there are no firm figures on how many households are following the [] path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise. There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

  • More than 650,000 households had not paid in 18 months, LPS [Applied Analytics] calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

  • In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.


  • [F]or borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future. “I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’”

  • Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up. Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond. “I need another year,” he said, “and I’m going to be pretty comfortable.”

For more, see Owners Stop Paying Mortgages, and Stop Fretting.

Improper Mortgage Assignment By Now-Defunct Originating Lender Could Lead To Free Home For Delinquent Borrower, Says Foreclosure Defense Attorney

In Fayetteville, Arkansas, The City Wire reports:
  • The Legal Aid [of Arkansas] folks held [a] seminar in April in hopes of training attorneys interested in joining the effort to defend against foreclosures. First and foremost, seminar attendees learned that the worst mistake someone facing foreclosure can make is to take no action.


  • April Carrie Charney, senior staff attorney at Jacksonville, Fla., Area Legal Aid and a Legal Aid of Arkansas alum, said people going through the foreclosure process do have defenses. She signed on as a seminar presenter for the purpose of passing on some techniques that have been successful in Florida to Arkansas attorneys. “I'm going to fill up their quivers with more arrows than they'll ever need to stop or prevent foreclosures,” she promised prior to the seminar.


  • [C]harney said[] a good number of mortgages simply aren’t transferred correctly. Let’s say, for example, Joe Borrower takes out a mortgage through Fred’s Bank and Trust. Mortgages, quite often, are bundled up and put into trusts to provide a basis for investment in the mortgage-backed securities market. Fred’s Bank and Trust goes out of business and Joe Borrower’s loan goes into default -—if the mortgage was not transferred correctly into the aforementioned trust, who has standing to bring a foreclosure action?

  • With Fred’s Bank out of business, can anyone legitimately bring a foreclosure action? In some cases, might the borrower wind up with a house free and clear of any mortgage obligation?


  • Whether we’ll see lawyers in Arkansas jump up and start aggressively defending against foreclosures is anyone’s guess. It also remains to be seen how the courts will react to some of the tactics suggested by Charney. Still, we do know there are a lot of foreclosures out there and it appears Arkansas attorneys are starting to take a hard look at how to fight them in court — and make a few bucks in the process.

For the story, see Foreclosure rights.

Tuesday, June 01, 2010

Michigan Man Faces Larceny Charges In Alleged Ripoff Disguised As Loan Modification Help

In Washtenaw County, Michigan, reports:
  • He offered to help struggling homeowners save their Saline homes from foreclosure, but authorities say all Bryan Crevier delivered were empty promises and widespread fraud. Crevier, 48, is charged with multiple counts of larceny for allegedly swindling nearly $10,000 from three Saline women within a few months in 2008.


  • Saline police began investigating Crevier in the spring of 2008 when three city residents reported he took money from each of them up front for loan refinancing services like closing costs, appraisals and fees. The women, ages 47, 58, and 60, were all friends dealing with financial hardship and were in danger of losing their homes.

  • Though he presented himself as a mortgage modification consultant and had each resident fill out official applications, Crevier never filed the women’s paperwork with lending institutions, police reports said. By the time they suspected him of fraud, Crevier had stopped returning their phone calls and e-mails. When officers visited his Troy home that fall, it was vacant and appeared abandoned, police said. [...] Crevier is also charged with one count of larceny by false pretenses of more than $20,000 in Macomb County.

For more, see Grosse Pointe man accused of swindling Saline residents out of money for foreclosure help.

Treasure Coast Duo Face Add'l Charges In Alleged Home Hijacking Racket; Took Control Of Vacant Homes In Foreclosure, Rented Them To Unwitting Tenants

In Port St. Lucie, Florida, TC Palm reports:
  • Two men arrested earlier this year after investigators linked them to a scheme in which a home was rented to a family without the homeowners’ knowledge now each face more than a dozen additional charges, according to recently released records and a detective.

  • Robbie Jay Hughes, 36, and Issiac Rivers, 46, were arrested in early February after police accused them of renting a home in foreclosure to a family in September 2009. Following media coverage of the arrests, police received complaints of similar incidents involving the men, a warrant application states. “They would drive throughout the city, find foreclosures, or, since Robbie Hughes was a Realtor he had access to the computer and locating foreclosures due to his license,” Port St. Lucie Police Detective Kim Bailey said.

  • In general, Bailey said if the homes needed maintenance, such as pool cleaning or lawn care, arrangements were made for that to be done. The men would break into the homes and change the locks, affidavits stated, and they mainly accepted cash or money orders.

For the story, see Port St. Lucie police add additional charges to suspects in home foreclosure fraud case.

Philly Court Provides Online Forms For Victimized Homeowners Seeking To Undo Effect Of Forged Documents In Home Title Ripoffs

In Philadelphia, Pennsylvania, the use of forged documents to rip off people's houses is apparently serious enough that the local court system has made available online a "fraudulent conveyance, quiet title" packet, a 22-page set of forms and instructions enabling area homeowners to initiate quiet title lawsuits without an attorney to properly restore the title to their homes in their names. If the homeowner is broke and can't afford the filing fees and other costs associated with filing a lawsuit, there's a form included in the packet that can be used to ask a judge to allow the matter to go forward without paying these fees and costs.

Go here for the fraudulent conveyance, quiet title packet.

Monday, May 31, 2010

Ocwen Throws In The Towel; Gives Back Title To Home To Owner After Foreclosing Despite Debt Being Fully Paid Off

In Greenfield, Indiana, WRTV-TV Channel 3 reports:
  • A woman who said she had no idea that her house had been put up for foreclosure even though the mortgage was paid off is relieved that a loan servicing company has backed off after years of struggle.


  • The Army veteran said she didn't know that Florida-based Ocwen Financial Corporation had sought foreclosure. The company was given the deed to the home and asked a court to remove Elliott and her family in June 2007. In November 2006, a court had sided with Ocwen, and the home was sold in a sheriff's sale in February 2007.


  • Elliott filed a complaint with the Indiana Attorney General's Office and the Comptroller of the Currency, which regulates national banks. "She stayed in the home and defended it," said Tom Williams, Elliott's lawyer.

  • Elliott's case advanced to the Indiana Court of Appeals, where the court gave a stinging response to the companies for their actions and questioned their motivation. “The Kafkaesque character of this litigation is difficult to deny,” the judges said in their opinion. The foreclosure remained on hold, and the case was sent back for a trial.(1) [...] Ocwen Financial Corporation dropped its lawsuit a couple of weeks ago.

For the story, see Woman Celebrates End Of Foreclosure Fiasco (Loan Servicer Sought Foreclosure Despite Proof Mortgage Was Paid).

(1) For the ruling of the Indiana Court of Appeals, see Elliott v. JPMorgan Chase Bank, 920 N.E.2d 793; 2010 Ind. App. LEXIS 99 (Ind. Ct of App., February 3, 2010).

BofA Continues Out-Of-Control Seizing Of "Mortgage-Less" Homes; Refuses To Correct Screw-Up Until Media Intervenes

In Tuolumne, California, KCRA-TV Channel 3 reports:
  • Nancy Willmes paid cash for her Tuolumne home in 2001. So she was quite surprised when Bank of America send her a notice of default on the property in February. "I honestly felt like Bank of America was trying to steal my property," Willmes said. She contacted Bank of America to try to find out why the bank believed it could foreclose on property she had purchased outright.

  • Willmes has chain-of-ownership records, which show Bank of America had sold the property to Fannie Mae years earlier. Fannie Mae foreclosed on the previous owner, and Willmes purchased the property with cash from Fannie Mae. But Willmes said Bank of America did not care about the documentation. The bank proceeded with the foreclosure, placing ads in the local paper and nailing a foreclosure notice to her door.

  • "I called the title company, the title company called B of A, and they refused to rescind it," Willmes said. Fearful she would lose her home to the bank, Willmes called KCRA Call 3, and a Call 3 volunteer contacted Bank of America. Willmes said that's when Bank of America began returning her phone calls. The bank rescinded the notice of trustee sale, stopping the foreclosure. In a statement to KCRA 3, Bank of America said the problem was a system error. It said it updated its records and canceled the sale.(1)

For more, see Bank Tries To Foreclose On Owned Home (Tuolumne Woman Owns Home Outright).

(1) For other posts on Bank of America's seemingly relentless pursuit of homes that they have no legal claim to, see:

Lenders To Find Themselves In Crosshairs Over Premature, Illegal Evictions Of Foreclosed Homeowners

In Chicago, Illinois, Chicago Public Radio reports:
  • [Sam] Frazier's house had been sold at a foreclosure auction just the day before he was locked out of it. But in Illinois, that sale doesn't automatically transfer ownership of a house. A judge still has to issue an order that confirms the sale was done properly, and also to say how much longer the homeowner may continue to live there -- usually 30 days.


  • Kelli Dudley has been practicing consumer and foreclosure law for nearly a decade. She and two other attorneys have taken on Frazier's case, and they say they're seeing a number of similar stories. They're trying to identify common threads in these cases to mount a class-action lawsuit. Right now, their big target is U.S. Bank, based in Minneapolis. Dudley says it probably wasn't anyone from US Bank who boarded up Frazier's home, but she asserts the bank is ultimately responsible when any of its agents, or agents of its agents, do something illegal.


  • Dudley says there's another thing about these cases they're seeing. "Even if there is an order of possession, we've still got the hurdle to get over that only the sheriff or the authorized person can do the eviction." Frazier says the man who locked him out of his home wouldn't give any ID, but Frazier says he certainly wasn't from the Cook County Sheriff's department.

For more, see Homeowners Struggle to Challenge Premature Evictions.

Sunday, May 30, 2010

Active Duty Texan Returns Home To Find $300,000, Free & Clear Residence Sold Out From Under Him By HOA Over $800 Unpaid Fee

In Frisco, Texas, Mother Jones reports:
  • Michael Clauer is a captain in the Army Reserve who commanded over 100 soldiers in Iraq. But while he was fighting for his country, a different kind of battle was brewing on the home front. Last September, Michael returned to Frisco, Texas, to find that his homeowners' association had foreclosed on his $300,000 house—and sold it for $3,500. This story illustrates the type of legal quagmire that can get out of hand while soldiers are serving abroad and their families are dealing with the stress of their deployment. And fixing the mess isn't easy.


  • In Texas, homeowners' associations can foreclose on homes without a court order, no matter the size of the debt. In May 2008, the HOA sold the Clauers' home for a pittance—$3,500—although its appraisal value was $300,000, according to court documents. The buyer then resold the house to a third person. [...] In August 2009, the new owner sent the couple an eviction notice, according to court records filed in the case.


  • There are a bevy of laws that are supposed to protect servicemembers from losing their homes or jobs while they're on active duty, including the Servicemembers Civil Relief Act (SCRA). The homeowners' association's lawyer filed an affidavit wrongly claiming that neither of the Clauers was on active duty, says Barbara Hale, the couple's lawyer. Hale is seeking to have the court reverse the foreclosure and declare it "null and void," she says.(1)

  • In the meantime, the Clauers have obtained an agreement allowing the family to stay in the home, Hale says. She's "confident that the courts will sort this out and do the right thing," but notes that the drawn-out legal process must be stressful for the Clauers. [...] "It's ridiculous how much this is costing us," he says. "I'll be taking out a mortgage on my house that was free and clear just to try to get my house back."

For more, see Soldier in Iraq Loses Home Over $800 Debt (Capt. Michael Clauer's homeowners' association foreclosed on his family's $300,000 house and sold it for $3,500).

See also, WFAA-TV: Back from Iraq, Frisco soldier finds home sold by HOA.

(1) One legal issue that this case could turn on is whether the false affidavit reportedly filed by the foreclosure attorney claiming that neither of the Clauers was on active duty is absolutely void (ie. void ab initio), or whether it is merely voidable.

If found to be absolutely void, an argument can be made that the foreclosure sale, which was based on the void afidavit, is also absolutely void, meaning that the foreclosure sale and the subsequent sale of the property to a third party could conceivably be wiped out.

If the false affidavit is found to be merely voidable, however, the foreclosure sale and subsequent sale to the 3rd party purchaser will also be considered voidable (as opposed to absolutely void). In that event, successfully wiping out these interests could turn on whether the foreclosure purchaser and subsequent purchaser are entitled to the protection of the recording statutes as bona fide purchasers. Since it appears that neither Captain Clauer nor his wife relinquished possession of the home throughout the process, and Mrs. Clauer remained in continuous physical possession thereof, this possession could arguably create, under Texas law, a legal duty on the purchasers to ascertain the rights of the third-party possessor. If a court finds that such an inquiry would have lead to the discovery of the fact that Captain Clauer was on active military duty during the relevant period, the purchasers could be found to be on constructive notice that the foreclosure sale may have been conducted in violation of the Servicemembers Civil Relief Act, which generally prohibits a foreclosure sale of a servicemember's home while on active duty. See Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001):

  • One purchasing land may be charged with constructive notice of an occupant's claims. This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (Tex. 1904); American Surety Co., 82 S.W.2d at 183. When this duty arises, the purchaser is charged with notice of all the occupant's claims the purchaser might have reasonably discovered on proper inquiry. Dixon v. Cargill, 104 S.W.2d 101, 102 (Tex. Civ. App.--Eastland 1937, writ ref'd); see also Flack, 226 S.W.2d at 632. The duty arises, however, only if the possession is visible, open, exclusive, and unequivocal. See Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (Tex. 1936).

See footnote 2 in this post for more on the effect of possession by one other than the seller on imputing constructive notice on a purchaser of real estate under Texas law. For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Among other legal issues that could impact on the Clauers' ability to get back their home are:

  1. Was there a violation of the Federal Servicemembers Civil Relief Act in carrying out the foreclosure sale and, if so, does said violation make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable?
  2. Was the foreclosure sale price so low (home with equity of $300K sold for $3,500) so as to "shock the conscience," and, if so, does this fact make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable? (In this regard, there is a general rule in the foreclosure law of some states that says that where the price realized at a foreclosure sale is so inadequate as to shock the conscience, it may itself raise a presumption of fraud, trickery, unfairness, exploitation, overreaching, or culpable mismanagement, and therefore be sufficient ground for setting the sale aside. See, for example, Berry v. Deutsche Bank National Trust Company, No. 2080840 (Ala. Civ. App., May 14, 2010)).
  3. In this story, there is only a brief mention that a certified letter was mailed. No mention on whether the homeowners actually received it and, if not, what other steps the HOA took to notify them. The issue here would be whether the notice of the foreclosure action given to the homeowners was "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006) (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950) "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].")

    If the notice of sale is found by a court to be absolutely void, the foreclosure sale likewise would be found void. (Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented, in the U.S. Supreme Court, a homeowner in connection with the lousy method used to give notice of a pending action that led to the loss of his home in a tax sale.)

Retired Lawyer Summoned To Undo Bad Deed That Victimized Elderly Homeowner; Unwinds Home Title Ripoff, Forces Bank To Restore Cash From Drained Acct.

Buried at the end of a recent New York Law Journal story on the push to advance attorney pro bono efforts to represent the poor in civil cases is this excerpt on one retired lawyer who became involved in the program:
  • Roger Hawke, 74, began volunteering for Legal Aid in Brooklyn the day after he retired as a partner for Sidley Austin, for which he handled litigation worth billions of dollars. "I just couldn't see myself getting up every day and saying, 'what am I going to do today?'" he said.

  • Two and sometimes three days a week, he advocates for the elderly in cases where $10,000 can determine a major change in the quality of a person's life. In one case, someone forged an elderly client's power of attorney, transferred ownership of his house and cleaned out his bank account. Hawke brought successful actions to quiet title and force the bank to restore the funds.

Source: N.Y. Chief Judge Boosts Efforts to Tap Retired Lawyers for Pro Bono (Judge Jonathan Lippman said that the graying of the bar presents a 'window of opportunity' for encouraging pro bono).

NYS Chief Judge Continues Push For "Attorney Emeritus" Program To Bring Free Legal Help To Poor New Yorkers In Civil Cases

In New York City, the New York Law Journal reports:
  • The New York court system has enlisted more than 120 retired lawyers since January to offer free legal advice and representation to poor New Yorkers in foreclosure, debt collection, housing, family and other civil cases -- the first of what could be "thousands" of attorney volunteers, Chief Judge Jonathan Lippman said last week.

  • Lippman announced the appointment of an advisory council of 30 attorneys to develop a blueprint for his "attorney emeritus" program, which aims to achieve a "quantum jump" in pro bono activities by tapping a growing number of baby-boomer attorneys. The attorney emeritus program is intended as "a permanent piece of the puzzle" of providing adequate legal representation for the poor. It is designed to complement efforts to develop more reliable financial support from Albany for legal assistance organizations.

  • Participants -- retired lawyers in good standing who are at least 55 years old and have practiced law for at least 10 years -- pledge a minimum of 30 hours of unpaid assistance to low- and moderate-income clients each year. They are not subject to the state's $350 attorney registration fee or mandatory CLE requirements. They also receive free training and malpractice insurance coverage from the agencies or under the state Public Officers Law. Most important, Lippman said, they will get "a gold star on their chests" for taking on a role that has "status and meaning."


  • So far, 126 retired attorneys have signed up and are being connected to 53 participating legal services and pro bono activities around the state. But Lippman said that "it would not be overly optimistic" to project a corps of volunteers "in the thousands." [...] Lippman said that the graying of the bar presents a "window of opportunity" for encouraging pro bono, something he said that the courts previously have attempted only "on the margins." Many retirees "want to do something meaningful," he said, "but they don't know how to do it."

For the story, see N.Y. Chief Judge Boosts Efforts to Tap Retired Lawyers for Pro Bono (Judge Jonathan Lippman said that the graying of the bar presents a 'window of opportunity' for encouraging pro bono).

Real Estate Conveyances From Clients To Their Attorneys Are "Presumptively Fraudulent" Unless Lawyer Can Prove Otherwise

An old court ruling of the Missouri Supreme Court may come in handy for those who have been ripped off of their real estate by their attorneys and are seeking to undo the bad acts.

In this case, the client, Joseph, had suffered a stroke. Seven days before his death, Joseph executed a deed, presented by the attorney, conveying 275 acres of farmland, plus a 7/12ths interest in a 11.52 acre tract to the attorney and his wife, a niece of the soon-to-expire Joseph. The attorney had informed Joseph's sister, who was later appointed administratrix of her brother's estate, that he was doing this to avoid estate taxes. The notary who acknowledged the deed testified that there was no discussion concerning the contents of the papers at the time Joseph signed them.

The court held that the conveyance of the real estate from Joseph to the attorney was presumptively fraudulent, that the burden was on the attorney to prove the conveyance was fair and equitable, and that the attorney had not met this standard. The court rejected the attorney's argument that Joseph had not, individually, been a client and that he had only represented him in Joseph's capacity as co-guardian of a brother.(1)(2)

For the ruling, see Flanagan v. De Lapp, No. 59053, 533 S.W.2d 592, 1976 Mo. LEXIS 243 (Mo. 1976).

For an example of the kind of story in which the logic of this court ruling could come in handy, see Elderly Man Says Attorney Took His Lake House, in which an elderly Springfield, Tennessee man said a Nashville attorney had him unwittingly sign the title to his lake house away while he was recovering from a stroke.

(1) The foregoing summary of this court ruling is an adaptation of the LexisNexis(R) overview of the case.

(2) In arriving at this conclusion, the Missouri Supreme Court made the following statements regarding the applicable state law (bold text is my emphasis, not in the original text):

  • It is an almost universal rule that any client's transfer of his property to his attorney is subject to being set aside as resulting from undue influence unless the attorney is able to meet the burden of proving that the transaction was fair and equitable. In 7 Am.Jur.2d, Attorneys at Law, § 95 (1963), it is stated that "It is presumed that undue influence or fraud attaches to any assignment or conveyance that an attorney takes from his client while the relation of attorney and client exists." Similarly, 7 C.J.S., Attorney and Client, § 128 (1937) states:

    "* * * The general rule that all transactions and dealings between attorney and client are subject to close scrutiny and presumptively fraudulent or the result of undue influence applies with full force, however, to any purchase or acquisition by an attorney of his client's property. Hence, a transfer, conveyance, or assignment of property by a client to an attorney is subject to avoidance and being set aside as constructively fraudulent or the result of undue influence, except to the extent that it operates as a payment of reasonable and proper fees, if the attorney fails to discharge his burden by showing that the transaction was fair, equitable, and honest, for an adequate consideration, and that the client had the benefit of impartial advice or was fully informed of the nature and effect of his act so that he was in the same position as if he had dealt with a stranger. * * *"

  • See also 7 C.J.S., Attorney and Client, § 129 (1937); 7 Am.Jur.2d, Attorneys at Law, § 96 (1963). In Missouri the rule is in accord. It is stated in Laspy v. Anderson, 361 S.W.2d 680, 682 (Mo. 1962), as follows:

    "The law is well established in this state and elsewhere that public policy dictates the necessity to protect the confidential and fiduciary attorney-client relationship. Consequently, when a conveyance from a client to an attorney is attacked it is considered presumptively fraudulent and the burden is on the attorney to prove by convincing evidence that the transaction evidenced by the conveyance, as well as the conveyance itself, was fair and equitable in every respect. (Citing cases)."

  • Another Missouri case announcing such a rule is Bybee v. S'Renco, 316 Mo. 517, 291 S.W. 459 (1926). See also Cuthbert v. Heidsieck, 364 S.W.2d 583 (Mo. 1963).


The attorney in this case attempted to defend himself by claiming he never represented Joseph in any individual matters, but only represented him in his capacity as a co-guardian for the estate of Joseph's brother. This defense fell on deaf ears, based on these Missouri Supreme Court's statements of law:

  • The conclusion we reach is in accord with the rule stated in 7 C.J.S., Attorney and Client, § 127b(3) (1937):

    "The rule that dealings between attorney and client are presumptively fraudulent is not restricted to contracts or dealings with respect to the rights or property involved in the particular transaction or proceeding in which the attorney is acting for the client, but it may extend to other transactions and contracts, where the relationship may be presumed to give the attorney some advantage over the client."

  • Similarly, in the case of Swaim v. Martin, 158 Ark. 469, 251 S.W. 26, 27 (1923), the court stated:

    "The rule that an attorney who contracts with his client has the burden of proving that no advantage has been taken of the situation of the latter is not restricted to contracts or dealings with respect to the rights or property in controversy in the particular proceeding in which the attorney is acting for the client, but it may extend to other transactions and contracts, where the relationship may be presumed to give the attorney some advantage over the client. * * *"

Pennsylvania AG Indicts Attorney In Alleged $550K+ Ripoff Of 90-Year Old Woman; Victim Gave Lawyer POA, Then Named Him Her Estate Executor

In Harrisburg, Pennsylvania, The Delaware County Daily Times reports:
  • Agents from the attorney general's office [] arrested a Montgomery County attorney for stealing nearly $555,000 from an elderly woman and, after her death, from her estate. He allegedly used the money to refinance his North Carolina beach house and to pay his credit card debt, authorities said. Attorney General Tom Corbett identified the defendant as Frank H. Morgan, Jr., 63, [...] a partner in the Norristown law firm of McTighe, Weiss, O’Rourke, Troncelliti and Morgan. Evidence and testimony regarding Morgan’s alleged illegal activity was presented to a statewide investigating grand jury, which recommended the criminal charges being filed.

  • The grand jury found that in February 2006, Rita Trish, a 90-year women living in a Gladwyne assisted living facility, gave Morgan power of attorney, which authorized him to act on her behalf in legal and business matters. Trish gave Morgan her power of attorney three weeks after her husband died. In April of 2006, Trish signed a will naming Morgan the executor of her estate, which gave him the authority upon her death to administer her will and to ensure that her final wishes were respected.

For more, see Montco attorney busted in $550G scam on senior citizen.

See also, Attorney accused of embezzling once again:

  • A Montgomery County attorney arrested [] for allegedly stealing nearly $555,000 from an elderly woman and her estate was once accused of similar crimes in Delaware County. In a 1992 civil suit, Frank H. Morgan Jr. was accused of funneling $152,000 from the estate of a New York man to Villanova University to cover his son’s tuition.