Saturday, March 26, 2011

Florida Foreclosure Mill Admits No Wrongdoing In Deal To Cough Up $2M To Cool Off The Heat From State AG Robosigner Probe

The Washington Post reports:
  • A Florida law firm agreed Friday to pay the state $2 million in penalties for allegedly mishandling foreclosures — the first deal of its kind since the uproar over the issue began last fall.

  • The Law Offices of Marshall C. Watson was among the prominent law firms investigated by state authorities after major lenders, including Bank of America and J.P. Morgan Chase, admitted last fall that their employees had “robo-signed” foreclosure cases without reading them and improperly notarized some documents.


  • In the Marshall C. Watson case, homeowners complained about robo-signing and notary issues as well as whether documents had been forged, according to the Florida attorney general’s office. They added that their foreclosure notices were not served properly. In some cases, relatives with no stake in the process were served notices and the homeowners were billed to cover the cost of those actions. The settlement does not include any admission of guilt by the law firm.


  • The settlement also requires the firm to prepare foreclosure paperwork beyond what is required by Florida law.

For more, see Florida law firm to pay $2 million to settle foreclosure fraud charges.

Ex-Foreclosure Mill King Struggles Off Mat, Takes Wild Swing At Freddie In Lawsuit Alleging $1.3M In Unpaid Fees

In Miami, Florida, Bloomberg reports:
  • The Federal Home Loan Mortgage Corp. was sued by Florida attorney David Stern, who claims he is owed $1.3 million for legal services, according to a complaint filed [this week]. The government-run mortgage company breached its contract with Stern’s law firm by failing to pay, according to the complaint filed in federal court in Miami.

For more, see Freddie Mac Sued by Attorney David Stern Over $1.3 Million.

Florida Bar Prez Says Some Attorneys Face Profession's "Death Penalty" For Foreclosure Fraud; Outside Lawyer Hired To Work Specifically On Probes

The Palm Beach Post reports:
  • Florida Bar President Mayanne Downs predicts some Florida attorneys will pay the ultimate professional price for foreclosure-related wrongdoing - disbarment - as investigations mount statewide. "It's the death penalty of the legal profession," said Downs, who spoke to The Palm Beach Post's editorial board this week about legislative proposals affecting the courts and the state's ongoing foreclosure tumult.

  • The bar, which is responsible for investigating complaints of attorney misconduct, has 222 foreclosure fraud cases open on 157 lawyers. Those numbers are up from the end of 2010 when there were just 69 cases pending on 48 lawyers.

  • While specifics of the cases are not public, complaints generally about the handling of foreclosures have included knowingly forged signatures on court documents, bad notarizations on assignments of mortgage and shortcuts taken that led to illegal home repossessions. There are also 28 open bar investigations on 23 attorneys stemming from foreclosure defense complaints.

  • Although homeowner advocates have grumbled at what they say is a lack of action taken by the Florida bar, Downs assured that her group is taking accusations seriously, even hiring Sunrise-based attorney Joel Klaits to work specifically on the investigations.

For more, see Number of Fla. lawyers under investigation for foreclosure-related wrongdoing grows.

Homeowner Gets Dubious Letter Simulating Official Court Document Demanding Full Loan Payoff Sent By Attorney; Firm Refuses Media Inquiries For Comment

In Tampa, Florida, The Tampa Tribune reports:
  • Two weeks before Glen Ables' new, modified mortgage payment was to go into effect, a mysterious letter arrived in the mail. It threatened to derail the plan to save his house from foreclosure. That letter, from a Tampa lawyer, said he and his wife had 30 days to send them the balance of their mortgage. And it came with what looked like a copy of a court document filed in the case.

  • "I called BB&T the next morning," Ables said. "They were shocked I got this letter." Even more shocking is the document. The letter implies the document was filed in court. It even says, "13th Judicial Circuit In and for Hillsborough County" at the top. It lists the plaintiff as BB&T, and it's signed by a lawyer.

  • The only thing missing is the case number, and no court document is filed without one. In fact, the form was never filed, and there has never been a foreclosure case filed against the Ables, according to a records request by the Tampa Tribune.(1)

  • "I would say it's fake," Ables said. "I would say that it's nothing more than a scam to scare people. And I believe that the group that does this did not do its homework."

  • It's unclear whether this was intentional or a mistake. But either way, real estate experts say it's a symptom of the vast number of foreclosures on the market and the factory-like way law firms are working through cases.

  • The lawyer who signed the form Ables received is Laura Walker with Tampa's Gilbert Garcia Group. She didn't return repeated phone calls over three days and declined to come out of her Tampa office to speak with a reporter. The only other attorney listed on their door, Michelle Garcia Gilbert, also didn't return calls.

For more, see Bogus letter tells man with refinanced mortgage to pay balance.

(1) This letter arguably constitutes a violation of 15 USC 1692e(9) & (10) of the Federal Fair Debt Collection Practices Act which prohibits, in debt collection activities:

  • (9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval;

    The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.

Homeowner Lawsuit: Loan Servicer Wrongfully Sought Foreclosure After Screwing Up Application Of Mortgage Payments To Escrow, 'Suspense' Accounts

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A Beaumont couple has filed suit against the mortgage holder they claim destroyed their credit ratings and forced them to face foreclosure. Vertis Malvo Jr. and Fran Malvo claim they obtained a home equity mortgage in 2006, a debt that was later purchased by defendant Deutsche Bank National Trust Co. in early 2009.

  • In turn, Deutsche designated defendant Select Portfolio Servicing [fka Fairbanks Capital] as a loan servicing agent, according to the complaint filed March 16 in Jefferson County District Court. Since then, Deutsche failed to post payments and credits to the Malvos' accounts and refused to credit the account for errors, the suit states.

  • "Select Portfolio Servicing had informed Defendant that Plaintiff did not owe the premiums, but Select Portfolio Servicing continued to demand payment, applied monthly mortgage payments to escrow, or simply held the funds in a 'suspense account' which then created the erroneous reports of late payments to the credit bureaus," the complaint says.

  • "These erroneous reports caused Plaintiff to lose an extension of credit." On Jan. 24, Select Portfolio Servicing filed an application for foreclosure on the Malvos' property, wrongly alleging the couple failed to make multiple installment payments, the Malvos claim.

For the story, see Beaumont couple says foreclosure due to mortgage company error.

As Crackdown On Fraudulent Tax Exemption Claims For Florida Homesteads Continues, Lawmakers Ponder Bill To Authorize Up To $500 Whistleblower Bounty

In Orange County, Florida, WFTV-TV Channel 9 reports:
  • You pay all your property taxes, but not everyone does. Homestead exemption fraud is taking a big bite out of the tax money for Florida counties, but now more than ever Florida property appraisers are biting back. "It's an extraordinary amount of money," Orange County Property Appraiser Bill Donegan told WFTV.

  • Donegan has a homestead compliance unit, three investigators dedicated to finding people they believe are cheating the system. [...] Since 2006, Orange County has collected about $9.5 million in back taxes, fines, and interest from violators. During the same time, Volusia County investigators have brought in more than $14 million.

  • In Winter Park, WFTV found one home with a lien worth almost $42,000, the biggest in Orange County. One homeowner in Volusia County owes $120,000. Some other counties will go after homestead exemption violators if they find out about them, but don't have specific investigators. Seminole County is now considering starting its own unit.

  • Property appraisers say they have more cooperation with other states and more resources than ever before to help them crack down and find out where people are living. "We have access to the school board, access to voter rolls, we have access to utility companies," Donegan said. Most counties have hotlines to report violators.

  • State lawmakers are considering a bill that would give a reward of up to $500 for anyone who reports a property that's in violation.

Source: Cracking Down On Homestead Exemption Fraud.

SWAT Team Gasses Foreclosed Home, Takes Three Suspected Squatters Into Custody On Criminal Trespassing Charges As State DCF Snatches Two Pre-Schoolers

In Naples, Florida, WBBH-TV Channel 2 reports:
  • Three people were arrested after authorities were called to a home on Curling Ave. in North Naples just after 8 a.m. Thursday. They had gotten complaints of a disturbance there. When deputies arrived, 25-year-old Ryan Kiskadden reportedly went into the attic of the home. It was then learned that the home is a foreclosure and the people inside were apparently living there illegally.

  • As a precaution, the SWAT Team gassed the home before entering to search for Kiskadden. "We like to use every precaution that we can. It's important that we do, especially in light of the incidents in St. Pete involving the officers killed up there," explained Detective Wade Williams, with the Collier County Sheriff's Office.

  • Also arrested inside the home were 20-year-olds Mitch Werman and Tatiana Gil. Additionally, the Florida Department of Children and Families took Gil's two children, ages 2 and 3, from the home. [...] Because the home was foreclosed, the adults face criminal trespassing charges.

Source: Three arrested after SWAT situation in Naples.

Duo Cop Pleas To Income Tax Charges; Dodge Fraud Convictions In Alleged Sale Buyback Rental Flipping Scam That Left Unwitting Investors Holding Bag

In Fort Wayne, Indiana, The Journal Gazette reports:
  • A Fort Wayne man was sentenced to 2 1/2 years in federal prison Monday for tax charges stemming from a mortgage fraud scheme. Jeffery Radabaugh pleaded guilty in November, the day he was charged with failing to report income he collected from the scheme, which operated from 2005 to 2007.

  • He and Tobby Steele were both charged with felony charges of filing false tax returns. Radabaugh and two other people were also charged with misdemeanor charges of failure to file a tax return. [...] In his plea agreement, Radabaugh acknowledged being part of a mortgage fraud scheme that involved more than 100 distressed rental properties.


  • Radabaugh, an unlicensed real estate broker, admitted to paying mortgage brokers kickbacks to process the loans connected to the properties. Through his own real estate investment company, Radabaugh would locate rental homes for sale, negotiate a price representing the fair market value of the property, obtain an option on the property and then obtain an appraisal that was between 60 percent and 100 percent above the fair market price, court records said.

  • Radabaugh would then find a third-party buyer who would purchase the property at the inflated price. Much of the difference would be pocketed by Radabaugh and his company, to the tune of $20,000 to $35,000 per transaction, according to court documents.

  • Radabaugh promised the buyers he would find renters for the houses, manage the properties and then buy them back in three years. [...] Throughout the process, Radabaugh pocketed more than $2 million – money he failed to report as taxable income. Radabaugh also lied about the amount of money he made on his 2005 return, misreporting about $60,000 in income, according to court documents.

  • Steele, a Churubusco resident, admitted to filing a false tax return, misreporting more than $95,000 in income on his 2006 return, according to court documents. Springmann sentenced Steele to 15 months in prison in February, as well as a year on supervised release.

For the story, see Two sentenced in mortgage plot (Scheme involved more than 100 rental properties).

Friday, March 25, 2011

Florida Foreclosure Attorneys "Routinely Made" False Statements When Cranking Out Cases Through Assembly Line: Fannie 2006 Internal Report

The Wall Street Journal reports:
  • Fannie Mae was warned in a 2006 internal report of abuses in the way lenders and their law firms handled foreclosures, long before regulators launched investigations into the mortgage industry's practices.

  • The report said foreclosure attorneys in Florida had "routinely made" false statements in court in an effort to more quickly process foreclosures and raised questions about whether some mortgage servicers or another entity had the legal standing to foreclose.

For more, see Fannie Report Warned of Foreclosure Problems in 2006.

Iowa Couple Who Scored 'Free House' When Homestead Law Led To Void Mtg To Face Heat From State AG Probe Into Possible Fraud In Filing Loan Application

The Des Moines Register reports:
  • Attorney General Tom Miller has assigned a mortgage investigator to review the case of an Ankeny couple who used a more than 100-year-old law to save their house from foreclosure after making a single payment, a spokesman said this week. Until that review is complete, "it would be premature to say what, if anything, we can do," Geoff Greenwood said.

  • Matt and Jamie Danielson blamed a hasty home loan approval by their lender for ultimately being able to keep their house after they proved Jamie did not sign the mortgage in 2007. The Danielsons used that law while in foreclosure and had to make no further payments. The couple won an appeal of their foreclosure case in 2009 before the Iowa Court of Appeals.

  • After the story about the Danielsons was published last week,(1) the Register learned that the couple had been involved in other home deals that state title guaranty officials called questionable.

  • Inaccurate statements were also made on Matt Danielson's signed loan application. Among them: that he earned $13,000 monthly at a car wholesaler at 1234 Fifth St. in Ankeny - an address where state records show no such business exists.

For more, see State to investigate case of couple who got free house.

(1) See Iowa loophole voids mortgage, gives couple 'a free house'.

Couple Facing Foreclosure Face Criminal Charges For Allegedly Recording Bogus Documents In Public Records To Keep From Losing Home

In Ceres, California, The Modesto Bee reports:
  • A Ceres couple was arrested Monday on suspicion of recording bogus documents in an attempt to save their home from foreclosure. Two Southern California men helped Narciso and Alisema Plancarte, ages 58 and 55, prepare documents claiming that they no longer owed IndyMac Bank for a $294,000 loan obtained in 2005, according to an arrest warrant affidavit.

  • The owners told an investigator they knew the loan had not been repaid but they were desperate to keep their house and got no refinancing help from the lender, the affidavit says. "I'm just fighting for my house," Narciso Plancarte told investigator Glenn Gulley of the Stanislaus County district attorney's office, Gulley said in the affidavit.

  • The documents indicate that one of the Southern California men represents Mortgage Electronic Reporting System and that the company authorized the filings. But company attorneys told Gulley that neither man works for the firm, he reported.

Source: Ceres couple jailed in effort to save home.

Arizona AG Thwarts BofAs Attempt To Move State's Lawsuit To Federal Court; Action Alleges Deceptive Practices In Processing Loan Modifications

In Phoenix, Arizona, The Arizona Republic reports:
  • The Arizona attorney general's lawsuit against Bank of America over alleged mortgage fraud will remain in state court. The lender had asked the case, filed in late December, be moved to federal court. State Attorney General Tom Horne, who inherited the lawsuit from former Attorney General Terry Goddard, said state-court cases often move more quickly then those tried in federal court.

  • "Homeowners who have suffered from practices that may violate the Arizona Consumer Fraud Act need timely relief," he said. "And unnecessary delays can be damaging to them."

  • The suit alleges BofA deceived borrowers who were trying to obtain loan modifications to keep their homes. The lender is accused of violating the state's consumer-fraud laws by not responding to many homeowners' requests for help, rejecting loan-modification applications without supplying sufficient reason and beginning foreclosure proceedings on homeowners at the same time those borrowers were starting loan modifications.

  • The lawsuit was filed after a one-year investigation into the loan servicing and foreclosures practices of the Charlotte, N.C.-based lender, Arizona's largest mortgage holder and servicer.

For the story, see BofA lawsuit to stay in state court (AG says switch to federal level would slow its case over bank's mortgage practices).

Another Alleged HAMP Violation, Another HAMP Lawsuit

In Victoria, Texas, the Victoria Advocate reports:
  • A Victoria woman is suing BAC Home Loan Servicing over the wrongful foreclosure of her home. Plaintiff Patricia Garcia originally filed the lawsuit in state court in February. It was re-filed in federal court on March 18.(1)

  • Garcia claims BAC, whose principal office is in Plano, committed fraud and trespassed on her homestead title when they not only wrongfully foreclosed on her house, but they also sold it to the Federal National Mortgage Association, aka "Fannie Mae."


  • In the lawsuit, Garcia claimed BAC committed fraud because they not only proceeded to foreclose upon her homestead before they evaluated her HAMP eligibility,(2) but they were also without legal right to sell her home to Fannie Mae when it was sold, making the sale void.

  • Federal law prohibits mortgage servicers participating in HAMP from referring a loan for foreclosure or proceeding with a foreclosure sale on a qualifying loan until a homeowner, who has applied for a modification under HAMP, has been evaluated and, if deemed eligible, offered a trial modification, according to the lawsuit.

  • Garcia is seeking to set aside the foreclosure sale(3) and quiet her title to the homestead, re-establishing her as the rightful owner of the property. Additionally, she seeks to recover any damages that she may be entitled to as a result of BAC's premature foreclosure on her homestead. Tony Pitts, the Austin-based attorney for the plaintiff, declined to comment.

For more, see Woman sues over wrongful home foreclosure (Victoria homeowner claims loan servicing company committed fraud when they sold her house).

(1) It wouldn't surprise me that the reason the case was refiled in Federal court was as a result of the bank's request to remove the case to the Federal forum. Such a removal of a lawsuit from a state to a federal court is a commonly used maneuver in civil cases by big-time corporate defendants and their white-shoe law firms in lawsuits brought by individuals and other (possibly under-financed) plaintiffs. Such a removal typically increases the cost of litigation for the plaintiff, and in the event plaintiff's counsel is unfamiliar with litigating a case in a Federal court, this maneuver will effectively leave the case in limbo.

See generally, Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K ("It is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts." For more on fraudulent removals, see footnote 1 of an earlier post.

Now that this case has been refiled in Federal court, the bank can now seek dismissal of the lawsuit altogether (or at least portions thereof) by invoking the Rooker-Feldman doctrine. See footnote 3, below.

(2) For a sampling of other HAMP-related lawsuits brought against lenders & loan servicers for allegedly stringing borrowers along with empty loan modification promises, see:

(3) To the extent some of the claims in this lawsuit are viewed by the court as an attempt by the homeowner to ask a Federal court to reverse the effect of a state court judgment, the chances of a request to set aside the foreclosure sale surviving the bank's motion to dismiss are little to none, based on the so-called Rooker-Feldman doctrine. According to this doctrine, lower federal courts lack subject matter jurisdiction over claims that effectively challenge state court judgments.

The application of the Rooker-Feldman doctrine in a similar foreclosure situation was recently addressed by a Federal appeals court in Wilson v. Deutsche Bank Nat'l Trust (In re Wilson), No. 10-2021-bk (2nd Cir. February 18, 2011) (bold text is my emphasis):

  • Under the Rooker-Feldman doctrine, lower federal courts lack subject-matter jurisdiction over claims that effectively challenge state-court judgments. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 486-87 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 415-16 (1923).

    After the doctrine was modified by the Supreme Court in
    Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005), we held that there are four requirements that must be met before the Rooker-Feldman doctrine may apply: (1) "the federal-court plaintiff must have lost in state court;" (2) "the plaintiff must complain of injuries caused by a state-court judgment;" (3) "the plaintiff must invite district court review and rejection of that judgment;" and (4) "the state-court judgment must have been rendered before the district court proceedings commenced." Hoblock v. Albany County Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005) (internal quotation marks and alterations omitted).

    Because dismissal under the Rooker-Feldman doctrine is for lack of subject matter jurisdiction, this Court reviews de novo a court's application of the doctrine. Id. at 83.

    Here, application of the Rooker-Feldman doctrine was warranted in light of the connection between Wilson's federal complaint and the state court default foreclosure judgment in favor of DBNTC.

    First, the foreclosure judgment in favor of DBNTC indicates that Wilson "lost" in state court. See
    Hoblock, 422 F.3d at 85.

    Second, Wilson instituted adversary proceedings against DBNTC in order to "complain of injuries caused" by the state court foreclosure judgment, see id., as the crux of her complaint was that DBNTC wrongfully foreclosed on the property in question.

    Third, in filing her complaint, Wilson "invite[d] [federal] court review and rejection" of the state court foreclosure judgment, see id., as she explicitly sought reversal of that judgment and re-vestment of title through her argument that DBNTC had lacked standing to foreclose.

    Fourth, the foreclosure judgment was rendered in June 2008, over five months before she filed her Chapter 7 bankruptcy petition and adversary complaint. See id.

    Accordingly, we conclude that the bankruptcy court correctly dismissed Wilson's complaint pursuant to the Rooker-Feldman doctrine. As a result of this conclusion, we are not required to consider Wilson's argument that the Connecticut state court order denying her motion to open and vacate the foreclosure judgment was void, because it was issued in violation of the automatic stay provisions of 11 U.S.C. § 362(a).

    We have considered Wilson's other arguments on appeal and have found them to be without merit. Accordingly, the judgment of the district court is hereby AFFIRMED.

For another court ruling reaching the conclusion coming out of the Eleventh Circuit Court of Appeals (in a Florida case), see Parker v. Potter, Nos. 08-16332, 08-16667 (11th cir. 2010) (unpublished).

For another recent bankruptcy case (a New York case) applying Rooker-Feldman, see In re Agard, Case 8-10-77338-reg (Bankr. E.D.N.Y. February 10, 2011).

Go here for links to a couple of dozen more Rooker-Feldman foreclosure cases.

Thursday, March 24, 2011

Vermont Judge: 'Mortgage Does Not Follow Debt' Where Banksters Intend Otherwise; Failure To Assign Security Agreement With Note Stalls Foreclosure

In states where the common law provides that a transfer of a secured promissory note generally carries with it an equitable assignment of the mortgage securing it (ie. "mortgage follows the note"), does this mean that the mortgage will automatically follow the secured note upon the transfer of the latter?

The answer clearly is no, at least not according to Rutland County, Vermont Superior Court Judge William Cohen in a 2009 court ruling in which Judge Cohen refused to allow CitiMortgage to foreclose on a home where, although it obtained an endorsement of a secured note, there was no evidence that it also obtained a corresponding assignment of the mortgage, which was held by MERS.

From Judge Cohen's ruling (bold text is my emphasis):
  • Regarding the mortgage deed, “[a] transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise.” Restatement (Third) of Property, Mortgages § 5.4(a). The objective of this rule is to keep the obligation and the mortgage in the same hands unless the parties wish to separate them. Id. at cmt. b.

    Here, the parties split the Note and Mortgage Deed; Flagstar Bank retained the Note, which it later indorsed to CitiMortgage, while MERS held the mortgage deed, becoming the mortgagee of record.

    Separation of the obligation from the mortgage results in a practical loss of efficacy of the mortgage. Restatement (Third) of Property, Mortgages § 5.4 cmt. a. When the right of enforcement of the note and the mortgage are split, the note becomes, as a practical matter unsecured. Id. The result confers an unwarranted windfall on the mortgagor. Id.

    Here, the Note is enforceable by CitiMortgage, but the assignment of the Mortgage Deed from MERS to CitiMortgage has not been filed. CitiMortgage must prove that MERS assigned it the Mortgage Deed; thereby reuniting the obligation and mortgage deed that secures it in the same hands.

In denying CitiMortgage's request to foreclose, Judge Cohen gave it 30 days to get the assignment and submit it to the court; failing that, he would vacate an earlier-entered default judgment.(2)

For the ruling, see Citimortgage v. Bischoff, No. 255-4-09 Rdcv, 2009 Vt. Super. LEXIS 2 (Vt. Super. Ct. Oct. 28, 2009).

(1) Judge Cohen's ruling is consistent with the case law that appears to exist in at least a couple of other "mortgage follows the note" states. See, for example: (bold text is my emphasis):

  • Arkansas: Leach v. First Cmty. Bank, CA07-05, 2007 Ark. App. LEXIS 671 (Ct. App., Div II, 2007) (unpublished):

    Arkansas has long followed the rule that, in the absence of an agreement or a plain manifestation of a contrary intention, the security of the original mortgage follows the note or renewal thereof, [...] Simpson v. Little Rock North Heights Water District No.18, 191 Ark. 451, 86 S.W.2d 423 (1935).
  • Florida: WM Specialty Mortg., LLC v. Salomon, 874 So. 2d 680 (Fla. App. 4th DCA, 2004): A Florida appeals court, quoting from the state Supreme Court ruling in Johns v. Gillian, 134 Fla. 575, 184 So. 140, 143 (Fla. 1938):

    However, it has frequently been held that a mortgage is but an incident to the debt, the payment of which it secures, and its ownership follows the assignment of the debt. If the note or other debt secured by a mortgage be transferred without any formal assignment of the mortgage, or even a delivery of it, the mortgage in equity passes as an incident to the debt, unless there be some plain and clear agreement to the contrary, if that be the intention of the parties.
  • Minnesota: Jackson v. Mortg. Elec. Registration Sys., N.W.2d 487 (2009):

    We have held that, absent an agreement to the contrary, an assignment of the promissory note operates as an equitable assignment of the underlying security instrument. First Nat'l Bank of Mankato v. Pope, 85 Minn. 433, 434-35, 89 N.W. 318, 318-19 (1902).

In Jackson v. Mortg. Elec. Registration Sys., the Minnesota Supreme Court makes an interesting observation that reinforces this point that they bury in an excerpt from footnote 5 of their opinion:

  • It is worth noting that the case law contains a caveat for situations in which an agreement to the contrary has been made. First Nat'l Bank of Mankato, 85 Minn. at 435, 89 N.W. at 319.

It therefore appears fair to propose that in some (maybe most) "mortgage follows the note" states, the mortgage really doesn't follow the note where the intent of the parties was to split the two instruments.

Contrast these cases with U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637; 941 N.E.2d 40 (January 7, 2011), where the Massachusetts Supreme Judicial Court reaffirmed longstanding law that, in Massachusetts, the transfer of the promissory note does not operate as an equitable assignment of the underlying mortgage (ie. Massachusetts is not a "mortgage follows the note" state), and consequently, a foreclosing party must hold both instruments to commence a valid foreclosure in all cases.

(2) Inasmuch as it is always the intent for the note and the mortgage to be split apart in these MERS-fiasco cases, it may be that MERS-related foreclosures in "mortgage follows the note" states can't go forward unless the party seeking foreclosure can show that it holds both the note and the mortgage, and that it isn't enough for the foreclosing party to simply assert that the transfer of the promissory note automatically operates as an equitable assignment of the underlying mortgage/deed of trust.

Based on the foregoing, it appears to be incumbent on homeowners' attorneys to vigorously raise the issue of "intent to split note and mortgage" when briefing their MERS-related cases, particularly in those circumstances where foreclosure has already taken place and a voiding of the foreclosure sale (and possibly, any subsequent sale of the foreclosed home to unwitting third parties) is being sought.

It may be that, in MERS-related situations in "mortgage follows the note" states where the foreclosing party failed to prove it held both the promissory note (by a proper endorsement) and the mortgage (by an effective assignment), and the foreclosure sales have already taken place, foreclosing lenders (as well as subsequent unwitting third party purchasers of the foreclosed homes) in those states may find themselves holding the same bag that their bretheren in Massachusetts wound up holding after the ruling in Ibanez came down in January.

'Form 1099' Screw-Up By Sloppy Servicer Leads Cash-Lacking F'closed Couple To Pay Income Tax They Didn't Legally Owe; Lawyer: Not An Isolated Case

In Salinas, California, the Santa Cruz Sentinel reports:
  • People whose homes have been foreclosed are now facing another financial shock: a hefty tax bill. William Purdy, a tax attorney with Simmons & Purdy in Soquel, tells the story of a husband and wife who got a first mortgage of $700,000 and a second mortgage of $80,000 to buy a home in Salinas. After the wife lost her job, the couple couldn't make payments.

  • The lender foreclosed and said the home was worth a little more than $300,000. The couple then got a 1099-A and 1099-C indicating they had taxable debt relief in excess of $400,000. They went to a tax preparer and learned they owed $30,000. They ended up on a payment plan.

  • Two years later, Purdy discovered the couple owed nothing. Both of their loans were "purchase money" loans to buy a house, not a refinance, Purdy said, and the home was their primary residence, so under [California] state law they had no personal liability for the debt and no taxable debt relief.

  • "They were literally making payments on a tax they never owed," said Purdy, who gave them the good news just before Christmas. The problem, he said, is the lender incorrectly marked both 1099 forms indicating the couple was personally liable for the debt, and the tax preparer assumed the forms were accurate.

  • The couple are not alone in this predicament. Foreclosures have become commonplace, and taxpayers have had debt canceled via "short sales," selling their homes for less than what they owed to escape foreclosure.

  • "I am seeing most of the forms mismarked," said Purdy, who blames lenders for the economic crisis.(1) [...] Other tax advisers suggest using IRS Form 982 to reduce taxes from mortgage debt relief. Purdy said the Salinas couple's tax preparer used that tool.(2)

  • It does not provide complete relief, and here's why. California sets a limit of $800,000 in home indebtedness for a couple, with the maximum exclusion of $500,000 for forgiven debt.

For the story, see Tax bill after foreclosure can cause confusion (Couple who lost home made payments on a tax it turned out they didn't owe).

(1) See Foreclosing Mortgage Lender Screw-Up Results In Whopping IRS Tax Bill For Ex-Homeowner for another example of this type of loan servicer screw-up filing IRS Form 1099.

(2) The following information from the Internal Revenue Service may come in handy in determining how much income tax may be owed to the Feds, and more importantly, whether a homeowner can qualify for one of the law's exceptions from taxation (ie. exception for taxpayers for acquisition or home improvement debt forgiven on their principal residence if the balance of their loan was $2 million or less, insolvency exception, & bankruptcy exception are the three most common) that will allow him/her to dodge the tax either entirely, or at least partially:

Those lenders, servicers, etc. who have no clue how to prepare a Form 1099-A or Form 1099-C are invited to peruse the 2011 Instructions for preparing Forms 1099-A & C.

$105K Bail Set For Suspected "Deadbeat Dad" Pinched By Cops For Allegedly Hijacking Vacant Homes & Renting Them Out In Adverse Possession Racket

In Hillsborough County, Florida, The Brandon News & Tribune reports:
  • A Valrico man whose company is accused of taking over homes and renting them without the owners' permission was jailed [last week] on a string of charges. George Williams, 41, was arrested at the Orient Road Jail [last week], records show. He is being held on $105,000 bail.

  • Williams is charged with five counts of burglary of an unoccupied dwelling, four counts of grand theft of $100,000 or more, two counts of second-degree grand theft, organized fraud for less than $20,000, organized fraud over $50,000 and a failure to pay child support. The Hillsborough County Sheriff's Office issued a warrant for Williams on Tuesday.

  • Last month, an 8 On Your Side investigation profiled Williams in a report that revealed his company, Brevkam Ventures LLC, took possession of several vacant properties, gained access to the houses, then rented them out. Williams' Brevkam Ventures filed paperwork with the property appraiser's office claiming an interest through Florida's adverse possession law in nine Hillsborough County properties.

  • Adverse possession allows someone to take possession of an abandoned property if they live on it and pay property taxes on it for seven years. In a January telephone interview, Williams denied any involvement. "I have put nobody in no houses,'' Williams said. "I am not involved in any of the work.'' The name George Williams appears on each adverse possession form filed at the property appraiser's office.

  • Two other companies, Homes for Americans LLC, and Chateau Lan LLC, are also actively taking possession of properties, claiming they are following the adverse possession law.

For more, see Valrico man charged with renting out homes he doesn't own.

Go here for other posts on real estate-related hijacking scams.

Central Florida Woman Succeeds In Costly Effort To Move Back Into Home That Was Hijacked By Outfit Engaged In Adverse Possession Scheme

In Hillsborough County, Florida, Newschannel 8 reports:
  • After a costly, four-month ordeal, Danuta Brown regained the house and property taken out from under her. When she walked into the Dover house on Raven Manor Drive on Wednesday, she wiped tears from her eyes. They weren't tears of happiness - the four-bedroom, three-bath house was filthy. "I can't believe people would leave a house like this," Brown said. "This is such a mess, I can't believe it."

  • Brown eventually won back her property after a company called Chateau Lan took possession of her vacant house, citing Florida's adverse possession law. That law allows a person to take possession of abandoned property if he lives on it and pays taxes on it for seven years.

  • Though she was ultimately successful, Brown's long trip through the legal system was costly and time-consuming, and ended with her cleaning up a mess created by someone she had never intended to have live in her house.

  • It's a fight that's become increasingly common as several companies try to use adverse possession claims to put people in homes they don't own. Chateau Lan's Chris McDonald Sr., of Plant City, says he's taken possession of about 20 houses in this manner.(1) Records at the property appraiser's office show Chateau Lan has laid claim to a dozen properties through adverse possession.

For more, see Woman regains vacant home after court fight.

In another Central Florida real estate hijacking story, investigators have an arrest warrant for George Williams who they say is running an elaborate scheme to defraud by moving people into empty properties with out the owners' consent and collecting money.

Go here for other posts on real estate-related hijacking scams.

(1) In a related story, see Company owner says takeover of homes 'helps people' (Chris McDonald says there's a good reason he and his company, Chateau Lan, have taken over houses he doesn't own and allowed people to move in without the homeowners' permission. It helps people, he says).

Wednesday, March 23, 2011

NH Couple Score TILA Victory; Convincing Testimony Establishes Bank Failure To Provide Rescission Rights Notice In Mortgage Refinance Transaction

A U.S. Bankruptcy Court in New Hampshire recently found that Wells Fargo Bank violated the Federal Truth in Lending Act (TILA") on a refinancing loan it made to Nashua couple Mary Beth Sousa and her husband, William Sousa, Jr. where it failed prove that it provided the couple with two copies of notices of their right to rescind the mortgage transaction, thereby extending the period for rescission beyond the standard 3-day period. The court found that the couple properly rescinded the loan within the extended time period.

Notable in this case was, despite the fact that evidence was introduced in the case that the notice of right to cancel, signed by them, that contained an acknowledgment of receipt of the two copies, was given to them at the closing, the Sousas were able to rebut this evidence offering nothing more than their own testimony which, according to the court, "was consistent, persuasive, and was based on their specific recollections." The court also stated that the Sousas "convincingly testified that they left the closing with no paperwork and were never provided any, even after making several requests."

The following excerpt relates to the testimony of the sole witness called at trial by Wells Fargo, the attorney who handled the loan closing:
  • Since the presumption was rebutted, Wells Fargo must prove its compliance with TILA disclosures. Wells Fargo called one witness, attorney Ragab. Ragab had no specific recollection of the closing or his dealings with the Sousas. Thus, he could not testify as to what occurred on the day of closing nor during his subsequent communications with the Sousas. Instead, Ragab's testimony was limited to the routine office procedures and practices at the Ginn Firm.

    The Court does not question Ragab's sincerity in recalling the practices of his former employer. Nonetheless, at the Sousas' closing, enough errors were made to suggest that, at least at this particular closing, office procedures may not have been followed due to a desire to correct errors in the documents.

    Wells Fargo argues that the closing errors have no relationship to the question of whether the TILA disclosures were produced. It is true that failing to revise a HUD-1, for example, cannot directly lead the Court to conclude that Wells Fargo did not provide two copies of the notice of right to cancel. But those errors make the Sousas' account much less unimaginable, as it was characterized by Wells Fargo. In fact Wells Fargo describes the scenario, i.e., where copies of the closing packet were never provided, where the Sousas never discussed the situation with family and friends, and where the Sousas never requested the copies either in writing or orally from Wells Fargo, as simply "unbelievable."

    The Court strongly disagrees. Ragab testified that, at the time of closing, he had worked at the Ginn firm for ten months and he had conducted approximately twenty-five closings a month. Considering the high volume of work and the noted errors at the Sousas' closing, the possibility of the Ginn Firm inadvertently failing to provide borrowers copies of their closing packet is hardly unimaginable. Furthermore, the Sousas started making their regular mortgage payments after the closing. Hence, it appears that after a month of trying to obtain their copies, they started making their mortgage payments and moved on with their lives. Though the Sousas could have been more zealous in pursuing the documents, their account is certainly plausible.
For the ruling, see In re Sousa, Bk. No. 06-11398-JMD, Adv. No. 07-1215-JMD (Bankr. D. NH, March 14, 2011).

Representing the Sousa was attorney Peter S. Wright, Jr., of the now-former Franklin Pierce Law Center (known now as the University of New Hampshire School of Law), Concord, New Hampshire.

Harmon Law Offices PC argued the case for Wells Fargo.

Use Of Undated Allonge May Sink Mortgage Lender's Claim In Homeowner's Bankruptcy Case; Vermont Judge Says Bank Must Have Standing On Filing Date

A U.S Bankruptcy Court in Vermont recently denied a mortgage lender's motion for summary judgment in an adversary proceeding brought against it by debtor/homeowner Barry Alton Parker, in which Parker claimed that the bank lacked standing to enforce the mortgage note against him.

The bank tripped itself up in this case by using an undated allonge to the mortgage note. The court interpreted Vermont law as requiring a creditor to have standing on the date the bankruptcy case is commenced, and that a defect in standing at that time cannot be cured, thereby making the date the allonge was endorsed as the critical date in determining whether the bank has standing enforce the note and file a proof of claim.

The court concluded its ruling by saying that unless the parties present undisputed evidence showing the date the allonge was executed, it will set a trial date to determine whether the bank had standing to file the proof of claim.(1)

For the ruling, see In re Parker, Case No. 09-10186, Adversary Proceeding No. 09-1022 (Bankr. D. Vt. March 18, 2011).

(1) The relevant excerpt of the ruling follows:

  • This raises the question of when the allonge was endorsed, as the allonge endorsed by Mr. Brown is not dated. The Bank argues that the timing of the endorsement is immaterial to the question of whether the Bank is the holder of the Note because regardless of when the Note was endorsed, it is now endorsed and in the Bank's possession. See In re Wilson, 442 B.R. 10, 15, 2010 Bankr. LEXIS 4252, * 9-11 (Bankr. D. Mass. Nov. 29, 2010).

    However, under relevant Vermont jurisprudence pertaining to foreclosure actions, "[i]n order to enforce a mortgage note, a plaintiff must show that it was the holder of the note at the time the Complaint was filed." U.S. Bank Nat'l Assoc. as Trustee for RASC 2005 AHL1 v. Kimball, No. 6-1-09 Gicv (Vt. Super. Ct. Oct. 27, 2009) (Joseph, J.) (on appeal) (citing In re Gilpin, No. 09-10696 (Bankr. D. Vt. Oct. 7, 2009)) (emphasis added); see also In re Foreclosure Cases,
    521 F.Supp.2d 650, 653 (S.D. Ohio 2007) ("[t]o show standing . . . the plaintiff must show that it is the holder of the note and the mortgage at the time the complaint was filed"); In re Hwang, 396 B.R. 757 (Bankr. C.D. Cal. 2008), reversed on other grounds, 438 B.R. 661 (C.D. Cal. 2010); U.S. Bank Nat'l Assoc. v. White, 880 N.Y.S.2d 227 (Table), 2009 N.Y. Slip Op. 50100(U) (N.Y. Super. Ct. Jan. 23, 2009).

    Another recent Vermont case addressed the "propositions that a party must have standing at the outset of litigation, and that a defect in standing at that time cannot be cured," Deutsche Bank Nat'l Trust Co. v. Parisella, No. S0758-09, 2010 Vt. Super. LEXIS 59, *5 (Vt. Super. Ct. Oct. 25, 2010) (Toor, J.). There, the state court took great pains to thoroughly articulate the requirements of both constitutional and prudential standing, and concluded that "a plaintiff seeking foreclosure lacks standing unless it can show it was entitled to enforce the mortgage at the time it filed its complaint for foreclosure." Id. at *6-10.

    Notably, the Vermont Rule of Civil Procedure governing foreclosure proceedings likewise imposes this requirement:

    The plaintiff shall attach to the complaint copies of the original note and mortgage deed and proof of ownership thereof, including copies of all original endorsements and assignments of the note and mortgage deed. The plaintiff shall plead in its complaint that the originals are in the possession and control of the plaintiff or that the plaintiff is otherwise entitled to enforce the mortgage note pursuant to the Uniform Commercial Code.

    Vt. R. Civ. P. 80.1(b)(1).

    Here, the document the creditor has filed to enforce its rights is a proof of claim, rather than a complaint or motion, and the seminal date for analysis and allowance of a proof of claim, including the question of standing, is the date the bankruptcy case was commenced. See Official Form 10. Therefore, the critical inquiry is whether the Bank was the holder of the Note as of the date of Debtor's bankruptcy filing. Since the date the Note was endorsed is a material fact essential to the determination of whether the Bank is entitled to judgment as a matter of law, and since the record of undisputed material facts does not include any information about the date of the endorsement, the Court cannot adjudicate this issue on summary judgment.

    For the reasons set forth above, the Bank's motion for summary judgment is denied. Unless the parties present undisputed evidence showing the date the allonge was executed, the Court will set a trial date to determine whether the Bank had standing to file the proof of claim.


A notable piece of trivia here is that the U.S. Bank Nat'l Assoc. v. White case cited above is an example of the 'handiwork' belonging to Kings County (Brooklyn), New York Supreme Court Justice Arthur M. Schack that continues to 'permeate' the court rulings in this area of law around the country.

2nd Mortgage Lien Stripping Still Viable In "Chapter 20" Bankruptcy Cases???

In an apparently unsettled area of law, a recent ruling from a U.S. Bankruptcy Court in Michigan addressed the appropriateness of a debtor having two bankruptcy cases pending at the same time where a so-called "Chapter 20" bankruptcy(1) is involved (where a homeowner first files a chapter 7 to relieve himself of unsecured debts, followed by a Chapter 13 to "lien strip" a completely underwater second mortgage lien from his home in order to save it from foreclosure - ie. Ch.7 + Ch.13 = "Ch.20").

The relevant excerpt from the ruling follows (bold text is my emphasis):
  • There are cases, not mentioned in Debtor's brief (Docket # 16), holding that there is a per se rule that a bankruptcy debtor may not have two bankruptcy cases pending at the same time. These cases purportedly state the "majority view," and at least one of these cases is directly on point with this case. See, e.g., In re Sidebottom, 430 F.3d 893, 898-99 (7th Cir. 2005); In re Lord, 295 B.R. 16, 18-21 (E.D.N.Y. 2003); Turner v. Citizens National Bank of Hammond (In re Turner), 207 B.R. 373, 378-79 (B.A.P. 2d Cir. 1997). (Of these cases, In re Lord is directly on point.)

    But the Court is persuaded by contrary cases, including Grimes v. United States (In re Grimes),
    117 B.R. 531, 533-37 (B.A.P. 9th Cir. 1990) and In re Ragsdale, 315 B.R. 691, 693-94 (Bankr. E.D. Mich. 2004), that the better view is that such a per se rule is not correct, at least in the specific circumstances of this case.(2)

    Those specific circumstances are: a Chapter 7 debtor obtains a discharge in his Chapter 7 case, but then, while that case remains open only for the Chapter 7 Trustee to investigate and possibly administer assets of the Chapter 7 estate, the debtor files a new bankruptcy case under Chapter 13, in an effort to treat the first and second mortgages on his residence through a Chapter 13 plan and a lien-strip action, and thereby save his residence from foreclosure

I don't know what to make of this ruling - maybe it's nothing, but I'm sure there's someone out there who can figure out a way to make a big deal out of it.

For the ruling, see In re Smith, No. 11-45460 (Bankr. E.D. Mich., Southern Div. March 15, 2011).

(1) See generally:

(2) See also, In re Bollerud, No. 08-12177 (Bankr. S.D. Cal. 2009), where a U.S. Bankruptcy Court in San Diego, California OK'd a so-called "Chapter 20" in a 2nd mortgage lien stripping case where the debtor sought only to void the lien on the home without also seeking a discharge of the underlying debt.

Hapless Homeowner Scores Win As Lawyers Drop Legal Claims Against House In Probe Into Bid Rigging Of Baltimore Tax Lien Sale & Related Fee Gouging

In Baltimore, Maryland, Investigative Voice reports:
  • Lawyers who admitted to gaming local tax lien auctions have dropped legal claims against the home of a city resident who has been fighting to keep it for nearly 12 years.

  • Shortly after Investigative Voice revealed that DeLaurentis Reiff & Turer, a firm that is cooperating with federal authorities in their probe of rigged tax lien auctions, had filed claims against the home of Forest Park resident Reginald Lee related to a tax lien bought at auction, the firm notified Lee they are dropping their claim. The firm had been seeking $10,600 for legal fees and interest to redeem his property and avert foreclosure.

  • The latest development marks an unexpected about-face for the firm that asked a Baltimore City circuit judge to compel Lee to pay $8,000 in fees, plus interest in excess of a $2,300 unpaid tax debt. The fee included photocopying, Internet searches, and even a telephone call to discuss the case.

  • Documents reviewed by Investigative Voice showed that the firm had successfully won court orders compelling seven other city homeowners to pay nearly $30,000 in legal fees alone related to tax lien cases.

For more, see ABOUT FACE — Lawyers cooperating with feds dismiss claim against beleaguered city homeowner (Twelve-Year Battle Comes To Favorable End For Northwest Balto Resident Regonald Lee).

Tuesday, March 22, 2011

Parade Of Suspects Copping Guilty Pleas In Foreclosure Sale Bid Rigging Racket Continues As Sacramento Feds Notch Sixth Score In Ongoing Probe

In Sacramento, California, The Record reports:
  • A San Joaquin County investor pleaded guilty Friday in federal court to charges he illegally rigged bids with others at home foreclosure auctions in Stockton, the U.S. Attorney's Office in Sacramento reported. Gregory L. Jackson is the sixth defendant so far to plead guilty in the federal probe. He faces a federal prison sentence and $1 million in fines under terms of the negotiated plea deal.

  • In the scheme, the group of real estate speculators agreed not to compete with a selected bidder, who won the property at a noncompetitive price. They next held a private auction, officials said. In the private auction, each would bid the amount he or she was willing to pay above the public auction sale price. The price difference between the two auctions resulted in illegal gain, officials said. The group then divided that profit among themselves, prosecutors said. Jackson admitted to participating in the scheme between March and October 2009.

  • The other conspirators who have pleaded guilty are Anthony B. Ghio, Theodore B. Hutz, Yama Marifat, Richard W. Northcutt and John R. Vanzetti.(1)

Source: Guilty plea in home auction rigging.

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

(1) Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit, the United States Attorney’s Office for the Eastern District of California at 916-554-2700 or the FBI’s Sacramento Division at 916-481-9110.

Servicer Who Victimized Homeowner With Illegal Lockout Mysteriously Moves To Vacate Foreclosure, Release Mortgage, Return Keys To Now-Vandalized Home

In Jacksonville, Florida, First Coast News reports:
  • In 2008, Kimberly Clark was behind on the mortgage of her duplex that she rents out, but not in foreclosure. Her mortgage debacle since has been a roller coaster that many times has not made a lot of sense. "I was behind about 30 days, but I made a payment Oct. 15 and about two weeks after that they came and put the locks on the door," she said.

  • Five months after the bank locked her out, on February 2009, Clark was served with a foreclosure lawsuit. She protested the foreclosure filing as a mistake, she said, but March 2010 the lender won a final judgment in court.

  • But in December 2010, nine months after winning its judgment there was a strange turn in the case: For an unexplained reason, the lender filed a motion to vacate the judgment and dismiss the foreclosure lawsuit. Then, on Feb. 4 the bank filed a court document releasing the mortgage on the property in question.

  • And perhaps strangest of all, today an attorney gave Clark the keys to the property. "No one gave me a specific reason," she said. But returning the keys to Clark has presented her with a new problem.

  • The duplex rental has been vacant so long both units have been vandalized, she said. The air conditioning units and some of the plumbing fixtures are gone, and there is graffiti on the walls. "At this point, I will have a contractor assess the property, what value has been lost and go from there," she said.

For more, see Jacksonville Woman Gets Keys Back after Confusing Foreclosure.

"Oxycontin Made Me Do It!" Says Lawyer As He Cops Plea To Ripping Off $865K From Clients' Escrow Funds From Real Estate Closings

In Bridgeport, Connecticut, the Connecticut Post reports:
  • A Stratford lawyer is facing up to 10 years in prison after pleading guilty Friday to stealing more than $800,000 from nearly a dozen clients. John M. Rodia, of Minerva Street, Derby, pleaded guilty before Superior Court Judge George Thim to six counts of first-degree larceny and five counts of third-degree larceny.

  • Senior Assistant State's Attorney Robert Brennan said the 47-year-old Rodia, a former State Police trooper, faces up to 10 years in prison when he is sentenced May 12. Brennan said Rodia stole a total of $865,341 from 11 clients. He has not paid any restitution and is not expected to.(1)

  • According to police, in early 2009 they began receiving complaints that Rodia had been stealing clients' funds he had been entrusted with. Police said one local man claimed he had hired Rodia to handle the sale of his parents' home and Rodia kept $186,000 from the sale of the home and stuck the victim with the closing costs.

  • A couple hired Rodia to handle the refinancing of their Prospect home. But they claim he kept the money from the new mortgage and they nearly lost their home, police said.

  • Police said a Stamford man hired Rodia to handle the refinancing of the mortgage on his condominium, but Rodia kept the $360,000 to pay off the old mortgage. As a result, the condo is currently in foreclosure, police said.

  • A 63-year-old woman, who was injured in a car crash in Fairfield, hired Rodia in 2006 to represent her in a lawsuit against the other driver. But police said the woman later learned that Rodia had settled the suit for $2,500 and kept the money.

  • When confronted, police said Rodia admitted to the thefts, blaming his crimes on an addiction to Oxycontin, which he claimed he developed as a result of a series of back surgeries from a crash while he was a trooper. He claims he developed a $1,000-a-day addiction to the powerful painkiller. But sources said Rodia also lavished expensive gifts, including a car on his girlfriend.

  • Rodia is a 1986 graduate of the University of New Haven and a 1998 graduate of Columbia University Law School. He served as a Trumbull police office from 1986 to 1988, after which he joined the state police. Rodia served as a state trooper until December 1996.

Source: Lawyer pleads guilty to stealing $865,000.

(1) To the extent the victimized clients can't collect any money from this lowlife attorney, they might consider pursuing a claim with the Connecticut Client Security Fund, which is a fund established by the rules of the Connecticut Superior Court to provide reimbursement to individuals who have lost money or property as a result of the dishonest conduct of an attorney practicing law in the State of Connecticut, in the course of the attorney-client relationship. The fund provides a remedy for clients who are unable to obtain reimbursement for their loss from any other source. Go here to obtain a copy of form JD-GC-15 - "Application for Reimbursement - Client Security Fund" (PDF).

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Home Equity Loan Made In Violation Of Texas Homestead Law Declared Void; Lender's Assignee & Post-F'closure Sale Mortgage Lender Left Holding The Bag

The following facts are taken from a recent ruling from a U.S. Bankruptcy Court in Fort Worth, Texas:
  • A certain Mrs. Kimberly Arnold, together with her late husband Mr. Arnold, purchased a home in Haslet, Texas in 2004, paying all cash for the property.

  • Approximately a year and a half later, Mr. Arnold passed away.

  • Following the death of Mr. Arnold, Mrs. Arnold experienced financial difficulties.

  • At some point thereafter, Arnold sought the assistance of Sam Taylor (" attorney Taylor"), an attorney, on a criminal matter unrelated to this case. Taylor unwisely suggested Arnold contact Neal Matthew Quigley ("Quigley") for help with her financial situation.

  • Quigley, an apparent lowlife, is described by the judge in his ruling as "a crook, a scoundrel, a rapscallion, a chiseler."

  • Quigley agreed to give Arnold a home equity loan in the amount of $50,000, secured by the then-mortgage free Property, with the understanding that Arnold would sell the Property to repay her obligation. Arnold signed a promissory note (the "Arnold Note") for $50,000 and executed a deed of trust (the "Arnold Deed of Trust") with respect to the Property in favor of Quigley on or about November 26, 2007. The Arnold Deed of Trust appointed Mark A. Rodriguez as trustee.

  • The Arnold Note called for a maturation date of May 26, 2008, and called for a one lump sum payment due on that date. The Arnold Note also specified that non-judicial foreclosure would occur in the event of default. Arnold never received a copy of the final loan application (or even filled one out), nor did the Arnold Note state that the loan was an extension of credit under section 50(a)(6) of article XVI of the Texas Constitution.

  • A loan modification agreement was subsequently executed extending the due date on the Arnold Note to January 10, 2009.

  • On July 14, 2008, and unbeknownst to Mrs. Arnold, Quigley substituted attorney Taylor in place of Rodriguez as substitute trustee for the Arnold Deed of Trust. Quigley then assigned the Arnold Note to Moon Shadow Investments ("Moon Shadow") on September 15, 2008, and Moon Shadow recorded the assignment on September 22, 2008. Mrs. Arnold had no knowledge of the Assignment at that time.

  • On October 7, 2008 (a full three months before the due date on the loan, as extended by the aforementioned loan modification agreement), after Mrs. Arnold had entered into a contract for the sale of the home with third party, Jon Ireland, Quigley foreclosed on the Property and took title to the premises.

  • Though attorney Taylor was now listed as substitute trustee of the Arnold Deed of Trust, Quigley executed the substitute trustee's deed (the "Substitute Trustee's Deed") conveying the Property to himself.

  • Ireland (Mrs. Arnold's would-be buyer) discovered the Foreclosure only after he checked the real property records and found that the Property was now listed under Quigley's name instead of Mrs. Arnold's. Mrs. Arnold never received any notice of default or foreclosure from Quigley and knew nothing of the Foreclosure.

  • In December of 2008, Quigley contacted DLB, a company owned and operated by Safir with operations based in Arizona, to obtain a loan. Quigley told Safir that he had free and clear property and was seeking a large loan. Quigley sent Safir pictures of the Property, as well as documents suggesting that a tenant named "Melissa Poornich" lived there and paid monthly rent.

  • In January of 2009, Safir came to Texas to see the Property. When Quigley and Safir visited the Property, Arnold answered the door and Quigley introduced her to Safir as "Kimberly Arnold." Quigley then falsely introduced Safir as his insurance agent, something Safir did not deny. Mrs. Arnold became uncomfortable when Quigley and Safir started taking pictures of the Property, and told them they had to leave.

  • Safir loaned Quigley approximately $124,000 secured by the Property. Quigley executed a deed of trust and a promissory note in favor of DLB. The DLB Deed of Trust was recorded in the Tarrant County Deed Records.

  • DLB also purchased a title insurance policy issued by Lawyers Title Insurance Corporation in the amount of $120,000. The policy was dated February 5, 2009, and listed Quigley as holding title to the Property.

  • When neither Moon Shadow nor DLB received payment on their respective promissory notes, they began foreclosure proceedings against the Property, though neither actually foreclosed. Meanwhile, on March 16, 2009, Plaintiffs instituted a state court action against Quigley seeking a declaration that, as to Quigley, Mrs. Arnold held superior title to the Property.

  • Quigley filed for bankruptcy on June 2, 2009. On June 23, 2009, Plaintiffs filed their Motion to Lift Stay to Conclude a Pending Civil Action, or Alternatively, Request for Adequate Protection in Quigley's bankruptcy case, in which they asked the court to, among other things, permit them to proceed with the state court action. The court held a hearing on the Lift Stay Motion on July 23, 2009, at which the parties agreed to remove the state court action to the bankruptcy court.

An adversary proceeding in the bankruptcy court followed in which the judge was compelled to sort out the following claims and defenses of the parties:

  1. Mrs. Arnold and Jon Ireland took the position that the Arnold Note and the Arnold Deed of Trust were executed in violation of article XVI of the Texas Constitution, and are therefore void.
  2. Moon Shadow seeks to enforce Quigley's assignment of the Arnold Note and the Arnold Deed of Trust, arguing that Moon Shadow is a good faith purchaser for value and therefore owns the obligation under the Arnold Note.
  3. DLB argues that it stands as a bona fide purchaser for value with a superior interest in the Property as a result of the DLB Note and the DLB Deed of Trust.
  4. Quigley asserts a counterclaim against DLB, arguing that the DLB Note and the DLB Deed of Trust were usurious under the TEXAS BUSINESS AND COMMERCE CODE and the TEXAS FINANCE CODE, in that DLB attempted to collect money from Quigley in excess of the allowable statutory interest rate.
  5. Quigley also asserts a counterclaim against Arnold, arguing that he is entitled to repayment of the $50,000 he lent Arnold plus interest, costs, and attorney's fees, or in the alternative, a minimum $50,000 claim against Arnold and/or the Property.

Mrs. Arnold's Texas Homestead Claim:

For the reasons set forth in specific detail in the ruling, the court found that Mrs. Arnold met the burden of proving that the property qualified as her homestead, and therefore the Texas homestead law applied to her $50,000 loan transaction with Quigley.

The court then found (for the reasons set forth in specific detail in the ruling) that the loan made to her by Quigley was made in violation of a slew of provisions of the Texas homestead law (article XVI, section 50(a)(6) of the Texas Constitution). Among the consequences of these violations is the forfeiture of all principal and interest owing under the promissory note.

Moon Shadow's Claim:

Moon Shadow asserted that it is a good faith purchaser for value with respect to the Arnold Note, and therefore owns any obligations due under it. The court found that because Quigley was not authorized to make home equity loans pursuant to Paragraph P of article XVI, section 50(a)(6), Moon Shadow, as assignee of the Arnold Note likewise forfeits all principal and interest due that may have been due.

The court also pointed out that because the Arnold Note was void as to Quigley anyway, Moon Shadow, as assignee, could not have greater rights under the Arnold Note than did Quigley. The court added that this would be the case even if Moon Shadow could otherwise satisfy the requirements for bona fide purchaser status.

DLB's Claim:

The court found that, because attorney Taylor (the substitute Trustee) did not himself sign the Substitute Trustee's Deed by which Quigley purportedly took title after the foreclosure sale of Mrs. Arnold's home, said deed was found to be a forgery. There was no evidence indicating that Quigley had any authorization to sign said deed. Consequently, said Substitute Trustee's Deed, as well as DLB's subsequently-acquired interest as mortgagee in the property were void, and DLB was precluded from acquiring the status of bona fide purchaser. The court pointed out that a person cannot obtain bona fide purchaser status under Texas law when one of the links in the chain of title is a forgery.

The court then added that even if there was no forgery, the foreclosure by Quigley was nevertheless void because the Texas Constitution does not allow foreclosure of a deed of trust securing a home equity loan other than by court order. See TEX. CONST., art. XVI, § 50(a)(6)(D). Quigley improperly foreclosed on Mrs. Arnold through the non-judicial foreclosure process.

As if that wasn't enough, the judge then went on to say that, even if it was okay to use a non-judicial foreclosure in this case, the foreclosure of Mrs. Arnold's home failed to satisfy the requirements for a valid non-judicial foreclosure. Quigley provided no notice to Mrs. Arnold as required by section 51.002 of the TEXAS PROPERTY CODE, and foreclosed three months before the Arnold Note became due.

Quigley also assigned the Arnold Note and the Arnold Deed of Trust to Moon Shadow prior to the Foreclosure (an assignment of record, and thus of which DLB — and Lawyers Title — had constructive notice), and therefore, according to the court, had no right to foreclose on the Property under any circumstances anyway.

Quigley's Claims:

As for Quigley's claim that DLB violated Texas usury laws, Quigley was incarcerated on the date of the Hearing, and did not testify. The record contains no evidence that the DLB Note and the DLB Deed of Trust violated any such laws. Quigley's usury counterclaim therefore fails.


Based on the full discussion and analysis set forth in the ruling, the court concluded:

  1. Quigley and Moon Shadow forfeited all principal and interest due under the Arnold Note;
  2. the Arnold Note and the Arnold Deed of Trust are void;
  3. DLB is not a bona fide purchaser for value with a superior interest in the Property; and
  4. Quigley's counterclaims are without merit.

For the ruling, see In re Quigley, Case No. 09-43357-DML, Adversary No. 09-04317-DML (Bankr. N.D. Tex., Fort Worth Div., March 16, 2011).