Saturday, May 23, 2015

Antitrust Feds Continue Racking Up Guilty Pleas In Northern California & Atlanta-Area Foreclosure Sale Bid-Rigging Probes; Public Urged To Come Forward With Any Information Regarding Real Estate Public Auction Hanky Panky

The following excerpts are from two separate recent news releases from the U.S. Department of Justice:

#1 - Northern California:
  • A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

    Felony charges were filed [] in the U.S. District Court for the Northern District of California in Oakland against Wayne Lippman of Walnut Creek, California. To date, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 55 individuals have agreed to plead or have pleaded guilty.

    According to court documents, between August 2008 and January 2011, Lippman conspired with others not to bid against one another and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda and Contra Costa counties. Lippman made and received payoffs for the agreements not to bid, diverting money that would have otherwise gone to mortgage holders and other beneficiaries.


    [These] charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Alameda and Contra Costa counties, California. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.
For more, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions.

For the formal charges, see USA v. Lippman.


#2 - Atlanta, Georgia
  • A Georgia real estate investor pleaded guilty [] for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

    Felony charges against Eric Hulsman were filed [] in the U.S. District Court of the Northern District of Georgia in Atlanta. According to court documents, from at least as early March 6, 2007, and continuing at least until Dec. 6, 2011, in Fulton County, Georgia, and from at least as early as Jan. 2, 2007, and continuing at least until Jan. 1, 2008, in DeKalb County, Georgia, Hulsman conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions.

    Hulsman was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton and DeKalb properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.


    The primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb county public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and in some cases, the defaulting homeowner.


    A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

    Including Hulsman, eight cases have been filed as a result of the ongoing investigation being conducted by Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit
For the formal charges, see USA v. Hulsman.

Non-Profit Exec Cops Plea For Role In Bid-Rigging, Kickback Racket Designed To Rip Off Medicaid Program Of Money Earmarked To Help The Elderly & Infirm Transition Out Of Nursing, Rehab Institutions Back To Their Own Homes

From the Office of the New York Attorney General:
  • Attorney General Eric T. Schneiderman [] announced that Darlington Odidika, executive director of Yonkers-based nonprofit Systems and Abilities, Inc., pleaded guilty to his role in a bid-rigging and kickback scheme to defraud the Medicaid system of monies earmarked to allow the elderly and infirm to live in the community, rather than in an institutional setting. As a condition of [the] plea, Odidika, 47, of Poughkeepsie, will be sentenced to three months in jail and five years of probation. Odidika and the corporation are also required to repay the full amount that was stolen from Medicaid as a result of this scheme.

    “This defendant and his company stole funds from a program intended to assist the elderly and disabled to live in their own home surrounded by loved ones rather than a facility,” said Attorney General Schneiderman. “Every dollar stolen by perpetrators like Mr. Odidka impacts our state’s ability to support its neediest citizens. My office will do everything possible to ensure those monies are not sacrificed to their greed.”

    Systems and Abilities, Inc. was an enrolled provider in the Nursing Home Transition and Diversion Program (NHTD Program), a New York State Department of Health program that provides senior citizens and those suffering from physical disabilities alternatives to institutional living. Operating in Westchester and surrounding counties, Systems and Abilities arranged for contractors to provide modifications to the existing homes of qualified Medicaid recipients through a required bid process and then billed Medicaid based upon the alleged final costs of the projects. Systems and Abilities also billed Medicaid for moving expenses and basic home furnishings for individuals transitioning from a nursing home or rehabilitation center back into their homes.

    In [the] guilty plea, Odidika admitted to falsifying bids for these modifications and submitting them to agents of the Department of Health between August 31, 2009 and November 30, 2011. By falsifying these bids, Odidika was able to control which contractor won the bid and inflate the amount of payment that Systems and Abilities received as its share of the project. Odidika also admitted to submitting Final Cost Reports, and Medicaid claims based upon these reports, which falsely stated the actual costs of the projects. Similarly, he admitted to falsifying Final Cost Reports in the transition program for moving expenses, which were either never provided or significantly inflated over the actual costs, and submitting Medicaid claims based upon these false reports.

    Odidika and Systems and Abilities each pleaded guilty to one count of Grand Larceny in the Third Degree today before the Honorable Barry E. Warhit in Westchester County Court. Odidika is to receive a sentence of 90 days in the Westchester County Jail and five years of probation. The nonprofit Systems and Abilities was sentenced to pay a fine of $5,000. Sentencing for Odidika is scheduled for July 29. Odidika and the corporation are also required to pay restitution of $21,690, most of which has already been reimbursed to the Medicaid program.
Source: A.G. Schneiderman Announces Guilty Plea Of Westchester Nonprofit Executive For Stealing From State Program Assisting Seniors And Disabled (Darlington Odidika Falsified Bids For Construction Work, Inflated Costs Of Services Provided And Took Kickbacks On Behalf Of Nonprofit Systems And Abilities, Inc.; Schneiderman: Every Dollar Stolen By Perpetrators Like Mr. Odidka Impacts Our State’s Ability To Support Its Neediest Citizens).

Scheme Resulting In Rigging Periodic Inspection Process Of Federally Funded Housing Rental Units By Tipping Off City Housing Authority Of Secret Information Ends In Convictions For Housing Authority Exec, HUD Building Inspector

From the Office of the U.S. Attorney (Boston, Massachusetts):
  • A former executive of the Chelsea Housing Authority (CHA) and a former public housing inspector were convicted on Wednesday, April 1, 2015, for their roles in rigging the inspection process of federally funded housing units.

    James Fitzpatrick, 63, of Acton, Mass., and Bernard Morosco, 50, of Utica, NY, were convicted of conspiring to defraud the United States and the U.S. Department of Housing and Urban Development (HUD) by impairing, impeding, and defeating the proper operation of HUD’s physical condition assessment.


    [H]UD’s Real Estate Assessment Center (REAC) is required to “provide for an independent physical inspection of a public housing authority’s property or properties that includes, at a minimum, a statistically valid sample of the units in the CHA’s public housing portfolio to determine the extent of compliance with the standard.” REAC inspections are conducted by independent contractors who have received training from REAC on the inspection protocol and applicable regulations, and have been certified by HUD.


    Before the REAC inspections of the CHA in 2007, 2009, and 2011, Morosco gave Fitzpatrick, the Assistant Director of the CHA, an advance list that revealed which units at the CHA would be inspected. During those years, Morosco, who was a REAC-certified inspector, worked for the CHA as a consultant, advising the CHA about how to get better scores on its REAC inspections.

    One or two months before each REAC inspection, using information provided by Fitzpatrick, Morosco accessed HUD’s secure database and downloaded information to which he was not entitled. That information enabled him to use his REAC software to generate, in advance, the random sample that would later be generated by the assigned REAC inspector. Morosco then gave the samples to Fitzpatrick who, in turn, provided it to the CHA’s Executive Director, Michael McLaughlin.

    McLaughlin divided CHA employees into pairs, calling each pair a SWAT team, and sent them to inspect the units identified by Morosco. For the month before each inspection, the SWAT teams visited several apartments a day, inspecting and re-inspecting them as maintenance crews visited the units to make repairs, fumigate, and exterminate. When the REAC inspectors conducted the inspections, the units that were selected were the same as the ones provided in advance by Morosco.

Friday, May 22, 2015

Another Lawyer Files Bankruptcy, Faces Possible Disbarment On Heels Of Getting Tagged By State Authorities For Running Bogus Foreclosure Rescue/Loan Modification Racket; Scam Targeted Poor Latinos

In Boston, Massachusetts, The Boston Globe reports:
  • The Massachusetts Commission Against Discrimination ["MCAD"] has found that a Revere lawyer specifically targeted Latino clients for home loan modification services that he promised would save them from foreclosure, but pushed some of them further into financial peril.

    In a decision last week, a commission hearing officer ruled that David Zak provided “substandard service to Latino clients because of their national origin” and should pay 17 families more than $220,000 in damages. Whether they will receive any compensation is uncertain as Zak has filed for bankruptcy.(1)

    “I think they feel very vindicated that somebody listened to them,” said Nadine Cohen, a managing lawyer at Greater Boston Legal Services(2) who represented the families in the case.

    Zak is also facing disciplinary action by the Massachusetts Board of Bar Overseers and could lose his license to practice law. He is appealing the disbarment recommendation and also plans to appeal the discrimination ruling, he said Friday.

    Zak said he has helped hundreds of Spanish-speaking families modify their home loans and has never discriminated against them.

    “There were misunderstandings that arose with a small group of clients and those misunderstandings were blown out of proportion and mistakenly labeled as discrimination,” Zak said.

    But former clients, employees, and a business partner said that Zak made derogatory comments about Latinos and said they were “easy targets,” according to the discrimination commission’s decision. One employee said Zak told homeowners they would be “mucho estupido” if they didn’t hire him, according to the discrimination commission’s decision.

    Zak launched a home loan modification business in 2009, as struggling homeowners faced ballooning payments on their mortgages and saw their property values drop below what they owed the banks. To help keep people in their homes, the federal government urged lenders to modify qualifying loans.

    Zak advertised with Spanish- and Portuguese-speaking publications and radio stations, hired staff with ties to the Latino community to bring in clients, and claimed to be the only lawyer who had helped Latino families avoid foreclosure, according the commission’s decision.

    He and his employees charged families an initial $2,500 to provide a simple breakdown showing his firm could significantly reduce interest rates and monthly mortgage payments, but failed to mention that banks usually rejected that initial analysis, according to the commission’s ruling. He charged thousands more to file modification documents.

    But in many cases, families still lost their homes; in one case, Zak never responded to a bank modification offer, the decision stated.

    The Massachusetts attorney general’s office also has a complaint against Zak.
Source: Revere attorney allegedly discriminated against Latino homeowners.

For the MCAD press release, see MCAD Finds For 17 Latino Homeowners (Ruling Orders Revere Attorney to Pay $233,600 for Targeting Predatory Mortgage Modification Services).

(1) To seek some reimbursement for being screwed over, the victims here might be able to turn to the Massachusetts Clients' Security Board of the Supreme Judicial Court, which manages and distribute money collected from annual dues paid by members of the bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

(See Thieving Lawyers Draining Client Security Funds, a story published in The New York Times published in 1991 that gives some-real life examples of how client security funds deal with claims and the pressures they may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels).

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.

(2) Greater Boston Legal Services is a non-profit Massachusetts law firm that represents low-income individuals and families in Boston and 31 additional cities and towns in the Greater Boston area,

Thursday, May 21, 2015

NY AG Scores Default Judgment In Civil Suit Against Bogus, Now-Bankrupt Foreclosure Defense Attorney Who Clipped Homeowners Throughout Country For Monthly Fees In Exchange For Worthless Forensic Audits, Mortgage Cancellation Services, Etc.; Outfit Falsely Implied It Had Nationwide Presence & Connections w/ State AGs, Feds

From the Office of the New York Attorney General:
  • Attorney General Eric T. Schneiderman [] obtained a default judgment in New York County Supreme Court against two law firms and their lead attorney for participating in a fraudulent mortgage rescue scheme.

    The judgment ordered Litvin Law Firm; Litvin, Torrens & Associates, PLLC; and the firms’ principal attorney Gennady Litvin to immediately halt their illegal business practices, including preying upon financially vulnerable consumers by claiming to provide a comprehensive legal services plan that would allow consumers to avoid foreclosure.

    Under today’s judgment, the court also ordered the Litvin Law Firm and Gennady Litvin – which have recently filed for bankruptcy – and Litvin, Torrens & Associates to provide a full accounting so that the Attorney General’s Office can determine an appropriate amount for restitution for their victims, who typically paid hundreds of dollars in monthly fees for services that were never provided.(1)

    “Today, these law firms can no longer prey upon vulnerable families desperate to stay in their homes, and my office can begin determining appropriate restitution for their victims,” said Attorney General Schneiderman. “My office has no tolerance for attorneys who abuse their position in order to defraud consumers, and we will continue to take aggressive action against such schemes. In the meantime, I urge all New Yorkers to use our AGScamHelp app to check out a company claiming to offer mortgage help and get connected to free, trusted assistance through one of our many HOPP partners statewide.”

    Last year, the Attorney General’s Office filed a lawsuit against the firms and Gennady Litvin for engaging in fraudulent and illegal practices in offering legal services and other foreclosure assistance to consumers in New York and other states. Through repeated television and radio ads, the Litvin Law Firm induced consumers to call its offices by falsely implying that they had a connection to “State Attorneys Generals and the Federal Government” and that homeowners could have their mortgages satisfied in full, a most unlikely result.

    Through the use of third-party marketers, many of which used the term “legal” in their names, the firms solicited homeowners nationwide, representing that the homeowners would have a “custom made attorney defense team” that provided “a level of service that usually is only enjoyed by large corporate clients.” The marketers also purported to provide homeowners with “forensic loan audits” that were “vitally important” to identify errors in their mortgage loan documents, defend against foreclosure, and win concessions from lenders. On its website, the Litvin Law Firm led consumers to believe that it was a law firm with a nationwide presence, located in 31 states, and that the firm had the ability to provide foreclosure defense nationwide.

    Based on these representations, struggling homeowners paid the firm and its marketers a monthly fee, typically $595 or $750, to obtain legal services. However, many consumers did not receive the legal representation they were promised. The Litvin Law Firm and Litvin, Torrens & Associates, which had offices only in New York and Florida, could not provide nationwide foreclosure defense. Moreover, the forensic audits typically had very little value in saving consumers’ homes. In many cases, homeowners never spoke to an attorney in their state, never obtained a loan modification or other foreclosure relief, and wound up having to negotiate with lenders on their own.

    If you believe you were a victim of the Litvin Law Firm or Litvin, Torrens & Associates – or if you believe you were a victim of another mortgage fraud – please file a complaint with the Attorney General’s Office. Complaint forms can be completed online here. You may also call the Attorney General’s Consumer Hotline at 1-800-771-7755.
Source: A.G. Schneiderman Announces Court Judgment Against Brooklyn & Florida Law Firms For Running Fraudulent Mortgage Rescue Scheme (Judgment Orders Firms And Principal Attorney To Stop Illegal And Deceptive Business Practices And Submit To A Full Accounting For Restitution; Schneiderman: We Will Continue To Take Aggressive Action Against Attorneys Who Abuse Their Position In Order To Defraud Homeowners).

For the Spanish-language version of the state AG's press release, see Schneiderman Anuncia Fallo Judicial Contra Bufetes De Abogados De Brooklyn Y Florida Por Operar Un Fraudulento Esquema De Rescate De Hipotecas.


(1) To seek some reimbursement for being screwed over, the victims here might be able to turn to the The Lawyers’ Fund For Client Protection Of the State of New York, which manages and distribute money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

(See Thieving Lawyers Draining Client Security Funds, a story published in The New York Times published in 1991 that gives some-real life examples of how client security funds deal with claims and the pressures they may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels).

For similar "attorney ripoff reimbursement funds" that attempt to clean up 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.

East Hampton Billionaire Homeowners Temporarily Dodge Bullet As Town Agrees (After Being Roped Into Federal Court) To Three Week Delay In New Airport Rules That Threaten To Kibosh Their Helicopter Commutes In/Out Of NYC & Ruin Their Summer (Just In Time For Memorial Day Weekend!)

In East Hampton, Long Island, Bloomberg reports:
  • Some of New York’s wealthiest will be able to start their summer this weekend with a helicopter ride to a favorite eastern Long Island vacation spot.

    The Town of East Hampton agreed to delay new rules on noise limits that would have sharply curbed access to the town’s airport as a federal judge weighs a challenge to the restrictions.

    The new limits, which were to go into effect Tuesday, would’ve prohibited most helicopters from flying more than one trip a week during the summer season, “effectively shutting down commercial charter service,” helicopter operators said in a lawsuit seeking to block the measure. The summer season in northern U.S. typically begins with the Memorial Day long weekend, which starts May 23 this year.

    While there are other airports in the region, the East Hampton airport has by far the most helicopter landings, according to town officials.

    U.S. Judge Joanna Seybert in Central Islip said she would rule on the helicopter noise rules by June 8.

    The median price of all Hamptons homes that sold in the three months through March was $920,500, with homes priced from $1 million to $5 million accounting for 38 percent of the sales. CNN anchor Anderson Cooper was among those selling last quarter, getting $2.98 million in February for a four-bedroom waterfront cottage in Quiogue.

    The case is Friends of the East Hampton Airport Inc. v. Town of East Hampton, 2:15-cv-02246, U.S. District Court, Eastern District of New York (Central Islip).
Source: Billionaires Can Start Summer With Hamptons Chopper Ride.

For an earlier post on this story, see East Hampton Billionaire Homeowners Under Attack As New Rules Threaten To Restrict Their Noisy Helicopter Commutes To Work Into Manhattan To Once A Week ('High Fliers' May Now Be Relegated To Using Seaplanes Or, Worse, Limo Service, Subject To Traffic Jams).

Wednesday, May 20, 2015

Title Insurer's Failure To Read, Properly Interpret Probate Order Leads To Security For Lender's $416K Mortgage Loan Being Limited To Life Estate In Home; Both Left Holding The Bag When Borrower Died As Remaindermen Come Forward, Claiming Free & Clear Title To Collateral

The following facts have been adapted from a recent California Appeals Court ruling:
  1. In 1965, Lawrence Peterson (Lawrence) and his first wife acquired title to a home in Culver City, California.
  2. In 1985 (some twenty years later), Lawrence acquired sole title to the home by a quitclaim deed.
  3. In 1986, Lawrence, who was then married to his second wife, Jacqueline, died. At the time of his death, Lawrence owned the Property as his sole and separate property.
  4. Shortly thereafter in 1986, in a probate proceeding, the trial court admitted Lawrence's last will and testament.
  5. Later on during the probate proceeding, the trial court entered an order allowing, among other things, final distribution of the estate (Probate Order) that provided that, subject to certain conditions, Lawrence's home be distributed to Jacqueline.
  6. The relevant conditions of the property distribution of the home were as follows:
    .....(a) Jacqueline may reside in the home rent free for her lifetime; provided, however, that if she shall remarry, the home shall thereupon be sold, and the proceeds therefrom shall be distributed one-third to Jacqueline and one-third each to Lawrence's two sons, Mark and Paul;
    .....(b) Jacqueline may at her option sell the home at any time, whereupon the proceeds therefrom shall be distributed in the same manner set forth above (one-third each);
    .....(c) Upon Jacqueline's death prior to a sale of the home, the home shall pass in equal share to Lawrence's two sons, Mark and Paul (Editor's Note: I wonder if Lawrence's children were from his first wife; the court is silent as to this point and, apparently, was not relevant in the disposition of this matter. Lawrence sure took great pains to make sure his two sons would not be squeezed out of their share of the home  (ie. their inheritance) he acquired with his first wife in the event he predeceased Jacqueline, his second wife, and she were to remarry),
  7. On April 8, 1987, the Probate Order was recorded in the Official Records, Recorder's Office of Los Angeles County, California (ie. recording the probate order has the effect of making such order a part of the home's chain of title, and constitutes notice to the world of the status of the title to the premises, no different than a deed).
  8. In January, 2003, and notwithstanding the restrictions in the Probate Order, Jacqueline purported to transfer title to the home to "Jacqueline C. Peterson, a Widow." Contemporaneously therewith, Jacqueline borrowed $165,000 from California National Bank (apparently, the title insurer failed to read and/or understand the terms of Probate Order, which was recorded and, consequently, made a part of the chain of title).
  9. In March, 2008, Jacqueline refinanced the 2003 mortgage and obtained a loan from defendant and appellant Wells Fargo of $416,900 (again, the title insurer apparently failed to read and/or understand the terms of the Probate Order, which was recorded and, consequently, made a part of the chain of title. I suppose it should be noted that during the years 2003 through 2008 (the period leading up to the great real estate crash of less than a decade ago), there was big frenzy to make mortgage loans which were then packaged up and securitized by Wall Street financial institutions. It may be that, at the point where this $416,900 loan was originated, no one involved therewith wanted to be bothered with reading probate orders and the like when underwriting real estate titles and title insurance. They just wanted to pump out the mortgages and were readily willing to ignore the significance of the Probate Order in this case, hoping no one will catch the issue and, if caught, letting someone else down the road deal with the consequences of its significance, which is what ended up happening here).
  10. On March 25, 2010 (about two years later) Jacqueline died. The home loan from Wells Fargo went into default shortly thereafter and, consequently, a notice of default and election to sell the home was recorded, thereby commencing the foreclosure process..
  11. In response to the notice of default and election to sell the home, Lawrence's two sons brought an action for cancellation of Jacqueline's 2003 deed to herself, and for cancellation of the subsequent written instruments relating to the subsequent mortgages and notice of default. They also requested a preliminary and permanent injunction, and brought an action to quiet title against the relevant parties.
  12. Despite the fact that the term "life estate" was not used in the Probate Order to describe Jacqueline's interest in the home, the trial court found that the terms of the order were sufficient to establish Jacqueline's interest was not a fee interest, but was limited to a life estate in the home, with Lawrence's two sons holding a remainder interest therein.
  13. Consequently, the trial court voided Jacqueline's 2003 deed and all the subsequent instruments (ie. the $416,000 Wells Fargo mortgage, the notice of default, etc.), and quieted title to the home in the names of the two sons.
  14. For the reasons set forth in the appeals court ruling, the appellate court affirmed the trial court ruling.
For the court ruling, see Peterson v. Wells Fargo, No. B250925 (Cal. App. 2d Dist. Div. 5, May 8, 2015) (certified for publication).

Editor's Note: Representing Wells Fargo in the case was Fidelity National Law Group (the in-house litigation department of Fidelity National Title Group, one of the largest title insurance providers in the world), undoubtedly in response to a title claim filed by Wells Fargo with the title insurer.

    Tuesday, May 19, 2015

    Shameless Bankster Fails (But Nearly Succeeds) In Attempt To Invoke Statute Of Limitations To Establish Viability Of Its Mortgage Based On Forged Deed; BoA Nearly Gets NYS Courts To Set Aside Over A Century Of Case Law In Close Call

    Legal Issues:
    • forged deeds,
    • void ab initio (meaning a legal nullity at its inception) vs. voidable,
    • effect upon real property of of encumbrances (ie. mortgages, etc.) based on a forged deed,
    • inapplicability of New York's recording statute (NY Real Property Law § 291) to a forged deed,
    • inapplicability of the statute of limitations (CPLR 213 (8) [NY Law]) to foreclose a claim against parties (ie. title holders, mortgagees, other lien holders) claiming under a forged deed,
    • prevailing approach in other jurisdictions.

    From an Opinion Summary from Justia US Law:
    • Plaintiff filed a complaint against Bank of America and related entities seeking to set aside and cancel, as null and void, the Bank’s mortgage interest in real property conveyed on the authority of an allegedly forged deed.

      The Bank moved to dismiss the complaint under N.Y. C.P.L.R. 3211(a)(5) as untimely under N.Y. C.P.L.R. 213(8). Supreme Court dismissed the complaint in its entirety as time-barred.

      The Appellate Division affirmed as to the Bank, concluding that Plaintiff’s forgery-based claim against the Bank was subject to the six-year statute of limitations for fraud claims set forth in N.Y. C.P.L.R. 213(8).

      The Court of Appeals reversed, holding that the statute of limitations in section 213(8) did not foreclose Plaintiff’s claim against Defendant because, under prior case law, a forged deed is void ab initio, and as such, any encumbrance upon real property based on a forged deed is null and void.(1)
    Source: Opinion Summary - Faison v. Lewis.

    See also, NY appeals court holds statute of limitations does not bar action to cancel mortgage.

    For the court ruling, see Faison v. Lewis, 2015 NY Slip Op 04026 (May 12, 2015).

    (1) From the court ruling:
    • The legal question raised in this appeal is whether plaintiff Dorothy Faison is time-barred under CPLR 213 (8) from seeking to set aside and cancel, as null and void, defendant Bank of America's mortgage interest in real property conveyed on the authority of a forged deed.

      Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such, any encumbrance upon real property based on a forged deed is null and void.

      Therefore, the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiff's claim against defendant. As the Appellate Division affirmed the dismissal of plaintiff's claims as time-barred, we now reverse.


      [W]e will not impose statutes of limitations on forged deeds because the resulting prejudice to the "rights of the true owner of real estate" only "open[s] the door for the destruction of all titles, and makes[s] it much easier for the criminal to purloin real than personal property" (see Marden, 160 NY at 57-58).


      For over a century, since this Court's decision in Marden, a forged deed has been treated in New York as void ab initio. As the Court recognized in Riversidea statute of limitations cannot validate what is void at its inception. Therefore, a void deed is not subject to a statutory time bar. The defendant's arguments are in contravention of Marden and Riverside, and would subject a claim of deed forgery to a six-year statute of limitations under CPLR 213 (8), with the result that a forged deed may be relied upon to convey title and for purposes of encumbering real property.

      However, under well-established real property principles, because only a holder of legal title may convey an interest in real property, no property interest can be conveyed by a forged deed, and no person may be a bona fide purchaser of real estate on the force of such deed. Moreover, our recording statute does not apply to a forged deed, with the consequence that recording a forged deed cannot transfer title. We, thus, decline the defendant's invitation to unsettle this established doctrine to the detriment of our state's real property recording system.

      To adopt defendant's position is to permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome.

      Defendant fails to present a compelling reason to overturn or ignore our prior case law in the area of real property because as we have recognized, "parties in business transactions depend on the certainty of settled rules, `in real property more than any other area of the law, where established precedents are not lightly to be set aside'" (172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Ass'n, Inc., 24 NY3d 528, 535 [2014], citing Holy Properties Ltd., L.P. v Kenneth Cole Productions, Inc., 87 NY2d 130, 134 [1995]). No less so with respect to forged deeds, because landowners, banks, mortgagees, insurers, and a myriad of others depend on the simple rule that a forged deed is a legal nullity that cannot divest ownership or serve to encumber real property.

      Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed and defendant Bank of America, N.A.'s motion to dismiss the complaint against it pursuant to CPLR 3211 (a) (5) denied.

    Editor's Note: What merits highlighting in this case is how close the bankster (ie. Bank of America) came to winning this case by getting the New York judiciary to completely disregard over a century of case law. They won in the trial court; they won a unanimous decision in a state intermediate appeals court (in a 4-0 ruling - see Faison v. Lewis, 966 N.Y.S.2d 198, 106 A.D.3d 1047 (App. Div. 2nd Dept. 2013)); and they persuaded three judges on the New York Court of Appeals (the state's highest court) to buy into their argument - falling one vote short of winning - losing in a split, 4-3 decision. In other words, Bank of America got a total of eight trial and appellate level judges to buy into its argument that would, as the 4-judge majority conclusively stated, "permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome."

    Fans of the law on forged deeds may find the court's ruling to be interesting reading as it reviews the case law in New York on forged deeds (ie. void vs. voidable, effect on bona fide purchasers, effect of recording a forged deed (or an instrument based on a forged deed), applicability of statute of limitations in attempts to cancel void instruments, etc.) dating back over a century, beginning with the venerable Marden v Dorthy, 160 NY 39 [1899]).

    Monday, May 18, 2015

    HOA Lawsuit Accusing Property Manager Of Looting $228K From Homeowners' Coffers Triggers Criminal Probe

    In Hollywood, Florida, WPLG-TV Channel 10 reports:
    • A property manager at a 100-unit condominium on Hollywood Beach embezzled $228,000 from unit owners during a two-year period, according to a lawsuit filed by residents.

      The Hollywood Police Department is also criminally investigating the allegation that Kristin Glansen, 35, diverted large sums of money from The Waterway at Hollywood Beach into bank accounts she controlled, the city confirmed.

      "Everybody is upset over it," said current board president Kay Callari. "We all feel like we've been robbed."

      A lawsuit filed on the condo's behalf by attorney Eric Glazer alleges that Glansen created a company called Willis Homes, which has a very similar name to the condo's actual insurance company, Willis of Florida. And then Glansen cut big check after big check -- one of them as high $47,000 -- to her own company, the lawsuit alleges.

      "The prior manager here walked away with a lot of money wrongfully," said Glazer. "She cut the checks basically to Willis or Willis Homes and put it in her very own bank account making it appear as if insurance bills were getting paid."

      Attempts to reach Glansen, whose Elite Management company operated out of a small building on Sheridan Street, were unsuccessful, and a message left on her cellphone went unanswered.

      Glazer said one big mistake made by the condo board was giving Glansen the power to sign checks. Along with a former board president, Glansen signed each of the checks in question.

      He said that now residents must hope not only that they win a judgment against Glansen, but that she hasn't spent all the money and they can collect on their alleged losses.

      City spokeswoman Raelin Storey confirmed that a criminal investigation is ongoing.
    Source: Lawsuit alleges property manager embezzled $228,000 from condo association (Allegations by condo board lead to criminal investigation).

    Sunday, May 17, 2015

    Failure To Timely Record Medicaid Assistance Lien Leaves State Social Service Agency Holding The Bag; Filing Lien After Aid Recipient's Death Fails To Attach To Latter's Real Property Interest Since Title Passed To Kids Immediately Upon Demise

    From an Opinion Summary from Justia US Law:
    • The Department of Social Services (DSS) provided Medicaid benefits to Darlene Hollman while she was in a nursing home. Hollman had an interest in real estate at the time, but DSS did not record a lien on the property for the benefits it had provided until after Hollman died. Hollman’s children challenged the validity of the lien.

      The circuit court granted summary judgment in favor of DSS, concluding that an enforceable medical assistance lien was created on the property at the time the nursing home assistance was provided and that Hollman’s interest in the property transferred at death to the children subject to the lien.

      The Supreme Court reversed, holding:

      (1) DSS’s medical assistance lien did not attach to Hollman’s interest in the property before her death, and Hollman’s interest passed to her children immediately upon her death;

      (2) because the lien had not been recorded at the time of Hollman’s death, Hollman had no interest upon which the lien could attach; and

      (3) therefore, Hollman’s interest passed to her children free of DSS’s lien.
    For the Opinion Summary, see Hollman v. S.D. Dep’t of Soc. Servs.

    For the South Dakota Supreme Court's ruling, see Hollman v. South Dakota Dept. of Social Services, 2015 S.D. 21 (April 15, 2015).