Earlier today, a friend asked me what one factor makes the biggest difference in winning versus losing a foreclosure case. For me, that answer was easy – the facts of the case. That’s an unsurprising answer, I’m sure, and it only makes sense – if the facts are on my side, my chances of obtaining a favorable outcome are much higher than if the facts are bad.
But what’s the next most important factor? Ahhh, that, my friends, is far more interesting.
In my view, the second most significant variable in winning or losing a foreclosure case is not the identity of the bank that’s suing or the skill of the bank’s lawyer. Nope. It’s the identity of the judge.
How can that be, you ask? Why does the judge matter so much? Are the results of a particular case really that different depending on who the judge is? Well, frankly, yes.
You see, in many areas of law, I wouldn’t feel that way. That’s because, in many practice areas (e.g. personal injury, criminal law, etc.), the law is sufficiently established that any two judges presiding over a case are likely to agree on the outcome. Disagreements happen, sure, but not generally. In foreclosure-land, though, disagreements are an every-day occurrence. You see, the issues I argue every day in foreclosure cases – paragraph 22, 559.715, and face-to-face counseling in an FHA mortgage, among others – are issues for which there is (and has been) little or no published case law for many years now. Without any case law, it’s understandable how different judges would disagree on what the law is (or should be) – and how the particular judge hearing a case/hearing/trial can impact the outcome so significantly.
By way of example, suppose your mortgage has a paragraph 22, and the letter the lender sent tells the consumer to “bring a court action” rather than assert defenses in a lawsuit filed by the bank. That one phrase (one phrase of one sentence in a letter) can be the difference between winning the entire case (as many judges would rule) and losing (as other judges would rule (unless you have other defenses). [And no, you can’t control which judge you get, so don’t go there.]
Well, why can’t the judges all just get together and agree? Ha! Judges do talk about these issues amongst themselves. Constantly. And guess what? Often, they can’t agree! Often, the arguments are so close, the decisions such a close call, that any two, smart, reasonable, fair-minded judges can’t agree.
If you think that’s a fascinating dynamic on the circuit court level, you haven’t seen anything yet! In fact, as the law develops in foreclosure-land, I’m seeing this same dynamic unfold in Florida’s appellate courts as well. It’s subtle, yes, but I am absolutely convinced Florida’s appellate judges have significant, internal disagreements on what the law is (and what it should be) in foreclosure cases.
Take a look, for instance, at the 2013 decision in Focht v. Wells Fargo Bank, N.A. In that case, Florida’s Second District Court of Appeal reversed a final judgment of foreclosure because the lender did not prove it had standing when the suit was filed. In so ruling, the Second District asked the Florida Supreme Court to rule that foreclosure plaintiffs should not have to have standing at the inception of a lawsuit, certifying the question as one of great public importance. Essentially, the court said “this is the law and we are following it in this case, but we don’t agree it should be the law and we don’t like it.” Take a look, for instance, at the concurring opinion of Judge Altenbernd, who did not mince words about his perception of the unfairness of dismissing a foreclosure case on this basis.
[You might recall, after Focht was decided, I appeared as counsel, wrote a motion for rehearing, and would like to think I scared the bank’s lawyers into not pursuing an appeal in the Florida Supreme Court. That was a good thing, of course, because the Focht decision never went any further, and ‘standing at inception’ has remained the law in Florida, which is certainly a good thing for Florida consumers.]
Judge Altenbernd, though, clearly doesn’t like the concept of standing at inception in a foreclosure case. The bank didn’t go to the Florida Supreme Court in Focht, but clearly Judge Altenbernd hasn’t forgotten. That’s undoubtedly part of the reason why he was one of three judges who decided AS Lily LLC v. Morgan on Friday, May 8, 2015. That decision, in my opinion, is a complete anomaly in foreclosure-world, as it authorizes a foreclosure judgment even where the plaintiff did not have standing when suit was filed because the plaintiff had standing when the amended complaint was filed. This is, from my understanding of the law, contrary to at least 14 published decisions in Florida which require plaintiffs to have standing upon filing suit, not thereafter. In fact, I struggle to reconcile AS Lily with a 2012 decision from the very same court, ruling “even if U.S. Bank had properly amended its complaint to travel on the original note endorsed in blank, it would have needed to prove the endorsement in blank was effectuated before the lawsuit was filed.” See Feltus v. U.S. Bank, N.A.
My point is not to criticize. That’s not the point at all. Rather, these two decisions show how Judge Altenbernd feels about standing at inception in foreclosure cases – he doesn’t like it, he thinks the Florida Supreme Court should change the law on the issue, and he joined an opinion that, in my view, seems to contravene countless other decisions (including from his own court) by allowing a lender to foreclose where it obtained standing upon filing an amended complaint.
AS Lily was published on Friday, May 8, 2015. So what did Florida’s First District do on Monday, May 11, 2015? Issue this decision in Ham v. Nationstar Mortgage, LLC, reversing a foreclosure judgment because the bank did not have standing when that suit was filed. And take a look at footnote two of that decision: the First District expressly disagrees with Judge Altenbernd’s concurring opinion in Focht, essentially saying it is fair and equitable to require foreclosure plaintiffs to prove their standing at the inception of a lawsuit. Here, it’s worth cutting and pasting:
We are mindful of the perception that certain delinquent borrowers might enjoy a “windfall” where a foreclosure plaintiff is required to enforce a note at the time the initial complaint is filed, but the filing of a new suit when standing has been acquired would take place more than five years after the alleged default. See 95.11(2)(c), Fla. Stat. Proof of entitlement to enforce a note secured by a mortgage can be problematic in “this era of securitization of mortgage debt and computerized banking.” Focht v. Wells Fargo Bank (Altenbernd, J., concurring). However, as Judge Altenbernd observed, “in this case and numerous other cases, the financial institutions have brought these problems upon themselves by the complex methods of securitization and their own sloppy recordkeeping.” Id. at 313 (Altenbernd, J., concurring). We further note that many foreclosure actions languish due to the plaintiffs’ failure to prosecute cases in a timely manner and not from any wrongdoing by the borrower. Once a defendant contests the plaintiff’s standing as the proper party to enforce a note via foreclosure, the plaintiff’s right to bring suit on the note at the requisite time becomes a disputed issue the plaintiff must prove. It is not inequitable to require a plaintiff to prove its case, beginning with its standing to bring the action at the outset when that status is challenged.
How can one appellate court reverse the dismissal of a foreclosure case, saying the lender proved standing upon filing the amended complaint (after suit was filed), while another court – the very next business day! – reverses a final judgment of foreclosure because the lender did not prove standing at the time it filed suit? Simple. Different judges have vastly different takes on the law.
Think the discord among appellate judges on foreclosure issues ends there? Think again.
In 2014, the Fifth District issued decisions in Samaroo v. Wells Fargo Bank and Haberl v. 21st Mortg. Corp. In both cases, the Fifth District ruled in favor of the consumer, finding that a paragraph 22 letter lacked the requisite information. In 2015, the Fifth District decided Astoria v. Kaufman, which ruled in favor of the bank, concluding the paragraph 22 letter did contain the requisite information. At the time, I did not think too much of the Kaufman decision, particularly since it did not set forth the content of the letter. The Samaroo and Haberl letters complied, but Kaufman did not; no big deal, right? Plus, it was easy to reconcile all three cases, as they all employed a “compliance” standard.
But on Friday, May 8, 2015, the Fifth District issued its decision in Gorel v. Bank of New York Mellon. And this is where things get funky.
In Gorel, the Fifth District reversed a foreclosure judgment based on the lender’s lack of standing. In so ruling, however, the court also said it was not reversing based on paragraph 22 because the consumer was not prejudiced by the letter’s defects.
Huh? Prejudice was not an issue in Samaroo. Or Haberl. Or any other Florida DCA decision that exists on paragraph 22. And if prejudice was supposed to be a factor in the analysis, why didn’t the 5th DCA say so in Samaroo or Haberl? It didn’t. Instead, it ruled in favor of the consumer because the paragraph 22 letter was defective – regardless of whether the consumer was prejudiced by the letter’s defects. Quite simply, prejudice was not a factor. But now, suddenly, prejudice is the controlling factor? Without any mention of Samaroo or Haberl or any of the other, paragraph 22 decisions? And without the Fifth District ruling en banc? (Remember, once one three-judge panel in the 5th DCA rules on an issue, as it did in Samaroo and Haberl, a subsequent panel in another case is bound to follow the prior panel’s decision, even if the judges on the subsequent panel disagree.) How can that be?
Well, take a look at the judges on these four cases. Chief Judge Torpy was one of the judges on both Samaroo and Haberl. Clearly, Chief Judge Torpy is a judge who will look at a paragraph 22 letter, compare it to the requirements of paragraph 22 of the mortgage, and rule in favor of the consumer as a matter of law where the letter lacks the requisite information. That’s how I believe the analysis is supposed to be done – how I’ve argued (and countless judges have done it) thousands of times in courtrooms throughout Florida.
Chief Judge Torpy, by contrast, was not on the Astoria or Gorel panels. Instead, Judge Wallis was assigned to both of those cases. And was Judge Wallis on the Samaroo or Haberl cases? Nope. Hence, as I see it, Judge Wallis does not believe foreclosure cases should be dismissed based on paragraph 22 defects like Chief Judge Torpy does. Hence, even within the same appellate court, we get vastly different rulings employing completely different standards – even when those judges know they have to agree with one another’s prior decisions (unless they rule en banc, which they did not do).
This, folks, is my best explanation for how the Fifth District suddenly issued the Gorel decision in the face of (and without mentioning) Samaroo and Haberl. Not a terribly satisfying explanation, eh?
So what are circuit court judges to do? Which decision(s) should they follow? Samaroo, Haberl, Astoria, and Gorel all come from the same court, so which is right? Are they all “the law?” If so, how can those four decisions all be reconciled? That’s our job as lawyers, and the job of trial judges, too … but how can anyone reconcile the holdings in Samaroo and Haberl (ruling in favor of the consumer where the paragraph 22 letter lacked the requisite information irrespective of whether the consumer was prejudiced) with Gorel (suggesting in dicta that paragraph 22 defects are irrelevant unless the homeowner was prejudiced)? Well, ironically, I suspect different circuit judges will answer that question differently – continuing the very cycle I’m describing herein.
Ultimately, issues like this may wind up before the Florida Supreme Court. Until then, homeowners and their counsel are forced to accept the realization that the results in any particular foreclosure case – at trial and on appeal – depend greatly on which judge happens to be assigned to that case that day.
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