How Pino Impacts My Foreclosure Defense Practice
Forgive me if I didn’t come rushing to the computer to write a blog after the Florida Supreme Court issued its decision in Pino v. Bank of New York Mellon last week. Yes, that decision garnered national attention, but it was a yawner for me. The outcome was completely and totally, 100% predictable. I hate to sound callous, but were you really surprised the Court ruled a bank could sweep evidence of fraud under the rug, voluntarily dismiss a lawsuit after evidence of that fraud emerged, and file a new lawsuit? Hehehehe. If you really harbored hope for a different ruling, you haven’t been paying attention. If you expected some broad-sweeping ruling that spoke out against foreclosure fraud, you’ve been living under a rock.
Remember back in 2007, when the Florida courts had a chance to undermine the MERS system? Other states have since found the MERS system illegal, and a local judge named Walt Logan ruled MERS lacked authority to do anything as a “nominee.” However, Florida’s Second District Court of Appeal declined to invalidate the MERS system, instead ruling a “holder” can foreclose even without being the “owner.” Mortgage Electronic Registration Systems, Inc. v. Azize, 965 So. 2d 151 (Fla. 2d DCA 2007). As a result, at least in Florida, the banking industry has been able to get away with transferring notes/mortgages without a “chain of title” being recorded in the Official Records, basically by anyone coming to court with an endorsed note. For anyone challenging the mortgage industry’s sloppy practices, Azize was strike one.
In 2010, Florida’s Fifth District Court of Appeal was presented with the argument that a foreclosure plaintiff could not prevail where the mortgage was “owned” by MERS, as “nominee,” while the Note was held by someone else. After all, a mortgage does not exist separate from the note, as the former is merely security for the latter, so how could one entity “hold” the Note while another has the Mortgage? The Fifth District obliterated this distinction, allowing plaintiffs to foreclose a mortgage based on an endorsed note irrespective of the fact that the fact that the Note and Mortgage were owned/held by different entities. See Taylor v. Deutsche Bank Nat’l Trust Co., 44 So. 3d 618 (Fla. 5th DCA 2010). This was strike two against anyone challenging MERS or the banks’ fraudulent practices.
In 2011, Florida’s Fourth District Court of Appeal got the chance to adjudicate Pino v. Deutsche Bank Nat’l Trust Co., 57 So. 3d 950 (Fla. 4th DCA 2011). This was clearly an important case, so instead of the typical, three-judge panel, the decision was en banc, meaning every judge on the Fourth District joined in the decision. Sadly, all but one such judge agreed that a foreclosure plaintiff could voluntarily dismiss a lawsuit without prejudice and refile a new action even when evidence is presented of a significant fraud by that plaintiff upon the court. Obviously, Pino was a wonderful opportunity for Florida courts to explain they would not tolerate fraud in the foreclosure context, particularly fraud upon the courts. Yet the Fourth District declined to do so, deferring to a procedural rule. While I understand the rationale behind the procedural rule that authorizes plaintiffs to voluntarily dismiss, the moral of that first Pino decision, in my eyes, was that if the Florida courts had a procedural reason, a loophole, or any quasi-legitimate basis to look the other way on bank fraud, they were going to take it. Clearly, Florida’s highest courts were just not going to allow the foreclosure process to be turned on its head by arguments of foreclosure fraud.
As of 2012, many Florida foreclosure defense attorneys were arguing that securitized trusts lacked standing in foreclosure cases because the notes were not conveyed into the trusts in a manner consistent with the pooling and servicing agreements for those trusts. This was (and, in my opinion, is) a perfectly appropriate argument. How can any trust own something when its own trust rules says it cannot? Regardless, Florida’s Third District Court of Appeal shot down that argument, providing a two-sentence decision (without a single citation to a Florida case) that homeowners “lack standing” to challenge the issue. Castillo v. Deutsche Bank Nat’l Trust Co., 89 So. 3d 1069 (Fla. 3d DCA 2012). Once again, the Florida courts showed they weren’t going to allow any sort of widespread argument that plaintiffs couldn’t foreclose in Florida courts based on the banking industry’s fraudulent paperwork.
In fairness, the Florida Supreme Court did create Rule 1.110(b) in 2010, which required foreclosure plaintiffs to verify all complaints before filing them. In 2012, however, Florida’s Second District Court of Appeal clarified that this rule did not require a verification under penalty of perjury, as Florida law had operated for dozens of years, see Fla.Stat. 92.525, but ruled that a verification on “knowledge and belief” was sufficient. See Wells Fargo Bank, N.A. v. Taboada, 93 So. 3d 1073 (Fla. 2d DCA 2012). As a result, the verification requirement has no teeth whatsoever, as even if the person who signs it did so knowing the information contained in that complaint was false, he/she is not subject to penalties of perjury because the rule does not require that type of verification.
So that’s a quick summary of what we’ve seen from Florida’s highest courts in recent years on the issue of foreclosure fraud. Everything about the MERS process is okay, problems with the securitized trust are irrelevant, an endorsed note is all plaintiffs need, and even if a homeowner proves fraud in a foreclosure case, the bank can merely dismiss that case without prejudice and file a new one, burying the fraud forever.
Of course, just as telling as what we heard in these decisions was what we haven’t heard from the Florida Supreme Court since the foreclosure crisis began. No pronouncements against fraud. No rule amendments to prevent fraud. Nothing from the Florida legislature, either, which, instead of trying to prevent foreclosure fraud, is now trying to pass a new law that could make foreclosures go faster.
With this backdrop in place, how can anyone have been surprised by last week’s Pino decision? If you’ve been paying attention, that ruling has been in place for years – it was merely finalized last week.
I might sound like I’m criticizing the courts. I’m not. I mean, who the heck am I to criticize the Florida Supreme Court (a question I ask with all sincerity)? Even if it were my intent to criticize, what good would it do? Obviously this blog isn’t going to change the substantive rulings, or lack thereof, that come out of the Florida Supreme Court. Hence, the point isn’t to criticize … the point is to show why I handle things the way I do.
Let’s put it this way … The other day, a friend on Facebook (feel free to friend me – Mark Stopa) asked me why I don’t spend more time defending foreclosures by talking about foreclosure fraud. Well, this blog shows why. Regardless of what I think about it, those arguments don’t work. The judges just don’t like them. And whether I like it or not, Florida courts just aren’t going to create a system that prevents homeowners from getting foreclosed (certainly not on any widespread basis) based on foreclosure fraud.
Suppose you’re playing cards. Do you whine and complain if you get a crummy hand? Quit? Or do you play the best you can with the hand you’re dealt?
For me, that’s what foreclosure defense is – doing the best you can with the hand you’re dealt. I don’t like all of the rules/laws. I don’t always have a great hand. But I play the best I can with the hand I’m dealt.
In a different state, with a different set of laws, I’d love to cram foreclosure fraud down the banks’ throats over and over again. But in Florida, with this backdrop of case law, this is why I don’t talk much about foreclosure fraud. This is why I talk about things like paragraph 22 and standing at inception. Paragraph 22 might not be sexy or fun, but, in my experience, it works. So as much as others might lament Pino and the absence of any sanction for foreclosure fraud, I’m going to keep doing the best I can with the hands I’m dealt. While other defense lawyers in the industry charge clients for the privilege of pounding their heads into the wall (by making arguments about foreclosure fraud that clients want them to make but that Florida judges routinely reject), I’ll keep making the arguments with which I’ve had success. For me, doing the best I can with the hand I’m dealt – that’s what foreclosure defense is all about.
Let’s put it this way … it’s quite possible to get your foreclosure case dismissed without prejudice based on violations of paragraph 22, lack of standing, or lack of standing at inception. It’s entirely reasonable to hope you can settle with your bank – loan modifications, short sales, and deficiency waivers happen regularly in my practice. But if you’re looking to prove bank fraud in Florida, you’re probably going to be as disappointed as when you read Pino.
Mark Stopawww.stayinmyhome.com
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