Archive for June, 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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Using the FDCPA in Foreclosure Defense

Nearly every client with whom I’ve spoken has lamented the never-ending, harassing phone calls received from debt collectors.  “How do I make them stop calling?”  Many such clients know that the Fair Debt Collections Practices Act exists, but don’t know enough about it to avail themselves of its provisions.  In light of some questions I’ve received recently, it’s probably past time that I explain how I put the FDCPA to good use in my foreclosure defense practice.

Under Section 805(a)(2) of the Act, a bank is prohibited from communicating with a homeowner when the bank knows the homeowner is represented by counsel.  There are other parts of the Act and other ways a bank can be said to have violated it, but this provision is simple and straightforward – black and white – with very little room for interpretation.  If I’m counsel for a homeowner in a foreclosure case, the bank can’t contact that homeowner about the debt.  That’s it; no exceptions.

Hence, without disclosing any specific conversations with my clients, I’ll say this.  What I like my clients to do is log the calls.  Keep track.  Document them.  Get a notepad and write down the date and time of each call, the name of the person who called, the company on whose behalf he/she is calling, and the substance of the conversation.  If you have itemized phone bills reflecting the calls, keep them.  Then give these documents/logs to me so I can use them to defend your foreclosure case.

Contrary to what you might have thought, you don’t have to file a lawsuit to put these violations of the FDCPA to good use.  You don’t even have to file a counterclaim (and incur the filing fees associated with a counterclaim).  All you have to do is assert a setoff defense for the bank’s violations of the FDCPA in your existing foreclosure case.

How does it work?  Just think about it.  The bank is suing you for foreclosure, but you contend the amount you owe, if anything, must be reduced by the amount to which you are entitled by virtue of the bank’s violations under the Act.  At worst, that creates disputed issues of fact as to the amount you owe, precluding summary judgment.  At best, this reduces the amount you owe (in theory, down to zero).

There are certainly other ways the FDCPA can be used to help consumers.   For me, though, if you’re looking to maximize the bang for your buck, i.e. to avail yourself of a legitimate defense with little input of time an expense, this is how.  It’s incredibly simple for my clients to document/log the calls they receive from the bank and for me to use these calls as a substantive defense to foreclosure.  Nothing fancy, nothing confusing.  Just keep track of the calls you receive so I can assert the FDCPA as a setoff defense.

Oh, and another neat thing here … I firmly believe a homeowner who defends a foreclosure case and brings a setoff defense or counterclaim for a violation of the FDCPA is entitled to a jury trial on that issue regardless of the waiver of the right to a jury trial in the mortgage.  After all, the FDCPA claim exists independent of the mortgage (and the jury trial waiver contained therein), and the Eleventh Circuit (one step down from the U.S. Supreme Court) has held that consumers are entitled to a jury trial in a FDCPA claim.  See Sibley v. Fulton Dekalb  Collection Service, 677 F.2d 830 (11th Cir. 1982).   So if/when you get to a trial in your foreclosure case, a jury will get to decide the amount of the setoff for the bank’s violations of the FDCPA.

Yes, there’s more to the FDCPA than this.  There are nuances and complications and many other violations than simply calling a homeowner who is represented by counsel.  But this defense is simple and I’m confident it works.

Mark Stopa

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Failure to Post Non-Resident Cost Bond Prompts Dismissal

One of the technical (but totally legitimate) defenses that foreclosure defense attorneys love to raise is the plaintiff’s failure to post a non-resident cost bond.  Personally, I love this defense because it’s so easy to assert, yet the upside is huge – an outright dismissal of a lawsuit, regardless of whether that lawsuit otherwise had merit.  Today, I received a great Order from a judge on this issue, so this seemed like a good opportunity to discuss this “defense.”

Under Fla. Stat. 57.011, if a plaintiff initiates a lawsuit but is not a resident of Florida, it is required to post a $100 bond with the clerk.  The intent of the statute is to ensure that a defendant who prevails in the lawsuit can collect costs from the plaintiff in the event the defendant prevails on the merits.  As a practical matter, though, the intent of the statute doesn’t really matter – the statute is a legitimate way for homeowners to try to get a case dismissed.

Here’s how it works.  If a non-resident plaintiff fails to post the cost bond, then the defendant can give the plaintiff 20 days notice of its failure.  If the plaintiff still fails to post the bond, the defendant can move for dismissal.  Once the hearing on that motion arrives, if the plaintiff still hasn’t posted the bond, then the court can (and should) dismiss the case.  See Fla. Stat. 57.011.

I’ve made this argument many times, and sometimes the judge has agreed, dismissing the case where the plaintiff failed to post the bond.  Sometimes, though, I’ve had judges “grant” the motion but give the plaintiff another 10 or 20 days – after the hearing – to post the bond.  Respectfully, I find that terribly frustrating.  Fla. Stat. 57.011 does not say that the plaintiff should be given another chance to post the bond.  Once the defendant gives the plaintiff notice and moves for dismissal, then the court should, if the bond hasn’t been posted, dismiss the case.

My frustration that the statute is not always strictly enforced is likely why I enjoyed this Order from Judge Bruce Boyer.

The facts in that case transpired just the way I described above.  The plaintiff was a non-resident, yet it failed to post the cost bond.  I gave it notice of that failure, but it still didn’t post the bond.  So I moved to dismiss and set it for hearing.  When the hearing arrived and the plaintiff still hadn’t posted the bond, Judge Boyer dismissed the case.  The judge didn’t dismiss with leave to amend and didn’t give the plaintiff another chance to post the bond – he did what Fla. Stat. 57.011 says and dismissed the case.

The plaintiff didn’t like it, so it moved to vacate that Order.  Motion denied.  Then it moved for clarification, and that motion prompted Judge Boyer to draft this Order.

Do you think the Plaintiff will get the hint this time?  I sure think it’s clear – when a plaintiff fails to post a non-resident cost bond, the case should be dismissed, and there are no second chances.

Mark Stopa

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