Archive for June 5th, 2012

“Equity” in Foreclosure Cases

Can you imagine it?  Just picture it – a judge denying a foreclosure for equitable reasons.  No, not because the homeowner has a defense on the merits, but simply because the judge thinks it is inequitable to grant a foreclosure.  Frankly, I can think of a million fact-patterns which fit the scenario, but let’s just try one … a disabled, 85-year-old war veteran induced to enter 30-year mortgage at age 81, with nowhere else to go, and the mortgage has been securitized 20 times over.  Foreclosure sounds inequitable, right?  Are we really going to throw an 85-year old, disabled, veteran onto the streets?  Unfortunately, that’s precisely what any judge would do if there is not a legal defense to foreclosure.  And while I advocate like hell for homeowners, I’m not entirely sure I disagree.  Lawyers fight to uphold the law, and the law can’t be ignored based on some nebulous, subjective view of equity (particularly one which can vary from person to person).

Of course, once you accept that premise – that the law must be enforced even when the result is not necessarily equitable for homeowners – the obvious question becomes: why does this rationale not get applied the same way when it prompts an “inequitable” result for a bank?  Why, when a homeowner starts asserting legitimate defenses, does “equity,” i.e. the homeowner not paying the mortgage, start becoming a consideration?

Recently, I’ve seen one local judge start denying well-taken defenses in foreclosure cases, including failure to post a nonresident cost bond and failure to comply with conditions precedent (i.e. the notice/cure provision in paragraph 22 of the Mortgage) because the judge thought it was inequitable to dismiss a case for these reasons.  According to the judge, the language in Fla. Stat. 57.011 and the terms of the parties’ contract may require dismissal, but if the homeowner isn’t paying, it is not “equitable” to require dismissal for technical reasons like this, and mortgage foreclosure cases are cases in equity.  So that’s the judge’s rationale – “I’m not going to dismiss the case because I don’t think it’s equitable.”

With all due respect, I think this rationale is 100% wrong.  To illustrate why, one need only ask “when is the last time any judge denied a foreclosure purely for equitable considerations, regardless of what the law required,” such as the situation I described above?  Frankly, I don’t think that has ever happened, and, again, I’m not sure it should.  That’s the reality that homeowners (and, certainly, their lawyers) are forced to accept – the law is enforced, even where it seems inequitable on the facts of a particular lawsuit.  As such, why would anyone think it’s okay to deny defenses in a foreclosure case based on one person’s subjective views of what’s equitable?  Our courts don’t stop foreclosures because foreclosure would be unfair – they enforce the law.  So why should we deny meritorious defenses and ignore the law for equitable reasons?

In my view, we shouldn’t.  That’s why I just drafted this Motion for Rehearing.  Read it.  Use the arguments.  If any judge tries to deny well-taken defenses in foreclosure cases, e.g. the failure to post a nonresident cost bond or failure to comply with conditions precedent, for “equitable” reasons, make sure the judge knows that’s not allowed.  Judges can’t rewrite contracts simply because the result is seemingly unfair.  Judges can’t ignore statutes, even ones where the judge thinks an “absurd” result transpires.  Judges cannot deny well-taken motions to dismiss in foreclosure cases simply because the judge thinks dismissal would be inequitable.

If the judge disagrees, and insists on “equity,” use the example I cited above.  I’m certain every judge will agree that foreclosure can’t be denied merely because it would be inequitable to throw an 85-year-old, disabled vet onto the streets.  Once the judge accepts that, i.e. once the judge realizes the law is what is enforced even when it is inequitable for homeowners, the judge should agree that the law must be enforced even when it is inequitable for banks.

Mark Stopa

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