Saturday, June 5, 2010

Pair Charged In Ripoff Of Elderly Woman; Abused POA To Take Title To Home, Drain Bank Account, Say Investigators; Stiffed Nursing Home Triggers Probe

In Washoe County, Nevada, The Reno Gazette Journal reports:

  • Two Reno women in their 60s, including a real estate broker, are facing an August trial for alleged financially exploitation of an elderly woman. Peggy Viola Six, 63, an artist, and Robin Lee Benjamin, 64, a real estate broker who operates Market and Match home buying and selling system, pleaded not guilty Thursday morning to an indictment charging them with exploitation of an older or vulnerable person.


  • A Washoe County grand jury in March indicted the women on a charge of exploiting an 87-year-old woman. Six had the woman’s power of attorney due to her failing mental capacities, according to cout documents. Six and Benjamin are accused of draining the woman’s bank account and defrauding the woman of her home. Benjamin allegedly transferred ownership of the woman’s home to her name, and then tried to sell it for a $100,000 profit. [...] Officials estimate the woman was defrauded of hundreds of thousands of dollars.

  • Authorities say the woman was placed in a local elder care facility until Six stopped paying for her care.(1) Ultimately, the woman became a ward of the state and currently resides at a group home in Carson City.

For more, see Two Reno women arrested on suspicion of bilking elderly woman.

(1) Reportedly, Washoe Deputy District Attorney Dania Reid, a civil prosecutor who represents the county’s public guardian office, said the case was referred to her office once Six stopped paying for the woman’s care facility. During an investigation, it was discovered Six had allegedly used the woman’s money to buy a motor home and a car, and fraudulently transferred the woman’s home to Benjamin, the story states. Reid reportedly said her office is working to sell the woman’s home so that she can receive the proceeds.

Cops: Man's $315K Swindle Of Elderly, Dementia-Stricken Mom Leads To Eviction From Nursing Home & "Basically Put Her In The Poor House"

In Eden Prairie, Minnesota, the Eden Prarie News reports:

  • An Eden Prairie man was recently charged with stealing more than $315,000 from his elderly mother’s retirement accounts over the course of five years. The incident “is not a unique case,” noted Sgt. Bill Wyffels, who advised that older residents should never, never put only one person in charge of their assets. “This is an example of a mother putting faith into one of four children,” he noted. “That one child basically put her in the poor house.”

  • According to a criminal complaint, Terry Lee Carr, 66, has been charged three counts of theft by swindle over $35,000. In 1999 Carr was given power-of-attorney over his mother’s assets. By 2002, his mother was losing her memory and moved to Emerald Crest, a long-term care facility in Shakopee. Prudent investments and funds from long-term health insurance meant that his mother’s care should have been covered for the rest of her life.

  • However, in 2008 the victim’s three other children began to suspect that Carr was taking heir mother’s money. The woman was evicted from her care facility and one of her other children eventually looked to find her a less expensive care facility. In the process of that, Carr’s theft was uncovered. Over the years, the vast majority of the withdrawals were made at Mystic Lake Casino.

For the story, see Fraud involving elderly parent, ‘not a unique case’.

Texas Woman Accuses Sister Of Pocketing Rent From, Conspiring With Nieces To Use Forged Deed In Swiping Title To, Rental Property

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

  • A Jefferson County woman claims her sister stole money and property from her while serving as her property manager. Lieu Pham filed a lawsuit May 10 in Jefferson County District Court against her sister, Dieu Pham; her nieces, Lan Nguyen and Bong Nguyen; and Johnathan V. Tat. Lieu Pham claims she owns Gulfway Washateria [...] and entrusted management of the business to her sister, Dieu Pham.

  • As part of her responsibilities, Dieu Pham was supposed to collect rent from tenants who leased Lieu Pham's building, according to the complaint. However, Lieu Pham has not received any revenue or rent from her tenants, the suit states. When she pressed her sister for an accounting of business transactions, Dieu Pham refused to provide the requested data, the complaint says.


  • Not only did Dieu Pham hide records from her sister, but she also conspired with her daughters to steal her sister's land and building by forging Lieu Pham's signature on warranty deed purporting to transfer the property to the Nguyens from Lieu Pham, she claims. [...] Lieu Pham alleges breach of fiduciary duty against her sister, theft of property against her sister and nieces, conversion against her sister and nieces and negligence per se against [notary Johnathan V.] Tat for allegedly "fail[ing] to act as a reasonably and prudent notary would" in connection with notarizing the allegedly forged deed.

For the story, see PA woman in dispute with sister over property management.

Friday, June 4, 2010

Pennsylvania AG Indicts Attorney In Alleged $550K+ Ripoff Of 90-Year Old Woman; Victim Gave Lawyer POA, Then Named Him Her Estate Executor

In Harrisburg, Pennsylvania, The Delaware County Daily Times reports:

  • Agents from the attorney general's office [] arrested a Montgomery County attorney for stealing nearly $555,000 from an elderly woman and, after her death, from her estate. He allegedly used the money to refinance his North Carolina beach house and to pay his credit card debt, authorities said. Attorney General Tom Corbett identified the defendant as Frank H. Morgan, Jr., 63, [...] a partner in the Norristown law firm of McTighe, Weiss, O’Rourke, Troncelliti and Morgan. Evidence and testimony regarding Morgan’s alleged illegal activity was presented to a statewide investigating grand jury, which recommended the criminal charges being filed.

  • The grand jury found that in February 2006, Rita Trish, a 90-year women living in a Gladwyne assisted living facility, gave Morgan power of attorney, which authorized him to act on her behalf in legal and business matters. Trish gave Morgan her power of attorney three weeks after her husband died. In April of 2006, Trish signed a will naming Morgan the executor of her estate, which gave him the authority upon her death to administer her will and to ensure that her final wishes were respected.

For more, see Montco attorney busted in $550G scam on senior citizen.

See also, Attorney accused of embezzling once again:

  • A Montgomery County attorney arrested [] for allegedly stealing nearly $555,000 from an elderly woman and her estate was once accused of similar crimes in Delaware County. In a 1992 civil suit, Frank H. Morgan Jr. was accused of funneling $152,000 from the estate of a New York man to Villanova University to cover his son’s tuition.

Texas Woman Unwittingly Buys Home Slated For Tear-Down; Sues Firm For Subsequent Demolition After Deal Reached w/ City To Halt Action Pending Repairs

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

  • A Beaumont woman claims a demolition company razed a home she purchased despite an addendum ordering the company to refrain from such an action. Sandra Ledesma filed a lawsuit May 5 in Jefferson County District Court against Albert Dill doing business as Jay Dill Trucking.

  • Ledesma claims she purchased a home [...] in Beaumont on June 24 from Carl Adams for $15,000. Although she knew the home needed significant repairs, Ledesma did not realize the city of Beaumont had scheduled it for demolition until she attempted to obtain a permit for electrical work from the city on Sept. 21, according to the complaint.

  • "After talking with Quentin D. Price, the assistant city attorney for the City of Beaumont, Plaintiff entered into an agreement with the City of Beaumont wherein the City agreed that it would not demolish the structure located at 4070 Harding if a Certificate of Occupancy was obtained by November 22, 2009," the suit states. "This agreement was extended until December 22, 2009. On September 24, 2009, Plaintiff began repairs on the home."

  • Meanwhile, the city placed a notice for bids of the demolition of the home, which Dill accepted on Sept. 15, the complaint says. The city notified Dill on Sept. 22 that it could not demolish the structure pursuant to an injunction, Ledesma claims. Despite the notification, Dill demolished the home on Oct. 1, 2009, according to the complaint.

For the story, see House demolished despite injunction, lawsuit claims.

Property Seller Accused Of Allowing Would-Be Buyer To Take Possession Of "Ike-Damaged" Home & Make Repairs, Then Refusing To Transfer Title

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

  • A Port Arthur man claims he cannot rent out property he rightfully owns because its former owner refuses to transfer the deed. Raymond McClain filed a lawsuit [...] against Linda Garrison. McClain claims he bought property located [...] in Port Arthur from Linda Garrison for $4,000. The property formerly belonged to Linda Garrison's father, Oneal Garrison, but became hers after he died in August 2006, according to the complaint.

  • After purchasing the property, which had been damaged in Hurricane Ike, McClain claims he made significant improvements to it, believing that Linda Garrison would transfer the deed to him. However, Linda Garrison has failed to perform acts required of her, such as filing an inventory, appraisement and list of claims, and the court removed her as executor of her father's estate in March, the suit states. Still, McClain has attempted to get the deed transferred into his name, the complaint says.

  • "McClain has contacted the Defendant by phone and in writing several times, and even provided her with a deed to sign, but to date the Defendant has not signed the deed to the Property," the suit states. "As a result, record title to the Property still shows to be held by the estate of Oneal Garrison, and McClain is unable to rent the Property as section VIII housing." In his three-count complaint, McClain alleges breach of contract and specific performance and trespass to try title against Linda Garrison.

Source: PA man claims property owner failing to provide deed.

Thursday, June 3, 2010

"We Are Not Bound By State Borders!" Proclaims Indiana AG In Launching Attack On Alleged Ohio-Based Loan Modification Racket

In Fort Wayne, Indiana, The Indianapolis Star reports:

  • The Indiana attorney general's office claims a Cincinnati-based loan modification firm signed fraudulent agreements to help nearly 600 Hoosier homeowners avoid foreclosure. Foreclosure Assistance USA told the homeowners they would help prevent foreclosure in claims made on websites and radio and in direct-mail advertisements and phone solicitations, the attorney general's office said in a statement.(1)


  • "The suit also claims FA USA violated Indiana law by failing to have a $25,000 surety bond while accepting money up front from customers for services that had not yet been performed," the statement said. "The company is also accused of deceptive acts including misrepresenting to consumers that the consultants were experts in the area of foreclosure prevention or possessed in-depth knowledge of the industry."


  • "Out-of-state companies often don't believe the Indiana attorney general's office has jurisdiction over their practices," Attorney General Greg Zoeller said in the statement. "That's simply not true. The vast majority of foreclosure consultant scams originate outside Indiana and this enforcement action reflects that we are not bound by state borders."

For the story, see Suit: Ohio foreclosure firm scams 600 Indiana homeowners.

For the Indiana AG press release, see Out of state but not out of reach, Attorney General goes after Ohio-based foreclosure consultant company.

(1) The Ohio attorney general filed a similar lawsuit against Foreclosure Assistance USA in 2009 in a Hamilton County, Ohio, court, the story states.

Wisconsin AG Files Civil Suit Against California Outfit For Alleged Misrepresentations Made In Offering Loan Modification Services

From the Office of the Wisconsin Attorney General:

  • The Wisconsin Department of Justice filed suit [] against a company doing business as "USA Loan Auditors" for engaging in deceptive practices in the course of selling purported "loan modification" services to Wisconsin homeowners.

  • The complaint alleges the California-based company, Relief Law Center (d/b/a "USA Loan Auditors") has engaged in deceptive practices by sending homeowners mailings that suggest the homeowner's mortgage lender is under investigation for predatory lending abuses. The mailings falsely claim that as a remedy for the supposed-abuses, the homeowner may be entitled to a loan modification. The Idaho Attorney General issued a Cease and Desist Order against the company earlier this year.

For the entire press release, see Van Hollen sues loan modification company.

Kern County Deputy DA On Loan Modification Rackets: "They Are People Very Worthy Of Criminal Prosecution!"

In Bakersfield, California, KBAK-TV reports:

  • When the economy and real estate market went south, many families went to home loan modification companies to save their homes. But, more than a dozen Kern County families contacted Eyewitness News after one modification company took their money and didn't do anything it promised. Each family paid Los Angeles-based Loan Modification Group ["LMG"] $3,000 to get a home loan modification, and each family had their own reason for wanting a modification.(1)


  • Eyewitness News went to Kern County Deputy District Attorney Gordon Isen, who specializes in real estate fraud, to ask about home loan modification scams. Isen said, "When there's a downturn in the real estate market this type of crime has arisen in the past, but it's now reached proportions I've never seen before and I don't think anyone's seen before." He added that not only is it a serious crime, but an intentional one. "It's not a crime of passion, it's not a crime of the moment. People doing this type of criminal conduct think about their crimes, they prepare for their crimes, they consult with others and conspire. I think they are people very worthy of criminal prosecution."

For the story, see Home loan modifiers scam families out of $3,000 each.

(1) According to the report:

  • Eyewitness News decided to ask LMG what happened to our homeowners' money, but that was easier said than done. When Eyewitness News went to the address where our homeowners mailed their payments and paperwork, it didn't exist. The search took us all over Los Angeles and we finally found the company in Chatsworth. When Eyewitness News asked an office employee if the company's name was Loan Modification group, she said it was Balboa company. Turns out, Loan Modification Group is also known as MBM and Balboa Law Group. [...] Since the encounter, Eyewitness News learned that the company is no longer offering home loan modifications.

Recently Enacted New Mexico Anti-Loan Modification Scam Law Calls For Prison, $10K Fine For Violators

In Santa Fe, New Mexico, The Associated Press reports:

  • A New Mexico law that went into effect [last week] is aimed at companies that charge homeowners and make fraudulent promises to help them get their loans modified to protect their homes against foreclosure. Attorney General Gary King says there's been an alarming increase in mortgage rescue scams as a result of the U.S. housing crisis.

  • He says many of the companies targeted by the Mortgage Foreclosure Consultant Fraud Prevention Act operate from outside the state. The law applies to people offering services to stop or postpone foreclosure. It requires companies to provide a written contract disclosing their services and charges and prohibits firms from charging fees until the services have been provided. The law calls for up to a year in prison and-or a $10,000 fine for a violation.

Source: New Mexico law targeting foreclosure scams.

Wednesday, June 2, 2010

Ocwen Throws In The Towel; Gives Back Title To Home To Owner After Foreclosing On Fully Paid Off Mortgage

In Greenfield, Indiana, WRTV-TV Channel 3 reports:

  • A woman who said she had no idea that her house had been put up for foreclosure even though the mortgage was paid off is relieved that a loan servicing company has backed off after years of struggle.


  • The Army veteran said she didn't know that Florida-based Ocwen Financial Corporation had sought foreclosure. The company was given the deed to the home and asked a court to remove Elliott and her family in June 2007. In November 2006, a court had sided with Ocwen, and the home was sold in a sheriff's sale in February 2007.


  • Elliott filed a complaint with the Indiana Attorney General's Office and the Comptroller of the Currency, which regulates national banks. "She stayed in the home and defended it," said Tom Williams, Elliott's lawyer.

  • Elliott's case advanced to the Indiana Court of Appeals, where the court gave a stinging response to the companies for their actions and questioned their motivation. “The Kafkaesque character of this litigation is difficult to deny,” the judges said in their opinion. The foreclosure remained on hold, and the case was sent back for a trial.(1) [...] Ocwen Financial Corporation dropped its lawsuit a couple of weeks ago.

For the story, see Woman Celebrates End Of Foreclosure Fiasco (Loan Servicer Sought Foreclosure Despite Proof Mortgage Was Paid).

(1) For the ruling of the Indiana Court of Appeals, see Elliott v. JPMorgan Chase Bank, 920 N.E.2d 793; 2010 Ind. App. LEXIS 99 (Ind. Ct of App., February 3, 2010) (case also available here).

BofA Continues Out-Of-Control Seizing Of "Mortgage-Less" Homes; Refuses To Correct Screw-Up Until Media Intervenes

In Tuolumne, California, KCRA-TV Channel 3 reports:

  • Nancy Willmes paid cash for her Tuolumne home in 2001. So she was quite surprised when Bank of America send her a notice of default on the property in February. "I honestly felt like Bank of America was trying to steal my property," Willmes said. She contacted Bank of America to try to find out why the bank believed it could foreclose on property she had purchased outright.

  • Willmes has chain-of-ownership records, which show Bank of America had sold the property to Fannie Mae years earlier. Fannie Mae foreclosed on the previous owner, and Willmes purchased the property with cash from Fannie Mae. But Willmes said Bank of America did not care about the documentation. The bank proceeded with the foreclosure, placing ads in the local paper and nailing a foreclosure notice to her door.

  • "I called the title company, the title company called B of A, and they refused to rescind it," Willmes said. Fearful she would lose her home to the bank, Willmes called KCRA Call 3, and a Call 3 volunteer contacted Bank of America. Willmes said that's when Bank of America began returning her phone calls. The bank rescinded the notice of trustee sale, stopping the foreclosure. In a statement to KCRA 3, Bank of America said the problem was a system error. It said it updated its records and canceled the sale.(1)

For more, see Bank Tries To Foreclose On Owned Home (Tuolumne Woman Owns Home Outright).

(1) For other posts on Bank of America's seemingly relentless pursuit of homes that they have no legal claim to, see:

Lenders To Find Themselves In Crosshairs Over Premature, Illegal Evictions Of Foreclosed Homeowners

In Chicago, Illinois, Chicago Public Radio reports:

  • [Sam] Frazier's house had been sold at a foreclosure auction just the day before he was locked out of it. But in Illinois, that sale doesn't automatically transfer ownership of a house. A judge still has to issue an order that confirms the sale was done properly, and also to say how much longer the homeowner may continue to live there -- usually 30 days.


  • Kelli Dudley has been practicing consumer and foreclosure law for nearly a decade. She and two other attorneys have taken on Frazier's case, and they say they're seeing a number of similar stories. They're trying to identify common threads in these cases to mount a class-action lawsuit. Right now, their big target is U.S. Bank, based in Minneapolis. Dudley says it probably wasn't anyone from US Bank who boarded up Frazier's home, but she asserts the bank is ultimately responsible when any of its agents, or agents of its agents, do something illegal.


  • Dudley says there's another thing about these cases they're seeing. "Even if there is an order of possession, we've still got the hurdle to get over that only the sheriff or the authorized person can do the eviction." Frazier says the man who locked him out of his home wouldn't give any ID, but Frazier says he certainly wasn't from the Cook County Sheriff's department.

For more, see Homeowners Struggle to Challenge Premature Evictions.

Idaho Couple Gets Back Home Sold Out From Under Them In Foreclosure While Loan Modification Agreement In Effect; Trustee Agrees To Rescind Sale

In Boise, Idaho, The Idaho Statesman reports:

  • A West Boise family has gotten their home back after it was sold in March in a foreclosure sale, said their attorney, Richard Eppink of Idaho Legal Aid(1) in Boise. Zijad and Hata Rudan had formally entered and were complying with a federal loan modification trial period before the home was sold.

  • Eppink said Gorilla Capital of Oregon, the company that purchased their home, has relinquished all interest in the home. The trustee who conducted the sale has agreed to rescind the foreclosure sale. Zijad Rudan said he is happy about the agreement and feels that justice was done. The Rudans are waiting to see if their loan servicer MetLife will negotiate with them regarding the Making Home Affordable program and their mortgage.

Source: Boise family retains home sold in foreclosure.

(1) Idaho Legal Aid Services is a nonprofit law firm dedicated to providing representation for low income people throughout Idaho.

Couple Says They Followed All Bank Instructions Given At Lender-Sponsored, Traveling Loan Modification "Carnival Show" & Are Still Facing Foreclosure

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

  • A Valley couple is about to lose their home to foreclosure and they claim their bank scammed them. Keven and Linda Harper, of Phoenix, said they were strung along by Wells Fargo Bank and promised a loan modification that never happened. Now, they said they're about to lose their home to foreclosure.

  • In September, the couple said they went to Wells Fargo's Loan Modification Workshop in downtown Phoenix.(1) The Harpers said they were promised a loan modification and told that all they'd have to do is go through a trial period, make their new lower payments on time and they'd be approved. "We did everything they asked," said Linda Harper.

  • According to the Harpers, they were told a few days ago that there would be no loan modification and they owed $9,200 in missed payments. They said they were also told if they didn't pay the amount in five days, the house would go into foreclosure. [...] A representative with Wells Fargo Bank told CBS 5 News they are looking into the Harpers' situation.

For the story, see Valley Couple Claims Bank Ran Scam (Couple: Promised Loan Modification Never Happened).

(1) Wells Fargo's traveling loan modification carnival show hit Miami Beach last weekend for a 3-day extravaganza.

Tuesday, June 1, 2010

Brooklyn Judge Journeys Through "The Twilight Zone" In Recent Ruling Slamming Standing Lacking Lender, Notorious Foreclosure Mill Law Firm

In Brooklyn, New York, The Wirenius Report Blog reports on Kings County Supreme Court Justice's Arthur M. Schack (a judge which, it points out, has "earned fame just by making banks follow the rules applied to ordinary litigants") and his most recent journey through the "The MERS Mortgage Twilight Zone," and which features notorious Western New York assembly line, foreclosure mill law firm operator, Steven J. Baum, P.C.

One excerpt from his recent court ruling, in which Justice Schack denies, with prejudice, a standing-lacking lender's request to move forward with a foreclosure action, follows (bold text is my emphasis, not in the original text):

  • Plaintiff made its renewed motion for an order of reference 204 days late, in violation of the Court's May 2, 2008 decision and order. Moreover, even if the instant motion was timely, the explanations offered by plaintiff's counsel, in his affirmation in support of the instant motion and various documents attached to exhibit F of the instant motion, attempting to cure the four defects explained by the Court in the prior May 2, 2008 decision and order, are so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling, creator of the famous science-fiction televison series, The Twilight Zone.(1)

  • Plaintiff's counsel, Steven J. Baum, P.C., appears to be operating in a parallel mortgage universe, unrelated to the real universe. Rod Serling's opening narration, to episodes in the 1961 - 1962 season of The Twilight Zone (found at, could have been an introduction to the arguments presented in support of the instant motion by plaintiff's counsel, Steven J. Baum, P.C. - "You are traveling through another dimension, a dimension not only of sight and sound but of mind. A journey into a wondrous land of imagination. Next stop, the Twilight Zone."

For more, see "The MERS Mortgage Twilight Zone."

For the court ruling, see HSBC Bank USA, N.A. v Yeasmin (aka "Yeasmin II"), 2010 NY Slip Op 50927 (NYS Sup. Ct. Kings County, May 24, 2010).

For "Yeasmin I", see HSBC Bank USA, N.A. v Yeasmin, 19 Misc 3d 1127, 2008 NY Slip Op 50924 (NYS Sup. Ct. Kings County 2008).

Thanks to Catherine Isobe of Bedford Stuyvesant Community Legal Services, Brooklyn, NY for the heads-up on the ruling.

(1) The Twilight Zone was a TV series that ran between 1959 and 1964, and is described by The Internet Movie Database ("IMDb") as (bold text alterations added, not in the original description):

  • Rod Serling's seminal anthology series focused on ordinary folks [ie. In the MERS Mortgage Twilight Zone, that would be Justice Schack, other judges presiding over foreclosure actions, homeowners facing foreclosure and their foreclosure defense attorneys] who suddenly found themselves in extraordinary, usually supernatural, situations. The stories would typically end with an ironic twist that would see the guilty punished [ie. standing-lacking lenders, assembly-line foreclosure mill rackets, and the multiple corporate hat-wearing vice presidents that carry out their employers' illicit handiwork].

The "extraordinary, usually supernatural, situations" would be a reference to the creation of the "fictional chains of assignment upon assignment, by entities in which the same people appear as lawyers and principals, agents and employees."

Retired Lawyer Summoned To Undo Bad Deed That Victimized Elderly Homeowner; Unwinds Home Title Ripoff, Forces Bank To Restore Cash From Drained Acct.

Buried at the end of a recent New York Law Journal story on the push to advance attorney pro bono efforts to represent the poor in civil cases is this excerpt on one retired lawyer who became involved in the program:

  • Roger Hawke, 74, began volunteering for Legal Aid in Brooklyn the day after he retired as a partner for Sidley Austin, for which he handled litigation worth billions of dollars. "I just couldn't see myself getting up every day and saying, 'what am I going to do today?'" he said.

  • Two and sometimes three days a week, he advocates for the elderly in cases where $10,000 can determine a major change in the quality of a person's life. In one case, someone forged an elderly client's power of attorney, transferred ownership of his house and cleaned out his bank account. Hawke brought successful actions to quiet title and force the bank to restore the funds.

Source: N.Y. Chief Judge Boosts Efforts to Tap Retired Lawyers for Pro Bono (Judge Jonathan Lippman said that the graying of the bar presents a 'window of opportunity' for encouraging pro bono).

Judge Awards Free & Clear Title To Homeowner After Lender Carries Out Foreclosure Sale w/out Posting "Lost Note" Indemnity Bond, Violating Court Order

In Miami, Florida, The Daily Business Review reports:

  • All Orlando Eslava wanted from his lender was a loan modification to make his payments affordable. Instead, he got his $207,000 mortgage wiped out — and a crash course in the confusing way foreclosures are unfolding in a court system chock-a-blocked with cases.

  • The teacher was Miami-Dade Circuit Court Judge Jennifer Bailey, who cancelled Eslava’s debt after lender HSBC Bank USA ignored her previous order to post a $414,000 bond. Bailey said the actions of William Huffman, HSBC’s lawyer from Tampa-based Florida Default Law Group, were “contemptuous,” according to a court hearing transcript.

  • HSBC’s run-in with Bailey began in December 2009 when she granted the lender’s motion for the foreclosure sale of Eslava’s one-bedroom unit at El Dorado Tower in Aventura. But HSBC lost the note on Eslava’s property. So the judge ordered the lender to post a $414,000 bond to indemnify Eslava in case another lender filed a claim against the unit.(1) According to court records, HSBC and Florida Default did not post the bond and proceeded with an April 9 foreclosure sale that gave the lender title to the condo.

  • Eslava and his lawyer, Sheleen Khan, sought to overturn the sale, claiming the lender violated Bailey’s court order. At a May 6 hearing, Bailey dismissed the foreclosure case with prejudice, which prevents the lender from suing Eslava again. The judge also canceled the mortgage and ordered HSBC to return title of the condo to Eslava. “None of us is above the law,” Khan said. “This is a landmark ruling.”

  • In addition to canceling the mortgage, Bailey chastised Huffman, according to a transcript of the hearing obtained by The Daily Business Review. “When the order is simply ignored … at the end of the day, you’re the lawyer, you’re responsible,” she said. Bailey did not sanction Huffman but said he should consider her order a “wake-up call.”

  • Some day, this foreclosure crisis is going to be over, and you need to decide what kind of lawyer you are going to be,” Bailey told him. “Because at the end of the day, you are responsible for your client’s compliance with court orders.” Huffman apologized. He said his client failed to post bond because he had misunderstood the order, according to the transcript. “I don’t want apologies,” Bailey replied. “I want performance. I want responsible attorneys who meet the basic standards of knowing what … is going on in their files.” Huffman did not return a telephone call or e-mail seeking comment.

  • Bailey’s frustration with the lender and Florida Default weren’t limited to Eslava’s case. She complained about the general “chaos and disorganization” of lenders and their lawyers.


  • Initially, Judge Bailey sided with Florida Default’s request to proceed with the sale but ordered HSBC to post the bond by April 2. On April 9, the bank sold the condo without posting the court-ordered bond. Kahn. Eslava’s lawyer, filed an objection to the sale. At the May 6 hearing, Judge Bailey expressed disbelief that HSBC had opposed canceling the sale when Eslava was still in the middle of a loan modification trial. She called the bank’s oppositionidiotic,” according to the transcript.

  • You are filing pleadings in court every day and you don’t even know what’s going on with the case,” she told Huffman, the HSBC lawyer. “In no other species or kind of law would that be remotely acceptable, or frankly, anything short of malpractice. But somehow in Foreclosure World everybody thinks that is just fine, that you can know absolutely nothing about your files and walk in here and ask judges for things left and right without even knowing what’s going on.”

For the entire story, see Judge wipes out homeowner’s $207,000 mortgage (requires paid subscription; if no subscription, TRY HERE, TRY HERE, or TRY HERE).

Thanks to Deontos .is for the heads-up on this story.

(1) Section 673.3091(2) of the Florida Statutes ("Enforcement of lost, destroyed, or stolen instrument") states the following with regard to a lender's attempt to enforce a lost, destroyed, or stolen promissory note or other negotiable instrument (bold text is my emphasis, not in the original text of the statute):

  • The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

In this case, Judge Bailey complied with this statute by requiring the posting of a "lost note" indemnification bond in the amount of double the homeowner's $207,000 mortgage to adequately protect the homeowner against loss that might occur if, in the future, someone else comes along with the actual note that was purportedly lost and attempts to enforce it against the homeowner. (I wonder how many judges have granted foreclosure judgments where purportedly lost promissory notes were involved without complying with this requirement in the Florida statute).

By the way, a question for all my friends in the Florida title insurance industry who are being asked to insure the (potentially crappy) title to real estate that has recently gone through a foreclosure proceeding. Does a judge's failure to comply with this statute in a foreclosure action involving a lost promissory note make a foreclosure judgment absolutely void (ie. void ab initio), or is the foreclosure judgment merely voidable??? (and how do you insure over this risk???).

Chronic, Rubber-Stamping Florida Judge Once Again Draws Appellate Court Attention For Denying Plaintiff/Lenders' Motions To Cancel Foreclosure Sales

A recent ruling from a Florida appeals court brings renewed attention to the conduct of now-ex-Volusia County Circuit Court Judge John V. Doyle for issuing rubber-stamped denials of motions to cancel foreclosure sales filed by plaintiff/lenders and allowing foreclosure sales to take place (against the wishes of both the lenders and the homeowners).

Doyle's rubber-stamped denials of these motions have been the subject of three recent appeals heard by Florida's Fifth District Court of Appeal. An excerpt from the most recent case (bold text is my emphasis, not in the original text):

  • On May 12, 2009, LaSalle filed a motion to cancel/vacate foreclosure sale, stating: "Since the date of the entry of the Final Judgment of Foreclosure and the notice of sale, the borrowers have entered into a Non-FNMA Home Affordable Modification Program in an effort to retain their home and avoid the sale of their home."

  • The trial court denied the motion without a hearing, using a "DENIED" stamp with a handwritten date of May 13, 2009. LaSalle then filed a renewed motion to cancel/vacate foreclosure sale, providing: "Since the date of the entry of the Final Judgment of Foreclosure and the notice of sale, the borrowers have entered into arrangements with the Plaintiff for a short sale of the property, which sale is scheduled to take place on May 20, 2009."

  • A docket entry indicates that the trial court denied the renewed motion. On May 14, 2009, the foreclosure sale took place as scheduled, at which "Equitable Gain Inc." purchased the property for a bid of $8,000.00.

LaSalle then filed an objection to the sale and an emergency motion to vacate summary final judgment and to vacate foreclosure sale and to return funds to the third party purchaser. The trial court again denied LaSalle's objection and motion without a hearing, using the "DENIED" stamp with a handwritten date of May 20, 2009. LaSalle's subsequent motion for rehearing or in the alternative motion to vacate certificates of sale and title met with the same, rubber-stamped fate.

In addressing this problem, the 5th District Court of Appeal stated (bold text is my emphasis, not in the original text):

  • This case is virtually identical in all material respects to two other cases recently before this Court. U.S. Bank Nat'l Ass'n v. Bjeljac, 17 So. 3d 862 (Fla. 5th DCA 2009) and Wells Fargo Bank, N.A. v. Lupica, 17 So. 3d 864 (Fla. 5th DCA 2009). The trial judge was the same in all three of these cases and the procedure he consistently followed is the problem.

  • In the U.S. Bank case, the lender sought to cancel and to reset a scheduled foreclosure sale, which the court denied without a hearing using a "DENIED" stamp. The lender's subsequent Objection to Sale, Motion to Return Third Party Funds, to Vacate Certificate of Sale and to Set Aside Foreclosure Sale met the exact same fate.

  • In the Wells Fargo case, the lender initially sought to cancel the foreclosure sale before it occurred, representing to the court that a modification agreement had been reached with the defendant homeowners. This motion was denied without a hearing, using a "DENIED" stamp. Thereafter, Wells Fargo filed a Motion to Vacate the Foreclosure Sale, again attempting to enter into a forbearance agreement with the defendant homeowner that would provide them with the opportunity to save their home. As with all the other motions, no hearing and a simple "DENIED" stamp disposed of the motion.

  • In this case, as in the Wells Fargo and U.S. Bank cases, there is nothing establishing that the documents bearing these executed "denied" stamps were filed with the clerk of the court or when they were filed. As with the Wells Fargo and U.S. Bank cases, these orders cannot be considered properly rendered or final. We elect to treat this matter as a premature appeal and relinquish jurisdiction to the trial court for a period of thirty days for properly rendered orders.(1)

  • Because the trial judge involved in these cases is no longer on the bench, the successor judge will necessarily have to consider the motions de novo.

  • In this case, as in the Wells Fargo and U.S. Bank cases, there is also no reason we can discern why denial of the plaintiff lender's repeated motions to cancel the foreclosure sale should not have been granted, and the procedure followed by the trial judge leaves us in doubt that the motions were given any merits consideration. Accordingly, in order to enable meaningful appellate review, if the trial court again denies LaSalle's motions, it must provide reasons.

For the latest of the three rulings, see LaSalle Bank National Association v. Alicea, Case No. 5D09-2129 (Fla. 5th DCA, May 21, 2010).

(1) The appeals court expressed some empathy in their ruling in the U.S. Bank case for overworked trial judges, but stressed the importance of jurists refraining from the use of their rubber stamps when ruling on motions (bold text is my emphasis, not in the original text):

  • We are mindful of the significant workload faced by Florida’s trial judges, particularly with the flood of foreclosures inundating the court system and the staff reductions necessitated by budget shortfalls. Nonetheless, for an appellate court to provide meaningful review of a trial court order, particularly when the trial court possesses significant discretion, some indication of the reasons underlying the trial court’s ruling is helpful. “It is not the function of an appellate court to cull the underlying record in an effort to locate findings and underlying reasons which would support the order.” Jacques v. Jacques, 609 So. 2d 74, 75 (Fla. 1st DCA 1992). Here, the trial court’s “denied” stamp does not help us determine if the trial judge abused his discretion or not. Some basis for the ruling would be instructive both to the parties and this Court.

Lack Of Evidence Of Individual's Authority To Execute Assignment Of Mortgage Sinks Foreclosing Assignee In Attempt To Lift Stay In Ch. 13 Proceeding

In a recent ruling by a U.S. Bankruptcy Court in Boston, Massachusetts, a foreclosing lender was denied relief from an automatic stay to foreclose on a mortgage. As the basis for its ruling, the court pointed to the failure of the foreclosing lender, Property Asset Management, Inc. ("PAM"), who purportedly acquired its interest in the mortgage via an assignment, to prove that the multiple-corporate-hat-wearing individual who executed the assignment on behalf of the assigning company had authority to do so.(1) Accordingly, the court found that the foreclosing lender failed in its burden of proving that it had authority to foreclose, standing to move for relief from the automatic stay, and therefore denied the lender's motion for relief from the stay, without prejudice to renewal upon proper proof.

For the ruling, see In re: Moreno, Case No. 08-17715-FJB (Bankr. D. Mass., Eastern Div. May 24, 2010).

(1) In denying the lender's motion for relief from the automatic stay, the court made the following analysis (bold text is my emphasis, not in the original text):

  • As the party seeking relief from stay to foreclose a mortgage on the debtor's property, PAM bears the burden of proving that it has authority under applicable state law to foreclose the mortgage in question and, by virtue of that authority, standing to move for relief from the automatic stay to foreclose.


  • To show that it presently holds the mortgage, PAM must show a valid assignment of the mortgage from MERS to itself. PAM contends that it holds the mortgage by assignment from MERS. Accordingly, PAM must show that the assignment, which was executed for MERS by Denise Bailey, was within the scope of Bailey's limited authority to act for MERS.

  • Ms. Bailey's authority to act for MERS is defined in the MERS Authorization in seven enumerated paragraphs. In each, Ms. Bailey's authority to act is dependent on the existence of a specified relationship of Litton, the MERS member by whom she is employed, to the loan in question. PAM has submitted no evidence of the existence of any such relationship. The beneficial owner of the loan at the time of the assignment was Aurora Bank FSB, but there is no evidence that Litton was at the time the servicer of the loan for Aurora Bank FSB or was registered with MERS as such.

  • The Court does not find that Aurora Bank FSB had not retained Litton as its servicer; there is simply no evidence on the issue. But the burden is on PAM to prove that it had, and PAM has not adduced evidence to that effect.

  • Accordingly, by a separate order, the Court will deny PAM's motion for relief from the automatic stay without prejudice to renewal upon proper proof.

Monday, May 31, 2010

NYS Chief Judge Continues Push For "Attorney Emeritus" Program To Bring Free Legal Help To Poor New Yorkers In Civil Cases

In New York City, the New York Law Journal reports:

  • The New York court system has enlisted more than 120 retired lawyers since January to offer free legal advice and representation to poor New Yorkers in foreclosure, debt collection, housing, family and other civil cases -- the first of what could be "thousands" of attorney volunteers, Chief Judge Jonathan Lippman said last week.

  • Lippman announced the appointment of an advisory council of 30 attorneys to develop a blueprint for his "attorney emeritus" program, which aims to achieve a "quantum jump" in pro bono activities by tapping a growing number of baby-boomer attorneys. The attorney emeritus program is intended as "a permanent piece of the puzzle" of providing adequate legal representation for the poor. It is designed to complement efforts to develop more reliable financial support from Albany for legal assistance organizations.

  • Participants -- retired lawyers in good standing who are at least 55 years old and have practiced law for at least 10 years -- pledge a minimum of 30 hours of unpaid assistance to low- and moderate-income clients each year. They are not subject to the state's $350 attorney registration fee or mandatory CLE requirements. They also receive free training and malpractice insurance coverage from the agencies or under the state Public Officers Law. Most important, Lippman said, they will get "a gold star on their chests" for taking on a role that has "status and meaning."


  • So far, 126 retired attorneys have signed up and are being connected to 53 participating legal services and pro bono activities around the state. But Lippman said that "it would not be overly optimistic" to project a corps of volunteers "in the thousands." [...] Lippman said that the graying of the bar presents a "window of opportunity" for encouraging pro bono, something he said that the courts previously have attempted only "on the margins." Many retirees "want to do something meaningful," he said, "but they don't know how to do it."

For the story, see N.Y. Chief Judge Boosts Efforts to Tap Retired Lawyers for Pro Bono (Judge Jonathan Lippman said that the graying of the bar presents a 'window of opportunity' for encouraging pro bono).

Real Estate Conveyances From Clients To Their Attorneys Are "Presumptively Fraudulent" Unless Lawyer Can Prove Otherwise

An old court ruling of the Missouri Supreme Court may come in handy for those who have been ripped off of their real estate by their attorneys and are seeking to undo the bad acts.

In this case, the client, Joseph, had suffered a stroke. Seven days before his death, Joseph executed a deed, presented by the attorney, conveying 275 acres of farmland, plus a 7/12ths interest in a 11.52 acre tract to the attorney and his wife, a niece of the soon-to-expire Joseph. The attorney had informed Joseph's sister, who was later appointed administratrix of her brother's estate, that he was doing this to avoid estate taxes. The notary who acknowledged the deed testified that there was no discussion concerning the contents of the papers at the time Joseph signed them.

The court held that the conveyance of the real estate from Joseph to the attorney was presumptively fraudulent, that the burden was on the attorney to prove the conveyance was fair and equitable, and that the attorney had not met this standard. The court rejected the attorney's argument that Joseph had not, individually, been a client and that he had only represented him in Joseph's capacity as co-guardian of a brother.(1)(2)

For the ruling, see Flanagan v. De Lapp, No. 59053, 533 S.W.2d 592, 1976 Mo. LEXIS 243 (Mo. 1976).

For an example of the kind of story in which the logic of this court ruling could come in handy, see Elderly Man Says Attorney Took His Lake House, in which an elderly Springfield, Tennessee man said a Nashville attorney had him unwittingly sign the title to his lake house away while he was recovering from a stroke.

(1) The foregoing summary of this court ruling is an adaptation of the LexisNexis(R) overview of the case.

(2) In arriving at this conclusion, the Missouri Supreme Court made the following statements regarding the applicable state law (bold text is my emphasis, not in the original text):

  • It is an almost universal rule that any client's transfer of his property to his attorney is subject to being set aside as resulting from undue influence unless the attorney is able to meet the burden of proving that the transaction was fair and equitable. In 7 Am.Jur.2d, Attorneys at Law, § 95 (1963), it is stated that "It is presumed that undue influence or fraud attaches to any assignment or conveyance that an attorney takes from his client while the relation of attorney and client exists." Similarly, 7 C.J.S., Attorney and Client, § 128 (1937) states:

    "* * * The general rule that all transactions and dealings between attorney and client are subject to close scrutiny and presumptively fraudulent or the result of undue influence applies with full force, however, to any purchase or acquisition by an attorney of his client's property. Hence, a transfer, conveyance, or assignment of property by a client to an attorney is subject to avoidance and being set aside as constructively fraudulent or the result of undue influence, except to the extent that it operates as a payment of reasonable and proper fees, if the attorney fails to discharge his burden by showing that the transaction was fair, equitable, and honest, for an adequate consideration, and that the client had the benefit of impartial advice or was fully informed of the nature and effect of his act so that he was in the same position as if he had dealt with a stranger. * * *"

  • See also 7 C.J.S., Attorney and Client, § 129 (1937); 7 Am.Jur.2d, Attorneys at Law, § 96 (1963). In Missouri the rule is in accord. It is stated in Laspy v. Anderson, 361 S.W.2d 680, 682 (Mo. 1962), as follows:

    "The law is well established in this state and elsewhere that public policy dictates the necessity to protect the confidential and fiduciary attorney-client relationship. Consequently, when a conveyance from a client to an attorney is attacked it is considered presumptively fraudulent and the burden is on the attorney to prove by convincing evidence that the transaction evidenced by the conveyance, as well as the conveyance itself, was fair and equitable in every respect. (Citing cases)."

  • Another Missouri case announcing such a rule is Bybee v. S'Renco, 316 Mo. 517, 291 S.W. 459 (1926). See also Cuthbert v. Heidsieck, 364 S.W.2d 583 (Mo. 1963).


The attorney in this case attempted to defend himself by claiming he never represented Joseph in any individual matters, but only represented him in his capacity as a co-guardian for the estate of Joseph's brother. This defense fell on deaf ears, based on these Missouri Supreme Court's statements of law:

  • The conclusion we reach is in accord with the rule stated in 7 C.J.S., Attorney and Client, § 127b(3) (1937):

    "The rule that dealings between attorney and client are presumptively fraudulent is not restricted to contracts or dealings with respect to the rights or property involved in the particular transaction or proceeding in which the attorney is acting for the client, but it may extend to other transactions and contracts, where the relationship may be presumed to give the attorney some advantage over the client."

  • Similarly, in the case of Swaim v. Martin, 158 Ark. 469, 251 S.W. 26, 27 (1923), the court stated:

    "The rule that an attorney who contracts with his client has the burden of proving that no advantage has been taken of the situation of the latter is not restricted to contracts or dealings with respect to the rights or property in controversy in the particular proceeding in which the attorney is acting for the client, but it may extend to other transactions and contracts, where the relationship may be presumed to give the attorney some advantage over the client. * * *"

Northern Florida Judge To Consider Sanctions For Alleged F'closure Mill Racket Suspected Of Fabricating &/Or Presenting False Or Misleading Paperwork

In St. John's County, Florida, The Florida Times Union reports:

  • A law firm under state investigation for its handling of foreclosure cases(1) could face court sanctions in St. Johns County for giving a judge false information about who owned a mortgage. Circuit Judge J. Michael Traynor threw out a foreclosure suit this month after concluding the plaintiff listed on a foreclosure filed by Florida Default Law Group never owned the note.

  • Lawyers compounded that problem, the judge decided, by filing paperwork later that named the real mortgage holder, HSBC Bank, but falsely described the bank as a “successor” to the original plaintiff, U.S. Bank National Association. Because U.S. Bank really never held the note, what the lawyers were claiming wasn’t true, the judge said.

  • The court was misled,” Traynor wrote in an order dismissing the case. He added that judges “should be able to confidently rely on the statements made by counsel.” “As officers of the court, attorneys should ensure that the facts they represent as true … are correct and accurate,” Traynor wrote.(2)

  • The ruling doesn’t stop the real mortgage holder from filing a new suit against homeowners William and Lauren McLeod, and the judge said the whole problem may have just been a matter of sloppy preparation for the case. But the case reflects a broader problem of faulty information being used in lawsuits where people’s homes are at stake, said Chip Parker, a Jacksonville attorney representing the McLeods. “This happens all the time in various forms,” Parker said, arguing that a number of South Florida law firms have become “foreclosure mills” designed to handle mass volumes of lawsuits with little regard to details.

  • "They will do whatever they have to do … without regard to the truthfulness of what they’re filing,” said Parker, whose firm asked for the dismissal. Many people never challenge foreclosures, he said, so cases that couldn’t win at trial sail through anyway.

For the story, see Foreclosure foul-up could cause court penalties for lawyers (A judge says the firm gave false information; state also investigating).

(1) The Tampa-based Florida Default Law Group was identified last month by the Florida Attorney General’s Office as being the subject of a civil investigation by its economic crimes unit, the story states. A statement posted on the agency’s website said the law firm, described as one of the state’s biggest handling foreclosures, “appears to be fabricating and/or presenting false and misleading documents in foreclosure cases.”

(2) Traynor has scheduled a hearing in August to decide whether lawyers from Florida Default should face sanctions, acording to the story.

Active Duty Texan Returns Home To Find $300,000, Free & Clear Residence Sold Out From Under Him By HOA Over $800 Unpaid Fee

In Frisco, Texas, Mother Jones reports:

  • Michael Clauer is a captain in the Army Reserve who commanded over 100 soldiers in Iraq. But while he was fighting for his country, a different kind of battle was brewing on the home front. Last September, Michael returned to Frisco, Texas, to find that his homeowners' association had foreclosed on his $300,000 house—and sold it for $3,500. This story illustrates the type of legal quagmire that can get out of hand while soldiers are serving abroad and their families are dealing with the stress of their deployment. And fixing the mess isn't easy.


  • In Texas, homeowners' associations can foreclose on homes without a court order, no matter the size of the debt. In May 2008, the HOA sold the Clauers' home for a pittance—$3,500—although its appraisal value was $300,000, according to court documents. The buyer then resold the house to a third person. [...] In August 2009, the new owner sent the couple an eviction notice, according to court records filed in the case.


  • There are a bevy of laws that are supposed to protect servicemembers from losing their homes or jobs while they're on active duty, including the Servicemembers Civil Relief Act (SCRA). The homeowners' association's lawyer filed an affidavit wrongly claiming that neither of the Clauers was on active duty, says Barbara Hale, the couple's lawyer. Hale is seeking to have the court reverse the foreclosure and declare it "null and void," she says.(1)

  • In the meantime, the Clauers have obtained an agreement allowing the family to stay in the home, Hale says. She's "confident that the courts will sort this out and do the right thing," but notes that the drawn-out legal process must be stressful for the Clauers. [...] "It's ridiculous how much this is costing us," he says. "I'll be taking out a mortgage on my house that was free and clear just to try to get my house back."

For more, see Soldier in Iraq Loses Home Over $800 Debt (Capt. Michael Clauer's homeowners' association foreclosed on his family's $300,000 house and sold it for $3,500).

See also, WFAA-TV: Back from Iraq, Frisco soldier finds home sold by HOA.

(1) One legal issue that this case could turn on is whether the false affidavit reportedly filed by the foreclosure attorney claiming that neither of the Clauers was on active duty is absolutely void (ie. void ab initio), or whether it is merely voidable.

If found to be absolutely void, an argument can be made that the foreclosure sale, which was based on the void afidavit, is also absolutely void, meaning that the foreclosure sale and the subsequent sale of the property to a third party could conceivably be wiped out.

If the false affidavit is found to be merely voidable, however, the foreclosure sale and subsequent sale to the 3rd party purchaser will also be considered voidable (as opposed to absolutely void). In that event, successfully wiping out these interests could turn on whether the foreclosure purchaser and subsequent purchaser are entitled to the protection of the recording statutes as bona fide purchasers. Since it appears that neither Captain Clauer nor his wife relinquished possession of the home throughout the process, and Mrs. Clauer remained in continuous physical possession thereof, this possession could arguably create, under Texas law, a legal duty on the purchasers to ascertain the rights of the third-party possessor. If a court finds that such an inquiry would have lead to the discovery of the fact that Captain Clauer was on active military duty during the relevant period, the purchasers could be found to be on constructive notice that the foreclosure sale may have been conducted in violation of the Servicemembers Civil Relief Act, which generally prohibits a foreclosure sale of a servicemember's home while on active duty. See Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001):

  • One purchasing land may be charged with constructive notice of an occupant's claims. This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (Tex. 1904); American Surety Co., 82 S.W.2d at 183. When this duty arises, the purchaser is charged with notice of all the occupant's claims the purchaser might have reasonably discovered on proper inquiry. Dixon v. Cargill, 104 S.W.2d 101, 102 (Tex. Civ. App.--Eastland 1937, writ ref'd); see also Flack, 226 S.W.2d at 632. The duty arises, however, only if the possession is visible, open, exclusive, and unequivocal. See Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (Tex. 1936).

See footnote 2 in this post for more on the effect of possession by one other than the seller on imputing constructive notice on a purchaser of real estate under Texas law. For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Among other legal issues that could impact on the Clauers' ability to get back their home are:

  1. Was there a violation of the Federal Servicemembers Civil Relief Act in carrying out the foreclosure sale and, if so, does said violation make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable?
  2. Was the foreclosure sale price so low (home with equity of $300K sold for $3,500) so as to "shock the conscience," and, if so, does this fact make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable? (In this regard, there is a general rule in the foreclosure law of some states that says that where the price realized at a foreclosure sale is so inadequate as to shock the conscience, it may itself raise a presumption of fraud, trickery, unfairness, exploitation, overreaching, or culpable mismanagement, and therefore be sufficient ground for setting the sale aside. See, for example, Berry v. Deutsche Bank National Trust Company, No. 2080840 (Ala. Civ. App., May 14, 2010)).
  3. In this story, there is only a brief mention that a certified letter was mailed. No mention on whether the homeowners actually received it and, if not, what other steps the HOA took to notify them. The issue here would be whether the notice of the foreclosure action given to the homeowners was "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006) (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950) "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].")

    If the notice of sale is found by a court to be absolutely void, the foreclosure sale likewise would be found void. (Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented, in the U.S. Supreme Court, a homeowner in connection with the lousy method used to give notice of a pending action that led to the loss of his home in a tax sale.)

Homeowner Hammers HOA, Attorney In Court For "Unreasonable Collection Practices" In Foreclosing On House Over Tiny Amount In Unpaid Dues

In San Antonio, Texas, WOAI-TV Channel 4 reports:

  • When the HOA foreclosed on [Kent] Hern because he owed a couple hundred dollars, he took them to court. Hern lives on the north side of town in the Hidden Forest subdivision. He fell behind on his HOA payments a few years ago while he was out of the country on business. No matter, Newton still filed the papers with Bexar County to take Hern's house.

  • "He's the ringleader for attorneys who foreclose on homes for HOA's," says Hern about [local attorney Tom] Newton.(1) "When I saw there was a number of HOA's that had actually taken these steps to foreclose on homeowners for such ridiculously small amounts of money, we just decided that I was going to fight it because it just wasn't fair," he added. A Bexar County jury agreed with Hern, saying the HOA and Newton engaged in "unreasonable collection practices" while foreclosing on his house over such a tiny amount in unpaid HOA dues.

  • The jury also thought the massive amount of legal fees added to the dues was completely out of line.(2) Hern was awarded a total of $22,000; $11,000 of which was to cover his attorney's fees.

  • Hern's attorney, Peter Kilpatrick, took Hern's case because he's tired of seeing people lose their homes over something so small. "This is a message to those HOA's that even though homeowners should pay their assessments, and on time, when they don't, they have rights too and they should not be plowed over with these gestapo-like collection tactics," explained Kilpatrick. Kilpatrick says part of the problem is in the contract the HOA's sign with Newton. It says the HOA is not allowed to accept past due payments from homeowners without Newton's approval.

For more, see Homeowner beats HOA lawyer in court.

(1) Attorney Tom Newton reportedly represents almost all the HOA's in San Antonio, and if your home is on the auction block, there is a good chance he is the guy you'll have to deal with, the story states.

(2) This alleged practice sounds similar to the racket mortgage loan servicers run with homeowners. The moment a payment is missed, the door is open to play "let's run up the fees and squeeze the homeowner."

Sunday, May 30, 2010

Georgia Attorney Gets Five Years In Theft Of $600K+; Client Home Sale Proceeds Included In Pilfered Loot

In Fayetteville, Georgia, The Citizen reports:

  • A Fayetteville attorney who bilked his clients of more than $647,000 was sentenced [] to five years in prison and an additional 25 years probation. Howard Geoffrey “Geoff” Slade Sr., 62, pled guilty to all 12 counts he was charged with, all but two being theft by taking while acting in a fiduciary capacity. The remaining two were theft by taking charges.


  • In the wake of the money Slade admitted to pilfering was at least one broken marriage; another wife who felt guilt for not trusting her husband’s request to get her money from Slade because she trusted him; and more. [...] One of the victims was an invalid woman who was supposed to receive half of the proceeds from a house sold as part of an estate. The victim never got that money.


  • One of the victims, who was owed more than $289,000 from proceeds of a real estate transaction, said she tried for months on end to get Slade to repay her. One time he gave her a check with insufficient funds. Then came a laundry list of excuses, including that he would pay $25,000 at one time, $50,000 at another. He offered to give the victim his share of a beachside condominium. Lastly, he offered to make the victim a beneficiary of his life insurance policy.

For more, see Attorney gets 5 years for bilking clients (Geoff Slade Sr. admits to taking $647,000 from client funds).

Recently Issued State Supreme Court "Produce The Note" Rule Holding Down New Foreclosure Filings In Florida?

In South Florida, The Sun Sentinel reports:

  • Foreclosure filings have decreased this year, but it may not be a brightening economy causing the decline. Broward County had 7,134 homes and condos in some stage of foreclosure last month, down 31 percent from April 2009, according to RealtyTrac Inc. In Palm Beach County, foreclosure filings dropped 36 percent from March, county officials said. Partly responsible: a new Florida Supreme Court rule that requires lenders to verify they are the actual owners of a home before making the initial case for foreclosure. Show me the "note," in other words.


  • The new rule was approved in February with the intention of unclogging the foreclosure courts, which have an estimated statewide backlog of 500,000 cases. It also gives judges power to sanction plaintiffs who make false accusations on the ownership of notes, or missing notes. "I believe it has affected the number of new filings," said Palm Beach County Circuit Court Judge Meenu Sasser, who handles the county's foreclosures. "It streamlines the process.

  • Law firms handling the foreclosure overload, sometimes called foreclosure mills, have routinely filed a "lost note" claim with the original default notice, regardless of whether they looked for the note, said Miami-Dade Circuit Court Judge Jennifer Bailey. [...] When asked what efforts were made to find the note, however, such excuses as "searched file cabinet" and "searched fire proof safe" have appeared on several court records.

  • "It was very confusing. How can you foreclose on the note if the note is lost?" Bailey said. "The judges would be trying to track the note and they're saying they own it, but don't have it and don't know where it is." But if a borrower didn't protest the foreclosure, the cases often sailed through. [...] Bailey, who was on the foreclosure task force, said the rule wasn't needed before the real estate boom when home loans were more straightforward and foreclosures fewer. "There's some weird stuff going on," she said.

For more, see Banks must prove ownership to foreclose homes.

Louisville-Area Tax Lien Investors Accused Of Squeezing Delinquent Owners w/ Bogus Legal Fees When Redeeming Homes; Suit Seeks Class Action Status

In Jefferson County, Kentucky, The Louisville Courier Journal reports:

  • Companies that buy delinquent property tax bills are charging unnecessary, exorbitant and illegal legal fees to owners who want to reclaim their property -- and preying on the elderly and unsophisticated, according to a lawsuit filed in Jefferson Circuit Court.

  • The suit, filed earlier this month on behalf of an 86-year-old woman and two other plaintiffs, says that charging attorneys' fees, often within a year after the sales, is both unlawful and unethical.

  • Under Kentucky law, private companies can buy delinquent bills and charge derelict owners 12 percent a year until they pay the debt. If the owners still don't pay after one year, the company can start foreclosure proceedings against the property and add interest and attorney fees. But the law says that no action may be brought to initiate the foreclosure until one year after the property is certified delinquent.

  • The lawsuit alleges that the Jamos Fund I LP, of Fort Thomas, Ky., is violating that stipulation by tacking on exorbitant legal fees before the year expires, merely for sending notices to taxpayers that their bills have been purchased. In an interview, James Ballinger, one of the lawyers for the plaintiffs, said other companies, including some owned by lawyers, are doing the same.

  • Cindy Lanham, a spokeswoman for the Kentucky Finance and Administration Cabinet, which is not involved in the suit, said it believes that attorneys' fees can be charged during that period, but Ballinger said he believes the courts will look askance at such fees if they aren't earned. He said that the suit is the first of its kind filed in Kentucky and that the state's courts have never decided whether pre-litigation expenses can be charged during the year after a tax certificate is purchased.(1)

For more, see Companies that purchase late tax bills sued (Fees are illegal, local plaintiffs say).

(1) The complaint asks that the suit be declared a class action on behalf of everyone who has paid what are described as "outrageous fees" to the Jamos Fund I and attorneys Steven Roland Smith and Greg Dewey Voss.

"Cheat Sheet" Lays Out The "Who's & What For's" Regarding Ongoing Probes Into Banks & Their Business Activities

ProPublica reports:

  • Here’s our attempt to lay out exactly what’s known about which banks are being investigated by whom and for what.(1) We’re going to keep updating this page, so please send us stories or details we’ve missed.

For more, see Bank Investigations Cheat Sheet.

Related story: Covering the Bank Investigations: A Cautionary Tale.

Thanks to Deontos .is for the heads-up on the "cheat sheet."

(1) The "honor roll" of outfits, and links to stories about ongoing probes into their activities, included in the ProPublica "cheat sheet" are: Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS.