Monday, November 12, 2012

Fla. Appeals Court: F'closing Lender Must Prove Note Ownership As Of Filing Date; Nixes Retroactive Mortgage Assignments; Says One Year TILA Limitations Statute Inapplicable When Recoupment, Setoff Raised As Defense

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

  • A foreclosure sale isn’t necessarily the end for some homeowners, as one South Florida couple has found.

    An appeals court last week sided with Cesar and Ruth Vidal, who appealed a Broward County Circuit Court ruling granting a lender’s right to repossess their North Lauderdale home.

    The home was sold to a third party at a foreclosure auction in April 2011, but the Fourth District Court of Appeal ruling means that the foreclosure must be overturned, said John H. Ruiz, the couple’s Miami lawyer.

    The appeals court also ruled that the Vidals could continue to seek damages and try to have the mortgage canceled on the grounds that the lender, Liquidation Properties Inc., allegedly violated the federal Truth in Lending Act, Ruiz said.(1)

    He said both rulings could be precedent-setting and have the potential to affect thousands of other foreclosures in Florida. “This is a victory for homeowners in a huge way,” he said.
  • In late 2010, several big lenders temporarily stopped filing thousands of foreclosures nationwide while they investigated possible paperwork errors. Bank employees admitted to signing foreclosure affidavits without reviewing them.

    In the furor that followed, homeowners and their lawyers accused lenders and judges of rubber-stamping foreclosures and compromising defendants’ rights to due process.

    Some homeowners say banks lost the mortgages and improperly submitted back-dated paperwork in an effort to show ownership.

    In the Vidal case, the Broward court ruled that Liquidation Services proved its right to foreclose. But the Fourth District Court of Appeal disagreed, saying the lender didn’t produce an affidavit showing it owned the mortgage prior to filing the foreclosure, as required by law.(2) Lawyers for Liquidation Services could not be reached for comment.

    In filing a mortgage foreclosure suit ... it is incumbent on the plaintiff to be in a position to prove he, she, or it owns and holds the note as of the date suit is filed,” the appeals court wrote.
For the story, see Broward couple wins appeal after house is foreclosed.

For the ruling, see Vidal v. Liquidation Properties, Inc., No. 4D10-3358 (Fla. App. 4th DCA October 31, 2012).

(1) In connection with the alleged violations of the federal Truth in Lending Act, the central point was whether the statute's one year statute of limitations applied when the issue of recoupment was raised by the homeowner. According to the Florida appeals court:
  • The trial court held the affirmative defense of violations of the Truth in Lending Act was legally insufficient because the statute of limitations under that Act had run.

    Federal law imposes a three-year statute of limitations from the consummation of the transaction on any action for rescission under the Truth in Lending Act. 15 U.S.C. § 1635(f) (2006); Dove v. McCormick, 698 So. 2d 585, 587 (Fla. 5th DCA 1997).

    A one-year statute of limitation from the date of violation of the Act applies to actions for recoupment. 15 U.S.C. § 1640(e). However, when recoupment and setoff are raised as a defense, the one-year statute of limitations does not apply. Title 15 U.S.C. 1640(e) states:

    'This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law."

    The Vidals' affirmative defense seeking recoupment damages and set-off for Truth in Lending violations was not barred an the statute of limitations set forth in the Truth in Lending Act. Liquidation filed no sworn statements showing the defense was not valid. The failure to rebut a properly raised affirmative defense precludes the entry of summary judgment in favor of Liquidation. Servedio v. US Bank Nat'l Ass'n, 46 So. 3d 1105, 1107 (Fla. 4th DCA 2010).
(2) The court addressed this point in the following excerpt:
  • While Liquidation filed the original note and an allonge to the note endorsed in blank, the allonge is not dated, and Liquidation did not file an affidavit demonstrating that the note was transferred prior to the filing of the complaint.

    The assignment of mortgage reflects transfer of only the mortgage, not the note. Although the Assignment of Mortgage was sworn to on February 6, 2009, and states "ASSIGNMENT EFFECTIVE AS OF 01/15/2009," two inferences can be drawn from the effective date language. One could infer that ownership of the note and mortgage were equitably transferred to Liquidation on January 15, 2009, but one could also infer that the parties to the transfer were attempting to backdate an event to their benefit.

    Because the language yields two possible inferences, proof is needed as to the meaning of the language, and a disputed fact exists. Soncoast Cmty. Church of Boca Raton, Inc. v. Travis Boating Ctr. of Fla., Inc., 981 So. 2d 654, 655 (Fla. 4th DCA 2008).
In a footnote, the court briefly addressed the possible use of backdated assignments by foreclosing lenders to cover up their screwups:
  • Allowing assignments to be retroactively effective would be inimical to the requirements of pre-suit ownership for standing in foreclosure cases.

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