Archive for March, 2014

Paragraph 22: Where Are We?

For much of the last two-plus years, paragraph 22 has been my baby.  I’ve argued it in Florida courtrooms many hundreds – perhaps thousands – of times.  I’ve blogged about it (here, here, and here), trying to help everyone understand the argument.  I’d like to think this has changed foreclosure defense in Florida.  I feel like it has for my clients, as I’ve had hundreds of foreclosure cases dismissed (by 32 different circuit court judges in 10 different counties) on this basis.

Like anything in law or in life, paragraph 22 doesn’t always work.  Many judges don’t like it.  Many don’t agree with it.  The biggest problem, though, has been the relative absence of published case law from Florida’s appellate courts.  As a result thereof, any two, randomly chosen, circuit court judges could pick up the same paragraph 22 letter and reach vastly different conclusions.  Some may think the information in the letter is sufficient; others may not.  Some may think the letter must “comply,” others may believe “substantial compliance” is okay.

By and large, that’s what has been happening for much of the last two years.  Some judges will dismiss a case based on certain language in the paragraph 22 letter, while other judges won’t.  Having argued this many hundreds of times, the randomness of the results I obtain is sometimes difficult to accept.  Particularly in counties where the judges who preside over foreclosure hearings randomly rotate, the difference between winning and losing a case can hinge not on what the paragraph 22 letter says, but on what judge happens to be sitting on the bench that day.  Since the American justice system strives to give predictable, consistent rulings, that’s obviously not ideal.

Within the last week, though, the landscape has changed.  After going many months without any published decisions on paragraph 22 from the appellate courts, we got two such decisions within the past week.  Interestingly, the homeowner prevailed in one such appeal but lost in the other.  So where are we?  What’s the current state of the law on paragraph 22?

U.S. Bank v. Busquets and Samaroo v. Wells Fargo Bank may seem vastly different, particularly given the result in each case.  However, I see these decisions as remarkably similar, helping frame the issues for judges and counsel in foreclosure cases.

First, prejudice is irrelevant.  Banks love to argue prejudice in the paragraph 22 context by saying, in layman’s terms: “sure, the letter may not contain the information required by paragraph 22 of the mortgage, but the homeowner wasn’t paying the mortgage anyway, so any defects in the language of the letter are irrelevant.”  Now that we have three cases – Busquets, Samaroo, and Judy v. MSMC Venture, LLC, 100 So. 3d 1287 (Fla. 2d DCA 2012) – which have engaged in a paragraph 22 analysis without discussing prejudice, I think it’s fair to say the concept of “prejudice” in the paragraph 22 context is dead.  It doesn’t matter whether the homeowner is harmed by defects in the paragraph 22 letter – the letter still must contain the required information.

Score one for homeowners here.

Similarly, “substantial compliance” is dead.  Busquets, Samaroo, and Judy do not engage in a “substantial compliance” analysis.  Re-read Judy and Busquets and you won’t find “substantial compliance” mentioned anywhere.  It’s completely missing.  As I see it, if “substantial compliance” were how courts were supposed to evaluate paragraph 22 letters, these decisions would have at least mentioned the term.  Meanwhile, the Fifth District in Samaroo explicitly rejects the concept, saying substantial compliance is “an argument we cannot credit.”

This is a huge win for Florida homeowners.  Huge.  Some may disagree, but what I see is three published decisions, none of which adopt a “substantial compliance” analysis, all of which make it clear that “close enough” is not good enough.  Hooray!  “Substantial compliance” is dead.

One defect is one too many.  The paragraph 22 letters in Judy and Samaroo had just one defect, yet both courts did not allow foreclosure based on that one defect.  As such, I think it’s clear a bank cannot foreclose in Florida if the paragraph 22 letter is missing just one piece of information.  (Notably, even if “substantial compliance” were the standard, the Florida Supreme Court has adopted this same approach – one defect is one too many – in that context.  See Olivier v. City of St. Petersburg, 65 So. 2d 71 (Fla. 1953)).

Read the letter – nothing more.  Perhaps the best part of these three cases, though, is the most subtle.  Do you notice, in all three decisions, how the courts do nothing except look at the letter and decide whether it says what it’s supposed to say?  Under no circumstance do the courts resort to extrinsic evidence.  At no point do they cite the need for testimony (from homeowners, banks, or any witnesses).  Clearly, no testimony is necessary to evaluate the sufficiency of the letter.  Instead, judges review each letter and determine, as a matter of law, whether the letter says what it is supposed to say.

I don’t want to bog you down with legalese, but this makes a huge difference.  If testimony were needed to adjudicate the sufficiency of a paragraph 22 letter, getting a case dismissed on this basis would be much harder, much more complicated, and much more expensive.  But it’s not.  It’s easy.  Get the bank to produce the letter, admit in a deposition, interrogatory answer, or affidavit that is the letter it sent, and set a motion for summary judgment for hearing.  Following Judy, Busquets, and Samaroo, the judge can look at the letter and decide, as a matter of law, whether the letter says what it needs to say.  If it doesn’t, your case should be dismissed.

For two-plus years, I’ve been doing precisely this.  I’ve been moving for summary judgment, presenting the paragraph 22 letters to judges, and arguing they are defective.  I’ve been arguing prejudice and substantial compliance are not part of the analysis, that testimony regarding the content of the letter is unnecessary, and the judges can rule on the content of the letter as a matter of law.  Now, the appellate courts have accepted this approach.  It won’t always work (see Busquets), and not every letter is defective.  But paragraph 22 is not only live and well in Florida, it’s never been better.

Mark Stopa

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Help Me Change the World

“Change the world.”  I know what you’re thinking – “Stopa is swinging at windmills again.”  Look … I know it’s a cliché, and yes, “changing the world” sounds impossibly optimistic.  But if you never read another blog from me again, please … read this one.

This is a hard week for consumer advocates.  We’re all struggling to keep our composure as we read this 150-page manual from Wells Fargo, illustrating in painstaking detail the extent of the fraud that exists in foreclosure-world.  I could go on and on with examples, pulling excerpts from the manual and showing just how crooked these banks are and how corrupt the process has become.  Instead, I’ll give just one.

Page 17 of Wells Fargo’s own manual shows that when Wells Fargo wants to foreclose, and doesn’t have an endorsement on the original Note, it doesn’t send the Note to a prior owner/holder to get endorsed, but has its own employees (the “WFHM Default Docs Team”) execute that endorsement.  Please stop and think about that for a minute.

In Florida, the law has morphed in recent years to clarify that all a bank needs to foreclose is possession of an original, endorsed Note.  That endorsement, of course, is supposed to be signed by the *prior* owner/holder of the Note – the entity that transferred/sold the Note to Wells Fargo.  In a fraud-free world, that’s how endorsements would be done – the prior owner/holder of the Note signs an endorsement when it transfers/sells the Note to Wells Fargo.  But here we have Wells Fargo’s own manual showing that when it doesn’t have an endorsement from the prior owner/holder, all it does is have its own employees effectuate that endorsement.

If you’ve ever wondered why, when you review endorsements on Notes in foreclosure cases, you see the same few signatures over and over again (Joan Mills, in Wells Fargo’s case, or Michelle Sjolander, for Bank of America), this is why.  When the endorsements are effectuated, they aren’t signed with an original, wet-ink signature, as would happen in the ordinary course of business if one bank were legitimately transferring possession of the original Note to another bank.  Instead, the bank that wants to foreclose puts a stamp of an endorsement on the Note (not a signature but, literally, a stamp of a signature) and tries to use that endorsement as proof of standing.

Is this really what foreclosure “proof” has become?  The bank that has the Note lacks the requisite endorsement, so it just stamps an endorsement on the Note itself?  “Here you go, Court.  Here’s the original Note with an endorsement.  Never mind that we put the endorsement on the Note ourself; here’s the endorsed Note.”

An increasing number of people in this country are disgusted with how the big banks get away with stuff like this, particularly when they’re the ones that crashed the global economy not so long ago.  In fact, just today, the New York Times published this story, explaining how “our” government has completely dropped the ball in prosecuting these criminal banksters.  If you’re rich and powerful in the banking industry, you don’t get punished no matter how bad your misconduct – it’s really that simple.  And that’s not my spin – that’s straight from the New York Times.

At times like this, I want our courts to exhibit the utmost integrity.  I want our courts to show the public that they don’t tolerate this type of misconduct.  Unfortunately, these big banks are powerful.  Throughout the country, and including here in Florida, the banks and their related business interests put immense pressure on the legislature to “clear the backlog” of foreclosure cases.  The legislature, in turn, strong-arms our courts to push through the cases.  As a result, right now in Florida, there are, literally, quotas in place.  The legislature is telling our courts, right now: “Clear this number of foreclosure cases or you won’t get additional funding.”  The deadline is June 30, 2014.

How powerful are the interests creating the pressure to “clear the backlog”?  Remember my blog posts from months ago (another topic which nobody will talk about, hence the corruption of it all) – it takes 10 million dollars in demonstrable net worth to be invited to a foreclosure auction held by Fannie Mae, the auctions at which foreclosed properties are sold in bulk for pennies on the dollar to rich and power investors like Bill Clinton.

Think about that for a minute.  Here we have court systems throughout Florida killing themselves to prosecute cases faster … so properties can be sold in bulk in secret sales to uber-wealthy investors like Bill Clinton?  All so the courts can get a pittance of funding from the legislature which is controlled by the lobbyists hired by the rich and powerful?

I’m confident many judges dislike this dynamic.  After all, as we all learned in grammar school, the judicial branch of government is supposed to operate independent of the legislature; the latter is not supposed to be able to tell the former what to do.  Unfortunately, though, these judges aren’t allowed to speak out.

I’ve tried speaking out (both via this blog and in courts throughout Florida on a daily basis).  I’ve tried supporting our good judges in Florida (of which, despite the foreclosure morass, there are many).  I’ve tried screaming from the rooftops about the inequity of it all.  But I’m just one person, and I can’t do it alone.  The foreclosure process is a runaway train, too big and too fast for me to stop it myself.  That’s why I need your help.

I’m optimistic I can get the ear/attention of the powers that be.  Maybe I’m crazy/naïve, but I think I can.  If so, I don’t want to be unarmed.  You see, it’s one thing for me to explain the perversities of the process myself; it’s another for me to have proof.  You, ladies and gentlemen, can give me that proof.

If you’ve had a bad experience in foreclosure court in Florida, share it with me.  I’m not talking about how you lost your case/home when you think you should have won.  And I’m not asking for tear-jerking stories of personal strife (e.g. I had cancer and the judge foreclosed on me anyway).  I want testimonials from Florida homeowners which reflect a lack of integrity with the system as a whole.  I’m talking about things like:

– The judge would not let me speak, at all.

– I was denied a continuance after the bank got three continuances.

– My motion was set for hearing at the same time as 30 other motions in other cases and I was limited to 60 seconds of argument

– At trial, the bank’s lawyer did not even have to ask any questions, as the judge asked all the questions and prosecuted the case

– The court said it “did not care” that the appellate court ruled on an issue (or anything to that effect), ruling the opposite of how the appellate court ruled.  (This is a slippery slope.  Reasonable people can disagree about the law or how it applies in a particular case.  So I’m not asking for long explanations of how you think the judge got it wrong.  Instead, I’m asking for any stories where the judge said he/she “did not care” how the appellate court ruled, “did not agree” with the appellate court’s ruling, or anything of that ilk.)

– The court declined to accept a settlement agreement of entry of a foreclosure judgment with an extended sale date, even though it was agreed upon by both parties.  “You agree to entry of judgment with 120-day sale date?  That’s too far away.  30 day sale date.”

– The court declined to reschedule a foreclosure sale where both parties agreed it should be rescheduled based on a settlement or settlement discussion (because the court wanted the sale to take place sooner).

– The court induced a pro se homeowner to consent to judgment when he/she wanted to go to trial (e.g. “if you consent to judgment, I will set a 120-day sale date, but if you oppose the trial, you will get a 30-day sale date”).

Please do not misunderstand the intent here.  I don’t want or need any judges’ names.  If you give me judges’ names, those names will be deleted.  This is NOT a forum to criticize a judge or to complain that Judge X ruled against you.  Many homeowners have been foreclosed, and many of them were appropriate rulings.  My point here is to obtain testimonials reflecting the fairness of the judicial process in Florida and how that made you feel about the court system as a whole.  It doesn’t even have to be your case – just something you saw/observed that reflects the fairness/integrity of the system.  Particularly if this was your only experience in a Florida court, I want to know how your experience/observations make you feel about the judicial system.

Please limit your letters to 200 words or less and send the letters to:  Stopa Law Firm, Attn:  Testimonials, 2202 N. West Shore Blvd, Suite 200, Tampa, FL 33607.

If you send such a letter, you agree there is no attorney-client privilege regarding the contents of that letter and consent to my use of the letter, in my discretion, as I see fit.

I make no promises here, folks.  Like I said, this a huge, runaway train with no brakes, and I’m just one man.  That said, I’m hopeful, if I can compile some testimonials like I’m envisioning, that we can effectuate some real change in how the system operates.  After all, maybe it’s the optimist in me, but I can’t help but believe that the powers that be would shudder if they realized just what’s happening in our courts on a regular basis.

Mark Stopa

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“Equity” Does Not Trump Law, Even in Foreclosures

If you’ve ever sat through a mass-motion calendar in foreclosure court, you’ve seen it happen.  An elderly or disabled homeowner appears pro se and makes a heart-wrenching, emotional argument why he/she shouldn’t be foreclosed.  Cancer.  Job loss.  Nowhere else to live.  Invariably, the judge will respond with something like “I’m sorry, but that’s not a legal defense to foreclosure.”  Often, in fact, Florida’s judges are so used to hearing these stories from homeowners that they begin each hearing by asking “do you have any legal defense to foreclosure?” (emphasizing the term “legal defense”).

As much as we may not like it, equity does not trump law.  If my client is 85, cancer-stricken, and has just six months to live, that is not a reason for a judge to deny foreclosure.  We might think it should be, but it’s not.

I often find myself lamenting this concept, but, fortunately, it works both ways.  You see, just as a judge cannot ignore the law when foreclosure might seem terribly unfair to the elderly/disabled woman, the judge cannot ignore viable legal defenses just because that judge might find it inequitable for the homeowner to live in the house for free.

Unfortunately, I see this concept more and more nowadays.  Judges have been litigating foreclosure cases for five years.  Some are tired of dealing with it.  All are under immense pressure from higher-ups to “clear the backlog” of foreclosure cases.  This has caused some judges to view certain foreclosure defenses as inequitable.  “They’re living in their house without paying, so why should I dismiss the foreclosure suit against them based on some technical defense?”

To be fair, most judges won’t come right out and say it like that.  But if you litigate for homeowners enough, you can see this thought process from some judges.  “Foreclosure is an equitable proceeding.  I can rule in a way that I find equitable.”  Sometimes, that means disregarding defenses for the sake of a more expeditious foreclosure.

Respectfully, I believe that’s the wrong approach.

Let’s give some examples.

Florida Statute 57.011 requires any plaintiff who is not a resident of Florida to post a $100 non-resident cost bond upon filing suit.  Under the terms of the statute, if the plaintiff doesn’t post the bond, the defendant gives written notice of the failure to do so.  Then, if the Plaintiff still doesn’t post the bond, the defendant moves for dismissal and the court “shall” dismiss the lawsuit without prejudice.

I can totally see how enforcement of this statute, as drafted, seems terribly inequitable.  What is the point of a $100 cost bond, anyway?  To ensure a defendant can recoup $100 if the case is dismissed?  Are we really going to dismiss a case over $100?  Perhaps unsurprisingly, many judges don’t like dismissing a foreclosure case when a plaintiff fails to post the non-resident cost bond.  Some have outright told me they “do not dismiss cases” on this basis.  That sounds reasonable, perhaps, but I respectfully submit it is wrong.

It doesn’t matter if the judge thinks a statute is arcane and outdated, that dismissal is too harsh of a penalty, or that the defendant shouldn’t get to recoup attorneys’ fees for winning the case on a “technicality.”  A judge’s role is to enforce statutes as they are written, not to inject his/her own, subjective views of equity in applying a statute.  After all, that’s how our government is set up – judges enforce statutes and the legislature writes (and re-writes) them.  Florida’s highest courts have explained this concept on many occasions – statutes must be enforced even if the judge finds it unfair to do so.  See e.g. Thomas v. State, 65 So. 2d 866 (Fla. 1953) (“in deference to the Legislative Department of the Government, we have no authority to ignore the statute.  Whether or not we believe in the statute is immaterial.  If the statute is unwise, the remedy is to repeal by legislative enactment and not by judicial decree because we disagree with it.”).

Similarly, I’ve had a lot of success getting foreclosure cases dismissed when the paragraph 22 letter the bank sent before filing suit did not contain the information required by that paragraph of the mortgage.  That’s not to say all cases turn on this, of course.  After all, some of these letters are sufficient and some are not, and most judges will rule accordingly (dismissing the cases where the letter is the requisite information and not dismissing those that are sufficient).  Some judges, though, don’t rule that way.  Most won’t come right out and say so, but some judges have never found a paragraph 22 letter that did not “substantially comply.”  Since there is not one appellate decision in Florida that says “substantial compliance” is the standard in the paragraph 22 context – not one – I don’t believe these judges are ruling this way based on law, but a mixture of law and what that judge perceives to be equitable.

On one level, I can understand that.  Why should a foreclosure case be dismissed because a letter a bank sent a homeowner before filing suit did not say precisely what it was supposed to say?  I get that argument, I do.  But where the parties’ contract required that letter to contain certain information before filing suit – in a contract drafted by the bank and put in boldfaced font – how can anyone choose to ignore the parties’ own contract simply because they wouldn’t like the result of enforcing that contract as written?

As I see it, all of us in foreclosure-world must insist the law be enforced and subjective views of equity be cast aside.  As much as we might want sympathy to guide a judge’s decision when dealing with that elderly/handicapped woman, equity can’t drive the train.  Otherwise, our entire system of laws gets thrown by the wayside in favor of what each judge thinks is fair.  “Law” would cease to exist, being replaced by each judge’s subjective view of equity.  We just can’t have that.

This might sound like I’m saying “judges aren’t fair.”  That’s not what I’m saying.  My point is that our system of laws can’t operate in a way that each judge rules based on what he/she thinks is fair because there is no way to enforce that.  After all, if you take any two, random people, they will often disagree on what is fair or equitable.  Realizing that Florida has many dozens of judges, with a myriad of different backgrounds and experiences, it’s easy to see how equity cannot drive the train – the opinions about what is “equitable” would be all over the map!  One judge would think foreclosure was equitable in a given situation (the homeowner didn’t pay), while another would not (the homeowner was elderly/handicapped).  There would be no way to know/predict how any particular judge felt, and no way to enforce these subjective views of fairness.

Don’t take my word for it.  In 1986, the Florida Supreme Court was presented with an “equitable” argument in a mortgage foreclosure case.  The Court ruled:

Petitioners argue that the foreclosure should be denied because an acceleration of the due date would be an inequitable or unjust result and the circumstances would render the acceleration unconscionable. … Although providing equitable relief in a proper case is discretionary with the trial judge, were that discretion not guided by fixed principles, the degree of uncertainty injected into contractual relations would be intolerable.  Equity cannot therefore look solely to the result in determining whether to grant relief, but must apply rules which confer some degree of predictability on the decision-making process.

David v. Sun Fed. Savings & Loan Assn., 461 So. 2d 93 (Fla. 1984).  That’s it, folks.  Foreclosure cases are adjudicated based on a compilation of “rules which confer some degree of predictability on the decision-making process.”  Id.; see also Smiley v. Manufactured Housing Assocs. III Ltd. P’ship, 679 So. 2d 1229 (Fla. 2d DCA 1996) (“in determining whether to grant equitable relief, the trial court cannot look solely to the result but must apply rules which confer some degree of predictability on the decision-making process”).

So the next time you have a judge disregard the cost-bond statute as arcane and outdated, or inject his/her views about how foreclosure defense is not “equitable,” remind the judge of these concepts.  Point out how “equity” isn’t a defense for that elderly/handicapped homeowner, so “equity” can’t be a basis for ignoring statutes or laws that work in the homeowner’s favor, either.

Mark Stopa

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