Saturday, March 6, 2010

Oakland Judge Gives Lender The Boot In Unlawful Detainer Action After Foreclosure; Says Ambiguous Eviction Notice = No Notice

In Oakland, California, BeyondChron reports:

  • In a direct challenge to bank evictions of tenants across the state, Tenants Together is urging renters to contest foreclosure evictions. Pointing to a new ruling from an Alameda County Superior Court judge, Tenants Together argues that most post-foreclosure eviction notices issued to tenants are invalid under California law.


  • A tenant in Oakland did exactly that. With assistance from the nonprofit East Bay Community Law Center, and in particular EBCLC attorney Jaime Arnone Modica, the tenant filed a motion to dismiss (called a demurrer) against an eviction lawsuit (called an unlawful detainer) commenced by Aurora Loan Services LLC. The tenant argued that the notice to quit was uncertain and confusing because it referenced several time frames and failed to unambiguously terminate tenancy at a particular time.(1) The court agreed. On February 9, 2010, Judge Frank Roesch dismissed the case without leave to amend, meaning that the action terminated conclusively in favor of the tenant.

For more, see Judge Throws Out Bank Eviction (Calls into Question Validity of Evictions Across California).

(1) Reportedly, Marc Janowitz, the EBCLC staff attorney who argued the case before Judge Roesch, praised the ruling, noting that "an unclear eviction notice is an invalid eviction notice. It is not the tenant's job to figure out what the landlord is trying to tell them to do. We see a lot of these confusing notices after foreclosures. In my opinion, they are invalid, and apparently, the Court agreed."

Reportedly, after acquiring property through foreclosure, banks routinely serve a single notice upon all occupants of the property, reciting various timeframes, legal rights and requirements that apply differently depending on the type of occupant. Banks typically do not perform due diligence to determine whether the occupant resides as a tenant or former homeowner at the property, instead serving confusing notices designed to cover all possible situations.

According to the story, tenant advocates point out that California law encourages this gamesmanship by banks and their lawyers because tenants are afraid of the possible credit impacts of contesting these evictions in court. Under current law, unless the tenant wins within 60 days of the filing of the case, the bank's eviction action, even if totally invalid, can end up as part of the tenant's credit history, making it harder for tenants to find rental housing in the future, the story states.

Foreclosing Lenders Continue Giving Tenants The Boot In Violation Of Federal Law

CNNMoney reports:

  • Renting a home that is going through foreclosure? If so, don't be fooled: Lenders can't kick you out; they have to honor the terms of your lease.(1) Of course, that doesn't mean that some lenders' representatives aren't trying to scare people away.


  • [T]enant advocacy groups charge that lender representatives, including some unscrupulous real estate agents, have been preying on tenants' ignorance. They pressure renters by sending them misleading letters that drive some out. One letter sent out by a Texas law firm stated, "This letter constitutes formal and final demand that you vacate the premises within three days [emphasis ours] of the date this letter is delivered." Worse, the message threatens legal costs if tenants don't comply. With that facing them, many fold their tents. "The average person wouldn't know the law has changed," said Robert Doggett, an attorney for Texas RioGrande Legal Aid. "People assume they have to leave."


  • [M]any [foreclosing lenders] often contract with outside companies -- law firms and real estate brokers -- to handle the [eviction] workload. And in some cases it may be those contractors who are overstepping the bounds, without the banks' knowledge, according to Gabe Treves, program director at California advocacy group Tenants Together. "The realtors see tenants as a roadblock to their commission," he said, "so they bully and mislead them into signing away their rights to say in their homes."

For more, see Your landlord got foreclosed. Do you have to go?

For national news coverage on tenants being bullied out of their homes after foreclosure, see Renters Can Stay Until Their Lease Is Up.

(1) Under the Protecting Tenants at Foreclosure Act, which Congress passed last May, tenants are usually eligible to stay after the property has been foreclosed as long as they have a valid lease and are paying their rent regularly. Even renters on a month-to-month lease get 90 days to leave.

Fight Between Alleged Slumlord Facing Foreclosure & Bank Over Collection Of Rent Payments Leaves Milwaukee Tenants Caught In The Middle

In Milwaukee, Wisconsin, WITI-TV Channel 6 reports:

  • A foreclosure faux pas and the link to a notorious landlord. Some east side renters say they're caught up in someone else's financial woes, and caught up in a rent paying run around. One apartment with two places to send the rent check. That's the dilemma some on Milwaukee's east side is facing. Some aren't even sure if they'll be living in their rental the next day.

  • About a dozen live inside an east side apartment complex. For some it's home, for Laura Burmester it's been uneasy living. She was given a notice threatening eviction February 9th. "It's just really frustrating...just constantly nervous like when you get a phone call what's going to happen next...always have paid our rent in full."

  • The problem is she's not sure who to send the rent to. January 28th a letter from Waterstone Bank says they're the owner of the mortgage of the building she lives in. The property is in the process of foreclosure and to send payment to a management company called Milwaukee Investment Realty. About two weeks later she says she got a letter of apology from the previous landlord. It read sorry for the recent confusion, but to pay them. "It's just become a headache now, and everyone's looking for money and we don't know where to send it."

  • What was clear was the threat of eviction from her landlord listed as Tim. When the tenants called the number the name they got was Tim Brophy. In several legal documents Tim Brophy is called a defendant, he's also called one of Milwaukee's most notorious slumlords. Cited over and over again for city violations. He's been the subject of FOX6 Investigations.

For the story, see Milwaukee renters caught in crossfire of battle between notorious slumlord and the bank.

Friday, March 5, 2010

Soured Contract For Deed Deal Leaves Illinois Homeowner Out On The Street, Despite Having Never Missed A House Payment

In Knoxville, Illinois, The Register Mail reports:

  • The big green house has been purchased by a mortgage company, even though [Amanda] Schwabe kept up her contract for deed payments faithfully for 31 months. Even though she paid homeowners insurance, the property taxes and even replaced a boiler.

  • Schwabe’s story is a cautionary tale for those who buy and sell homes through the contract for deed process. “I don’t know what I’m going to do,” Schwabe said. “I’m not necessarily looking for help. I just want to warn other people who get into contract-for-deed situations. They have to be careful.”

  • Schwabe moved into the big green home at the end of June 2006, taking over the deed-for-contract arrangement of a co-worker. She signed a new contract with Jim Morgan, the home owner, on Aug. 16, 2006, promising to pay $720 a month for a year, at which time she would take over the mortgage of $67,000 at 9 percent interest. In essence, after a year, owner Jim Morgan’s name would come off the deed and Schwabe would assume full responsibility for the purchase of the home. The transaction was overseen by an attorney John Blake. Crucially, the deed-for-contract arrangement was not filed with the Knox County Courthouse. Schwabe and Morgan insist Blake said he would file the transaction.


  • In February of 2009, Morgan was forced to declare bankruptcy. Since the mortgage company didn’t recognize Schwabe as having a claim on the house, it was foreclosed.


  • The cost to Schwabe? She paid on the house for 31 months — 13 at $720 per month and another 18 at $705 per month. That’s a grand total of $22,050. She also paid insurance bills totaling $3,534 and $1,018 in taxes. Throw in the $4,500 for a new boiler and Schwabe poured $31,102 into the big green house. “The moral of the story?” Schwabe rhetorically asked. “Don’t do deed-for-contract unless you can get a lawyer. And make sure the mortgage company knows about it. Don’t trust that they will have your best interests at heart.”

For the story, see Contract-for-deed deal leaves family homeless.

Underwater Home Sellers Cautioned To Keep Their Eyes Open For Fine Print In Lenders' Approval Packages When Seeking Short Sales

In Central Florida, a recent story in The Tampa Tribune serves as a cautionary admonition to underwater homeowners looking to go the short sale route in an attempt to unload their homes (and their related mortgage obligation(s)):

  • Lenders are increasingly adding language to the [short sale] approval package, reserving the right to pursue the deficiency later - that is, the difference between what you owed on the house and what it sold for. Some homeowners, so anxious to get out of a pending foreclosure, skip right over that part of the letter. Some understand but opt to take their chances, betting they won't hear from the lender again. For some lucky buyers, this has been the case - so far. They've sold their home as a short sale, moved on, and haven't had any problems. But other lenders require the seller to agree upfront to pay back a set amount.


  • Lenders don't always go after short sale homeowners. But in Florida, lenders can wait up to five years to file for a court judgment to make the borrower pay. After the judgment is granted, the lender has 20 years to collect the cash. This is particularly frightening because lenders could wait until the debtor is back on their feet to act. The homeowner could recover financially only to discover years later that they owe the bank tens of thousands of dollars.(1)

For more, see Read the fine print in a short sale.

(1) If the lender intentionally drags its feet in bringing action with the view of waiting for the debtor to get back on his/her feet before it attempts to recover its debt, the "foot-dragging" lender may be found to have "slept on its rights" and, consequently, leave itself vulnerable to a laches defense. See:

Winter v. Allstate Mortg. Corp., 303 So. 2d 399 (Fla. Ct. App, 3rd Dist. 1974):

  • Of course, a party ordinarily has twenty years in which to enforce a judgment in Florida. However, when undue delays are exercised without sufficient reason, it has been held that equitable defenes may be raised which may cut off the right to satisfy a judgment. Orr v. Allen-Hanford, Inc., Fla.1946, 158 Fla. 34, 27 So.2d 823; Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.

Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43:

  • In the case of Orr v. Allen-Hanford, Inc., 158 Fla. 34, 27 So.2d 823, we held that a creditor may satisfy his judgment within twenty years, but when undue delays are exercised without sufficient reasons shown therefor, equitable defenses become available that may cut off the right to satisfy the judgment.

Indiana AG File Civil Suit Against Notorious Alleged California Loan Modification Racket

In Allen County, Indiana, The Fort Wayne Journal Gazette reports:

  • Indiana Attorney General Greg Zoeller sued a California mortgage relief company, alleging violation of Indiana’s deceptive consumer sales act. The lawsuit, filed this month in Allen Superior Court, is not the only one pending against Home Relief Services LLC, which is facing more legal troubles in California, including felony charges, according to court records.(1)

  • Zoeller sued the company, as well as its legal affiliate, The Diener Law Firm, on behalf of both Allen and Elkhart county residents, according to court documents. The attorney general is asking a judge to enjoin the company from continuing to violate Indiana’s consumer protection laws, as well as order it to pay restitution.

For more, see Foreclosure aid firm sued by state for alleged breach.

(1) According to the story, California officials filed a similar lawsuit against the company, alleging Home Relief Services and its agents persuaded homeowners to stop dealing directly with their mortgage lenders and charged $4,000 in upfront fees with a promise of mortgage modification, according to the California attorney general’s Web site. In addition, Christopher Lee Diener, Stefano Joseph Marrero and Terrence Green Sr., all named as defendants in the Indiana lawsuit because of their involvement with the company, have been charged in Orange County, Calif., with 98 felonies alleging grand theft by false pretense and conspiracy to commit grand theft by false pretense, according to court documents, the story states.

Northern NJ Attorney Charged w/ Misleading Client Of Lien Status On Real Estate Purchase Encumbered By Three Mortgages, Misusing Cash In Trust Account

In Bergen County, New Jersey, The Record reports:

  • An Englewood attorney has been charged with theft and forgery, accused of misrepresenting the legal status of a development property in which he allegedly encouraged a client to invest $245,000, authorities said []. Gordon Allen Washington, 50, was served with a complaint [] charging him with forgery, theft by deception, theft by failure to make required disposition. He was released on his own recognizance.

  • Washington, who goes by his middle name, encouraged a Bergenfield woman to invest $245,000 in a Jersey City redevelopment project [...] in Jersey City in 2006, said John L. Molinelli, the Bergen County prosecutor. Molinelli said Washington knowingly misinformed the client, Shirley McDougald, telling her in writing that the property was “unencumbered” when in fact there were three existing mortgages on it. Washington also is accused of misusing more than $45,000 of McDougald’s money, which he was holding in an attorney trust account.

For the story, see Englewood attorney charged with theft, forgery.

2nd Defendant Cops Plea In Bridgeport Short Sale Flipping Scam; Allegedly Duped Lenders Into Accepting Less Than Full Payment On Underwater Loans

From the Office of the U.S. Attorney (Bridgeport, Connecticut):

  • Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 38, a licensed real estate agent residing in Norwalk, pleaded guilty [...] to one count of bank fraud stemming from her involvement in a “short sale” mortgage fraud scheme.


  • According to court documents and statements made in court, McELANEY worked with Sergio Natera, also a real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera subsequently directed communications to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management, LLC, an entity that Natera controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property.

  • On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, and Natera and McELANEY retained the difference in the two sale prices. [...] Natera pleaded guilty to one count of bank fraud on February 11, 2010. He awaits sentencing.

For the U.S. Attorney press release, see Another Connecticut Real Estate Agent Admits Defrauding Bank In Short Sale Mortgage Fraud Scheme.

For earlier post on the indictment in this case, see CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans.

Thursday, March 4, 2010

Crooked Counselor Charged In Refi Swindle; State Lawyer Fund Coughs Up Cash To Cover Client's Mortgage On Eve Of Foreclosure; More Charges In Works

In New Haven, Connecticut, The New Haven Register reports:

  • A former city lawyer has been arrested in the theft of more than $143,000 while handling the refinancing of a client’s home mortgage in 2007. Morris I. Olmer, 81, [...] was arraigned at Superior Court on a single count of first-degree larceny. He is accused of pocketing $143,530.35 instead of paying off the original lender when a Hamden client refinanced a mortgage, according to the arrest warrant affidavit.

  • Olmer’s client was then on the verge of foreclosure when the mortgage was paid off by the [Connecticut Bar's] Client Security Fund.(1) All practicing lawyers pay into the state fund to aid victims of attorney misconduct.(2)

  • Olmer, a former city alderman who had practiced law for more than 50 years, had his law license suspended for six months in February 2007 in an unrelated mortgage scheme. He resigned as a member of the Connecticut bar in July 2008, according to state judicial records. Olmer is accused of swindling his client in January 2007.


  • The criminal charge came when two complaints were filed with the Statewide Grievance Committee by the owner of the Hamden home and another client. Those complaints were forwarded to the office of the chief state’s attorney for prosecution. “The essence of both cases’ complaints was that attorney Olmer had been retained by both complainants to handle refinance closing on their homes; however, Olmer kept the proceeds from the new mortgage companies and did not pay off the existing mortgages,” Gregory Zigmont, an inspector for the financial crimes bureau of the office of the chief state’s attorney wrote in the arrest warrant affidavit.

  • Olmer has only been charged in one of the complaints, but a source close to the investigation said a second arrest warrant is being prepared.

For the story, see Ex-lawyer charged in $143G swindle.

See also, New Haven Independent: Ex-Lawyer Charged With Swindling Client.

(1) Typically, it's the underwiter that issued the title insurance policy that forks over the dough to satisfy the unpaid mortgage and winds up holding the bag in this kind of case. No word in the story whether the Client Security Fund will now chase the title insurer to recover its money, or if it recognizes the insurer as an additional victim of the swindle eligible for damage recovery.

(2) For those ripped off by crooked counselors in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Montana Bar Again Bags, Boots Repeat Offender For Client Ripoffs As Attorney Cops Federal Plea To Wire, Bankruptcy Fraud

In Billings, Montana, the Billings Gazette reports:

  • A former Billings lawyer with a felony record of stealing from clients(1) [] admitted he again stole from clients. Appearing in federal court, Marvin Earl “Toby’’ Alback, 62, pleaded guilty to wire fraud and bankruptcy fraud for misappropriating money from clients for his own personal use. In December, the Montana Supreme Court ordered disciplinary action against Alback, who resigned his license in September amid misconduct allegations.


  • Assistant U.S. Attorney Ryan Archer said that in the bankruptcy fraud, Alback was hired by a family in March 2008 to represent them in a bankruptcy case. When the family had trouble making their mortgage payment, Alback told them to write their settlement and mortgage payments to him and he would deposit the money with the bank. Alback deposited the money into his trust account and never made the payments on the mortgage. Although he eventually paid back the money, he caused significant back payments and late fees to avoid foreclosure, Archer said. The investigation also found that Alback obtained the family’s $557 tax refund check for 2008 and deposited it into his business account. He used the money for personal expenses. The refund check belonged to the bankruptcy estate, Archer said.

  • In the wire fraud, Alback represented another client in a lawsuit that was settled for $12,500 in August 2009 and a check was written to his client. While Alback was entitled to a share of the settlement, he forged his client’s name without her knowledge, deposited the $12,500 into his account and used it for his personal benefit. The client received a check for her settlement in October 2009, but it bounced and she has not received any money that was paid to settle the suit.(2)

For the story, see Ex-Billings lawyer admits fraud.

(1) According to the story, Alback was sentenced to 16 years at Montana State Prison in 1987, with 13 years suspended for felony theft. Alback admitted stealing more than $95,000 from two clients. He was disbarred and his license was reinstated in 2000. More recently, Alback was accused of violating attorney rules of conduct by failing to properly represent a Billings woman in a case filed in 2007. He also was being investigated for at least one other complaint. Even though Alback resigned his license in September, the Montana Supreme Courtsaid that did not prevent it from imposing sanctions on him for misconduct, the story states.

(2) If a Montana attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Montana Lawyers' Fund for Client Protection for information on how to recover some or all of your losses from the fund.

For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Albany-Area Title Agent Admits To Pocketing $125K In Closing Cash Intended To Satisfy Existing Mortgages In Real Estate Transactions

In Albany, New York, The Business Review reports:

  • The owner of a title company in Clifton Park, N.Y., will spend three to nine years in prison after pleading guilty to stealing $125,000 that should have been used to pay off her clients’ old mortgages. Susan Laverne, 64, pleaded guilty on Feb. 10 to one count of second-degree grand larceny, a felony. Laverne initially was charged in September 2009 with three counts of second-degree larceny in connection with the transactions. Laverne, who also goes by Susan Zenner, owned and operated the now-defunct JTR Abstract, a title and settlement company [...]. The charges stemmed from a few house closings in Albany County that were handled by Zenner, said Christopher Baynes, assistant district attorney and chief of the financial crimes unit for the Albany County district attorney’s office. Most of the deals involved mortgage refinancing. [...] The scam caught up with her in December 2008, when clients from Bethlehem learned that their old $125,000 loan was never paid off.(1)

For more, see Title company owner pleads guilty to grand larceny.

(1) Reportedly, Laverne faces separate charges of grand larceny and criminal possession of a forged instrument for allegedly conspiring with a Saratoga Springs couple to steal $2.3 million from mortgage lenders. Law enforcement officials said Laverne allegedly helped Stephen Sutliff and his wife, Nickole Sutliff, fraudulently obtain multiple mortgages for homes on the same day, the story states.

Las Vegas Man Indicted By State AG On Allegations Of Offering Bogus Loan Modifications; Faces Theft, Felony Charges

In Las Vegas, Nevada, the Las Vegas Sun reports:

  • A 50-year-old Henderson man was indicted [] on four felony counts of theft and one felony count of forgery in connection with the operation of DB Financial Services, a foreclosure rescue business located in Henderson, Nevada Attorney General Catherine Cortez Masto said. Jeffery Tye Brown was accused of misleading customers into believing that, for a fee, he would guarantee resolution of a victim’s pending mortgage foreclosure.(1)

For more, see Henderson man indicted for alleged foreclosure rescue scams.

(1) Reportedly, The indictment alleges that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments of $999 for foreclosure rescue services that he never performed. He failed to give refunds despite promising them in his contracts and advertising, the story atates. He also allegedly forged documents to the state Mortgage Lending Division to cover up the criminal activity. Shortly after execution of a search warrant on the DB Financial offices in 2008 by the task force, Brown reportedly fled the country. He has been extradited back to this country from the Philippines, where he was hiding to evade authorities, according to the story.

California AG To Financially Distressed Homeowners: Steer Clear Of Forensic Loan Audit Ripoffs

From the Office of the California Attorney General:

  • Attorney General Edmund G. Brown Jr. [] joined the California Department of Real Estate (DRE) and the State Bar of California in warning Californians to avoid forensic loan audits, the loan-modification industry's latest "phony foreclosure-relief service," in which homeowners pay up-front fees for a forensic review of their lender's practices, but are provided no actual foreclosure relief.

  • "Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure," Brown said. "The foreclosure-relief industry continues to be long on promises, but short on results." Individuals and businesses who offer forensic loan audits use inflated and misleading claims to convince homeowners to pay up-front fees for services that produce no actual foreclosure relief.

  • Homeowners are encouraged to pay for an audit of their mortgage loan file to determine their lender's compliance with state and federal mortgage-lending laws. This audit is pitched to homeowners as a tool they can use to gain leverage and speed up the loan-modification process.

For the rest of the California AG press release, see Brown Warns Homeowners to Avoid Forensic Loan Audits.

State Regulator Orders Shut Down Of Five S. Florida Loan Modification Outfits On Charges Of Pocketing Illegal Upfront Fees, Operating Without License

In South Florida, the Sun Sentinel reports:

  • State regulators took the first step Thursday in what they said will be an ongoing effort against unlawful mortgage modifiers, ordering several South Florida operations to immediately stop doing business. The Florida Office of Financial Regulation cited five companies Thursday morning: Foreclosure Solution Specialists Inc., of Tamarac; the Federal Housing Assistance Program, west of Fort Lauderdale; Liberty Home Solutions, of West Palm Beach; Keep Living in Your Home, of Boca Raton; and Saving Your Home, of Miami. They were alleged to have violated two state laws by taking money upfront for mortgage modifications and by not being licensed to perform those services.

For more, see State cracks down on five South Florida home loan rescue companies (Mortgage modifiers allegedly violated new rules).

Feds Apprehend Fugitive Title Insurance Agent Suspected In $500K Escrow Swindle; Failed To Satisfy Existing Mortages, Record Deeds In R/E Transactions

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • Daniel E. Fink Jr., age 43, of Baltimore, who owned and operated Homemaxx Title & Escrow LLC (Homemaxx), a title company that conducted residential real estate closings with offices in Middle River and Parkville, Maryland, was arrested in Palm Beach, Florida [] and had his initial appearance in federal court in Florida []. Fink was a fugitive since March 26, 2009 when a federal grand jury in Baltimore returned an indictment charging him with wire fraud and money laundering in connection with a scheme to defraud lenders and homeowners of over $500,000.


  • Fink [allegedly] caused Homemaxx to fail to pay outstanding first mortgages on real estate transactions or to record deeds in the real estate records of local and state governments. Fink allegedly transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with Homemaxx, and used the money intended to be disbursed pursuant to real estate closing documents for personal expenditures unrelated to real estate transactions. In connection with a particular real estate refinancing transaction by one of his customers, Fink allegedly diverted funds from the escrow account and then used the proceeds to purchase a new 2004 CLK Mercedes.

  • As a result of this scheme, Fink is alleged to have defrauded lenders and homeowners of more than $500,000, and to have used $93,228 of the criminal proceeds for money laundering. The indictment seeks the forfeiture of $593,228.

For the U.S. Attorney press release, see Title Company Owner Arrested on Mortgage Fraud And Money Laundering Charges (Was a Fugitive for Almost a Year).

Wednesday, March 3, 2010

El Paso Man Accused Of Sale/Rental Of Homes To Would-Be Buyers Without Paying Off Existing Mortgages; One Victim Loses Home, Another Faces The Boot

In El Paso, Texas, KFOX-TV Channel 14 reports:

  • An arrest warrant is issued for the owner of a local mortgage company after allegedly defrauding two women on their payments. Maria Martinez is being evicted from her Lower Valley home [...]. She claims she was defrauded by Solar of El Paso Inc. She says the company told her to make her mortgage payments to Kenneth Daniel, the owner. "I would deposit the payment into Kenneth Daniel's account," Martinez said.

  • She said she got a statement from Chase bank earlier this year indicating she was facing foreclosure. The attorney for Solar of El Paso Carlos Quinonez released this written statement: "Maria Martinez breached the terms of her contract with Solar, Inc. On November 1, 2008, Maria Martinez failed to make payment as required under the terms of her contract." But Martinez showed KFOX receipts that prove she was making payments.

  • Last week, the County Attorney's Office filed a deceptive business practice charge on a separate case. The alleged victim Veronica Lara also contracted with Solar of El Paso. Lara said she spent hundreds of dollars fixing up the house she bought from Daniel [...]. Last year, she was evicted from the home. "It's a feeling of desparation. We had to move everything, we didn't know where to go. It was hard on the kids, they lost their rooms. We didn't know how to explain to them."

  • Currently, Daniel has an outstanding warrant for this case. "I don't want this to happen to other people," Martinez said crying. "We are left with no money. And now they're kicking us out of the house," she said.

For the story, see Warrant For Owner Of Local Mortgage Company.

Pair Held On $200K Bond For Allegedly Pocketing Proceeds On "Contract For Deed" Home Sales Without Making Payments On Existing Liens

In Midland, Texas, the Midland Reporter Telegraph reports:

  • The second man allegedly involved in a real estate fraud scheme targeting homeowners around Midland turned himself in to authorities [...]. Marcus Jacob Rosenberger, 33, was charged with two counts of forgery after police said he and his business partner Jason Heath Morrison, also 33, defrauded several individuals by purchasing their residences from them and never making payments on their mortgages.


  • Morrison and Rosenberger [] signed a [purchase] contract with [one] homeowner stating they would continue making future payments on the mortgage until the home was sold, authorities said. Then after the home sold, Vanguard Properties would pay off the lien on the residence and keep the remaining funds from the sale. However, the affidavit stated that was not the case.

  • Rosenberger claimed to have sold the house to a woman in July after he took possession of it from the victim on June 29, 2009. The selling price of the home was for $110,000, investigators wrote. However, Vanguard Properties never made any payments to the victim's bank or his mortgage and the $68,000 that he owed. According to police, the woman who had purchased the home had made six monthly payments to Vanguard Properties and a down payment and the money never went toward the bank for the mortgage.

  • The homeowner returned home in December to find he was $13,000 behind in payments, the affidavit stated. Police believe Morrison and Rosenberger took "possession of the property fraudulently;" no contracts of the sale or deeds were ever filed or recorded through the Midland County Courthouse either. The homeowner is one of four police said were victimized by both Morrison and Rosenberger.

  • Morrison was arrested [] by investigators; both men remained locked up as of press time at the Midland County Detention Center on total bonds of $200,000 each.

For more, see Second fraud suspect turns self in.

Hedge Fund Operator Sues Loan Servicer To Jam Foreclosure Action On $3B Mortgage Secured By 11,000-Unit NYC Apartment Complex

In New York City, The Wall Street Journal reports:

  • Hedge-fund investor David Tepper has stepped into the battle over the fate of Peter Cooper Village and Stuyvesant Town, the giant New York City apartment complex involved in one of the largest commercial-real-estate failures. Earlier this week, Mr. Tepper, who runs hedge-fund firm Appaloosa Management, filed a complaint seeking to hold up the foreclosure action launched by the so-called special servicer representing investors who own the $3 billion first mortgage on the property. That mortgage was packaged into commercial mortgage-backed securities that were sold to various investors such as Mr. Tepper's firm.


  • Mr. Tepper, who says he owns more than $750 million of the CMBS debt, is among the largest investors in the debt. [...] Mr. Tepper's lawsuit is a sign the imbroglio over the future of Stuyvesant Town figures to become even more heated.


  • In the lawsuit, Appaloosa says CW Capital shouldn't have moved to foreclose on the complex while earning fees. The complaint says a foreclosure could cost as much as $200 million in transfer taxes, which would be paid by the investors who own the CMBS bonds. Those expenses could have been avoided had the property gone into bankruptcy, the suit says. "The key is, the servicer has to practice its fiduciary duty" to CMBS investors, Mr. Tepper said. "Why did they go into foreclosure? Why are they taking all these excess costs?"

For the story, see Tepper Enters Contest Over Apartment Complex (requires paid subscription; if no subscription, try here, then click link for the story).

See also: The New York Observer: 'Tranche Warfare' Finally Breaks Out at Stuy Town as Billionaire Hedge Funder Goes to Court:

  • [Mr. Tepper's] Appaloosa said in court papers that it bought a giant $750 million of the mortgage, a substantial piece of which was junior tranches, which would be among the earliest to be wiped out if the property is sold for less than the $3 billion initial price tag on the mortgage. "CWCapital has recklessly and imprudently exposed the Appaloosa Intervenors—and other Certificateholders—to wholly avoidable losses, risks, and injuries," the filing said.

Go here for Appaloosa's Memorandum of Law on its Motion to Intervene in the Stuyvesant Town foreclosure action.

S. California Lender Accused Of Pushing Homeowners Into Foreclosure By Jacking Up Escrow Payments After Borrowers File Bankruptcy

In Pasadena, California, the Whittier Daily News reports:

  • Allegations that OneWest Bank is systematically pushing home loan borrowers toward foreclosure has elicited concerns from two Southland lawmakers. Rep. Adam Schiff, D-Pasadena, said the claims contained in several lawsuits - if true - don't bode well for people who are trying to remain in their homes. "I personally don't know what the evidence is, but I'd be quite shocked if that was going on," he said. "I don't know how banks can unilaterally raise mortgage rates when a bankruptcy is going on."

  • Rep. Linda Sanchez, D-Lakewood, also voiced concerns about the claims leveled at OneWest, or any other bank, for that matter. "I'm concerned about recent allegations that banks in Southern California may be victimizing homeowners," Sanchez said. "With the current economy, banks - especially those that received bailout funds - should be working with borrowers rather than pushing them into foreclosure."

  • Sacramento attorney Peter Macaluso and Mark Wolff, another attorney from Elk Grove, recently filed several lawsuits on behalf of struggling borrowers whose mortgage loans are held by OneWest. The actions allege the bank routinely performs an escrow analysis soon after a borrower files for bankruptcy. Following that analysis, the homeowner's monthly mortgage payment is hiked - sometimes substantially.

  • "They changed the mortgage payment for one of my clients eight times in eight months," Macaluso said earlier this week. The hikes place monthly mortgage payments further out of reach for financially strapped borrowers, effectively pushing them toward foreclosure, he said.

For the story, see Lawmakers concerned over OneWest lawsuits.

Wells Fargo Sells Home Out From Under Borrower, Despite No Late Payments On Loan Modification, Says Boston Homeowner

In Boston, Massachusetts, the Boston Herald reports:

  • Roberta Frugoli thought she had a deal to modify her mortgage and avoid foreclosure, but the Carver woman claims Wells Fargo auctioned off her home anyway. “My head is still spinning,” the 54-year-old divorced mother of three said. “I got a call from the bank at work saying they (seized) my house and I said, ‘You can’t do this, I had all the paperwork in.’” Frugoli is one of four Massachusetts homeowners suing Wells Fargo or Bank of America over lenders’ alleged failure to comply with the federal Home Affordable Modification Program.


  • Frugoli, who owns a cleaning company, thought she worked out a pact to reduce her mortgage bill by $1,000 to $1,400 a month. But even though lawyer Josef Culik says he submitted all paperwork, Wells Fargo reclaimed title to the woman’s home last month via a foreclosure auction. “Something went terribly wrong,” said Culik, who plans to sue the bank [] to block his client’s eviction. “When someone is being evaluated for (HAMP), foreclosure activity is supposed to be suspended.”

  • Boston lawyer Gary Klein filed a separate lawsuit [] against Wells Fargo on behalf of two other Hub homeowners.(1) Klein, who also sued Bank of America on behalf of a Salem homeowner,(2) claims the lenders gave his clients three-month “trial” modifications, but failed to make changes permanent. “The servicers don’t appear to be acting in good faith,” said Klein, who’s won some $100 million in foreclosure-related settlements from banks. "They’ve told the government that they’re going to be modifying mortgages, but they aren’t doing it.”(3)

For the story, see Woman loses home while in talks on loan changes (when the link expires, try here).

For follow-up story, see WCVB-TV Channel 5: Woman Sues Big Banks To Save Foreclosed Home:

  • Frugoli and her attorney have filed suit in Brockton Superior Court against Wells Fargo. "The banks agreed to evaluate any homeowner for a loan modification before they considered foreclosure. That's a prerequisite to foreclosure under the making home affordable program," attorney Josef Culik said. Frugoli claims that did not happen in her case and now she's asking a judge to cancel the foreclosure sale of her home. The judge said he would hear from both sides in two weeks.

(1) See Bosque et al. v. Wells Fargo Bank, N.A.

(2) See Johnson v. BAC Home Loans Servicing, LP.

(3) In a related story, see The Boston Globe: Banks violated mortgage rules, lawsuits allege (Plaintiffs say they’re stuck in loan-modification limbo).

Chase Refused Couple's Attempts To Make Mortgage Payments, Says Texas Lawsuit

In Jefferson County, Texas, The Southeast Texas Record reports:

  • A Beaumont couple claims their bank has repeatedly threatened to foreclose on their home and has refused the couple's attempts to make payments. Charles W. and Phyllis E. Turnage filed a lawsuit Feb. 19 in Jefferson County District Court against Chase Home Finance. The Turnages claim that since 2007 Chase Home Finance has repeatedly accused them of failing to make payments. In fact, Chase has filed a foreclosure suit against the couple, but later dismissed it, according to the complaint.

  • Chase has refused to accept the Turnages' payments in an attempt to set them up for foreclosure, the suit states. "Plaintiffs have attempted to resolve and satisfy Defendant but Defendant has a gaggle of agents dedicated to frustrating, harassing, and tormenting the Plaintiffs attempts to resolve and satisfy Defendant and their obligations under the Home Equity Agreement," the complaint says. "The Bank has taken the Plaintiffs monies then refused to apply to the refinancing of the home so as to artificially cause forfeiture and set the stage for foreclosure of Plaintiff's home."

For the story, see Couple claims lender rejected payments, plans foreclosure.

Couple Loses Home To Foreclosure Despite Being Current On Loan Modification Payments; Media Intervention May Cause Lender To Reverse Action

In Colorado Springs, Colorado, KXRM-TV Channel 21 reports:

  • A Colorado Springs family has their house auctioned off from under them. But they may get to stay in their home now that FOX21 News is asking questions. The family bought the home near the Air Force Academy in 2005. Then last year the man lost his job and the family fell behind on their mortgage. They were able to get on a payment program through the mortgage company and had been keeping up the payments ever since. Then last week they were told their house had been sold at auction.


  • When [Tammy and Flavio] Bugarin[] asked why the home had been foreclosed when they had been keeping up on the payment plan Wells Fargo didn’t have an answer. "Wells Fargo showed absolutely no paperwork that we were on a program," Flavio said. But after FOX21 News called Wells Fargo, officials said they would rescind the foreclosure sale and get the Bugarins on another payment plan.

For more, see Mortgage mess hits Springs family.

In a related story, see ProPublica: Chase and Other Servicers Leave Many in Loan Mod Limbo; Treasury Threatens Penalties.

Tuesday, March 2, 2010

"Nail & Mail" Process Service Victimizes Dead Man In Foreclosure Suit; Survivors Left To Sift Thru Parents' Personal Belongings Dumped On Front Lawn

In Douglas County, Georgia, MyFoxAtlanta reports:

  • A Douglas County family is trying to figure out what went wrong and why they lost a home to foreclosure. Family members said Thursday that a court appointed conservator was supposed to pay the bills on a home belonging to a deceased relative, but the home ended up in foreclosure.

  • David Brown said he heard about the foreclosure on his late father's house from a voicemail left by neighbor. "There's a lot of activity over there it looks like their throwing everything on the front lawn," said Brown.

  • Brown's father, Dr. James Brown died in June. The estate was placed in the hands of a court-appointed conservator until the will could be worked out. "Larry Smith, the conservator was supposed to preserve the estate. Obviously [he] hasn't done his job," said Brown. The probate judge in the case, Hal Hamrick referred questions to Smith. Smith said he couldn't comment on the case.

  • Smith's attorney said, "I have gone through Mr. Smith's files. We received no notice of the foreclosure or any hearings." The magistrate clerk said a notice of the foreclosure by SunTrust bank was tacked on the home and mailed in January [ie. "nail & mail" method of process service], but no one ever responded.(1)

  • The Brown family said they spent the two days gathering up the belongings from the front lawn of the Douglas County home. "This is not the way I wanted to go through my mom and dad's personal things," Brown said. The family said they weren't sure what to do next. Smith's attorney said Brown's mail was supposed to have been forwarded to them, but claimed they never received any notices.

Source: Family Loses Home in Conservatorship.

(1) The homeowner died in June; the foreclosure notice was "nailed & mailed" over six months later in January. No word whether the process server engaged in a diligent search & inquiry for the homeowner by:

  • inquiring of neighbors as to the homeowner's whereabouts,
  • searching Social Security records using homeowner's Social Security number (usually found on mortgage loan application on file with lender) for any indication of his death,
  • searching state drivers' license and motor vehicle records for a current address, expired driver's license, or expired/cancelled vehicle registration,
  • searching county Health Department records to see if a death certificate was filed for the homeowner, and, if so, search court records for information on the appointment of the conservator.

Typically, the process server gets paid a flat fee for its rendered services, so being stuck having to do the extra leg work to detremine if the homeowner is deceased and, if so, do even more leg work to properly serve process on the deceased homeowner's heirs (assuming they can be identified and found) is not exactly in his/her financial interest. Taking a "head-in-the-sand' approach by simply relying on "nail & mail" is, ostensibly, a much easier route for the process server to go (and the easiest route to abuse), assuming the process server can go undetected and get away with it without first attempting a diligent search and inquiry for the homeowner. For a list of some of the types of activities that go towards establishing a satisfactory search by a process server for a lawsuit defendant, see Affidavit Of Diligent Search And Inquiry (found at page 14).

For a recent story of a homeowner screwed over in a similar way by faulty process service (ie. "sewer service"), see Central Florida Judge Voids Foreclosure Sale, Allowing Homeowner Victimized By Sewer Service To Recover Title To Home.

For more on the use of the "nail & mail" method of serving process on defendants in lawsuits, see NY AG Files Criminal Charges & Parallel Civil Suit Against Process Serving Firm & Its CEO Alleging Massive "Nail & Mail Sewer Service" Operation.

Central Florida Judge Voids Foreclosure Sale, Allowing Homeowner Victimized By Sewer Service To Recover Title To Home

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • William Berta could be among the most findable people in the world. The 70-year-old has lived in his Sarasota home for decades. He runs a business on 12th Street, has a pilot's license, collects Veterans Affairs benefits, and recently got a traffic ticket here. His home has cars in the driveway, the water and power are on, and he says his two dogs bark at anyone who knocks on the door of the home he shares with his son.

  • Yet the bank foreclosing on his five-acre property told a judge that Berta had abandoned the home, could not be found and might even be dead. That declaration allowed Wells Fargo Bank to take possession of Berta's home in December without him ever knowing that a foreclosure case had been filed, and he had no chance to raise a defense. "They didn't want to find me," Berta said. "They tried to use their knowledge of the law to steal my house."

  • As foreclosures continue to overwhelm the court system, there is a growing concern that sloppy and careless work in foreclosure cases is making Berta's experience a common one. The kicker in Berta's case: A process server had no trouble serving him with eviction papers after taking the deed to his property, right at the home the bank previously said he had abandoned. Berta immediately called an attorney. Sarasota attorney Martin Burzynski, whose firm now represents Berta, said his firm is seeing cases that he considers "borderline fraud."(1)

For more, see An abrupt eviction, narrowly averted.

For more on the "sewer service" problem, see: MFY Legal Services: Justice Disserved (documents problem of improper service of process in debt collection lawsuits that have led to judgments entered against unknowingly victims).

(1) Reportedly, Berta's attorney found a number of problems with the foreclosure action, the biggest was that the firm only tried to serve him once, at his home, at 3:30 p.m. on a Monday in June. In addition, the bank's attorney filed an affidavit that stated they could not determine Berta's:

  • Social Security number (which would be on the original mortgage papers),
  • marital status (a simple public records search shows his divorce), or
  • whether he owned vehicles or boats (state records clearly show he owns two cars, a boat and a plane).

But based on that abandonment affidavit, a judge gave Wells Fargo a summary judgment against Berta, according to the story. The quick case meant the bank's attorney spent as little time and money as possible on a foreclosure case, as compared to when a homeowner puts up a vigorous legal fight, the story states. Most notably, the affidavit allowed the firm to skip local rules that would have required them to meet with Berta, because the property is homesteaded.

The judge set aside the foreclosure sale without a typical hearing, awarded Berta attorney's fees, and has left the bank with having to start over again, the story states.

Mass. High Court To Hear Ibanez? Court Ruling Shined Light On Foreclosure Screw-Ups That Left Title To Thousands Of Bay State Homes In Legal Limbo

Massachusetts attorney Richard D. Vetstein writes in The Boston Globe's Boston Real Estate Now blog:

  • For those of you following the controversial U.S. Bank v. Ibanez case,(1) which invalidated potentially thousands of foreclosures across the state, both sides last week asked the Massachusetts Supreme Judicial Court to take the case — as I originally predicted. The SJC’s acceptance of the case would cut months to years off the normal appellate process. This would be great news for everyone eagerly awaiting a final decision.


  • The SJC should decide whether to take the case within 30 days or so, and I predict they will take it on. However, I still think the SJC will ultimately affirm Judge Long’s ruling against foreclosing lenders, a bad decision from a title and conveyancing standpoint in my view. Meanwhile, in the aftermath of Ibanez, some lenders are re-doing foreclosures and some are just waiting it out.

  • Most title insurance companies are unwilling to touch an Ibanez afflicted property with a ten foot pole. Many folks find themselves in a tough predicament. I recently assisted a buyer of a foreclosed property who was initially rejected by two title insurers. We fortunately convinced one title company to insure over an Ibanez issue, so the client could close. But I have another client who is stuck, and we’re trying to track down the original owner of the property to obtain a deed. It’s a tough situation all around.

Source: Ibanez foreclosure case possibly heading to Massachusetts high court.

For Justice Keith C. Long's pair of rulings in this case, see:

For earlier post on this story, see Lenders' Problem "Entirely Of Their Own Making" Says Judge In Affirming Earlier Ruling That Puts Title To Foreclosed Massachusetts Homes Into Question.

Fla. High Court Creates Safeguards In Foreclosure Process By Requiring Loan Ownership Verification By Lenders Before Filing Suits, Mandating Mediation

In Central Florida, The Tampa Tribune reports:

  • The Florida Supreme Court continues to make it more difficult for lenders to foreclose in the Sunshine State. The court says lenders are now required to verify they own loans before they file a foreclosure lawsuit. And, according to the court order, lenders can no longer charge the homeowner for that investigation. This follows the court's order in late December that requires lenders to offer owners of primary residences a chance to negotiate with a third-party mediator before moving forward with foreclosure.


  • Lenders sometimes have a difficult time coming up with the original note to prove they have the authority to foreclose. This is because loans were often bundled and sold as securities. In some cases, the notes are stored in warehouses or get lost in the shuffle.

For more, see Court makes it more difficult for lenders to foreclose.

Foreclosure Rescue Operators Try To Dodge Liability For Alleged Sale Leaseback, Equity Stripping Scam, Despite Binding Settlement Agreements

A recent court ruling by the District of Columbia Court of Appeals describes an attempt made by a couple of notorious D.C.-area foreclosure rescue operators(1) to wiggle their way out of out-of-court settlement agreements that they entered into with several equity stripping victims. The agreements were originally entered into after the victims brought suit against them.(2)

For the facts of the case, and the court's ruling, see Dyer v. Bilaal, 983 A.2d 349; 2009 D.C. App. LEXIS 573 (D.C. Ct. of App. 2009).

(1) Dennis Dyer, Vincent Abell, Modern Management Company, Marta Bertola, and other defendants.

(2) Six homeowners brought suit against the operators alleging fraud and other torts as well as violations of state and federal lending laws and consumer protection laws. The homeowners were allegedly offered bogus sale leasebacks arrangements that purported to help save their homes from foreclosure. Instead of merely signing loan documents in connection with what the homeowners thought was a mortgage refinance, they unwittingly transferred title to their homes for a fraction of their value and became tenants. See this CBS Evening News Report interviewing two of the victims of this foreclosure rescue scam.

In an unrelated case, a jury verdict of more than $3 million had been returned against three of the defendants in an almost identical suit brought by the same lawyers who were representing the plaintiffs in this case. See Wilson v. Abell, et al., Docket No. 04-7270 (D.C. Super. Ct., jury verdict March 27, 2007); a decsription of the facts in this case can be found in Appellate Brief: Wilson v. Modern Management, et al. (available online courtesy of Legal Aid Society of the District of Columbia). See also: Media Coverage Not New For D.C.-Area Foreclosure Rescue Operator.

Monday, March 1, 2010

Upstate NY Assembly Line F'closure Mill Law Firm Attracts Spotlight, Scorn From Various Quarters; Manufactured Mortgage Assignments Among Allegations

The New York Post reports:

  • As the mortgage melt down paralyzed the economy across the US and throughout New York State, one company in the center of the storm had all the business it could handle. The little-known law firm of Steven J. Baum PC, which is based in suburban Buffalo, NY, and represents dozens of banks in matters of failed mortgages, last year filed a staggering 12,551 foreclosure lawsuits in New York City and the suburbs, which works out to about 48 a day.

  • The foreclosure mill is one of a handful of super-regional law firms used by the country's banks -- and its lawyers appear to have practiced in every county courthouse and bankruptcy court from Staten Island to Plattsburgh and from Montauk to Niagara Falls. But as the volume of its workload increased, so did complaints from opposing lawyers and judges that some of the thousands of lawsuits contained questionable legal work.


  • The complaints against Baum -- on the record during hearings, in legal pleadings and, eventually, borne out in judges' decisions -- include:

  • * Not divulging mortgage payments: In the White Plains bankruptcy of Blanca Garcia, Baum's firm filed papers claiming Garcia was in arrears -- when she actually made payments and showed the court her receipts, but they were not credited to her account. When Garcia's lawyer complained, Baum's firm answered the claim but, the lawyer said in court papers, ignored the receipts and continued to claim the mortgage was in arrears.

  • * Creating questionable assignments: A Suffolk County judge took it upon himself to investigate a filing by Baum's firm when it attempted to foreclose on the home of Gloria E. Marsh. "A careful review," the judge wrote in a four-page order, "reveals a number of glaring discrepancies and unexplained issues of substance." The judge found that Baum filed the action before the date it claimed its client took ownership of the mortgage.

  • * Botched legal papers: In the bankruptcy of Matthew Austin, Baum's firm tried to prove that its client owned the mortgage backing Austin's house by filing an assignment of that mortgage from a Florida company signed by an executive of that company -- but it was notarized in Buffalo, NY. "To the extent assignor flew to upstate New York to appear before a notary in the law offices of Steven J. Baum, PC, defies all logic," the lawyer said in court papers. "Clearly this is a manufactured document intended to defraud the Court." The bank and Austin, in hopes of settling the matter, are discussing a mortgage modification.


  • Judges are taking action. A few, like Justice Jeffrey Spinner in a widely reported case in Suffolk last November, are ripping up mortgages and tossing entire cases brought by Baum after it couldn't prove its case. Second, the US Trustee, the arm of the Department of Justice charged with keeping the country's bankruptcy courts free from malpractice, has had its Manhattan office monitoring cases involving the Baum firm. And just last month, a New York bankruptcy judge said he now has "probable cause" to believe that lawyers for the Baum firm acted inappropriately.


  • Steven J. Baum, 41, took over his father's sleepy Buffalo law practice several years ago, moved it to suburban Amherst and super-sized it. It now has about 500 employees, according to an ad it placed on an online jobs site, plus has started Pillar Processing, a legal-document processing company. Pillar, too, has gotten the attention of judges. One judge blasted Baum for trying to distance himself from a bad courtroom gambit by having a non-lawyer employed by Pillar file a motion canceling the request.


  • One bank executive told a judge during a hearing in a Poughkeepsie court hearing that the bank pays law firms $650 for every referral -- presumably just to file the foreclosure action. Additional pleadings would be extra.

For more, see Liening on NY homeowners (Chase and law firm draw scrutiny over tactics in foreclosure).

FDCPA Suit Seeking Class Action Status Shines Light On Alleged "Assignment Manufacturing" Practices By Lenders, Servicers, Others In F'closure Actions

A recent Federal lawsuit filed in Miami, Florida alleging violations of the Fair Debt Collection Practices Act (FDCPA) describes some of the practices allegedly engaged in by lenders, servicers, their employees, and others involving the manufacturing of assignments of mortgage that are then used when bringing foreclosure actions against homeowners who have fallen behind on their house payments.

For more, see All Aboard!!! Class Action Against Deutsche Bank National Trust Company, U.S. Bank National Association, Lender Processing Services, Inc. and DOCX, LLC.

Wells Fargo, BofA Stiffed Homeowners On Permanent Loan Modification Promises, Say Suits Seeking Class Action Status

In Boston, Massachusetts, The Boston Globe reports:

  • Two lawsuits filed [] in US District Court in Boston claim Wells Fargo and Bank of America have not followed federal rules for mortgage loan modifications, leaving some homeowners stuck in foreclosure “limbo.’’

  • According to one of the lawsuits, Wells Fargo Bank North America did not honor agreements with Wilfredo and Odalid Bosque of Leominster and Germano DePina of Roxbury that would have made their temporary loan modifications permanent through the US Treasury’s Home Affordable Modification Program. In a second suit, Patricia Johnson of Salem alleged Bank of America Corp. did not abide by a similar arrangement that was intended to reduce her mortgage payments.

  • When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expect that promise to be kept,’’ lawyer Gary Klein wrote in the complaints.(1) [...] The suits said both banks received $1,000 for every successful loan modification through the federal program. According to the suits, if the homeowners made three successive payments under temporarily modified loan terms, it would trigger a second stage “in which the homeowner is offered a permanent modification.’’ [...] Klein said he would ask a judge to give the lawsuits class-action status.

For the story, see Banks violated mortgage rules, lawsuits allege (Plaintiffs say they’re stuck in loan-modification limbo).

In a related story, see ProPublica: Chase and Other Servicers Leave Many in Loan Mod Limbo; Treasury Threatens Penalties.

For the lawsuits, see:

(1) Co-counsel in the Bosque case are: National Consumer Law Center, Boston, and Neighborhood Legal Services, Lawrence, MA.

The Sloppiness Of The Assembly Line, Foreclosure Mill Attorneys Continues

In Central Florida, a recent column in the Sarasota Herald Tribune comments on some of the sloppy paperwork being churned out and filed in court by assembly line, foreclosure mill law firms, and the judges letting them get away with it:

  • [T]here's much evidence, as the Florida Bar has confirmed, that some bulk-rate foreclosure firms are seriously cutting corners. And why not? They can usually file sloppy documents with unverified and false claims and get away with it, because most foreclosures are not contested. Usually, nobody even skims through the documents. A recent court ruling says judges don't need to. The checking is up to homeowners.

  • That has led to filings so ridiculous that I thought anti-foreclosure lawyer April Charney was kidding when she e-mailed a recent find from Lee County. It is a template, a fill-in-the-blanks foreclosure document, that foreclosure-mill lawyers filed in court as a real one, with almost nothing filled in.

  • But though law office employees or contractors apparently forgot, or didn't bother, to fill in names of key parties in that foreclosure, some ironic truth was left in there, Charney says. Where there should be names of the investment company that allegedly held the mortgages or transferred it to another company, the court document lists "Bogus Assignee" and "Bad Bene" (beneficiary, it seems).(1)

  • "It's a cruel joke," says Charney, a Legal Aid lawyer who has been teaching foreclosure seminars for area lawyers and judges. "We are finding these all over the country." Such flagrantly self-identifying bogus documents are only a bit more obvious and extreme than routine ones that often have equally shaky and unproven mortgage assignment claims, Charney says.

  • "It really is kind of pathetic," she says, and it shows why judges should be angry, and why more struggling homeowners should get legal help.

For the story, see Bogus foreclosure claim not isolated.

(1) For examples of mortgage assignments that literally list the name of the assignor or assignee as "BOGUS" or "BOGUS ASSIGNEE FOR INTERVENING ASMTS, see:

For those who are interested, drop me a line at and I can forward you copies of several bogus assignments that were recorded in public records that were kindly provided to me by a reader of the blog - be sure and put "BOGUS ASSIGNMENTS" in the subject line.

Another Rubber-Stamped Foreclosure Judgment Gets The Boot From Appeals Court; Trial Judge Fails To Apply Binding Precedent To Standing-Lacking Lender

The Court of Appeals for the First Appellate District of Ohio recently ruled (footnotes omitted, my emphasis added):

  • Defendants-appellants Jamie and Gary Gindele appeal the summary judgment entered for plaintiff-appellee Bank of New York on its foreclosure complaint. On appeal, the Gindeles argue that Bank of New York did not acquire its interest until after the foreclosure complaint had been filed, and that under our holding in Wells Fargo Bank, N.A. v. Byrd,(1) Bank of New York’s complaint should have been dismissed without prejudice. We agree.

  • In Byrd, we held that “in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.” [...] A thorough review of the record reveals that the sole indication of its interest as mortgagee is an after-acquired assignment; and the bank failed to produce any evidence in the trial court affirmatively establishing a preexisting interest.


  • We likewise reject Bank of New York’s argument that the real party in interest when the lawsuit was filed was later joined by the Gindeles. We are convinced that the later joinder of the real party in interest could not have cured the Bank of New York’s lack of standing when it filed its foreclosure complaint.


  • In a foreclosure action, absent understandable mistake or circumstances where the identity of a party is difficult or impossible to ascertain, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage. Bank of New York failed to establish an enforceable interest that existed at the time it filed suit, and it has not alleged or proved understandable mistake or that the identity of the proper party was not readily ascertainable. Bank of New York’s complaint in foreclosure should have been dismissed without prejudice under Byrd.

For the entire ruling, see Bank of New York v. Gindele, 2010-Ohio-542 (2/19/2010).

(1) 178 Ohio App.3d 285, 2008-Ohio-4603, 897 N.E.2d 722.

Sunday, February 28, 2010

Florida Bona Fide Purchaser, Possession, Duty Of Inquiry

The following compilation of cases is an extended version of the list of Florida cases contained in the February 1, 2009 post, Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire, that address the issue of the effect of possession by an occupant of real property by one other than the seller/vendor on a prospective purchaser's status as a bona fide purchaser.
As stated in my February 1 post, these cases are presented here to remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles) where, after scamming or otherwise abusively relieving an unwitting homeowner of his/her title, the scammer either sells the property to an unwitting third party, or encumbers the property with a loan from an unwitting mortgage lender, neither of whom participated in the abusive transaction with the homeowner, nor having any actual knowledge thereof. Voiding the deeds and mortgages in these cases (in situations where the instruments are voidable, as opposed to being absolutely void - "void ab initio") will turn on whether the subsequent third party purchaser or encumbrancer, despite lacking in actual knowledge of the fraud or other abusive transaction, can otherwise be charged with notice of the fraud, thereby making bona fide purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.
(In a related post that addresses the distinction between deeds that are absolutely void (void ab initio), and deeds that are merely voidable, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable?)
While certainly not purporting to be an exhaustive list of cases dealing with the issue of possession and the duty to inquire when attempting to establish (or attack) one's status as a bona fide purchaser, the following compilation of case law citations specifically address this issue.
One caveat: Any serious consideration of the bona fide purchaser doctrine should, first and foremost, begin with a reading of the state recording statutes, as they are currently constituted. Since there are over 50 jurisdictions in the U.S., each with their own recording statute, I certainly can't address them here (for the Florida recording statute, see 695.01 Conveyances to be recorded). But after reading your state's recording statutes, you may want to consider how these cases, if at all, fit into making the legal analysis necessary when attempting to undo/unwind/void an abusive real estate transaction by attacking the bona fide purchaser status of a subsequent purchaser or encumbrancer/mortgage lender. Keep in mind that, even in the event that the Florida state legislature has passed laws subsequent to these court rulings that either modifies or renders them obsolete in Florida, the persuasiveness of the logic that underlies them may still be of value to those involved in litigation outside of Florida (don't lose sight of the fact that the doctrine of bona fide purchase is not a creature of state statute, but one of English common law, which is the starting point for this doctrine, not only as generally applied in Florida, but as generally applied in Florida's sister states as well).

Florida Supreme Court Cases

Blackburn v. Venice Inlet Co., 38 So. 2d 43 (Fla. 1948):
  • It is settled law in Florida that actual possession is constructive notice to all the world, or any one having knowledge of said possession of whatever right the occupants have in the land. Such possession, when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in premises. Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492.
Williams v. Markey-Harmon Co., 145 Fla. 201; 198 So. 825; 1940 Fla. LEXIS 928 (Fla. 1940): Cites the requirements of the rule enunciated in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, where it was said:
  • "Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquriring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45 Fla. 482, 33 So. 702. This Court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'Where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202."
Florida Land Holding Corp. v. McMillen, 135 Fla. 431; 186 So. 188; 1938 Fla. LEXIS 1573 (Fla 1938): This Court cited from its earlier decision in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, when it said:
  • "Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.
  • "While a mortgagee is a 'purchaser' to the extent of his interest in the mortgaged property and where it appears that he is a bona fide purchaser for value and 'without notice of any secret unrecorded claim or interest' in such property, he will be protected. Warner v. Watson, 35 Fla. 402, 17 So. 654. There being, however, no charge of secrecy in the instant case the above rule does not apply especially where it is shown that the property at the time of the mortgage was occupied by others than the mortgagor under a contract for deed.
Marion Mortg. Co. v. Grennan, 106 Fla. 913; 143 So. 761; 1932 Fla. LEXIS 1145 (Fla. 1932):
  • See Florida Land Holding Corp. v. McMillen, above.
  • In fact, the rights of a purchaser in possession of land under an unrecorded claim of title are protected against bona fide purchaser for value. Russell v. Scarborough, 155 Miss. 508, 124 So. 648; Crozier et al. v. Ange, 85 Fla. 120, 95 So. 426; 19 R.C.L. 421.
Ellis v. Everett, 79 Fla. 493; 84 So. 617 (Fla. 1920):
  • Complainant cites the case of Tyler v. Johnson, 61 Fla. 730, 55 South. Rep. 870. This is in line with the other decisions of this court holding that "Actual possession of the land affords notice that such possession is presumably pursuant to some right, and, if the right is not shown by the duly recorded title, the possession may be regarded as notice of any right claimed by one in possession. Such possession puts the purchaser upon inquiry."
  • In the case of Tate v. Pensacola, Gulf, Land & Development Co., 37 Fla. 439, 20 South. Rep. 542, this court said: "Actual possession of land is notice to all the world of whatever rights the occupant really has in the premises, and a vendor cannot convey to any other person whithout such person being affected with such notice. Actual knowledge of such possession on the part of those sought to be charged with such notice is not necessary. Notice in such a case is a legal deduction from the fact of possession."
  • The burden of proof is upon the party who claims by virtue of priority of record, against a prior but unrecorded deed, to show affirmatively the payment of a valuable consideration and such proof must be made by some other evidence than a mere recitation of it in a deed. Lake v. Hancock, 38 Fla. 53, 20 South. Rep. 811.
  • One setting up the claim of a good faith purchaser as against an unrecorded deed has the burden of showing that he purchased without notice of such deed. McFarland v. Peters, 87 Neb. 829, 128 N.W. 523, cited in Balard's Real Property, 787, and cases cited; Lake V. Hancock, supra, and the cases there cited.
Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115 (Fla. 1914):
  • Every judgment entered by the Circuit Court shall create a lien and be binding upon the real estate of the defendant in the county where rendered. Sec. 1600, Gen. Stats, 1906. No conveyance, transfer or mortgage of real property shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice, unless the same be recorded according to law. Sec. 248, Gen. Stats. 1906. The creditors referred to in the above statute are creditors who "had obtained liens on the recovery of judgments." Rogers v. Munnerlyn, 36 Fla. 591, 18 South. Rep. 669.
  • The law is well settled that under our recording laws subsequent purchasers and creditors acquiring subsequent liens by judgment or otherwise without notice of a prior unrecorded deed will be protected against such unrecorded conveyance, unless the party claiming thereunder can show that such subsequent purchaser or lien creditor acquired his title or lien with notice of such unrecorded conveyance; and the burden of showing such notice is upon the party claiming under such unrecorded conveyance. All of the presumptions in such a case are in favor of the bona fides of such subsequent purchaser or lien creditor, and that they acquired their subsequent title or lien in good faith and without notice of the unrecorded prior conveyance.
  • An execution creditor, equally with a subsequent purchaser, is protected under the statute against unrecorded deeds, and in order to deprive such judgment creditor of the protection of the recording statute it must be shown that he had notice in some recognized way of the rights of the party claiming under the unrecorded deed at the time of the rendition of his judgment. Feinberg v. Stearns, 56 Fla. 279, 47 South. Rep. 797.
  • Actual possession of land is such notice to all the world or to any one having knowledge of such possession as will put upon inquiry those acquiring title to or a lien on the land, to ascertain the nature of the rights the occupant really has in the premises. One who acquires title to or a judgment lien on land with constructive notice of the actual possession and occupancy of the land by one other than the vendor or judgment debtor, takes subject to such rights as the proper inquiry will disclose the occupant of the land actually has therein.
  • Possession, in order to be constructive notice of a claim of title to the land occupied, must be open, visible and exclusive; and such occupancy may be shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor. Such use may be any to which the land is adapted, and is calculated to apprise the world that the property is occupied under a claim of right therein. See Tate v. Pensacola, Gulf, Land & Development Co., 37 Fla 439, 20 South. Rep. 543; Massey v. Hubbard, 18 Fla. 688; McAdow v. Wachob, 45 Fla. 482, 33 South. Rep. 702.
Tate v. Pensacola, Gulf, Land & Dev. Co., 37 Fla. 439; 20 So. 542; 1896 Fla. LEXIS 150 (Fla. 1896):
  • The broad general rule has often been proclaimed by the courts that "the actual possession of land is notice to all the world of whatever rights the occupant really has in the premises, and a vendor can not convey to any other person without such person being effected with such notice." Finch vs. Beal, 68 Ga. 594; Sewell vs. Holland, 61 Ga. 608.
  • In such cases open, visible, actual possession is of itself notice of the rights of those in possession. Actual knowledge of such possession on the part of those sought to be charged with such notice is not necessary. Notice in such cases is a legal deduction from the fact of possession. Allen vs. Cadwell, 55 Mich. 8, 20 N. W. Rep. 692; Woodward vs. Clark, 15 Mich. 104; Hamilton vs. Fowlkes, 16 Ark. 340, and many authorities cited in text; Buck vs. Holloway, 2 J. J. Marsh, 163; School District vs. Taylor, 19 Kansas, 287; Lipp vs. Hunt, 25 Neb. 91, 41 N.W. Rep. 143; Moss vs. Atkinson, 44 Cal. 3; McConnel vs. Reed, 4 Seam, 117, S. C. 38 Am. Dec. 124; Killey vs. Wilson, 33 Cal. 690; Lipp vs. South Omaha Land Syndicate, 24 Neb. 692, 40 N.W. Rep. 129; Bank of Orleans vs. Flagg, 3 Barb. Chy. 316; Dixon & Starkey vs. Doe ex dem. Lacoste, 9 Miss. (1 S. & M.) 70; Strickland vs. Kirk, 51 Miss. 795; Perkins, Livingston & Post vs. Swank, 43 Miss. 349; Doolittle vs. Cook, 75 Ill. 354; Metropolitan Bank vs. Godfrey, 23 Ill. 579; Noyes vs. Hall, 97 U. S. 34.
  • Under our recording acts possession has been held to be such constructive notice of ownership as to dispense with the necessity of recording the deed. Massey vs. Hubbard, 18 Fla. 688.
  • Some objection of appellee is made that the possession of those through whom complainant derived his equitable title, was not such open, visible possession, such as is necessary to give constructive notice of the title of the tenant.
  • Possession, in order to be constructive notice of a claim of title, must be open, visible and exclusive, and is shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor. Such use may be any to which the land is adapted, and is calculated to apprise the world that the property is occupied. Truesdale vs. Ford, 37 Ill. 210; Wickes vs. Lake, 25 Wis. 71.
Florida District Court of Appeal Cases
Kroitzsch v. Steele, 768 So. 2d 514; 2000 Fla. App. LEXIS 11322 (Fla. App. Ct., 2nd DCA, 2000):
  • It is a basic tenet of property law that successors to legal title take title subject to those equitable interests of which they have notice. See Hoyt v. Evans, 91 Fla. 1053, 1055; 109 So. 311, 311 (1926). Actual possession is constructive notice to all the world or anyone having knowledge of said possession of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Lee County Bank v. Metropolitan Life Ins. Co., 126 So. 2d 589, 592 (Fla. 2d DCA 1961) (quoting Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 303; 67 So. 115, 116 (1914)).
  • Volume 77 of American Jurisprudence Second, Vendor and Purchaser, § 473 provides: Generally, possession of real estate is not notice of a claim not asserted, and if proper inquiry is made, and information concerning the rights of the possessor is withheld or concealed, possession will be notice only of the fact of possession and not of the rights of the possessor so concealed. The investigation should, however, be a reasonable one. The inquiry should be made directly of the person in possession, since such person is the one interested and from whom the proper information will be acquired; it is insufficient to make the inquiry as to the possessor's right from the vendor whose interest it is to conceal the true state of facts, and it is likewise insufficient to inquire merely of persons living in the neighborhood. (Emphasis added). See also Bright v. Buckman, 39 F. 243, 244 (N.D. Fla. 1889); Humble Oil & Ref. Co. v. Laws, 272 So. 2d 841 (Fla. 1st DCA 1973).
  • In Humble Oil, a prospective purchaser contracted to purchase an oil, gas, and mineral lease with the record owners of a property inhabited by tenants who had executed an unrecorded contract for sale of the property and rights with the record owners. See 272 So. 2d at 842. During negotiations with the prospective purchaser, the record owner remarked that she did not think she owned any mineral rights. The prospective purchaser observed that the property in question was inhabited and being cultivated, but ended his inquiry into the tenants' rights with a record search. The First District affirmed the trial court's determination that the tenants' possession put the prospective purchaser on notice of their interest in the land. Id. at 842-43. The court explained: [The] prospective purchaser, having knowledge of the possession of the realty by the . . . lessees, was required to inquire as to the full terms and conditions of their lease, including their right to purchase. . . . [The prospective purchaser] did not visit the property or make any inquiry other than as reflected by the courthouse records. Id.
  • In this case, it is undisputed that the Buyers checked the official property records at the courthouse, obtained a copy of the purported lease between Varner and the Tenants, obtained title insurance, and drove by the property to ascertain that the residence was occupied. The question for this court to resolve is whether those actions constituted reasonable inquiry. We conclude that there were sufficient red flags raised in this residential purchase to require further inquiry by the Buyers. The one-year lease agreement Varner showed to the Buyers was dated July 1992, signed by Mr. Kroitzsch only, and had not been witnessed. Although Varner represented that the Tenants were past due on the rent, the Buyers did not obtain an estoppel letter from the Tenants prior to the closing. Additionally, the Buyers never inquired about the amount of rent claimed to be unpaid, and the closing statement for the purchase of the property contained no proration of rent.
  • The Buyers drove by the property to ascertain that the residence was occupied, but made no effort to contact the Tenants to ascertain their interests in the property. In fact, the Buyers made no contact with the Tenants at all until months after their purchase of the residence from Varner. The Buyers did not rely upon an affidavit of Varner as to the Tenants' possessory interest at closing, as the affidavit was executed by Varner sixteen days after the closing. Finally, it is true that the Buyers bought an owner's title insurance policy, but that policy did not protect against the rights of parties in possession.
  • The Buyers relied solely upon the public records, a questionable residential lease agreement, and the representations of the seller in ascertaining the Tenants' rights to the property. Like the prospective purchaser in Humble Oil, the Buyers failed to make any inquiry with the Tenants as to their rights in the property. We agree with the First District that such actions are necessary in cases where red flags are raised in determining the property rights of record owners who have tenants, as here. Because we conclude that the Buyers did not conduct a reasonable inquiry into the status of the Tenants' possible interest in this property, we reverse the order requiring the Tenants to vacate the property and remand for further proceedings in the trial court.
Citgo Petroleum Corp. v. Fla. E. Coast Ry., 706 So. 2d 383 (Fla. Ct. App. 4th DCA, 1998):
  • We also reject FEC's argument that Citgo's failure to record its easement renders it ineffectual against FEC. Under Florida's recording act, FEC is subject to Citgo's pre-existing, unrecorded easement unless FEC was "without notice" of it. See § 695.01(2), Fla. Stat. (1995); Ruotal Corp. v. Ottati, 391 So. 2d 308, 309 (Fla. 1980); Florida Power & Light Co. v. Rader. [footnote omitted] If the circumstances known to FEC when it acquired the subject property were "such as should reasonably suggest inquiry" into Citgo's property rights, then FEC is deemed to be on "inquiry notice" of -- and bound by -- those encumbrances which would have been discovered upon a reasonable inquiry. See Chatlos v. McPherson, 95 So. 2d 506, 509 (Fla. 1957).
  • Applying this principle, in Florida Power & Light Co. v. Rader, where the transferee took possession of land upon which FP&L had constructed power lines and poles pursuant to an unrecorded easement, this court reversed the trial court's finding that FP&L's failure to record its easement rendered the easement ineffectual against the transferee. The court explained: Actual, open and obvious possession is constructive notice to all the world of whatever right the occupant has in the land, and puts upon inquiry those acquiring any title to or lien upon the land so occupied to ascertain the nature of the rights the occupant has in the premises. 306 So. 2d at 567.
  • Pursuant to Rader, we conclude, as a matter of law, that Citgo's actual, open, and obvious possession by construction of a conspicuous pipeline placed FEC on inquiry notice of Citgo's easement. As FEC conceded below, it had actual knowledge that Citgo was constructing a pipeline across FEC's proposed right-of-way; in fact, FEC and Citgo corresponded concerning the specifications for building the pipeline beneath FEC's tracks, and FEC later built its new track between vents which conspicuously protruded from the relocated pipeline. See Kirma v. Norton, 102 So. 2d 653 (Fla. 2d DCA 1958)(holding that a grantee was bound by a sewer pipe easement which crossed his land and emptied into a river, even though the pipes were underground, as the emergence of the pipes from the river bank should have put a prudent buyer on notice to inquire, and he was, therefore, bound by what he would have learned).
  • A review of Citgo's 1983 Agreement with the DOT would have revealed to FEC that Citgo "will at all times, both during and after construction, have free and complete access to the existing and new jet fuel line ...." In light of its prior licensor-licensee relationship with Citgo, FEC argues that its actual knowledge of the pipeline is not tantamount to inquiry notice of an easement. However, the presence of the pipeline put FEC on inquiry notice of "whatever right" Citgo had in the land. See Rader, 306 So. 2d at 567; accord Randolph v. Martin, 100 So. 2d 198, 199 (Fla. 3d DCA 1958)(holding the transferee to be on inquiry notice of an easement where she was aware of the easement-holder's use of the property even though she did not know the "extent" of the easement-holder's claim).

Florida Power & Light Co. v. Rader, 306 So. 2d 565 (Fla. App. Ct. 4th DCA 1975):
  • The trial court concluded, apparently on the basis of Section 695.01(1), F.S., that appellant's failure to record the easement deprived appellee, who purchased the property in 1959, of either actual or constructive notice of the easement, and therefore the easement was ineffectual as against appellee. Such conclusion is contrary to appellee's testimony to the effect that prior to purchasing the property he had made a visual inspection of it and had seen the power lines and poles in question.
  • Actual, open and obvious possession is constructive notice to all the world of whatever right the occupant has in the land, and puts upon inquiry those acquiring any title to or lien upon the land so occupied to ascertain the nature of the rights the occupant has in the premises. Blackburn v. Venice Inlet Co., Fla.1948, 38 So.2d 43; Marion Mortgage Co. v. Grennan, 1932, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492; Tate v. Pensacola Gulf, Land & Development Co., 1896, 37 Fla. 439, 20 So. 542.
  • It is true that at the time appellee inspected the premises and observed the presence of the electric power transmission lines he was uncertain as to the boundary line of the property and, therefore, did not then know that the transmission lines were on the property. It is also true that the survey which was prepared at his request (and examined by him before closing the sale) did not reflect the location of the transmission lines. The fact remains, however, that the electric power transmission lines were on the property and were open, obvious and visible. Appellee was charged with notice of that which was there to be seen, irrespective of whether he actually knew of such possession. Humble Oil & Refining Co. v. Laws, Fla.App.1973, 272 So.2d 841; Moore v. Choctawhatchee Electric Co-operative, Inc., Fla.App.1967, 196 So.2d 788; Vincent v. Hines, 1920, 79 Fla. 564, 84 So. 614; Tate v. Pensacola Gulf, Land and Development Company, supra.
Humble Oil & Refining Co. v. Laws, 272 So. 2d 841; 1973 Fla. App. LEXIS 7438 (Fla. App. Ct. 1st DCA 1973):
  • At the time of the execution of the above instrument, the Laws gave the Fillingims a check for $1,000 marked "land rent and option to buy." When Mr. Fillingim accepted the check, he shook hands with Mr. Law and stated: "As far as we're concerned, the property's yours. You can do whatever you want with it".
  • The Laws went into immediate possession of the land, limed and fertilized a part of it, planted 75 acres in soybeans and had 6 acres in permanent pasture. Oats and wheat were planted in the fall. An old shack on the property was rewired for electricity and was occupied by Mr. Laws from 30 to 45 days while he worked the land. They also cleared an area under a big magnolia tree for a future home site, seeded it with grass, and planted roses and azaleas. Extensive farm equipment owned by them was continuously on the property.
  • Some time prior to July 9, 1970, an agent for Humble left his calling card at the Fillingim's residence. Mrs. Fillingim called the agent who discussed with her his company's desire to lease the oil, gas and mineral rights on the subject land. Mrs. Fillingim advised that she didn't think they owned any mineral rights. Subsequently, the agent examined an abstract of the land and agreed to pay the Fillingims $3,350 (and other consideration dependent on certain contingencies) for an oil, gas and mineral lease. Mrs. Fillingim told the agent the property was "rented". An oil, gas and mineral lease between the Fillingims and Humble was executed and recorded.
  • Humble vigorously contends that its only possible notice of the Laws' interest in the subject land was their cultivation of same and the owner-seller's statement to its agent that the land was rented for one year. Further argument by Humble is that cultivation of the land without a continuous residence thereupon is not sufficient to put a lessee on notice of an unrecorded option or contract for sale, citing as its authority a Texas case. 2[Jackson v. De Guerin, 124 Tex. 424, 77 S.W.2d 1041 (1935)] It might well be that Texas law recognizes Humble's position, but it does not "hold water" in Florida. Actual possession is constructive notice to all the world of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. 3[Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492 (1932); Florida Land Holding Corporation v. McMillen, 135 Fla. 431, 186 So. 188 (1938); Blackburn v. Venice Inlet Co., 38 So.2d 43 (Fla.1949)]
  • Humble, a prospective purchaser, having knowledge of the possession of the realty by the Laws, as lessees, was required to inquire as to the full terms and conditions of their lease, including their right to purchase. 4[Denco, Inc. v. Belk, 97 So.2d 261, 265 (Fla.1957)] As related in the above facts, the exclusive possession by the Laws was more than adequate to put any person upon inquiry as to their interest in the lands occupied by them. This Humble did not do. Its agent did not visit the property or make any inquiry other than as reflected by the courthouse records. The judgment appealed is affirmed.
United Contractors, Inc. v. United Construction Corp., 187 So. 2d 695 (Fla. App. Ct. 2nd DCA 1966):
  • The "constructive notice" doctrine has been fully adopted in Florida, especially as it most commonly is applied under our recording statute. See F.S. § 695.01 F.S.A.; Sapp v. Warner, 1932, 105 Fla. 245, 141 So. 124, reaffirmed on rehearing, 105 Fla. 263, 143 So. 648; Tri-County Produce Distributors, Inc. v. Northeast Production Credit Association, Fla.App.1963, 160 So.2d 46; Tolar v. Myer, Fla.App.1957, 96 So.2d 554; Daniel v. May, Fla.App.1962, 143 So.2d 536; Davis v. Brewer, 1939, 135 Fla. 752, 186 So. 207; Maule Industries, Inc. v. Sheffield Steel Products, Inc., Fla.App.1958, 105 So.2d 798; Hagan v. Sabal Palms, Inc., 186 So.2d 302, opinion filed March 23, 1966, 2d D.C.A.
  • "Implied actual notice" is an inference of fact, and includes notice inferred from the fact that a person has means of knowledge which it was his duty to use, Rinehart v. Phelps, 1942, 150 Fla. 382, 7 So.2d 783, but such possession to be notice of claim of title, must be open, visible and exclusive, Carolina Portland Cement Co. v. Roper, 1914, 68 Fla. 299, 67 So. 115.
  • Actual possession is notice to all the world of whatever right the holder has in the property and such possession, when open, visible and exclusive, will put upon inquiry those having or acquiring any title to or lien upon the property to ascertain the nature of the right the holder really has in the property. Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.
  • "The principle applied in cases of alleged implied actual notice is that a person has no right to shut his eyes or ears to avoid information, and then say that he has no notice; that it will not suffice the law to remain wilfully ignorant of a thing readily ascertainable * * * when the means of knowledge is at hand." Sapp v. Warner, supra.
Lee County Bank v. Metropolitan Life Ins. Co., 126 So. 2d 589; 1961 Fla. App. LEXIS 2900 (Fla. Ct. App. 2nd DCA, 1961) Rehearing Denied Feb. 15, 1961:
  • A similar issue as to priority of rights between a subsequent mortgagee and a vendee in possession under an unrecorded contract for deed was presented and discussed in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 763, 87 A.L.R. 1492.
  • The Supreme Court stated in regard to the rights of the parties:
  • "It is not necessary to determine here whether the contract for deed to the Reeds was acknowledged or recorded, as the contract would be good not only as between the original owner and his vendees and between the original owner and the grantee of the title in which latter instrument the said contract for deed was also transferred. The said contract for deed was in fact effective, though not recorded as against the subsequent mortgage which was executed after the property had been sold to said vendees, as it is clearly shown that said vendees had from date of purchase been in actual adverse possession of the premises and at the time of the execution and delivery of the mortgage and each subsequent assignment.
  • "Actual possession is constructive notice to all the world or any one having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola, G., L. & Dev. Co., 37 Fla. 439, 20 So. 542, 543, 53 Am.St. Rep. 251; McAdow v. Wachob, 45 Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier et al. v. Ange, 85 Fla. 120, 95 So. 426, that, 'Where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, §§ 201 and 202.
  • "While a mortgagee is a 'purchaser' to the extent of his interest in the mortgaged property and where it appears that he is bona fide purchaser for value and 'without notice of any secret unrecorded claim or interest' in such property, he will be protected. Warner v. Watson, 35 Fla. 402, 17 So. 654. There being, however, no charge of secrecy in the instant case, the above rule does not apply, especially where it is shown that the property at the time of the mortgage was occupied by others than the mortgagor under a contract for deed. If the mortgagee, though he does it passively, suffers another to purchase and expend money on land under an erroneous opinion of the title without making known his claims, he shall not afterwards be permitted to exercise his legal rights against such purchaser. Hagan v. Ellis, 39 Fla. 463, 22 So. 727, 63 Am.St.Rep. 167; Price v. Stratton, 45 Fla. 535, 33 So. 644; Coram v. Palmer, 63 Fla. 116, 58 So. 721.
  • The above decision was followed in the disposition of a similar question in Scott et al. v. Simmons et al.,
    151 Fla. 628, 10 So.2d 122, wherein the purchaser, pursuant to an oral contract of purchase, paid the vendor, Simmons, $100 down payment, immediately took possession and began fencing the land on July 5, 1939. The purchaser had an abstract brought up to date on July 8, 1939, which disclosed an apparent satisfactory state of the title.
  • Meanwhile, on July 14, 1939, a mortgage was recorded which had been executed on June 27, 1925, by a prior grantor to secure a portion of the purchase price. The deed conveying the land to the vendor, Simmons, had contained no reference to the encumbrance. The mortgage holders, Mary C. Scott and her husband, brought a foreclosure action against Simmons and his wife, and against the purchaser from Simmons who had taken possession. The suit was dismissed and the mortgagees appealed.
  • In affirming the dismissal the Court held: "The problem with which we are confronted is the relative rights of the vendee, who took possession under the verbal contract without knowledge of the mortgage and before it was recorded, and the mortgagee, who placed her mortgage on record before delivery and recordation of the former's deed. The genuineness of the possession by the appellee Simmons is not challenged and it is not even suggested that it was casual, occasional, temporary, equivocal or of such character as not to provoke inquiry. 8 Thompson on Real Property (Permanent Edition), Page 421, et seq. Being of this quality the possession was certainly notice to the mortgagee that the possessor had a real interest in the property and his rights, therefore, were not affected by the lien. The mortgagee was relegated for relief to the interest of the vendor which she could reach provided she gave actual notice to the vendee. Recording the instrument, after the commencement of the possession, did not relieve her of the necessity of informing him of its existence and of the default of the mortgagor if she intended her claim to attach to the amount owed by him to the vendor. See Thompson on Real Property, supra, page 424. "Authority for this conclusion may be found in a decision of this court, Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492, where the same principle was involved and where the facts in all essential respects correspond with those in the instant case. * * *"
  • As illustrated by the foregoing decisions, actual possession of real property, when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises.
  • Pursuant to this rule it has been held that a mortgagee of real estate takes his security charged with notice of the equities of a third person in possession of the property at the time of the execution of the mortgage. First Federal Sav. & Loan Ass'n. of Miami v. Fisher, Fla.1952, 60 So.2d 496. And therefore, where at the time property is mortgage it is actually occupied by others than the mortgagor, the mortgagee is thereby put on notice to inquire as to the rights of the occupants. Marion Mortgage Co. v. Grennan, supra.
  • A factually similar situation was presented to the court in Fraser v. Fleming, 190 Mich. 238, 157 N.W. 269, 270, wherein the purchaser, under an unrecorded contract entered into on June 30, 1913, which required the vendor to construct a house, had moved part of his furniture in on October 1st or 2nd. The workmen completed the house, with the exception of painting on October 4th. The purchaser contended that he moved in on October 4th, but it was conceded by opposing parties that the purchaser was in possession of the premises by October 7th. In the meantime, the vendor was negotiating for a loan with the mortgagee and the terms of the loan were agreed to on October 4th and the mortgage was drafted that day. The mortgage was not acknowledged until October 7th and none of the money was paid over until October 8th.
  • The Supreme Court of Michigan, in holding that the vendee in possession under these circumstances should prevail over the mortgagee, stated: "* * * The question therefore is whether their possession of the lot was of such a character as to amount to constructive notice when defendant parted with the money loaned on the mortgage. 'The rule uniformly settled in this state is that payment must be made before notice in order to secure the title to the land purchased.' Palmer v. Williams, 24 Mich. 328; 39 Cyc. § 1763. And 'possession of land by a contract purchaser is constructive notice of his rights.' Corey v. Smalley, 106 Mich. 257, 64 N.W. 13, 58 Am.St.Rep. 474. "Defendant testified that the money loaned was paid to Trimble's creditors on the morning of the 8th, after the deed from Dodge had been recorded, and the deed was recorded at 10:45 a.m., as shown by the register's certificate. It is practically undisputed that the Carpenters had supper in the house on the evening of the 6th, and that their goods were in the house by the evening of the 7th, when they began living there regularly and continually. We cannot agree with the circuit judge that this possession was insufficient to operate as constructive notice. What more notorious and open possession could they have taken? Their goods were in the house, they were eating and sleeping there, and any one calling at the house would have found them there on the day the money was paid, and on the night before. * * * The possession by the Carpenters was in the best of faith, and not for the purpose of defrauding defendant; and, although it had not existed for any great length of time before the payment of the money, it had existed for a sufficient period to operate as constructive notice. Allen v. Cadwell, 55 Mich. 8, 20 N.W. 692; Miner v. Wilson, 107 Mich. 57, 64 N.W. 874;, Oconto Co. v. Lundquist, 119 Mich. 264, 77 N.W. 950; Boyer v. Chandler, 160 Ill. 394, 43 N.E. 803, 32 L.R.A. 113; Phelan v. Brady, 119 N.Y. 587, 23 N.E. 1109, 8 L.R.A. 211. Constructive notice by possession is equal to constructive notice by record. 39 Cyc. § 1745. The mortgage was therefore void in equity as against the rights of the Carpenters, and is equally void as against complainant, who has succeeded to those rights."
  • The Howes, in the instant case, had moved their furniture into the house, slept there, took their meals there, parked two cars there, and had no other place to live at the time the mortgage was executed. The bank had been furnished a title opinion which specifically stated that the opinion was subject to the rights of any parties in possession. It is also undisputed that at no time prior to the real estate closing did the defendants Howe or Metropolitan Life Insurance Company, Inc., have actual knowledge of the existence of the mortgage to plaintiff, the Lee County Bank.