Archive for April, 2012

The Wizard Behind the Curtain, Part Two

It’s a new ballgame, folks.

Remember my recent posts, including here and here, where I argued at length that a servicer could not prosecute a lawsuit without the trustee/agent ratifying the servicer’s actions?  In my view, it’s not enough that the servicer says it has the authority to proceed on behalf of a trust – the servicer must prove it with evidence from the trust itself.

Unfortunately, this has not been happening in foreclosure cases in Florida.  Instead of servicers proving their authority to act on behalf of a trustee, the servicers merely assert they have that authority, without any independent proof.  This has prompted many consumer advocates, including myself, to wonder whether the plaintiffs named in foreclosure lawsuits even know these lawsuits are pending, a phenomenon many in the industry have called The Wizard Behind The Curtain.

Anyway, earlier today, Florida’s Fourth District issued an earth-shattering opinion, agreeing with everything I’ve been arguing in these regards:

In the mortgage foreclosure context, ‘standing is broader than just actual ownership of the beneficial interest in the note.’  … In securitization cases, a servicer may be considered a party in interest to commence legal action as long as the trustee joins or ratifies its action. … Here, the caption of the verified complaint states that the underlying action is brought by CW solely in its capacity as special servicer on behalf of U.S. Bank, N.A. … Although CW’s complaint is verified, it is verified by the SVP for CW – not by the real party in interest, the trust.  CW relies on nothing more than its own allegations and affidavit to support its argument that it has standing to sue on behalf of the trust.  This is insufficient evidence to prove that it is authorized to sue on the trust’s behalf.

Ellstno/Leetsdale, LLC v. CWCapital Asset Mgmt, LLC, Case No. 4D11-3151 (Fla. 4th DCA 2012) (boldface in original).

In light of this opinion, a servicer cannot prosecute a lawsuit on behalf of an alphabet soup securitized trust unless the servicer presents proof from the trust reflecting its authority to proceed.

Think about that for a moment.  Let it simmer.  How is the plaintiff going to prove that at trial?  As I’ve been saying for a long time, I see two possibilities: (1) have the trustee so testify (in addition to the servicer, which means, yes, there must be two witnesses); or (2) produce a written, authenticated document showing the servicer’s authority to act on the trustee’s behalf with respect to that specific property.

This opinion should also dispel any notion that it is acceptable for a non-party servicer to verify a foreclosure complaint in lieu of the plaintiff doing so.  The Elston opinion did not expressly so hold, but it clearly suggested as much.  (“Although CW’s complaint is verified, it is verified by the “SVP” for CW – not by the real party in interest, the trust.”).

Personally, I love that the Wizard Behind the Curtain is finally being exposed.  In my view, banks AND THEIR LAWYERS better think twice about prosecuting foreclosure cases based solely on the representations of a servicer.  Clearly, the servicer must be able to prove its authority to prosecute that case with something besides its own affidavit.

Mark Stopa

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Dismiss Cases? Or Cram Through Judgments?

It’s only Tuesday, but it’s been quite a week already.  I’ve had four different foreclosure cases dismissed – four different cases, for four different reasons.  In contrast, I had one judge sua sponte set a plaintiff’s motion for summary judgment for hearing (refusing to set defense motions that were also pending, including a dispositive defense motion).  Then, when plaintiff’s counsel refused to proceed with summary judgment at the hearing, the judge denied summary judgment.  Upon doing so, however, the judge immediately set a trial date while refusing to hear my argument that the case could not be set for trial, showing such bias and hostility that I felt compelled to file a motion to disqualify.  This stark contrast made me wonder … which do you think is better?  Dismissing cases (where the law allows)?  Or being intent on cramming through foreclosure judgments?

Let’s start with the dismissals.

In one case, the Honorable David Demers of St. Petersburg granted a Motion to Dismiss for Lack of Prosecution, appropriately ruling he had “no discretion” to deny the motion where there was no record activity in the 10 months preceding the Notice of Intent to Dismiss or the 60 days thereafter and Plaintiff failed to show good cause in writing five days before the hearing.  Plaintiff’s counsel argued the case should remain pending, but instead of trying to cram a square peg into a round hole, the judge recognized the law required dismissal and he followed the law, dismissing the case.

In another case, the Honorable Anthony Rondolino of St. Petersburg dismissed a case without leave to amend because the Plaintiff failed to amend its Complaint for more than 6 months after a prior order giving it 20 days to amend.  Again, Plaintiff’s counsel argued the case should remain pending, but the judge followed the law and dismissed the case.

Interestingly, during that hearing, Judge Rondolino lamented how Florida’s governor and the banks complain about how the court system is too slow to prosecute foreclosures (using those delays as an excuse to ask for non-judicial foreclosures), as, in his view, it’s clear the banks are the ones who are dilatory.  That six-month delay was a good illustration of his point.

In a third case, the Honorable Douglas Baird of Clearwater granted a motion to compel discovery, ruling Plaintiff had waived objections thereto where it failed to file them for many months.  Rather than providing these discovery responses, Plaintiff chose to voluntarily dismiss its case.

In a fourth case, the Honorable James Barton of Tampa granted summary judgment for my client given the bank’s failure to comply with conditions precedent to suit.

Four cases, all dismissed, each for a different reason.  That, of course, makes for a significant point – it is very possible to adjudicate the “backlog” of foreclosure cases in a manner other than merely cramming through foreclosure judgments.  In other words, there are many ways a foreclosure case can be dismissed, if you’re fighting it.

By contrast, I am filing this Motion to DQ Judge because I’m so troubled at what happened in today’s hearing in a different case.  This judge took it upon himself to issue an Order setting a hearing on the plaintiff’s motion for summary judgment (not setting a hearing on any of my client’s motions).  After denying summary judgment (where plaintiff’s counsel was unprepared to proceed), the judge immediately set a trial, refusing to listen to my arguments or read my case law about why trial could not be set.  In fact, when I asked to be heard, he pointed at the door, basically telling me I could leave if I didn’t agree.

In my opinion, it was clear this judge had pre-determined that he was going to grant summary judgment or set trial, regardless of the facts of a foreclosure case.  Summary judgment or trial, that was it (on a case, mind you, that the judge took it upon himself to prosecute by setting a hearing).  Respectfully, is that really appropriate?

You tell me – which approach do you think is better?  Dismissing cases where the law authorizes, or judges taking it upon themselves to set a plaintiff’s motion for summary judgment for hearing, then either granting that motion or setting a trial (without regard to any arguments or case law about the propriety of a trial date)?  I know which approach I think is proper/better.

Mark Stopa

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All Parties Must Consent to a Magistrate

In my experience as a litigator, I’ve noticed on many occasions that judges hate to get involved in discovery disputes.  Often, if the disputes are hotly-contested, complicated, or tedious, judges want to punt the issue to a magistrate, as doing so prevents the judge from having to rule on such issues.

Florida Rule of Civil Procedure 1.490(c) is clear.  “No reference shall be to a magistrate, either general or special, without the consent of the parties.”

Earlier today, I had a hearing where the judge was frustrated with the magnitude of the parties’ disagreements regarding discovery.  Rather than hearing motions for sanctions and to compel, he ordered the parties to a magistrate.  I objected, both verbally and in writing, but the judge entered the Order anyway.

Respectfully, the law on this issue is clear, and Florida’s appellate courts will not hesitate to grant certiorari or mandamus where a court refers the parties to a magistrate without their consent.  See Urbanek v. Hopkins, 65 So. 3d 645 (Fla. 4th DCA 2011); Rosenberg v. Morales, 804 So. 2d 622 (Fla. 3d DCA 2002); Hulett Enviro. Svcs., Inc. v. Advantage Pest Related Svcs., Inc., 778 So. 2d 478 (Fla. 4th DCA 2001); Pesut v. Miller, 773 So. 2d 1185 (Fla. 2d DCA 2000).  As a result, I just drafted this Petition for Writ of Certiorari or Mandamus.

The petition is not in a foreclosure case, but the law works just the same way.  If a court directs a party to a magistrate, and he/she does not consent, then that ruling is error, and the appellate court will/should quash such an Order.  Frankly, I’d be very surprised to not procure such a ruling in this instance.

Mark Stopa

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