Archive for March 20th, 2012

How Bad Are the Foreclosure Mills?

Elizabeth R. Wellborn, P.A., one of Florida’s foreclosure mills, recently fired 14 employees for wearing orange.  This story made national headlines for its sheer stupidity and as a glaring illustration of how Florida is an “at will” state, which means employees can generally be fired (or quit) for any reason whatsoever (so long as it’s not discrimination based on things like race, gender, ethnicity).

But what I find telling about the story is this …

Apparently, Wellborn’s office fired these employees out of the mistaken belief they all wore orange as a form of protest against management.  That being the case, I can’t help but wonder:

How ungodly awful must it be at the foreclosure mills for the boss to wrongly think (without even asking) the employees are protesting?

I mean, seriously.  If I showed up at my office one day and several staff members were wearing the same color, it wouldn’t even occur to me – it wouldn’t even cross my mind – that the staff might be protesting my firm’s management.  How bad must things be at the foreclosure mills for management to so presume?

Mark Stopa

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Lynn Szymoniak, a Case Study of Bankruptcy

Lynn Szymoniak is a famous foreclosure fighter, and she’s about to get 18 million dollars as part of the AG Settlement with the banks.  In this article, the Huffington Post interviews her and discusses what she’s going to do with the money.

This may sound like a feel-good story in a sea of awful, horrific stories in the foreclosure context, and I suppose in some ways it is.  That said, when I read the article, I look past the fluff and think about what homeowners can learn from her situation.  Remember, she might be famous and about to collect millions, but she’s been facing foreclosure for many years now.

While I won’t pretend to know the specifics of Lynn’s situation, I can tell from the article (and other, prior articles) that she’s facing foreclosure on her current home.  As a result, once she receives her $18 million, she has to decide whether to continue fighting that foreclosure case or to cave in to the banks and pay off the mortgage in full (even if it means paying the full amount owed, plus interest, fees, and costs – an amount far in excess of the home’s current value).

What should Lynn do?  I think that’s a personal choice.  Frankly, I’m more interested in discussing what she could/should have done.  In fact, this is the perfect way to illustrate a point I make with foreclosure clients regularly:

If you’re in foreclosure and struggling financially, but you’re (a) young; (b) feel like your financial situation will improve in the future; or (c) both, then you should strongly consider filing a bankruptcy (when you know you’re able). 

Consider Lynn.  If someone in her situation filed Chapter 7 bankruptcy, got a discharge, and then collected 18 million dollars, she could keep the entire 18 million, as her debt would all have been eliminated through the Chapter 7.  Conversely, by not filing bankruptcy and collecting the 18 million now, she still owes all of her debt (including, at minimum, the deficiency on her home), and she won’t be able to eliminate this debt through bankruptcy.  (As she’s collecting 18 million, she obviously can’t file bankruptcy).

Undoubtedly, very few homeowners reading this will ever get a one-time payment of 18 million dollars.  Regardless, the point is the same.  If you have a lot of debt, but suspect your financial situation will improve in the future, you should consider filing bankruptcy while you can.  That way, if you start earning more money in the future, that money can go into your pocket – not the banks and other creditors you still owe from debts you incurred years prior.

As I see it, any homeowner who is young, has a lot of debt, and is eligible to file Chapter 7 bankruptcy should file it when they can.  Why wait?  If you file when you can, you’ll eliminate your debts and ensure you put any future monies you earn into your pocket.  If you don’t file, and your financial situation improves, it may be too late to file bankruptcy, so you’ll have to use your extra monies you earn to pay your old debts.

Do you want to use future monies to pay old debts?  Or put those monies into your pocket?

I realize I’m over-generalizing a bit here, and every person’s situation is different.  (Plus, eligibility for bankruptcy entails some details beyond what I’ve written here.)   That said, I’m convinced that filing Chapter 7 when you’re eligible to do so is the right path for most homeowners, especially those who are young and/or expect their financial situation to improve in the future.

Mark Stopa

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Challenging Service of Process

A basic element of any lawsuit, including a foreclosure lawsuit, is a plaintiff’s obligation to effectuate service of process on a defendant.  Service of process is a fundamental tenant of a defendant’s right to due process, as it ensures a defendant knows about a lawsuit and is given an opportunity to defend.

One of the things I enjoy most about foreclosure defense is challenging service of process when I believe it to be insufficient.  When is that?  Well, in my experience, bona-fide challenges to service of process invariably arise when the plaintiff tries to effectuate service by publication.

To understand why this is so, take a close look at Miller v. Partin, 31 So. 3d 224 (Fla. 5th DCA 2010).  In that opinion, Florida’s Fifth District explains the limited circumstances in which service of process by publication is authorized and the many hurdles through which the plaintiff must jump to create valid service in this manner.

First off, Fla. Stat. 49.011 restricts a plaintiff’s ability to effectuate service by publication to certain types of cases.  If a plaintiff is seeking monetary relief, for instance, then service by publication is not allowed.  This arises often in foreclosure cases because the plaintiff seeks not only a foreclosure, but a deficiency judgment.  Quite simply, if the plaintiff seeks a deficiency judgment, it must procure personal service; service by publication is inadequate.

I love arguing this because, in my experience, plaintiffs sometimes cave on their request for a deficiency so as to not have to obtain personal service.  For instance, just yesterday I received this Order, where a Ft. Lauderdale judge denied a Motion to Quash Service (inappropriately, in my view, but more on that below).  Even in denying the motion, however, the judge clarified that the Plaintiff was not able to get a deficiency.  This had nothing to do with the merits of the case, mind you.  Rather, merely by challenging service of process (and even when the judge ruled adversely on the Motion to Quash), we were able to get an Order clarifying the plaintiff could not get a deficiency.

Another aspect of service by publication that makes it easy to challenge is that the Plaintiff needs to have a valid reason to have resorted to service by publication.  Not wanting to effectuate personal service isn’t good enough.  Basically, the Plaintiff has to show it tried to procure personal service but was unable to do so (e.g. because the defendant was evading service).  However, just because a Plaintiff asserts it was unable to obtain personal service doesn’t make it so.  A defendant in this situation can file affidavits showing he/she was not evading service and that the process server could have and should have served him/her via personal service.  When a defendant makes such an argument, it is incumbent on the court to conduct a hearing, allow both sides to present evidence, and make fact-findings.  In other words, as the Second District ruled in my recent appeal, a judge can’t simply rule against a homeowner in this situation without giving the parties a hearing.

There are a lot of other procedural requirements when effectuating service by publication.  Some people might consider these “technicalities,” but the law is clear.  Personal service is preferred, so if a plaintiff is going to resort to service by publication, it must strictly comply with all statutory requirements, and its failure to do so will cause service to be quashed.

I strongly believe the judge who entered this Order overlooked one such requirement.  In that case, one of the reasons I was challenging service by publication was because the Notice of Action did not specify the date in which the Defendant was to respond to the Complaint.  Bear in mind, Fla. Stat. 49.09 provides:

The Notice of Action … shall require the defendant to file written defenses with the clerk of the court and to serve a copy not later than the date fixed in said notice.

For those unfamiliar with service by publication, the Notice of Action is the document that gets published in the newspaper (verbatim) that purports to inform the defendant of the existence of the lawsuit and his/her obligation to respond to the Complaint.  For comparison’s sake, when a defendant is personally served, the obligation to respond, and the deadline to do so, are clear – it’s 20 days after the date the papers were personally served.  However, when a defendant is served by publication, there is no personal service, so the only way a defendant knows the deadline to respond (or, for that matter, knows about the existence of the suit) is by looking at the Notice of Action.  Per Fla. Stat. 49.09, the Notice of Action is supposed to set forth the deadline.

With that in mind, take a look at this Notice of Action.  Do you notice how it doesn’t specify a date by which the Defendant must respond to the Complaint?  Instead, it says the Defendant must respond “within thirty days of the first publication of this Notice.”  The problem with that, of course, is that there’s nothing in the Notice of Action that specifies when it was first published, so the Defendant has no way to know when this thirty-day period began, or, hence, when it ended.  As a result, the Notice of Action does not specify a date by which the defendant must respond and does not comport with Fla. Stat. 49.09.  As a result, in my view, service of process was defective and should have been set aside.

That sounds technical, but I’ve won that argument with Florida judges on multiple occasions.  So why didn’t I win this one?  Well, this is surprising to me, given the number of times I’ve seen this issue arise, but there are no Florida cases (in the appellate context) which discuss this issue.  None.  That won’t be true for long, though – I’m appealing this issue, and I’d be surprised if Florida’s Fourth District Court of Appeal did not take the opportunity to issue a written opinion and explain that a Notice of Action must specify the date for a defendant to respond, failing which service of process by publication is ineffectual.

All of this may sound technical, and I suppose it is.  Hopefully, I’ve made all Florida homeowners realize that service of process is something that should be challenged (when possible, of course).  With that in mind, please realize – service of process is waived if not challenged immediately (basically, with the first papers filed by a homeowner).  This is an excellent reason for homeowners to procure competent counsel right off the bat, as it’s very easy for defendants to unknowingly waive bona-fide defenses such as this by filing papers on their own.

Mark Stopa

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