Archive for July 9th, 2010

Stopa Law Firm on NBC Nightly News – Link and Reaction

On July 10, 2010 (after two, last-minute scheduling changes), foreclosure defense attorney Mark Stopa and three clients of Stopa Law Firm were profiled nationally on NBC Nightly News with Brian Williams, reported by award-winning journalist Mike Taibbi.  The story can be found here:

Having just watched the story, here’s my reaction.

Having done a few stories like this with the media, I’ve learned you never really know how the media will convey the story, i.e. what that particular reporter/editor will find newsworthy, until it airs.  This was no different.  In our interview, Mike Taibbi and I talked a lot about the foreclosure process in Florida.  We talked about struggling homeowners trying without success to get loan modifications, getting sued, and feeling like they have no choice but to hire a lawyer like me to defend the foreclosure lawsuit.  We talked about legitimate defenses that homeowners have in these cases and the systemic fraud committed by banks in the foreclosure process.  Unfortunately, none of this made it into the story (which I understand, at least from the perspective that this is the NBC Nightly News, and it’s just a 30 minute program).   As you saw, NBC chose to focus on how homeowners can live in their homes for free, without paying their mortgage, while the case is pending. 

I know much of the public finds this controversial, but I’m glad this message is getting out on a widespread, national level.  Florida homeowners need to understand their rights through the foreclosure process.  Like it or not, this is one of the rights that homeowners enjoy – even if you’re behind on your mortgage, you don’t have to leave your home unless and until the bank *wins* a foreclosure suit. 

That said, I don’t agree with NBC’s portrayal that Alex, Susan, and my other clients have engaged in a ”strategic default.”  As I see it, a “strategic default” is when a homeowner can afford to make the monthly mortgage payments but chooses not to do so for “strategic” reasons, e.g. because the home is significantly underwater (and the homeowner hopes that if he/she defaults, the bank will take back the house as full payment, waiving any claim for a deficiency).  The vast majority of my clients, if not all of them, stopped paying their mortgage because they couldn’t afford the monthly payments, then hired me because the bank filed a foreclosure lawsuit.  In my view, there’s a big difference between choosing not to pay when you’re able and not paying because you can’t afford it. 

Obviously I’m not the editor at NBC.  Had I been, I would have shown clips from my interview with Mike about how homeowners can’t make monthly payments after they’ve been sued because the banks won’t accept them.  Respectfully, there’s nothing “strategic” about that.  If anything, it’s the banks that are making the “strategic” decision not to accept payments because they’d rather foreclose.  That’s why many thousands of people are getting foreclosed, day after day – banks would rather foreclose than enter loan modifications.  That’s where the process is broken, and that’s what I’m trying to help fix.  Yes, a byproduct of what I’m doing is that people live for free.  But what else are they supposed to do?   Banks have filed suit for foreclosure and won’t accept any payments.  As I see it, Florida homeowners have no choice but to hire a lawyer like me to defend the foreclosure lawsuit and try to force the bank to negotiate.  The only alternative – walking away and accepting a foreclosure – is simply not a viable option for most people. 

During our interview, Mike Taibbi seemed interested in how banks often induce homeowners to stop paying (by telling them that they had to be in default to be considered for a modification), then filed suit for foreclosure and rejected any modification.  We also discussed how many of my clients have legitimate defenses – typically because of the bank’s inability to prove that it (as opposed to a different bank) owns the Note.  I really wish this had aired, and I really wish the media was willing to discuss the fraud that banks perpetuate throughout the foreclosure process.  For now, it’s one step at a time, and it’s good that we’re getting the word out, on a national level, that it’s possible to defend foreclosure cases.

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Motions to Dismiss – some judges are starting to “get it”

Stopa Law Firm is currently counsel in about 400 foreclosure cases throughout the State of Florida, so we’ve had more than our share of hearings on Motions to Dismiss.  Although there are lots of judges who systematically deny these motions even when, in my view, they are clearly meritorious, I’m happy to say there are many judges who are starting to ”get it.” 

For instance, about six months ago, I had my first hearing with Judge Scaglione in Brooksville (Hernando County, Florida).  It was clear he hadn’t heard a lot of foreclosure cases, and, at the time, he openly questioned why I’d be defending a foreclosure case because, if the homeowner hadn’t paid the mortgage, that’s ”all that matters” (or words to that effect).  Fast forward six months to a motion to dismiss hearing before that same judge, Judge Scaglione … this time, he obviously gave careful consideration to a Motion to Dismiss that I filed, and entered an Order granting the Motion to Dismiss in light of the Plaintiff’s lack of capacity and failure to attach the note or plead the essential terms of the note as part of its lost note count.  (After all, how can a court re-establish a document when the plaintiff fails to plead the essential terms thereof?)  I must say, it’s a pleasure to see judges like this, who had believed that homeowners couldn’t have a defense in a foreclosure case, take the time to evaluate the law and see what the homeowners’ lawyers are saying have merit. 

Of course, no judge, in my experience, is applying the law in foreclosure cases more than Judge Rondolino in St. Petersburg.  As reflected in this well-written Order, Judge Rondolino is consistently granting motions to dismiss in foreclosure cases where the law requires it.  My question is why more judges, up to this point, have been unwilling to make similar rulings.  It’s not like Judge Rondolino is the only judge getting cases with these fact patterns – the facts are typically very similar from one case to the next. 

Yes, I realize that homeowners are behind on their mortgage.  But many times, the bank induced them to go into default based on promises of a loan modification, then accelerated the balance owed, filed suit, and rejected the modification (leaving the homeowner with no choice but to defend a foreclosure suit and hope the bank will agree to a modification).  More importantly, regardless of the homeowner’s circumstances, the law must be followed.   And in my view, the law usually requires dismissal in foreclosure cases (admittedly, often with leave to amend). 

In most foreclosure cases, the Note and Mortgage attached to the Complaint were entered on behalf of an entity that is different than the Plaintiff, yet the Plaintiff conclusorily alleges itself to be the “holder” of the Note (without any ultimate facts explaining how or why that is so).  Before we evaluate the propriety of that argument vis a vis a Motion to Dismiss, let’s look at the law in other contexts (not foreclosure cases), when a plaintiff alleges something in the body of its Complaint that is inconsistent with the exhibits thereto.  (Stick with me, this will come full circle.)

In Blue Supply Corp. v. Novos Electro Mechanical, Inc., the Third District affirmed the dismissal of a complaint with prejudice, ruling:

[T]he contract attached to the complaint as well as the concession of Blue Supply’s counsel at oral argument establish that Carlos Novos was not a party to the Blue Supply/Nobox Electro Mechanical contract.  Because of this inconsistency, any claims against Novos, individually, predicated on the existence of a contract between Carlos Novos and Blue Supply must be viewed as properly dismissed. 

990 So. 2d 1157, 1159 (Fla. 3d DCA 2008).  This decision makes clear that if a plaintiff wants to allege someone is a party to a complaint, but the written contract shows otherwise, the complaint fails to state a cause of action. 

Another context where the inconsistency between an exhibit and the allegations in the body of a complaint frequently arises is when a plaintiff tries to bring a claim for fraud based on representations that are directly contrary to the language of a written agreement.  In Hillcrest Pacific Corp. v. Yamamura, for instance, the Fourth District affirmed a dismissal with prejudice where “the agreement plainly contradicts the allegations of the complaint and is fatally inconsistent with Pacific’s claim for fraudulent inducement.  Although Pacific alleges the appellees misrepresented the price of the property, the price is clearly stated in the agreement.”  727 So. 2d 1053, 1056 (Fla. 4th DCA 1999). 

With this backdrop in place, let’s look at cases where the plaintiff conclusorily alleges itself to be the “holder” of a Note and Mortgage, even in the face of exhibits attached to the Complaint in the name of another entity. 

With exceptions that typically don’t apply, see Fla. Stat. 673.3011, to sue for foreclosure, the plaintiff must be the “holder” of the Note.  See Booker v. Sarasota, Inc., 707 So. 2d 886 (Fla. 1st DCA 1998) (“to be the real party in interest on a promissory note, the plaintiff must be the holder of the note.”).  It’s easy to conclusorily allege yourself to be the “holder,” just as it’s easy to conclusorily allege fraud (as in Hillcrest) or that a defendant is a party to a contract (as in Novos).  However, as in Hillcrest and Novos, there’s more to it than that.  

“Holder” is a defined term under Florida law.  Under Fla. Stat. 671.201(21), the “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to the order of the person in possession.”  To be the “holder” when it was not the original mortgagee, (1), the Plaintiff must be ”in possession” of the Note; and (2) the Note must contain an indorsement in blank or an indorsement to the Plaintiff.  Absent both of these elements, the Plaintiff is not the “holder” as a matter of law; see also Fla. Stat. 673.2011(2) (“if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder.”) . 

Any time the plaintiff brings a claim to re-establish a lost note, the plaintiff is necessarily admitting it is not in possession of the Note.  In these cases, the plaintiff cannot be the “holder” as a matter of law.  See Fla. Stat. 671.201(21).  As Judge Rondolino has repeatedly ruled, dismissal is required on this basis.  Additionally, when the Note attached to the Complaint lacks an indorsement (in blank or to Plaintiff) or contains an indorsement to a different entity, the Plaintiff is not the holder by the very definition set forth in the statute.  See id.  Again, dismissal is required.  

Time and time again, judges throughout Florida are denying motions to dismiss on these facts.  Respectfully, those rulings are wrong.  I know judges want to push foreclosure cases.  But when the Plaintiff alleges itself to the the holder of the Note in the body of the Complaint, but the exhibits to the Complaint show it is not, plaintiff fails to state a cause of action.  Any ruling to the contrary cannot be reconciled with Hillcrest and Novos, supra

Many times, plaintiffs try to cure these pleading deficiencies after the motion to dismiss is filed but without filing an Amended Complaint.  The classic example is when the plaintiff files a “Notice of Dropping Lost Note Count” or argues, at the hearing on the Motion to Dismiss that the lost note claim is being dropped.  This does not change the outcome.  First off, Florida law does not allow plaintiffs to dismiss one count of a multi-count Complaint; the only way to “drop” a lost note count is to file an Amended Complaint eliminating that count.  See Deseret Ranches of Florida, Inc. v. Bowman, 340 So. 2d 1232 (Fla. 4th DCA 1976) (“The proper method of deleting less than all counts from a pleading is amendment of the pleading pursuant ot Fla.R.Civ.P. 1.190. Appellees attempted to do the impossible when they filed a Notice of Dismissal as to one count of a two count complaint. They should have limited themselves to filing their second amended complaint according to Fla.R.Civ.P. 1.190, omitting the undesired count.”). 

Regardless, the question is not whether Plaintiff was the holder at the time of the motion to dismiss hearing – the question is whether the Plaintiff was the holder (and has inconsistent allegations as to whether it is the holder) at the time the Complaint was filed.  After all, ”the plaintiff’s lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed.”  Progressive Express Ins. Co. v. McGrath Community Chiropractic, 913 So. 2d 1281, 1285 (Fla. 2d DCA 2005). 

In a situation like this, where the Complaint alleges Plaintiff to be the holder, but also alleges Plaintiff lacked possession at the time the Complaint was filed, and then asserts it has possession at the motion to dismiss hearing, some explanation is in order.  How can Plaintiff change the position alleged in its own pleading without filing an Amended Complaint?  Without any ultimate facts explaining itself?  In what other context, besides foreclosure cases, would that be permissible?  Plaintiff should be made to file an Amended Complaint, attach the Note upon which the suit was based, and allege itself to be the holder.  That’s the only way that Plaintiff’s exhibits would not be fatally inconsistent with the allegations in the body of its Complaint.  Then, as the case proceeds, Plaintiff will have to explain why it lacked possession at the outset of the case but obtained possession thereafter.  If the explanation is that Plaintiff obtained possession after filing suit, dismissal without prejudice is the proper remedy.  See id. (“if the [plaintiff] was without standing when the action was filed, the [action] was at best premature.  A new lawsuit must be filed.”). 

The analysis is the same when, on the eve of the motion to dismiss hearing, the plaintiff produces a note – the same note attached to the complaint – but this time with an indorsement in blank or an indorsement to the plaintiff.  Respectfully, if that indorsement was not on the Note attached to the original complaint, it cannot be considered for purposes of a motion to dismiss.  Since when do plaintiffs get to have the court rely on documents that are different than those attached to their complaint when adjudicating a motion to dismiss?  If Plaintiff wants the Court to consider the Note with the indorsement to it, and that indorsement was not on the Note attached to the Complaint, then Plaintiff must file an Amended Complaint with that version of the Note attached.  (Of course, as the case proceeds, Plaintiff will have to explain why the Note attached to the Complaint did not contain this indorsement, and if the evidence shows that Plaintiff obtained the indorsement after filing suit, the case must be dismissed without prejudice). 

There are many other, bona fide arguments in these Motions to Dismiss.  Respectfully, it’s time for judges to closely evaluate these arguments in the same way they adjudicate motions to dismiss in other (non-foreclosure) cases.  There is absolutely no reason to have one set of laws in foreclosure cases and another set of laws everywhere else.

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Mark Stopa, clients of Stopa Law Firm to appear on NBC Nightly News

For the third time in six weeks, Florida attorney Mark Stopa will be featured in a story by the national media. 

Stories of this type are always subject to be rescheduled, but at present, Mark Stopa and three clients of Stopa Law Firm are scheduled to appear on the NBC Nightly News with Brian Williams on Friday, July 9, 2010 at 6:30 p.m. EST.  

The interview was conducted by emmy-award winning journalist Mike Taibbi, and the NBC Nightly News is the highest-rated broadcast news program in the United States, so it goes without saying that this is a special opportunity. 

My goal, of course, is to continue to educate the public, especially Florida homeowners, about their rights through the foreclosure process.  Together, with attorneys like me, Matt Weidner, and many others in the Tampa/St. Pete area, we are making a difference – repeatedly getting noticed on a national level.  Let’s keep up the fight!

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