Saturday, September 19, 2015

Victims Of Rent Hustle Break Up Ripoff In Progress; Thief Who Pocketed Deposits For Vacant Home Speeds Off, Escapes Capture; Cops: We See 15-20 Similar Scams Monthly

In Tampa, Florida, The Tampa Tribune reports:
  • Cliff Brown appeared to be an honest real estate agent trying to make a buck. But looks can be deceiving.

    Authorities say Cliff Brown was a fake name and that he scammed Yasmin Lopez and her girlfriend, Bianca Olivera, out of hundreds of dollars by pretending to be a real estate agent and taking their deposit for a rental house that wasn’t for rent.

    The Hillsborough County Sheriff’s Office sees 15 to 20 similar scams a month, said sheriff’s office spokesman Larry McKinnon. “They’ll find a house that is empty or appears to be abandoned,” McKinnon said. [...] “Generally, we will give them a couple of weeks to get out,” McKinnon said.

    Lopez and Olivera first made contact with Brown on July 20 about a rental home he advertised on Craigslist. When the two 21-year-olds pulled up to Minnehaha Street in Tampa, a black Dodge minivan was parked out front and Brown was inside the peach-colored house.

    “There was a lockbox on the home,” Lopez said. “The house was beautiful.”

    Lopez said Brown greeted them and said the property had belonged to his dead father. Lopez said he was smart and looked professional with his white dress shirt and black sport coat.

    The couple strolled around the 1,250-square-foot house and liked everything they saw. They were so enamored, they said, they shrugged off the red flags: no “for rent” sign in the front yard; Realtor’s license left at home; no business card.

    The couple decided they wanted the house, Lopez said, so they gave Brown $800 cash down, plus another $50 for the background check application. He wrote them a receipt.

    They were scheduled to meet with Brown a few hours later at a Wendy’s parking lot, Lopez said, and give him another $800 for the security deposit. But that time never came.

    Between meetings, Lopez said, the couple learned Brown was going to show Olivera’s sister the same house. They grew suspicious.

    “We looked further into it and we found the actual owner’s number, and he told us to call the police department,” she said.

    Outside the house on Minnehaha, Lopez and Olivera waited for the police to arrive and take a report. Before that happened, however, Brown drove by in his minivan, then sped off.

    “I was sure he didn’t know we called the cops,” Lopez said.

    The couple jumped into Lopez’s Honda Civic hatchback and chased Brown but said he drove through stop signs, drove in the wrong direction on one-way roads and broke other traffic laws to avoid begin caught. “He was doing it all,” Lopez said.

    Brown got away and Lopez and Olivera returned to the house, where the police were waiting along with five or six other cars belonging to potential renters.

    It turns out everything about Brown was a lie, even the minivan; it was a rental registered under another person’s name.

    Although he evaded Lopez and Olivera on the road, he was captured on video during the couple’s walkthrough.

    “We were recording because we wanted to show our families the house,” Lopez said.

    Since Lopez and Olivera’s run-in with Brown, the Minnehaha house has sold for $124,900, according to property appraiser records, and the couple has found a home in Tampa.

    But the scams continue, McKinnon said.

    “Just do your homework with these people before you pass money,” he said. “Because once you get money into their hand, they disappear into the night.”

Craigslist Used As Source Of Leads For Deed Thieves Looking To Flip Recently-Hijacked Vacant Homes; Officials Urge Property Owners To Sign Up For County Deed Fraud Alert System

In Lansing, Michigan, WLNS-TV Channel 6 reports:
  • Lansing Police are warning of a new housing scam is going on. Officials say they’ve seen several cases where someone tries to buy a house on Craigslist only to find the person who sold it to them wasn’t the real owner.

    It’s a home-buyer’s worst nightmare, spending thousands of dollars on a home only to find they’ve been scammed.

    Lansing Police say they’ve been seeing cases like this pop up with criminals using Craigslist to cash in.

    “They actually met with a person and thought they were purchasing a house. This was a vacant piece of property and it turns out they got scammed by his person,” said Robert Merritt, Lansing Police Department.

    They say these criminals make the sale seem legitimate by showing buyers a fraudulent deed, but in reality the home belongs to someone else.


    Police are investigating the scams but say be aware. If it sounds too good to be true, it probably is. The county does offer free legal advice if you need someone to check a deed before you buy.

    And if you’re not buying, but want to make sure someone isn’t using your address for an ad on Craigslist, you can sign up for the Ingham County Register of Deeds Fraud Alert System.

Palm Beach Cops Warn Of Home Title Hijacking Scams Utilizing Forged Deeds; Urge Homeowners To Sign Up For County Clerk/Controller Office's Free Property Fraud Alert

In Palm Beach, Florida, the Palm Beach Daily News reports:
  • Palm Beach police warn residents about a property and mortgage scam and recommend that property owners sign up for fraud alerts through the clerk’s office.

    People involved in the scam file fake deeds, making it appear as if they own homes that are not actually theirs.

    Once the person files the fake deed showing he or she as the owner, the fraudster may put the property on the market to try and sell it, said Captain Jeff Trylch. In addition, the fraudulent owner can use that property as collateral and get bank loans against the property.

    “There also have been cases where people get these fake deeds, become the fraudulent owner and attempt to evict the actual owner from that home,” Trylch said.

    The Clerk & Comptroller of Palm Beach County offers a free service for property fraud alert, which helps protect residents by monitoring the documents being recorded in the official records of the clerk’s office. By signing up, residents will receive notification by email or phone whenever a document is recorded in Palm Beach County using their name or their business’ name.

    “Signing up for the clerk’s fraud alerts is a way to know if anyone files any liens or any transactions regarding your property,” Trylch said. “It’s like a fraud alert on your credit cards. When you sign up, you can select either email or phone alerts and the alerts will come within 48 hours of any action taken regarding your property.”

    Sign up for Property Fraud Alerts offered by the Clerk & Comptroller, Palm Beach County at or call 1-800-728-3858.

Friday, September 18, 2015

Homeowner Scores $614K In Damages, Attorney Fees For Being Subjected To Outrageous Conduct By Homeowner Association's Rogue Debt Collectors That Constituted Civil Racketeering, FDCPA Violations

From a news release from the Bourassa Law Group LLC (Nevada):
  • A Nevada jury awarded a homeowner $466,000 plus her attorneys fees and costs for a total judgment of $614,091.04 against two HOA collection agencies for violations of the Fair Debt Collection Practices act and Civil Racketeering. The homeowner, Melinda Ellis, is represented by Mark J. Bourassa of The Bourassa Law Group.

    The homeowner owned property in Washoe County, Nevada that was part of the Arrowcreek homeowner association. After a dispute arose between the homeowner and the association, defendants Alessi Trust Corporation, and its successor, Alessi & Koenig, LLC pursued collection of HOA dues and substantial additional fees and costs. The defendants' collection tactics included filing multiple liens and threats to foreclose on the homeowner's property. The homeowner subsequently filed the lawsuit, entitled Melinda Ellis v. Alessi Trustee Corporation;, United States District Court Case No. 3:09-CV-0428-LRH-RAM, alleging that the defendants' conduct was in violation of the Fair Debt Collection Practices Act and constituted civil racketeering.

    The after a five day trial, the jury found the defendants liable for violations of the FDCPA and Nevada's Civil Racketeering laws. The jury further found the defendants acted in an extreme and outrageous manner, resulting in an award of punitive damages and attorneys' fees in addition to the statutory and compensatory damages.

    "This case is a great example of how the justice system can help those who are victims of predatory collection practices," said Bourassa. He continued, "Of course we are pleased with the result, but the important thing here is that we saved our client's home and restored her good name." Bourassa regularly advises consumers to save their letters and voicemails from collection agencies. "Folks mistakenly assume that if they owe the money, they don't have any recourse against aggressive collection agencies. Hopefully cases like this will let consumers know that they can fight back against abusive collection tactics and win."
Source: Homeowner Wins $614,000 Judgment Against HOA Collection Companies.

Some of the relevant court rulings:

Spotlight Shined On West Coast Law Firm That's Represented At Least 4,000 Foreclosure-Facing Homeowners In A Dozen Mass Joinder Lawsuits, Yet Has Never Won A Single Case On The Merits

In Los Angeles, California, BloombergBusiness reports:
  • [C]asting itself as defending the little guys caught up in the subprime crisis, Brookstone [Law], founded by a 41-year old attorney named Vito Torchia Jr., has represented at least 4,000 clients in a dozen mass joinder lawsuits against big banks, including Wells Fargo and Bank of America. Court documents indicate Brookstone’s earnings during 2011 and 2012 could be in the tens of millions of dollars. Yet the firm has yet to win a single one of these cases on the merits.

    “I think, generally speaking, these mass joinder cases are a new twist on an old scene,” said California Assemblyman Mike Gatto, a Democrat and former lawyer who chairs the state’s privacy and consumer protection committee and sits on its banking committee. After the financial crisis, a cottage industry cropped up offering relief to people with subprime loans. In many cases, however, these companies only subjected borrowers to a second round of abuse. “Somebody is in trouble, they get a call, and say ‘you’ll get relief if you sign onto our lawsuit.’ It’s a small price to pay to keep my biggest asset. But these are all just variations of fraud.”

    Is Brookstone the con that banks and former clients allege? Or is Torchia, already halted from practicing law by the California state bar, outmatched and getting smeared as he wages what he claims is a lonely, David-vs.-Goliath fight for homeowner rights?
For more, see Sue Your Bank, Keep Your Home, Repeat (Inside a deeply suspect mortgage-relief operation in L.A.).

Thursday, September 17, 2015

Sizzling NYC Real Estate Market Causes Hungry Developers To Target Small Co-Op Buildings For Conversion; Seek To Acquire "Supermajority" Of Units In Building, Then Squeeze Out Any Holdouts By Giving Them The Boot

In New York City, The New York Times reports (via The Real Deal (NYC)):
  • For three decades, Todd Selbert has lived in a sunny one-bedroom on the Upper East Side, surrounded by books, his vast jazz record collection and several abstract oil paintings. A former advertising executive, Mr. Selbert, 75, owns the top floor of a four-story co-op at 150 East 78th Street.

    But recently an investor purchased the other three units in the building, and consequently Mr. Selbert may soon find himself a tenant in his own home. He may even face eviction.

    “I love my apartment. I love my neighborhood. I love my block,” he said, sitting beside a large window overlooking the tree-lined street. “It is just hard to believe I’ve found myself in this position.”

    Co-op apartment buildings like Mr. Selbert’s were once considered impervious to the condominium craze that is sweeping New York City. But with the ever-increasing demand for residential real estate, record high land prices and few available development sites, small co-ops are emerging as one of the few remaining creative development options — albeit a complicated and costly one.

    Tom Brady, a salesman at Town Residential, working with several developers, tries to convince shareholders in small co-ops to sell. Because of the structure of most co-ops, once developers or investors acquire a “supermajority” of apartments in a building, they can maneuver to evict any holdouts.

    Most co-ops have in their bylaws a provision that if you own a supermajority, usually 75 percent of the shares, you can collapse the cooperative,” said Gary M. Rosenberg, the founding partner of the law firm Rosenberg & Estis. “Former shareholders then revert to either rent-stabilized tenants or market-rate tenants, in which case they could be evicted.”

    In most cases, shareholders retain their shares, which results in an eventual payout once the developer sells the building. (And if those shareholders have mortgages, the proceeds from the sale are used to pay off the loans.) But that doesn’t help those like Mr. Selbert, who just want to stay put.

    “Every inch of Manhattan real estate is in play, even the once-sacred co-ops,” said Adam Leitman Bailey, a lawyer who represents Mr. Selbert. Mr. Bailey, who won a temporary injunction to stop the collapse, or legal dismantling, of Mr. Selbert’s co-op, said he has a dozen clients in similar situations and that the number of cases he is getting has skyrocketed in the past 18 months.

    The buildings most at risk of being caught in the cross hairs are in popular neighborhoods, have unused air rights or lucrative retail spaces on the ground floor and have just a handful of apartments. But buying three-quarters of the shares is no easy feat even in the smallest of co-ops. Multiple shareholders must be convinced to sell, which can lead to infighting and lawsuits among neighbors.
For more, see How the Co-op Crumbles.

Central Florida Condo-Owning Couple Fall Victim To 370-Unit Complex's Conversion From HOA-To-Apartment Rentals; Forced To Sell For Half Of What They Paid, Leaving Them $70K Short Of Funds Needed To Pay Off Mortgage

In St. Petersburg, Florida, the Tampa Bay Times reports:
  • If someone forces you to sell your property, shouldn't they be required to give you at least as much as you paid for it? That's what Nadia and Tyson Le Monte thought when they learned they would have to sell their St. Petersburg condo — bought in 2006 for $254,900 — because the complex is being converted to rentals.

    The couple were stunned, therefore, when told they would get just $127,000. That is $70,000 less than what it would take to pay off the mortgage. Now Le Monte, a former Marine and government contractor in Iraq and Afghanistan, fears he may have to drop out of college and go back to work even though he is under treatment for post-traumatic stress disorder.

    Says his wife, a pharmacist at the Bay Pines VA Medical Center: "This is such an awful situation to be in.''

    The Le Montes are among the hundreds of Florida condo owners discovering that a new law designed to increase their rights in condo-to-apartment conversions won't help them nearly as much as they hoped.

    Signed by Gov. Rick Scott in July, the law as first envisioned would have guaranteed that all owners who bought from the original developer would be compensated for the full purchase price if the complex turned rental.

    But shortly before the Florida House voted on the measure, it was amended to provide full compensation only for owners with homestead exemptions. That was a blow for people who bought their condos as second homes or those like the Le Montes, who rented out their two-bedroom unit after moving to a bigger place when their family began to grow.

    Tallahassee lawyer Peter Dunbar, an expert on condo law, said the compromise was necessary to save the measure from defeat.

    "Our (state) Constitution says that homesteads are special and the Legislature can treat them specially,'' Dunbar said. "You can't make that same argument for a second-home owner or a flipper or a renter. You probably couldn't have solved 100 percent of the problems, so faced with the dilemma of losing it all, this was the best choice. Otherwise even the homestead folks would have lost (protection).''

    The Le Montes' condo is in Bay Isle Key, a 370-unit complex in north St. Petersburg near 1-275. It is one of hundreds of Florida condo developments that investors began eyeing for conversion to apartments as the foreclosure crisis created a soaring demand for rentals.

    But that was years after Nadia bought her condo, never realizing she could one day be forced to sell it at a huge loss.

Wednesday, September 16, 2015

Consumer Feds Take Action Against Two Biggest Zombie Debt Buyers; Shake Million$ Out Of Duo For Consumer Refunds, Penalties, Ordering Them To Stop Collection Efforts On Unverifiable, Unenforceable Debts, & Their Resales To 3rd Parties

The Consumer Financial Protection Bureau recently announced (via Public Citizen's Consumer Law & Policy Blog):
  • [T]he Consumer Financial Protection Bureau (CFPB) took action against the nation’s two largest debt buyers and collectors for using deceptive tactics to collect bad debts.

    The Bureau found that Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, lacking documentation, or unenforceable. Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents. The CFPB has ordered the companies to overhaul their debt collection and litigation practices and to stop reselling debts to third parties.

    Encore must pay up to $42 million in consumer refunds and a $10 million penalty, and stop collection on over $125 million worth of debts.

    Portfolio Recovery Associates must pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts.

    As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt. Although they pay only pennies on the dollar for the debt, they may attempt to collect the full amount claimed by the original lender. Together, these two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts.

    The CFPB found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves. These practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
For the entire press release, see CFPB Takes Action Against the Two Largest Debt Buyers for Using Deceptive Tactics to Collect Bad Debts (Encore and Portfolio Recovery Associates Must Refund Millions of Dollars and Overhaul Debt Collection and Litigation Practices).

Florida Appellate Courts Again Come To The Rescue Of Homeowner In Foreclosure Screwed Over By Standing-Lacking Lender & Snoozing Trial Judge

The following facts have been taken from a recent ruling by Florida's Fourth District Court of Appeals:
  1. The bank’s original complaint attached a copy of a note payable to another entity. The note did not contain an endorsement.
  2. The bank later filed a second amended complaint. Attached were copies of the note and an assignment of the note.
  3. The note now contained an endorsement to the bank. However, the endorsement was undated.
  4. The assignment purported to transfer the note to the bank on an “effective” date before the bank filed its original complaint. However, the assignment was executed after the bank filed its original complaint.
  5. The borrower answered and raised lack of standing as an affirmative defense. The borrower argued that the endorsement was undated and the assignment was executed after the bank filed its original complaint.
  6. At trial, the bank introduced into evidence the original note and the assignment. On the factual issue of whether the note was assigned to the bank before or after the bank filed the original complaint, the bank’s witness possessed no knowledge or information other than what the assignment’s face reflected.
  7. After the close of all evidence, the trial court entered a final judgment of foreclosure for the bank.
The homeowners then filed an appeal.

In reversing the trial judge, the appeals court stated:
  • We agree with the borrower that the bank failed to prove it had standing when it filed the action. We reach this conclusion for three reasons.

    First, the note’s endorsement to the bank was undated. See Matthews v. Fed. Nat’l Mortg. Ass’n, 160 So. 3d 131, 133 (Fla. 4th DCA 2015) (“[T]he note introduced at trial . . . did not establish standing when the suit was commenced. The blank endorsement was undated.”).

    Second, the assignment was “backdated” after the bank filed the action. See id. (“Nor does the backdated assignment, standing alone, establish standing.”) (citation omitted); Vidal v. Liquidation Props., Inc., 104 So. 3d 1274, 1277 n.1 (Fla. 4th DCA 2013) (“Allowing assignments to be retroactively effective would be inimical to the requirements of pre-suit ownership for standing in foreclosure cases.”).

    Third, on the factual issue of whether the note was assigned to the bank before or after the bank filed the original complaint, the bank’s witness possessed no knowledge or information other than what the assignment’s face reflected. See Lloyd, 160 So. 3d at 515 (“Plaintiff’s evidence supporting its claim that the assignment . . . ‘related back’ to before the suit commenced was also insufficient to prove standing in this case. The witness testified that he did not have any information, other than the document itself, to verify when the assignment took place.”).

    Based on the foregoing, we reverse and remand for entry of judgment for the borrower.
For the ruling, see Harris v. HSBC Bank USA, N.A., No. 4D14-54 (4th DCA, September 9, 2015).

Tuesday, September 15, 2015

Snoozing Florida Trial Judge's Refusal To Vacate Judgment Despite Lender's Failure To Name Record Owners As Defendants In Foreclosure Action Requires Review & Reversal By Appeals Court

The following facts have been adapted from a recent ruling by Florida's Fourth District Court of Appeal:
  1. After the borrower defaulted on a note secured by a mortgage on real property, Citibank filed a foreclosure complaint.
  2. Citibank obtained a final judgment of foreclosure in March 2013, and a foreclosure sale was set for a date in July 2013.
  3. In June 2013, a non-party, Diana Diaz, moved to cancel the sale. Her motion alerted Citibank that the owners of the property at the time the note and mortgage were executed had quit-claimed the property to Diaz and another person, Luis Garcia. Diaz and Garcia actually were the record title owners at the time the foreclosure complaint was filed.
  4. They were not named in the foreclosure action or on the final judgment; therefore, their interests were not foreclosed.
  5. Diaz did not move to intervene in the foreclosure action or to vacate the final judgment of foreclosure. Instead, she filed a separate action to quiet title to the property.
  6. Citibank moved to vacate the final judgment of foreclosure in October 2014, a year and seven months after the judgment was filed and a year and four months after Diaz alerted it to the existence of the record title owners.
  7. Without intervening, Diaz filed a response, arguing that the motion was untimely. The trial court denied the motion without explanation. This appeal followed.
In a nutshell, the appeals court reminded the trial judge that:
  • the owners of record at the time a foreclosure action is filed are indispensible parties to the action - "necessary parties so essential to a suit that no final decision can be rendered without their joinder.
  • without their joinder, the foreclosure proceeding, and any underlying judgment devolving therefrom, is void, and
  • when the underlying judgment is ‘void,’ the trial court has no discretion, but is obligated to vacate the judgment.”
Accordingly, the Florida appeals court reversed another trial judge's ruling (once again highlighting the importance of being represented by legal counsel competent enough to absorb the hit of a trial judge's crappy ruling and challenge it in the appropriate appeals court).

For the ruling, see Citibank, N.A. v. Villanueva, No. 4D15-239 (4th DCA, September 9, 2015).

Thanks to Deontos for the heads-up on this court ruling.

Florida Appeals Court Slams Brakes On Sloppy Foreclosing Lender's Attempt To Enforce Mortgage Where Only One Of Four Co-Owners Signed The Paperwork; Rejects Assertion That Non-Signatory Owners Ratified Mortgage Through Their Conduct

In a recent ruling by Florida's Third District Court of Appeal, the court denied a lender's attempt to foreclose a residential mortgage that was signed by only one of the four owners of the home when the loan was closed.

In bringing the foreclosure action, the lender attempted to circumvent this problem (obviously caused by sloppy loan origination, closing and title underwriting procedures, and occurring at a time in recent real estate history - late 2005 to early 2006 - that the trial court observed was one where "everybody was hoodwinking everybody") by asking the court to establish the existence of an equitable lien against property interest of all four owners by asserting the legal doctrine of ratification, and then foreclose against them on the basis of that lien.

Quoting from Citron v. Wachovia Mortgage Corp., 922 F.Supp. 2d 1309 (M.D. Fla. 2013), the court described ratification as follows:
  • "Ratification is conduct that indicates an intention, with full knowledge of the facts, to affirm a contract which the person did not enter into or which is otherwise void or voidable."
The court described the application of this legal doctrine in the context of a mortgage in this excerpt:
  • Ratification of a mortgage by a non-signatory property owner has been upheld in Florida in two distinct types of cases: (a) when the nonsignatory owner has received the benefit of the mortgage loan proceeds; or (b) when the non-signatory owner has authorized an attorney-in-fact to execute the mortgage on behalf of the owner.
For the reasons set forth in its ruling,(1) the appeals court rejected the application of the doctrine ratification under the facts and circumstances of this case, and declared that the property interest of the non-signing owners of the property was free of any lien.

For the ruling, see Wells Fargo Bank, N.A. v. Clavero, Case No. 3D14-520 (Fla. 3d DCA September 2, 2015).

For earlier posts on the legal doctrine of ratification, see:

(1) From the court's ruling:
  • A. Receipt of Benefit

    The non-signatory's receipt of mortgage loan proceeds, or receipt of a benefit from the application of those funds, may cure the failure to sign the mortgage as a matter of equitable subrogation, see Palm Beach Sav. & Loan Ass'n v. Fishbein, 619 So. 2d 267 (Fla. 1993), or ratification, see Fleet Fin. & Mortg., Inc., 707 So. 2d 949 (Fla. 4th DCA 1998).

    In the present case, however, neither the Parents nor the 3789 Property received a financial benefit from the loan proceeds. It is undisputed that all of the loan proceeds were utilized by the sole signatory to start the day care business. The Parents were not owners or employees of that business.

    We find no Florida case extending the principle of ratification to a parent's expression of a general intention to help a family member secure a loan for purposes of benefiting the family member. At oral argument, this type of indirect benefit was advanced by Wells Fargo as a worthy rationale for binding the Parents to the mortgage loan procured by Maria. We see no legal basis for extending the legal principle of ratification in such an instance, and on this record. The Washington Mutual loan circumvented the institutional lending process whereby the property owners/mortgagors sign documents informing them of the terms of the transaction, including the amount of the loan procured, federal Truth-in-Lending rights, interest rates, monthly payment amounts, and subjection of the homestead to the mortgage loan—all in a transaction in which the non-signatory owners themselves and the mortgaged property have received no benefit.

    Wells Fargo's reliance on the case of Citron v. Wachovia Mortgage Corp., 922 F.Supp. 2d 1309 (M.D. Fla. 2013), is unwarranted. In that case, Mr. Citron was a Florida-licensed mortgage broker. Mrs. Citron worked with him in a mortgage company, and the two had brokered some 47 mortgage loans for the lender that originally loaned money to the Citrons, World Savings. Wachovia Mortgage was the successor by merger to World Savings. The Citrons obtained hundreds of thousands of dollars of loan proceeds and invested those funds in a home later conveyed to their family trust.

    The Citrons sued Wachovia Mortgage in an attempt to rescind the loan for Truth-in-Lending violations and other alleged defects in the loan documents. The trial court denied any such relief because (among a number of facts in the record) the Citrons had received and had not promptly disgorged all of the direct benefits of the loan. Additionally, the Citrons had made monthly payments on the loan for over a year after learning of the alleged defects in the loan documents. "Ratification is conduct that indicates an intention, with full knowledge of the facts, to affirm a contract which the person did not enter into or which is otherwise void or voidable." 922 F.Supp. 2d at 1321 (quoting Still v. Polecat Indus., Inc., 683 So. 2d 634 (Fla. 3d DCA 1996)).

    In the present case, the Parents neither received loan proceeds, nor otherwise benefited from the application of those proceeds, nor made any monthly payments, nor acquired full knowledge of the material details of the mortgage loan.

    B. Attorney-in-Fact

    Section 695.01(1), Florida Statutes (2005), provides protection to creditors and purchasers who accept a conveyance or lien signed by an attorney-in-fact on behalf of a property owner (and then recorded), so long as the power of attorney itself is also recorded before the accrual of rights by "creditors or subsequent purchasers for a valuable consideration and without notice." Washington Mutual Bank could have required, but did not, such a power of attorney as a condition to the loan. And such a power of attorney is only effectual to the extent of the specific powers granted. Him v. Firstbank Fla., 89 So. 3d 1126 (Fla. 5th DCA 2012).

    Execution of the mortgage by an agent "previously unauthorized" may also be subject to ratification in certain instances. Branford State Bank v. Howell Co., 102 So. 649 (Fla. 1924). In that case, however, the Supreme Court of Florida held: "No rule of law is better settled than this: That the ratification of the act of an agent previously unauthorized must, in order to bind the principal, be with full knowledge of all the material facts." Id. at 650. In the present case, there was no evidence that Maria (or anyone else) informed the Parents or Hubert of all of the material facts relating to the Washington Mutual Bank loan and mortgage.

    Proceedings on Remand

    We affirm the trial court's findings that (a) Maria Castellon signed the promissory note, obtained the loan proceeds, and remains liable under the terms of the promissory note, (b) the defective Washington Mutual Bank promissory note and mortgage did not subject the Parents' homestead property to the lien of the mortgage and to sale, and (c) Wells Fargo does have an equitable lien to the extent of disbursements for property taxes and reasonable costs of insurance paid by Wells Fargo during the pendency of the foreclosure action, recoverable when the 3789 Property is no longer the Parents' homestead.

    We reverse that portion of the final judgment imposing and foreclosing an equitable lien for the principal or interest on the loan made by Washington Mutual Bank, with respect to the ownership interest of the Parents in the 3789 Property. On remand, the trial court should clarify that the Parents and Hubert are not personally liable for unpaid principal and interest due under the promissory note signed only by Maria.

    Affirmed in part, reversed in part, and remanded for further proceedings in accordance with this opinion.

Monday, September 14, 2015

Mortgage Lender Trips Over Illinois "Single Refiling" Rule; Left Holding The Bag With Unenforceable Mortgage As Federal Appeals Court Rejects Bank's Attempt To Foreclose After It Had Already Twice Filed Actions To Recover On Promissory Notes & Voluntarily Dismissed Each Case

From an Opinion Summary from Justia US Law:
  • In 2005, Mutual Bank of Harvey, Illinois, made loans to the defendants, evidenced by promissory notes. As security the defendants executed mortgages. Mortgage I applies to four properties in Appleton, Menasha, and Milwaukee, Wisconsin. Mortgage II applies to a property in Grand Chute. Mortgage III applies to seven Milwaukee properties.

    The notes went into default in 2008. In 2009, regulators closed Mutual Bank. The Federal Insurance Deposit Corporation (FDIC) was appointed receiver. Ultimately UCB became the owner and holder of the notes and mortgages on the Wisconsin properties.

    In 2011, UCB commenced mortgage foreclosure. Defendants argued that under the Illinois “single refiling” rule, 735 ILCS 5/13-217, UCB was barred from enforcing the promissory notes underlying the mortgages since UCB had twice formerly filed an action against the defendants to recover on the notes and voluntarily dismissed each of these prior actions.(1)

    The Seventh Circuit affirmed that Mortgage I, was governed by Illinois law and that UCB was precluded from foreclosing on Mortgage I. The defendants did not appeal a holding that Wisconsin law applied to Mortgages II and III and that Wisconsin law permitted UCB to foreclose.
Source: Opinion Summary - United Central Bank v. KMWC 845, LLC.

For the court ruling, see United Central Bank v. KMWC 845, LLC, No. 14-1491 (7th Cir. August 28, 2015), aff'g United Cent. Bank v. Wells Street Apartments, LLC, 957 F. Supp. 2d 978 (E.D. Wis. 2013).

(1) From the court ruling:
  • The Illinois single refiling rule provides that a plaintiff who dismisses a lawsuit "may commence a new action within one year or within the remaining period of limitation, whichever is greater." See 735 ILCS 5/13-217.[1]

    Illinois courts interpret this language to mean that a plaintiff who voluntarily dismisses a lawsuit may commence only one new action within the statutorily imposed time limit. See Carr v. Tillery, 591 F.3d 909, 914 (7th Cir. 2010).

    Once the plaintiff commences this one new action, any further action is barred. See, e.g., Timberlake v. Illini Hosp., 676 N.E.2d 636, 635-36 (Ill. 1997).

    In the present case, the district court found that UCB had formerly filed and voluntarily dismissed two actions in Illinois against the appellees for breach of the promissory note that Mortgage I secured. The court thus determined that, pursuant to the Illinois single refiling rule, UCB was statutorily barred from enforcing the note underlying Mortgage I.

    UCB does not dispute that the Illinois single refiling rule precludes it from enforcing the note underlying Mortgage I. Rather, UCB argues that the Illinois single refiling rule does not bar it from foreclosing on Mortgage I because a mortgage foreclosure action is not the same cause of action as an action on the underlying note.

    This argument, although correct inasmuch as Illinois law considers a mortgage foreclosure action to be a separate cause of action from an action on the underlying note, misses the point. It does not matter that UCB's foreclosure action itself does not constitute an impermissible second refiling; what matters is, as the district court noted, that long-standing Illinois law precludes a plaintiff from foreclosing on a mortgage when an action on the underlying note is barred by the statute of limitations or another procedural rule. See, e.g., Hibernian Banking Ass'n v. Commercial Nat. Bank, 41 N.E. 919, 922 (Ill. 1895) ("[I]t has been repeatedly decided by this court that the mortgage is a mere incident of the debt, and is barred when the debt it barred[.]"); see also Dale Joseph Gilsinger, Annotation, Survival of Creditor's Rights Created by Mortgage or Deed of Trust as Affected by Running of Limitation Period for Action on Underlying Note, 36 A.L.R. 6th 387 (2008) (collecting cases showing that the states are split on the question of whether a creditor can foreclose a mortgage when an action on the underlying note is barred).

    On the basis of this long-standing Illinois precedent, the district court determined that UCB could not foreclose on Mortgage I because it was barred by Illinois statute (the single refiling rule) from filing an action to enforce the note underlying Mortgage I. We find no error in this decision.

Florida Appeals Courts Continue (Seemingly Never-Ending) Clean-Up/Reversals Of Trial Judge Screw-Ups Involving Rulings Unfavorable To Homeowners In Foreclosure Cases

The following case notes are taken from recent client alerts from the Florida law firm Carlton Fields Jorden Burt:
  • Foreclosure/Standingplaintiff failed to establish by competent, substantial evidence it was owner and holder of note at time complaint filed by failing to establish that endorsement had been placed on note prior to filing of complaint. – Fiorito v. JP Morgan Chase Bank, National Association, as purchaser of the Washington Mutual Bank, f/k/a Washington Mutual Bank, P.A., No. 4D13-2813 (Fla. 4th  DCA August 26, 2015) (reversed and remanded)
  • Foreclosure/Standinglender failed to establish standing to enforce note, and therefore, entry of final judgment of foreclosure was improper – Lamb v. Nationstar Mortg., LLC, Case No. 4D13-3125 (Fla. 4th DCA Aug. 19, 2015) (reversed and remanded for entry of involuntary dismissal)
  • Foreclosure/Standingplaintiff [lender] failed to establish standing because no evidence was introduced showing note was transferred to plaintiff prior to commencement of lawsuit and pooling and servicing agreement was insufficient to establish standing – Perez v. Deutsche Nat’l Trust Co., as Trustee, Case No. 4D13-4812 (Fla. 4th DCA Aug. 19, 2015) (reversed and remanded with instructions to enter involuntary dismissal)
  • Foreclosure/Business Recordstrial court erred in entering final judgment of foreclosure because plaintiff’s employee’s testimony regarding standing was based on business records that were never introduced into evidence – Cardona v. Nationstar Mortg. LLC, Case No. 4D14-1609 (Fla. 4th DCA Aug. 19, 2015) (reversed and remanded for new trial)
  • Foreclosure/Summary Judgment: material issues of fact regarding whether certain properties were meant to secure two mortgages precluded entry of summary judgment in lender’s favor – Fowler v. TD Bank, N.A., etc., Case No. 5D14-4134 (Fla. 5th DCA Aug. 21, 2015) (affirmed in part, reversed in part, and remanded)
  • Foreclosure/Standing: judgment of foreclosure in favor of lender reversed when lender failed to prove standing to enforce and foreclose mortgage before the action was filedTomlinson and Crump v GMAC, Case No. 2D13-6030 (Fla. 2nd DCA September 2, 2015) (foreclosure judgment reversed)
  • Foreclosure/Deficiency: deficiency judgment in favor of an alleged assignee, who purportedly received assignment of right to pursue deficiency post foreclosure, was improper where alleged assignee failed to present any evidence of the assignmentBarry and Ruff v Vantium Capital, Inc, Case No. 2D14-3200 (Fla. 2nd DCA September 4, 2015) (deficiency judgment revered).

Sunday, September 13, 2015

Use of Fair Housing Testers Key To Justice Dept. Probe Yielding $75K Settlement From Illinois Mobile Home Park Landlord, Resolving Allegations That It Discriminated Against Blacks, Families w/ Kids

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department announced [] that the owners and operators of the Williams Trailer Court mobile home park in Marion, Illinois, had agreed to pay $75,000 to settle allegations that they discriminated against African Americans and families with children, in violation of the federal Fair Housing Act. The settlement was approved [] by the U. S. District Court for the Southern District of Illinois.

    The settlement agreement resolves a lawsuit alleging that the owners and operators of the park, located at 200 East Patrick Street in Marion, Illinois, violated the Fair Housing Act by refusing to rent mobile homes to African Americans and families with children. The lawsuit is based on the results of testing conducted by the department’s fair housing testing program. Testing is a simulation of a housing transaction that compares responses given by housing providers to different types of home-seekers to determine whether illegal discrimination is occurring.

    The testing conducted by the department revealed that the manager and part owner of the park, Lyle Williams, falsely told African Americans inquiring about renting mobile homes that no homes were available, while telling white home-seekers that such mobile homes were available. The testing also revealed that Williams unlawfully discouraged families with children from living there. In addition to Lyle Williams, the lawsuit also names as defendants the park’s other two owners, Kyle Williams and David Williams.


    Under the terms of the settlement, defendants will establish a settlement fund in the amount of $45,000 to compensate victims of the discriminatory practices. Defendants also will pay $30,000 in civil penalties to the United States. In addition, the agreement requires defendants to implement a nondiscrimination policy, establish new nondiscriminatory application and rental procedures, and undergo training on the Fair Housing Act. Persons who believe they may have been discriminated against at Williams Trailer Court should contact the department at 1-800-896-7743, extension 3, or by email at fairhousing@usdoj.govEmail links icon.

Big Brooklyn Landlord Tagged In Fair Housing Suit, Accused Of Violating NYC Human Rights Law By Discriminating Against Prospective Tenants Who Planned To Pay Rent With Housing Subsidy Created To Help Homeless Families

In New York City, the Fair Housing Justice Center recently announced:
  • On August 31, 2015, the Fair Housing Justice Center (FHJC) and two women with rental subsidies filed a lawsuit in New York County Supreme Court alleging that Starrett City, Inc. and Grenadier Realty Corp. are discriminating against prospective renters based on source of income in violation of the New York City Human Rights Law.

    The two individual plaintiffs, Regina Alston and Sandra Vaughn-Cooke, were each denied an opportunity to rent apartments at Spring Creek Towers in Brooklyn because they were planning to pay their rent with a Living in Communities (LINC) rental subsidy. The LINC program was created by the City of New York to assist homeless individuals and families in moving from temporary shelters into permanent housing.

    Spring Creek Towers, formerly known as Starrett City, is a 5800-unit residential development located at 1255 Pennsylvania Avenue in Brooklyn. Grenadier Realty Corp. is a full-service property management company with a portfolio of over 40 properties that contain 22,000 rental units.

    Ms. Alston and Ms. Vaughn-Cooke attempted to rent apartments at Spring Creek Towers, but were each told that the landlord does not accept LINC vouchers. In response to complaints from Ms. Alston and Ms. Vaughn-Cooke, the FHJC coordinated a testing investigation. Agents for defendants informed FHJC testers that LINC rental subsidies would not be accepted at Spring Creek Towers. As a result of the defendants’ discriminatory conduct, Ms. Alston and her two children were forced to remain in a crowded, unsanitary shelter until her family could move into public housing. Ms. Vaughn-Cooke remains homeless and continues to reside in a crowded, unsanitary shelter unable to locate suitable housing in a safe neighborhood.

    FHJC Executive Director Fred Freiberg commented, “The housing choices available to lower income households with rental subsidies are severely constrained by widespread source of income discrimination. Housing discrimination forces many subsidy holders through an invisible poor door back to high poverty neighborhoods that are often unsafe or unhealthy places to live, areas with few amenities, substandard housing, and/or poor performing schools.” Freiberg urged more vigorous enforcement of fair housing laws and added, “The City agencies providing these subsidies and their non-profit partners have a duty to locate housing options that improve the quality of life for subsidy holders, break the cycle of poverty and homelessness, and reduce residential segregation.”

    [New York City] HRA Commissioner Steven Banks said, “Families whose rent is paid with government assistance have the same right to rent an apartment as everyone else. City government will take action whenever discrimination by landlords is reported to us and we thank The Legal Aid Society, Mayer Brown and the Fair Housing Justice Center for bringing a lawsuit in this case.”