Monday, November 28, 2011

Suit: Missouri Foreclosure Mill's Conflict Of Interest In Trustee Role Screwed Financially Strapped Homeowners Challenging Legitimacy Of Sale Process

In St. Louis, Missouri, Courthouse News Service reports:

  • The Millsap & Singer law firm, "one of Missouri's largest foreclosure firms," violates its role as a neutral trustee in foreclosures by serving as attorney-in-fact for lenders, a class action claims in City Court.

  • Lead plaintiff Nurdin Beganovic says that in Missouri no court proceeding is needed for a foreclosure, and the trustee is the only neutral party involved. The trustee must work for the benefit of both parties, but Beganovic said Millsap does not.(1) Millsap, which operates out of Chesterfield, Mo., "is one of Missouri's largest foreclosure firms," the complaint states.

  • Beganovic claims Millsap attorneys, who handle thousands of foreclosures, have or should have knowledge of the increasing evidence of widespread fraud and negligence by lenders. But instead of investigating lenders, Beganovic says, Millsap looks the other way due to the profits it receives from foreclosures and because the firm will get more money from unlawful detainer lawsuits on the same homes it foreclosed on.

  • "Millsap & Singer has an ongoing relationship with many of the parties who bid on the properties at the foreclosure sale including, in many cases, an ongoing attorney-client relationship," the complaint states.

  • "Millsap & Singer has appeared as an advocate against debtors who contest the validity of foreclosures while simultaneously and purportedly serving as the trustee regarding those exact same properties. "In addition, upon information and belief, Millsap has actual knowledge of complete files of debtors, the irregularities that exist in said files, the widespread problems with fraud and negligence by mortgage industry actors, evidence suggesting the non-validity of purported note transfers, the non-existence of notes, and the lack of right to initiate foreclosures it has handled."

  • The class consists of all people who have been foreclosed upon in Missouri in which Millsap served as the trustee while it was also the attorney in fact for the party who initiated the foreclosure.

For the story, see Class Blows Whistle on Foreclosure Firm.

For the lawsuit, see Beganovic v. Millsap & Singer, P.C.

(1) In support of the allegations that the law firm has violated its duties as a trustee, the plaintiff cites Citizens Bank v. West Quincy Auto Auction, 742 SW 2d 161 (Mo. 1987), which describes the nature of the trustee's obligations to both the debtor and the creditor:

  • In Goode v. Comfort, 39 Mo. 314, 325 (1866), the Court noted:Trustees are considered as agents of both parties—debtors and creditors—and their action in performing the duties of their trust should be conducted with the strongest impartiality and integrity. They are entrusted with the important function of transferring one man's property to another, and therefore both reason and justice will exact of them the most scrupulous fidelity.

  • Six years later the Court, speaking through the same author, Wagner, J., in Graham v. King, 50 Mo. 22 (1872), struck down as void a foreclosure sale under a deed of trust where the named trustee was not at the sale and the sale had been conducted by the trustee's son. In so doing, the Court laid down the rule which has been followed in Missouri throughout the years:

    The office and duties of a trustee are matters of personal confidence, and he must exercise a just and fair discretion in doing whatever is right for the best interests of the debtor. He must in person supervise and watch over the sale, and adjourn it if necessary, to prevent a sacrifice of the property and no one can do it in his stead unless empowered thereto in the instrument conferring the trust. A trustee cannot delegate the trust or power of sale to a third person, and a sale executed by such delegated
    agent is void. (Perry Trusts, Section 779 and notes) Id. at 24. (Emphasis added.)

  • In case after case this settled principle of law affecting title to real estate has been considered by the courts of this state. The decisions have recognized that the named trustee in a deed of trust is a fiduciary—of the debtor and the creditor; that the trustee is vested not only with the power to sell the property but must exercise his discretion in so doing for the benefit of both parties. The power of sale given to the trustee is personal and cannot be transferred or delegated.

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