Saturday, March 9, 2013

Frustrated Neighbors Suspect Family Who Moved Into Vacant Home In Foreclosure Are Squatting Under Adverse Possession Claim; Cops: Our Hands Are Tied!

In Miami, Florida, WTVJ-TV Channel 6 reports:

  • Some Midtown Miami neighbors are furious about what they call attempts by a family to use an archaic law to move into a home in the neighborhood where they don’t belong.

    The family is squatting at 210 NE 44th St. using Florida’s adverse possession law, Midtown resident Tom Joule said. ”We have called the police many times. We have called the utility company saying these people are stealing utilities,” Joule said. “The first time the police came out they entered the residence and told us there is nothing we can do.”

    Joule said he believes the people who have moved into the home filled out a form with the county indicating they were trying to gain ownership through adverse possession.

    “There's a one-page form that they downloaded from the Internet,” Joule said. “No one verified who these people were. They simply said OK, you’re in possession of the property.”

    The property appraiser said late Monday afternoon that that no one has filed a form to officially begin the adverse possession process, however.

    Florida Power & Light said it could not provide account information. The water department said that officially there is no water there, as there is no account for the address.

    A man who was in front of the home Monday told NBC 6 South Florida that he spoke to the owner of the property, and police, but he didn't have anything to say about how he ended up there. The man also didn’t answer questions about whether he filled out the form with the county.

    Both Joule and neighborhood resident Carlos Carrillo said they have called 911 about the situation. Carrillo said he and his wife did so when they felt concerned for their own safety. ”We have no power or no ability to get them out of the home,” he said.

    Miami Police confirmed that they have responded to the home on multiple occasions after calls to 911 about disturbances between the neighbors, as well as noise. Police said they cannot do anything about removal because that is up to the courts.

    The state’s adverse possession law says that for a person to be in exclusive possession of a home, it has to be done openly, notoriously, and they have to stay in the home for seven years.

    In a high-profile adverse possession case in Boca Raton recently, police eventually evicted Andre Barbosa after he lived in a mansion there.

    Tax records show the home in Midtown is owned by Dr. Smith Joseph, who is running to be the next mayor of North Miami. Court records show the bank is moving to foreclose on the home.

    NBC 6 looked for Joseph at medical practice and campaign office Monday, but could not find him for comment. Joseph came to the property to see who was there, according to Joule.

    ”He was out the first day with the police,” Joule said. “The police said oh there’s nothing we can do, even though the owner was right here saying I don't know these people.”

    Real estate attorney Ben Solomon there is a mortgage on the property, and that prevents any attempts at using the adverse possession statute there.

    His advice to residents that believe squatters are present in their neighborhood? ”Well, obviously identifying the problem, reporting it to the owner and the authorities is a first step,” said Solomon, of the Association Law Group. “The owner should call the police and have the illegal trespasser removed.”
Source: Midtown Miami Neighbors Say They're Powerless To Get Squatters out of Neighborhood Home.

For story update, see Alleged Squatters Leave Midtown Home:
  • Regardless of how the alleged squatters found a home in up-and-coming Midtown, police were in full force Tuesday as a man, several women and children all were seen exiting the home carrying their belongings. Their monthlong stay at 210 NE 44th St. apparently over for good. [... P]olice did not eject or remove the family. They left voluntarily and called a city homeless program to help them.

On Verge Of Title Closing, Crackpot Quickly Abandons Adverse Possession Claim On Unoccupied Home When Commission-Hungry Real Estate Agent Calls Cops; Investigators Punt On Criminal Trespass Probe, Say 'It's A Civil Matter!'

In Delray Beach, Florida, the South Florida Sun Sentinel reports:

  • Patrick Glover is no Loki Boy.

    Glover, a Delray Beach businessman, quickly aborted his bid to gain ownership of a vacant house in a working-class Delray Beach neighborhood after a Realtor on the verge of completing the sale of the 1,820-square-foot property called police.

    According to Delray Beach police incident reports, Glover tried to take over the one-story house in the 300 block of Southwest Third Street on Feb. 6 by claiming adverse possession — the same controversial real estate law that was made famous by a brazen Boca Raton mansion squatter earlier this year. In that case, Andre 'Loki Boy' Barbosa, 23, plunked himself into a $2.5 million house in an exclusive community around Christmas and wouldn't leave — until cops forced him out earlier this month.

    Luckily for Realtor Laura Rolinc, 44, of Premier Residential Group, Glover wasn't about to pull the same stunt.

    Instead, Glover told Rolinc it was all a "misunderstanding" and a "mistake" when she called him on Feb. 13, immediately after discovering that her lock box was missing and the door locks on the house had been changed.

    She also found a taped-up 'adverse possession' notice in the front window. The document listed the claimant as, of Northwest 10th Avenue in Delray Beach, according to police reports. Filed Feb. 6, the form was signed by Patrick Glover.

    Rolinc had a client set to close on the house that same dayShe feared the worst: a long, drawn-out situation a la Barbosa's Boca caper.

    "I figured with all the hubbub of the story in Boca, that this was going to happen, because everybody thinks they can just walk into any vacant property and take it over," Rolinc said. "They don't realize what adverse possession entails."

    The obscure Florida real estate law allows for the right to claim possession of an abandoned property — but only after a claimant has lived there for seven years openly and while paying all the taxes.

    Rolinc called Glover and told him she would call police, which she did. He handed over the keys within an hour. She questioned Glover, who did not appear to have lived in the house. He said he didn't know what happened to the locks, nor could he say how he got into the property.

    A Delray Beach police officer inspected the property but "did not notice any significant signs of forced entry," according to the police report. The case was determined to be a civil matter. Glover was not charged.

    Reached by phone by the Sun Sentinel on Thursday, Glover briefly commented before hanging up. "It was all resolved," Glover said. Further attempts to reach him by phone and email were unsuccessful.

    Rolinc, glad the situation did not escalate, said the incident should have warranted a criminal investigation by police.

    Delray Beach police spokeswoman Sgt. Nicole Guerriero said police have little precedence with adverse possession cases, but since the Glover and Loki Boy incidents they have received more clarity from the Palm Beach County State Attorney's Office.
Source: Delray man drops claim on vacant house after Realtor calls police (Police warn would-be squatters that they could face arrest for trespassing).

South Florida Man Behind 7 Of 20 Open Adverse Possession Claims In Palm Beach County; Vacant Gas Station Included Among Squatter's 'Holdings'

In Palm Beach County, Florida, WPTV-TV Channel 5 reports:

  • On Northeast 4th Court in Boynton Beach, the neighborhood kids set up a basketball hoop. "(We play out here) everyday," said neighbor D.J. Joseph.

    On Sea Pines Way in Lake Worth, neighbors use the driveway in front of the abandoned house for extra parking.

    On Orange Street in Boynton Beach, neighbors are just sick of the abandoned house that is practically falling down. "Everybody comes in there smoking crack," said neighbor Les Roy. "It's bad for the neighborhood, we need the house broken down."

    The Orange Street property is one of seven properties being claimed by a man named Roody Silverlain. He's not just interested in homes. He is also squatting a gas station on Lake Worth Road.

    "It's a try to get rich quick scheme," said real estate attorney Larry Bray. Bray says it's unlikely any of the adverse possession claims will work, because the claimant has to prove they're not only paying property taxes, but taking care of the properties as if they lived there. "I think it's very doubtful they'll fill the requirements of the statute," said Bray.

    In Palm Beach County, there are twenty active claims by fourteen people, most in just the last year. The people living at a home on 21st Street in Boca Raton didn't want to comment on camera, but say the owners - relatives of theirs - asked them to live here after someone picked the locks and filed a claim with the county.

    Like the youngsters in Boynton Beach, their neighbors happen to like the attention the house has gotten. "At least its better than it was. Somebody is mowing the grass. They pay the kids next door to do it, but that's OK," said neighbor Ed Goetz.

    An attempt to reach Silverlain for comment on the seven homes on which he is squatting was unsuccessful.
Source: Palm Beach County has twenty open adverse possession claims (Squatters hitting countywide).

Friday, March 8, 2013

No-Kill Animal Shelter/Low-Cost Vet Clinic Temporarily Dodges Foreclosure As Sloppy Lender Fails To Submit Proper Loan Documentation In Court

In Bloomington, Illinois, The Pantagraph reports:

  • A Bloomington bank must re-file its foreclosure action against a McLean County animal rescue group, a judge ruled Monday, citing the bank’s failure to submit certain documents.

    Heartland Bank and Trust is seeking foreclosure over $1.1 million it is owed by Central Illinois Small Animal Rescue in rural Colfax. CISAR owes $750,000 in principal and interest on its initial loan and $294,460 on a second mortgage, plus late fees and other charges, according to court records.

    Springfield attorney Paul Adami argued on behalf of CISAR operator Pat Burr that the bank did not attach paperwork showing modifications made to the loans, originally issued by Bank of Illinois. Heartland took over the CISAR obligation after Bank of Illinois failed in 2010.

    In his arguments, Adami told Judge Rebecca Foley that “we have two loans, multiple mortgages, but the same problem running throughout this case: Heartland Bank has not provided proper documents to support its loan.”

    Bank attorney Thomas Howard countered that the nonprofit group did not meet the terms of an agreement to avoid foreclosure and has admitted that the debt is owed.

    CISAR provides a service to the community, said Howard, but that contribution to save animals does not preclude the group from its financial obligations.

    After the hearing, Burr said CISAR will continue to operate the shelter. She said the group has made substantial payments toward its debt, including paying off a $250,000 loan from Heartland. Problems started when Heartland told Burr that its existing loans would need to be refinanced, something the group has been unable to do, according to Burr.

    CISAR operates a no-kill shelter and low-cost veterinary clinic.

    Howard said the bank will resubmit its foreclosure notice by next Tuesday. A May 3 hearing is set.

Complaints Identify Pair For Alleged Roles In Racket That Used Powers Of Attorney From Duped Homeowners To Take Control Of Underwater Homes, Then Lease Them Out & Pocket Rent

In Tampa, Florida, Newschannel 8 reports:

  • For years now, real estate agent Sunnie Finkle and bail bondsman G.T. Wilson II have tried to make a living from Florida’s foreclosure crisis.

    Now they’re named in a complaint to the Pasco County Sheriff’s Office over a method they used with more than a dozen homeowners: Sign them up for a short sale, obtain power of attorney, rent the house to someone else, and keep the proceeds.

    “I do think I’ve been taken advantage of,” said Peggy Vieira, the New Port Richey homeowner who filed the complaint. “I blame both of them.”

    Vieira said she had no idea Wilson leased the home after she signed papers with Finkle to do a short sale, which involves persuading the bank to accept a payoff of less than the amount owed on the mortgage.

    David Wein, the renter, had no idea Vieira was the owner of the home and joined her in the Pasco complaint. “We got caught up in it,” Wein said.

    Finkle and Wilson were involved in similar deals in Hillsborough and Polk counties.

    A search of public records turned up more than a dozen cases in which homeowners granted Wilson power of attorney. Finkle put the number at 39. There is no evidence, however, that a short sale to Wilson was ever completed.

    “I’ve never had a closing with her,” said Lesley Lambert, regional manager for Universal Land Title, whose company has been handling paperwork on proposed short sales initiated by Finkle since October.
For more, see Pasco foreclosure 'helpers' profit at owners' expense (A Tampa Bay couple may have swindled homeowners in three counties. They took advantage of homeowners facing foreclosure).

County Treasurer Warns Locals Of Scammers Claiming To Be Gov't Reps Who Target Property Owners With Unpaid Taxes With Talk Of Foreclosure, Eviction

In Allegany County, New York, the Wellsville Daily Reporter reports:

  • If someone has come to your door in the last few weeks about foreclosure or eviction over unpaid taxes, it’s nobody from the county treasurer’s office, Treasurer Terri Ross says.

    “The office of the Allegany County treasurer has received several complaints resulting from unsolicited and deceptive practices directed towards landowners with outstanding delinquent taxes,” Ross said in a notice sent out near the end of January. “These practices have been performed by unknown parties claiming to be county representatives.

    “It is not the practice of Allegany County to contact landowners in person, nor does the Allegany County treasurer execute or threaten to execute eviction notices,” she said in the notice. “If an additional notice is to be posted upon a delinquent tax parcel, the notice will be posted by a uniformed Allegany County sheriff’s deputy.”
For more, see County treasurer cautions residents about home visits over delinquent taxes (Ross: Those who visit residences are falsely representing the treasurer's office).

Thursday, March 7, 2013

OK For Title Insurer To Stiff Homeowner By Failing To Defend Against 3rd Party's Adverse Possession Claim Based Solely On "Actual, Open, Notorious, Exclusive, Hostile & Continuous Possession" When 'Public Records Exception' Applies

The following facts have been abstracted from a recent decision of a U.S. District Court in Oregon in a case involving a homeowner-couple who sued their title insurer to recover costs and attorney fees, alleging that the insurer stiffed them on its duty to defend their title when the homeowners were sued for adverse possession by a third party on a purported claim that pre-dated the date the title insurance policy was issued:

  1. In 2004, a couple (the "Hansens") purchased property located in Wilsonville, Oregon.
  2. The Hansens obtained title insurance from Defendant Fidelity National Title Insurance Company.
  3. Six years later, on August 19, 2010, the Hansens were sued by the trustees of the Rogers Family Living Trust ("Rogers trustees"), alleging that they were fee simple owners of a portion of the Hansens' property.
  4. The Rogers trustees' adverse possession lawsuit against the Hansens was based on Rogers' allegation that "[they and their] predecessors in interest have had actual, open, notorious, exclusive, hostile and continuous possession...for more than ten years[.]."
  5. Further, the Rogers' trustees alleged in their adverse possession lawsuit against the Hansens that "[A]t the time [Rogers and their] predecessor in interest obtained ownership, the disputed property was surrounded by physical barriers with access only from [Rogers] property, it was represented to [Rogers] and their predecessors that their property line included the disputed property, ... and at no time ... did [the Hansens] or their predecessors in interest assert any ownership interest in the disputed property[.]"
  6. On September 1, 2010, the Hansens notified Fidelity that they had been sued and attached the complaint for the Rogers case. The Hansens also stated that they had retained counsel and requested Fidelity's assistance to defend against the Rogers trustees.
  7. In a letter dated September 15, 2010, the Hansens again requested that Fidelity tender a defense in the Rogers case and attached a proposed amended complaint.
  8. On October 4, 2010, after reviewing the amended complaint, Fidelity denied coverage under the title insurance policy, explaining that exceptions to the policy applied.
  9. The Hansens responded to Fidelity, arguing that the policy exceptions did not apply. On November 3, 2010, Fidelity again denied coverage and declined to tender a defense.
  10. The Hansens wrote once more to convince Fidelity that it was incorrect to deny coverage. On December 7, 2010, for the third time, Fidelity refused to tender a defense.
  11. The Hansens ultimately filed suit against Fidelity seeking reimbursement for costs and attorney's fees incurred in their property title defense in the Rogers case.
In ruling in favor of the title insurer, the court found that the insurer was not responsible for tendering a title defense based on the so-called "public records exception" (also referred to as the "parties in possession exception")(1) set forth in the insurance policy, which excepted from coverage:
  • Any facts, rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession.
The court found that Rogers' adverse possession claim fell within this exception in the policy, since the asserted claim could be ascertained by an inspection of said land or by making inquiry of persons in possession.(2)

For the ruling, see Hansen v. Fidelity National Title Insurance Company, No. 03:12-cv-00183-HZ (D. Or. January 31, 2013).

(1) The court explained the public records exception and the title insurer's duty to defend, as interpreted and applied in Oregon:
  • The public records exception was interpreted in Cooper v. Commonwealth Land Title Ins. Co., 73 Ore. App. 539 (Or. Ct. App. 1985).

    In Cooper, the court dealt with the same issue—whether the public records exception precluded an insurer's duty to defend.

    The facts of Cooper are very similar to this case. Cooper involved a title insurance company's refusal to defend the property owner against a claim over possession of disputed land. Id. at 541. The Cooper court reversed the granting of the title insurance company's motion to dismiss because the complaint included allegations that possession was based on "claim of right and pursuant to a deed." Id. at 543.

    In other words, the complaint alleged possession under two different theories—"own[ing] the land by adverse possession" or holding "the land pursuant to a deed". Id. Because of the ambiguity, the court could not determine whether the allegations about the deed or the allegation of adverse possession was surplusage. Id.

    Considering the public records exception, the Cooper court stated that "[i]n the absence of the language about the deed, there would be no duty to defend, because that duty only arises when there is some claim shown of record." Id. (emphasis added).

    Thus, if the complaint had not alleged ownership of the land by deed, then the public records exception would have precluded coverage under the title policy.

    In this case, the amended complaint does not include an allegation of ownership by deed.

    Instead, the Rogers trustees described their possession of the land as "actual, open, notorious, exclusive, hostile and continuous" and that the land was "surrounded by physical barriers with access only from Plaintiffs' property". Stines Decl. Ex. C at 2-3.

    These allegations support a claim of ownership by adverse possession, not by deed. Plaintiffs argue that there is an ambiguity in the initial complaint, as in Cooper, and that the Rogers trustees claim could have been based on a deed.[3] Pls.' Mem. Supp. Mot. Summ. J. 10. I have already found that the amended complaint supersedes the initial complaint. Plaintiffs focus on the initial complaint is misplaced. Plaintiffs do not address the adverse possession allegations in the amended complaint.

    Plaintiffs further argue that Defendant failed to show that the exceptions apply. Pls.' Reply 5. Plaintiff is correct that "[t]he insurer has the burden of proof that the loss is excluded." Stanford v. American Guaranty Life Ins. Co., 571 P.2d 909, 911 (Or. 1977).

    But the "burden of proof" referenced in Stanford concerns whether coverage was properly denied on the merits based on evidence, not in the context of whether there was a duty to defend, which is solely based on the complaint and the policy.

    Plaintiffs also fault Defendant for failing to introduce evidence in support of "pleadings filed after the initial complaint". Pls.' Resp. Def.'s Cross-Mot. Summ. J. 6. As stated earlier, the inquiry is whether a duty to defend arises based on the allegations in the amended complaint, and whether the policy exceptions preclude coverage in light of the factual allegations in the amended complaint.
(2) The trick here would have been for the homeowner to get the title insurer to delete the public records exception from the insurance policy when initially buying the premises & policy.

California Counties Consider Boosting Land Document Recording Fees To Fund Prosecutions Of Deed Theft & Other Real Estate Rackets

In San Diego, California, The San Diego Union Tribune reports:

  • San Diego County is eyeing a fee hike for certain property filings to raise more money for real estate fraud investigations.

    The assessor’s office is studying that possibility in light of a new state law that aims to help counties, especially those hard-hit by the foreclosure crisis, catch up on backlogs of housing-fraud cases.

    As of Jan. 1, the maximum fee amount counties can tack on for filing select real estate transaction paperwork rose to $10 from $3 for each filing. The money generated from this fee has long gone toward a trust fund for real estate probes and prosecution.

    The previous maximum of $3 per filing was “insufficient to adequately fund real estate fraud prosecutions and needs to be increased,” according to SB 1342.

    Affected documents include notices of default, which signal the start of the foreclosure process, and trustee deeds, which are filed when a foreclosure is completed.

    So far, at least two counties in California, Riverside and Ventura, have recently upped their filing fees. Riverside increased its fee to $6 per filing. In Ventura, it’s now $10.

    Other counties are expected to follow suit. Some are proceeding with caution because the fee hike may be challenged in court by the Sacramento-based Howard Jarvis Taxpayers Association. The group argues the fee increase is a special tax that’s unconstitutional if it’s put in place without a two-thirds vote of county residents.

    “It’s certainly grounds for a lawsuit,” said David Wolfe, the group’s legislative director, who called the fee hike massive.

    Twenty-two counties in the state, including San Diego, charge filing fees to maintain real estate prosecution funds, based on an October report from the Legislative Analyst’s Office.

    Because of the fund, California counties were able to lock in 200-plus real estate-crime convictions from 2011-2012, the report states, including 23 in San Diego County. Those convictions represent $656.6 million in monetary losses.

    If no legal challenges surface, San Diego County Clerk-Recorder-Assessor Ernie Dronenburg would like to propose a filing-fee hike to the county Board of Supervisors early in the year for approval.

    Foreclosures and mortgage defaults in the county have fallen drastically since the height of the recession, but the fallout from the housing crisis still lingers. “We’re always struggling for resources to try to combat the (real estate fraud) problem,” said Stephen Robinson, who heads the economic crimes division for the San Diego County.

    Robinson said the fund is important because it has helped pay for a real estate unit that includes three lawyers, three investigators, two paralegals and a secretary.

    Additional resources are welcome because mortgage-fraud cases are time-consuming and complex.

    “There are definitely cases that we could work if we had additional resources,” Robinson said. “It would be difficult for a police department to say, ‘I’m going to give a detective one case to work on for six months.’”

    Foreclosure-scam victim Frank Washburn supports raising fees if it means increased prosecution of real estate criminals.

    Washburn, of Chula Vista, admits he was duped out of $2,500 from a solicitor who claimed he could buy Washburn more time in his home, which was going through foreclosure. Washburn found the solicitor convincing because he came bearing official-looking documents.

    “I mean, more power to them,” said Washburn, 46, referring to counties that have implemented fee increases. “I hope they put an end to it.”

    Los Angeles County also hopes to propose a filing-fee increase to its Board of Supervisors as early as the spring, said David R. Lopez, deputy in charge of the real estate fraud unit in Los Angeles County. “Any increase would help,” Lopez said. “One additional body would help. (Caseloads) are stacking up in Riverside, here, and all over the state.”

Ex-Loan Peddler Cops Guilty Plea In I.D. Theft Scam Where He Used His Position To Process Mortgage Applications For Unwitting Victims Who Hadn't Applied For Credit; Defendant 'Sold' His Own Home To One 'Buyer-Borrower' For $300K+ Profit

From the Office of the U.S. Attorney (Alexandria, Virginia):

  • Kenneth H. DiPasquale, 37, of Morgantown, W.V., pleaded guilty [...] to conspiracy to commit mail, wire, and bank fraud and aggravated identity theft in connection with his role in fraudulent mortgage loan transactions, including the sale of his own home to a buyer whose identity he had stolen and to whom he “sold” the property for a nearly $320,000 profit
  • According to court records, DiPasquale was employed in 2007 as a loan officer at Citywide Mortgage, a mortgage lender located in Landover, Md. DiPasquale used that position to process loans based on false and fraudulent information, including for borrowers who had not even applied for loans and who had no idea their names and identities had been used as the borrowers in the transactions.

    In particular, when DiPasquale had trouble selling his own home in Bowie, Md., in October 2007, he stole the identity of an individual living in Arlington, Va., and “sold” this victim his house at a nearly $320,000 profit. The transaction involved fraudulent loan documents and an associate playing the role of the buyer at closing. The victim had no idea the property had been purchased in his name until the loans defaulted, the lenders came collecting, and the homeowner’s association sued the unsuspecting victim for unpaid dues.

Wednesday, March 6, 2013

C. Florida Title Company Head Gets 20 Months For Illegally Dipping Into Escrow Account, Creating Phony Docs To Dupe Insurance Underwriters In $1.1M Embezzlement

From the Office of the U.S. Attorney (Orlando, Florida):

  • Senior U.S. District Judge G. Kendall Sharp sentenced Douglas Wayne Bartle, III, also known as Ridgely Douglas Bartle and Douglas Wayne Bartle, Jr., (49, Winter Park) to 20 months in federal prison for wire fraud. The court also ordered Bartle to pay $862,770.12 in restitution to his victim. Bartle pleaded guilty on November 27, 2012.

    According to court documents, in 2004 Bartle and others opened a title insurance company named Vision Title. Vision Title had offices in various counties throughout Florida. The offices were formed as Florida limited liability companies (Vision LLCs).

    In 2009, to cover living and other personal expenses, Bartle embezzled money from Vision Title’s escrow account. To ensure that Vision Title’s insurance underwriters were unaware of the theft, Bartle used a computer in Orange County, Florida, to access the Internet and obtain bank statements on computer servers in North Carolina.

    Bartle then altered those bank statements and provided copies to Vision Title’s insurance underwriters. These fraudulent bank statements prevented the insurance underwriters from detecting the fraud and caused the insurance underwriters to allow Vision Title to stay in business.

    As Vision Title continued to operate, Bartle was able to steal more money. Because of Bartle’s actions, Vision Title had insufficient funds to cover claims that could have been made on title insurance issued by Vision Title.

    When law enforcement detected the fraud, Vison Title offices throughout Florida were immediately shut down. Vision Title employees lost their jobs with no advance notice. In total, Bartle embezzled approximately $1.1 million.(1)
For the U.S. Attorney press release, see Title Insurance Company President Sentenced To Federal Prison.

(1) According to an October, 2012 Orlando Sentinel article:
  • Stewart Title Insurance Co. underwrote Vision Title until 2008 and then Ticor Title Insurance Co. became Vision's underwriter. Ticor found discrepancies in Vision Title's bank statements on Wachovia Bank accounts.

    "The original bank statements clearly showed that Bartlett had provided Ticor with fraudulent bank statements to cover his embezzlement from Vision Title escrow accounts," the plea deal reads.

    On finding the discrepancies, Ticor closed Vision Title and notified law enforcement. Ticor lost $850,000, records show. Bartle agreed to repay Stewart Title and Ticor Title. Sentencing can carry a maximum of 20 years imprisonment and a fine of as much as $250,000.

No Equitable Relief For Hapless Homeowner Who Lost Ownership Of His Newly-Constructed House Because It Created 1.1 Acre Encroachment On Neighbor's Land

From an Opinion Summary from US Law:

  • Appellant Peter McGlashan and appellee Terrell Snowden own adjacent lots of real property in Ware County.

    McGlashan contracted to build a home on his lot and took exclusive possession of the completed home in July 2010. In March - April 2011, McGlashan discovered that his home encroached 1.11 acres onto Snowden's lot.

    After being informed by McGlashan of the encroachment, Snowden filed a complaint for ejectment, seeking to recover possession of his lot and the dwelling house and improvements located on it as well as damages for trespass, and seeking to be awarded fee-simple title to the home and improvements.

    McGlashan filed a counterclaim in which he raised an equitable claim for unjust enrichment and sought permission to remove the home and improvements from Snowden's lot.

    McGlashan also filed a third-party complaint against the builders of the home, seeking to recover from them the full value of McGlashan's loss should he lose the ejectment action or the cost of removing the dwelling and improvements from Snowden's lot should McGlashan have prevailed.

    After a hearing, the trial court granted summary judgment to Snowden. McGlashan appealed the judgment to the Supreme Court.

    The sole issue on appeal was whether the trial court erred when it granted summary judgment to Snowden on McGlashan's counterclaim for equitable unjust enrichment.

    Upon review, the Court disagreed with McGlashan's contention that the trial court erred.(1)

For the ruling, see McGlashan v. Snowden, S12A1896 (Ga. February 18, 2013).

(1) The court's ruling was short and sweet:
  • The sole issue on appeal is whether the trial court erred when it granted summary judgment to Snowden on McGlashan's counterclaim for equitable unjust enrichment.[2]

    We disagree with McGlashan's contention that the trial court erred. "Equity will grant relief only where there is no available adequate and complete remedy at law" (Cantrell v. Henry County, 250 Ga. 822 (1) (301 SE2d 870) (1983)), and "[t]he availability of money damages affords ... an adequate and complete remedy...." Besser v. Rule, 270 Ga. 473, 475 (510 SE2d 530) (1999).

    McGlashan's third-party complaint against the allegedly-negligent builders of the home seeks monetary damages for McGlashan's loss of the home should he lose the ejectment action filed by Snowden.

    Since McGlashan could recover money damages from the builders in this action, it would be inappropriate for the trial court to grant him equitable relief. See Coleman v. Retina Consultants, 286 Ga. 317 (3) (687 SE2d 457) (2009). See also Century Bank of Georgia v. Bank of America, N.A., 286 Ga. 72 (1) (685 SE2d 82) (2009).

    Accordingly, the trial court did not err when it granted summary judgment to Snowden on McGlashan's counterclaim seeking equitable relief.
In footnote 2 of the ruling, the court appears to give a subtle hint that, rather than bringing an equitable claim for unjust enrichment, the hapless homeowner who just lost his newly-constructed home due to an alleged builder screw-up should have simply urged the trial court establish:
  • that he was acting in good faith when having the home built on the neighbor's lot, and
  • the value of the home,
and then apply the state statute applicable in matters such as these. Then, in the event of a ruling in favor of the ejectment-seeking landowner, the landowner, pursuant to the Georgia ejectment statute, would have the option of either:
  • snatching the home, subject to the payment to the hapless homeowner, who acted in good faith, for the value of the improvements, such payment to be made within such time as may be fixed by the court in the decree, or
  • relinquish, to the homeowner, title to the 1.1 acre of land upon which the house sat, and to receive from said homeowner, the value of the land found by the jury to be due him, such payment to be made by the homeowner to the landowner within such time as the court may direct by its decree.
Under either option, "equity" will have been done by simply applying the statute, as opposed to asking a court to grant "equitable relief."

For the homeowner to seek relief in this case through a counterclaim seeking "equitable relief" when, as just described, there was an adequate remedy at law available to him suggests that he (or his attorney) may have committed a tremendous screw-up in the approach taken in litigating this case. The court, in footnote 2, stated:
  • [W]e do not in any way address the propriety of the trial court's rulings on other matters such as the proper ownership of the home in question or McGlashan's alleged "good faithin building the home in a manner that encroached upon Snowden's property. See, e.g., Small v. Irving, 291 Ga. 316 (729 SE2d 323) (2012); OCGA § 44-11-9(a).
By the way, in another footnote, the court suggests that if the landowner was aware of the fact that the home was being built on his land and sat silently, doing nothing to object in the process, the landowner may not be entitled to keep the home. In footnote 1, the court stated:
  • It is undisputed that Snowden, living in Florida, had no knowledge of the construction on his property until McGlashan informed him of the encroachment. Compare Ga. Railroad &c. Co. v. Hamilton, 59 Ga. 171 (1877) (railroad was estopped from denying Hamilton's title and recovering Hamilton's house since officials knew Hamilton was building on railroad land and did not object, and Hamilton acted in good faith).

Myrtle Beach Life Insurance Peddler "A Financial Assassin," Says Attorney Whose Elderly, Unsophisticated, High-Equity Homeowner-Clients Were Allegedly Targeted For Mortgage Refinance Racket Where Proceeds Were Illegally Used To Indirectly Finance $2M+ In Unnecessary Policies, Annuities

In Myrtle Beach, South Carolina, The Sun News reports:

  • Peggy Allen was born and raised across the street from the house where she now lives – a house that her grandfather built by hand, using timber he cut from his own land, more than 100 years ago.

    Bakers Chapel Road was a dirt road when Allen was a child, and Allen said she remembers “running across the field to Grandma’s house” to play when the weather was warm. Allen’s father and his four siblings grew up in the two-bedroom home, which still has its original, unpainted exterior.

    Today, a bank is threatening to foreclose on the home that’s been in Allen’s family for three generations. What should have been a comfortable, albeit modest, retirement with her husband, Charles, has instead turned into a gut-churning, constant worry over money.

    “We used to be able to pay all our bills and we could go out to eat whenever we wanted,” said 80-year-old Charles Allen, whose health has been in steady decline ever since he suffered a stroke in 2000. Charles Allen said that when the couple splurges on a restaurant meal these days they split a sandwich to save money. “I never dreamed something like this would happen to me.”

    The Allens blame Rick McDavid, a Myrtle Beach life insurance salesman, for their financial problems.

    They aren’t alone – nearly two dozen lawsuits have been filed against McDavid by families who say the insurance salesman scammed them by talking them into mortgaging their homes and properties for high-dollar life insurance policies they didn’t need and didn’t understand. The allegations include fraud, breach of contract and negligent misrepresentation.

    “I hope he goes to jail,” said Wanda Causey, whose husband Jackie uses a wheelchair to get around due to years of diabetic neuropathy and other health problems. The Causeys have been served with a foreclosure lawsuit on their property, which they say McDavid convinced them to mortgage for a whole-life insurance policy. Jackie Causey, who was used to making the financial decisions as the man of the house, was on methadone for pain when McDavid made his sales pitch.

    “Anybody that takes advantage of sick people and elderly people, I don’t know what’s good enough for them,” Wanda Causey said.

    Jackie Causey puts it more bluntly: “If I weren’t in this wheelchair, I’d go after him.”
  • McDavid is not facing any criminal charges and he denies any wrongdoing in his answers to the civil lawsuits. McDavid declined to talk to The Sun News. His lawyer, Stephen Brown of Charleston, said he has “a standing policy that I do not discuss litigation.”
  • Sid Connor, a Surfside Beach lawyer who represents the families suing McDavid, said the salesman preyed on elderly people and others who had plenty of equity in their homes but lacked financial sophistication.

    Rick McDavid is a financial assassin,” said Connor has spent nearly two years building cases against McDavid at no cost to his clients. “He comes armed with everything he needs to take your money, and these people don’t know it.”

    Connor estimates his clients have paid more than $2 million for insurance they didn’t need, in addition to mortgage payments they would not have had and the emotional trauma each of them has suffered. Connor spends more than half his time working on the McDavid lawsuits, with the rest of his schedule spent working on “a lot of routine stuff that pays the bills.”
  • The Allens were living on about $38,000 a year in Social Security and pension income when McDavid convinced them in August 2008 to mortgage their 100-year-old, debt-free home for $102,500 at 9.3 percent annual interest. Charles Allen, who retired to Aynor after working in a Rock Hill textile plant for more than 30 years, said his brother introduced McDavid as “someone who might be able to help us, so he [McDavid] called us and came over.”

    Charles Allen’s brother, Larry Allen – along with his wife, Betty – had taken out $3.5 million in life insurance polices just two months earlier, mortgaging their home for $320,000. Flush with cash from the mortgage, Larry and Betty Allen were singing McDavid’s praises, Charles Allen said. They now are among the clients suing McDavid after having paid $160,000 for insurance they can no longer afford.

    Charles and Peggy Allen, who recently celebrated their 59th wedding anniversary, said they did not fully understand McDavid’s sales pitch – “The stroke messed up my brain; I can read something but I don’t know what I’ve read,” Charles Allen said – yet the couple went through with the deal, figuring Charles Allen’s brother must know what he’s doing and counting on McDavid’s church-going background for assurances.

    The mortgage closing was a blur – “He [the lawyer] had a stack of papers and he kept flipping them, saying, ‘Sign here . . . sign here’,” Charles Allen said.

    Court records show proceeds from the mortgage were used to purchase three whole life insurance policies with death benefits totaling $350,000 for Peggy and Charles Allen. Because of Charles Allen’s poor health, the premiums for those policies totaled nearly $3,000 a month.

    “I told him [McDavid] I’ve had a stroke, that I can’t get life insurance,” Charles Allen said, adding that a nurse who conducted a physical for the insurance company initially told him he didn’t qualify for coverage. “He [McDavid] just said, ‘I’ll take care of it’. He told us we could buy whatever we wanted and we could put some money in the bank.”

    Things went fine for more than a year, despite McDavid’s repeated requests for premium payments. The Allens’ bank records show the couple made five payments totaling $66,500 for their insurance policies between August 2008 and December 2009. That is in addition to an $847 monthly mortgage payment the Allens now had to pay.

    When the Allens’ bank account ran low, McDavid urged them to refinance their home. In December 2009, McDavid arranged a new mortgage that netted about $30,000 but also carried a lower interest rate that cut the Allens’ house payment to $716 a month.

    Connor said the lower interest rate was by design, because an anti-churning law in South Carolina forbids multiple refinancings in a short period of time unless there is a tangible benefit to the consumer. That’s one reason McDavid initially arranged a high-interest mortgage.

    “By lowering their monthly payment, it counted as a tangible benefit,” Connor said.

    There was another reason: McDavid was getting a kickback from the yield spread premium – the difference in the actual interest rate paid versus the market rate a borrower qualifies for – on the initial, high-interest mortgage, according to court documents.

    All told, the Allens paid $94,000 on their life insurance policies and kept up with their mortgage for more than two years before the money ran out.

    “He wanted some more money and I told my wife we just can’t afford to make these payments any more,” Charles Allen said.
  • Connor said McDavid typically had the policies mailed to his office instead of his clients’ homes. McDavid then held onto the policies until after the cancellation period had expired and his clients could no longer get back their money.
  • Connor’s clients say they are confident they’ll eventually get their money back – if they live long enough to make it through all the court proceedings and their homes aren’t taken first. So far, Connor has been able to fend off the foreclosures by filing counterclaims against the lenders.
  • Connor is hedging much of his case on a state law that made it illegal, beginning in 2005, for a home lender to finance – either directly or indirectly – life insurance premiums. Although insurance premiums weren’t paid directly at the mortgage closings, Connor said the policies were written within weeks of the closings, sometimes within days, and his clients would not have been able to afford the premiums except for the proceeds from the mortgages that were arranged by McDavid.

    The law says directly or indirectly – that’s not a mistake, someone wrote that in there for a purpose so you can’t get around it,” Connor said. “If you are selling life insurance and orchestrating the mortgage, that is an indirect violation of the law.”

    Connor hopes to cancel the mortgages, recoup the insurance premiums his clients already have paid and get punitive damages against McDavid and the insurance companies.

    Connor said he knows some critics will argue that his clients should have been more careful, that they should have read and understood any document before they signed it, but he bristles at the notion of blaming the victims.

    “Is that what they’d say if it was their mom or dad?” Connor said. “These are simple, country people who go to church and trust people. Wouldn’t everyone like to have a little more money? Sure. That’s how McDavid got his foot in the door. But when you get older, your ability to think about these kinds of things diminishes and it becomes more difficult to fight off someone who wants to take advantage of you.”

Tuesday, March 5, 2013

Washington State Supremes: Trustee's Agreement With Bank Not To Delay Foreclosure Without Its Express Consent, Having Notary Falsely Pre-Date Notices Of Sale Violate State Consumer Protection Act

In Seattle, Washington, The Seattle Times reports:

  • The state Supreme Court on Thursday ruled that one of the West Coast’s major players in the foreclosure industry violated the state consumer-protection law by falsely notarizing legal documents and not considering requests to delay the auction of a Whidbey Island home.(1)

    The court, overturning an appeals court’s decision, instructed a King County Superior Court judge to issue an injunction against foreclosure trustee Quality Loan Service. Quality “has demonstrated little understanding or regard for Washington law,” wrote Justice Tom Chambers.

    Foreclosure trustees are not simply agents for the lender, the court wrote. “The power to sell another person’s property, often the family home itself, is a tremendous power to vest in anyone’s hands,” Chambers wrote. The law “requires that trustee to be evenhanded to both sides and to strictly follow the law.”

    In 2008, the nonprofit group Puget Sound Guardians sued Washington Mutual and Quality Loan for allegedly violating the consumer-protection law after the trustee sold Dorothy Halstien’s home at a foreclosure auction for a dollar more than the $83,087 the disabled senior owed, stripping her of more than $150,000 in equity.(2) The property’s new owners quickly flipped it, selling the property for $235,000.

    Halstien owed WaMu about $75,000 at the time she developed dementia and had a guardian appointed. The cost of her medical care ate up funds to pay the mortgage. She died in late 2008 at 76.

    Quality falsely notarized the date on the notice of trustee sale, the court said, and apparently trained its notaries to do this regularly from 2004 to 2007. Had the notice of sale been correctly dated, the foreclosure auction would have been delayed at least a week, the court said.

    “A signed notarization is the ultimate assurance upon which the whole world is entitled to rely that the proper person signed a document on the stated day and place,” Justice Chambers wrote.

    Dianne Klem, executive director of Puget Sound Guardians, said her agency made repeated requests to WaMu and Quality to delay the sale. But Quality had a written agreement with WaMu that forbade it from postponing a sale without the bank’s approval.

    An appeals court in 2011, rejecting a jury’s verdict against Quality, had ruled there wasn’t sufficient evidence to show Quality had violated the consumer-protection law — and as a result, was not liable for attorneys fees.

    In a statement Thursday, Quality said it “has dedicated significant resources to ensure non-judicial foreclosures are processed to the highest standards of legal compliance while respecting and focusing on compassionate treatment of all borrowers during their difficult time.”

    Fred Corbit, the senior attorney at the Northwest Justice Project(3) who represented Puget Sound Guardians, said the court’s ruling sent a strong message to all foreclosure trustees:

    “They have to treat both banks and borrowers in good faith, and if they don’t treat them in good faith then they’re going to be held liable for damages,” he said.
Source: State high court rules big foreclosure trustee broke consumer law (The state Supreme Court on Thursday ruled against a major player in the foreclosure industry, Quality Loan Service, saying it could not act merely as an agent for lenders).

For the court ruling, see Klem v. Quality Loan Service Corporation of Washington, No. 87105-1 (Wn. February 28, 2013).

(1) The state Consumer Protection Act is Washington's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes).

For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

(2) See Trustee Ordered To Cough Up The Cash In Wrongful Foreclosure; Conducted Auction Despite Notification By Owner's Court-Appointed Rep Of Pending Sale.

(3) Northwest Justice Project is a not-for-profit statewide law firm that provides free civil legal assistance and representation to low-income people and communities throughout Washington.

NJ Appeals Court: No Need For Property-Snatching Town To Include Foreclosure Judgment-Holding Lienholder In Pre-Condemnation Lawsuit Negotiations

From an Alert/Update from the law firm Duane Morris LLP:

  • In a recent decision, the Appellate Division of the Superior Court of New Jersey has held that New Jersey law does not require a condemning authority to negotiate with a mortgagee, which has obtained a final judgment of foreclosure on the subject property, prior to the initiation of an eminent domain actionBorough of Merchantville v. LB-RPR REO Holdings, LLC, No. A-3745-11T4 (App. Div., 2013).

    New Jersey law requires a condemning authority to conduct bona fide negotiations with a prospective condemnee prior to filing a complaint in condemnation. These negotiations entail, at minimum, "an offer in writing [based upon an approved appraisal] by the condemnor to the prospective condemnee holding the title of record to the property being condemned," prior to initiating a condemnation action. N.J.S.A. 20:3-6. Such negotiations are a jurisdictional prerequisite to a condemnor’s ability to proceed with a condemnation action.

    In Borough of Merchantville, in response to the Borough's filing of a complaint in condemnation, the lender objected to the condemnor's authority to condemn the subject property based on an alleged failure of the Borough to conduct bona fide negotiations.

    The lender asserted that it was the real party in interest because it had a final judgment of foreclosure and had taken possession of the property. Moreover, it had advised the Borough of the foreclosure action at the time the condemnor's offer was made. Thus, based on its being the judgment holder and the party in possession of the property, the lender claimed the condemning authority was obligated to negotiate with it as the true "stakeholder and only party with a genuine interest in negotiating the sale of the property."

    The trial court disagreed, finding that New Jersey law imposed no duty to negotiate with a lender who was not the record owner of the property at the commencement of negotiations.

    In affirming the trial court's decision, the Appellate Division explained that the rationale for requiring negotiations with the "owner of record" is that it allows a condemning authority to avoid the challenging proposition of negotiating with each party who may hold an interest in a property targeted for a taking.

    Although the mortgagee in Borough of Merchantville had obtained a final foreclosure judgment, the Appellate Division held that the condemning authority was not required to include the mortgagee, whose name "was not recorded on the Borough's rolls as the 'owner of record,'" in its pre-condemnation negotiations.

    Rather, in such instance, the mortgagor still was the "record owner" of the property. The Appellate Division added that if negotiations with the record owner fail and a condemning authority files a complaint initiating the eminent domain action, the law nevertheless protects parties with an interest in the property—including a mortgagee—by requiring the complaint to name such parties as defendants, and further allowing them to participate in the valuation portion of the proceedings.

S. Illinois Feds To Judge: Figuring Out Restitution For 1000s Of Screwed-Over Homeowners In Tax Sale Bid-Rigging Racket Too Expensive & Tough To Do; Let Them Bring Their Own Lawsuits, Go After Their Own Recoveries

In East St. Louis, Illinois, The Madison-St.Clair Record reports:

  • Calculating the losses of individuals who may have been victimized by the conspiracy that former Madison County Treasurer Fred Bathon pled guilty to [last] month is not practicable, the government asserts.

    The U.S. Attorney’s Office for the Southern District of Illinois filed a motion Monday regarding restitution, seeking an order from the federal court that it is impracticable to determine the losses of individual victims of the property tax sales scheme “given the complex issues of fact related to the large number of victims.”

    The government also asked the court to find that it “has exercised its ‘best efforts’ to accord crime victims their right of restitution in the instant case” and should not expend additional resources in “determining the exact amount of restitution owed to each of several thousands of victims in the case.”

    The motion stems from the conspiracy charge lodged against Bathon, who earlier this month pled guilty to violating the Sherman Antitrust Act. He admitted to structuring tax sales in a way that eliminated competitive bidding and allowed tax buyers to engage in price fixing.

    Bathon, according to the U.S. Attorney’s Office, did this for delinquent property tax sales conducted between 2005 and 2008, during which time he awarded properties at non-competitive interest rates and made sure his largest campaign contributors were the winning bidders.

    As a result, the federal prosecutor’s office asserts that by 2007 and 2008, distressed homeowners were charged the statutory maximum interest rate – 18 percent – on nearly every property tax lien sold.

    Bathon, who served as treasurer from 1998 until his 2009 resignation, is set to be sentenced May 17. Under the terms of his plea, he faces between 33 and 41 months in prison. He will also lose his entire public pension as a result of his conviction.
  • “A restitution determination would require the Government to begin investigating the particular details of roughly 10,000 property tax transactions after the guilty plea, when the criminal inquiry into Bathon’s activities has ended,” the motion states, noting that “the sheer volume of property tax sales involved in this case makes a restitution determination logistically impracticable.”

    Pointing to a previously filed motion regarding victim notification, the government contends that determining restitution would “be expensive and largely unsuccessful for the Government to attempt to identify and locate each of the owners of the properties subject to the tax sale.”
  • The prosecutor’s office further asserts that since Illinois law requires public employees convicted of a felony to forfeit their pensions, Bathon wouldn’t be able to pay a restitution judgment even if an amount could be calculated.

    According to the motion, the Antitrust Division of the U.S. Department of Justice advised the federal prosecutor’s office “that it is common in municipal tax lien bid rigging cases for the parties to agree, and the Court to order, that the complex and voluminous issues of restitution are better resolved by way of civil litigation.”

    Late last week, St. Jacob attorney John Barberis and Collinsville lawyer Steve Giacoletto filed a lawsuit in Madison County Circuit Court on behalf of five property owners who suffered financial losses as a result of Bathon’s tax sale auctions.

    The suit that seeks class action status names Bathon, Madison County and individuals tied to the tax sales — John Vassen, Dennis Ballinger, Robert Luken, John Scott, Scott McClean and Edward Beasley—as defendants.

    The plaintiffs seek an award of money for the losses and injuries they suffered as a result of the tax scheme. The suit states that as a result of the defendants’ conduct, Madison County property owners have lost or could lose millions of dollars in interest.

Possible Indefinite Bar Ticket Suspension Looms Over Lawyer For Taking Client's $63K Real Property As Security For Yet-To-Be-Earned $9.6K Fee, Then Foreclosing When Ultimately Stiffed After Providing Satisfactory Services

In Jefferson City, Missouri, reports:

  • The Office of Chief Disciplinary Counsel is recommending to the Missouri Supreme Court that the law license of Sunrise Beach Attorney Gregory D. Williams be suspended for six months, according to court documents.

    The Disciplinary Panel’s recommendation stems from an investigation and two hearings concerning a fee agreement and surrounding circumstances between Williams and a former client, Robert Boothe.
  • The Office of Chief Disciplinary Counsel is an agency of the Missouri Supreme Court responsible for investigating allegations of misconduct by lawyers, prosecuting the cases where a lawyer’s misconduct poses a threat to the public or to the integrity of the legal profession, and maintaining current records of disciplinary information for lawyers licensed to practice law in Missouri.

    The Office of Chief Disciplinary Counsel provided the following information concerning the Williams investigation:

    Robert Boothe is the Complainant in this case. Boothe is considered disabled by the Social Security Administration due to being bipolar with schizophrenic tendencies. Boothe also has a significant criminal history. He has a felony conviction for statutory rape in 1985 and a felony conviction for robbery in 1990, both in the State of Virginia. Boothe is also a registered sex offender in Missouri. Boothe has several other criminal convictions, including driving under the influence and possession of marijuana.

    Boothe was arrested on September 5, 2009, by the Missouri State Water Patrol, for having expired registration on his boat, being in the possession of a Schedule IV controlled substance without a prescription, possession of less than 35 grams of marijuana, and drug paraphernalia. He went into the Camden County Jail with a bond set at $40,000.

    Boothe owned property, but reportedly had no liquid assets. He allegedly had insufficient funds to bond out of jail. Boothe was also unable to obtain the services of a public defender because he owned real estate.

    According to panel documents, Boothe owned a lakefront lot at Lake of the Ozarks known as Lot 9 of Kip's Cove that he purchased for $63,500. At the time Boothe purchased the property, it was appraised in the office of the Camden County Assessor for $46,200.

    Boothe had been in jail since September 5, 2009 when he called Williams’ office on September 8, 2009 and spoke to an attorney. According to court documents, Boothe told the attorney he had "no cash whatsoever but owned property worth about $200,000.” The attorney told Boothe he would have to speak with Williams.

    Williams visited Boothe in the Camden County Jail on or about September 8, 2009. According to court documents, Williams stated that Boothe entered into a typed Client Minimum Fee Agreement dated September 8, 2009 and a typed Installment Fee Agreement, also dated September 8, 2009. The Installment Fee Agreement referred to a fee of $3,000. The Installment Fee Agreement set out in handwriting the following: "Property at Lot 9 Kip's Cove given as collateral for this note."

    The Disciplinary Panel alleges neither the document, nor any separate writing, contained language that Boothe should be advised of the desirability of seeking, and he be given the reasonable opportunity, to seek the advice of independent counsel before giving Williams a security interest in his property.

    The panel also alleges Williams did not provide Boothe the opportunity to give informed consent, in a writing signed by Boothe, to the essential terms of the security agreement including Williams’ role in the transaction.

    According to court documents, the Disciplinary Panel alleges that it is unclear as to when and where the agreement was signed and if it was legally notarized. The Disciplinary Panel alleges in its written recommendation the following: “Boothe executed a Future Advance Deed of Trust in (Williams’) presence that was not witnessed by a Notary. (Williams’) secretary, later notarized that document and backdated it to September 8, 2009, a date both (Williams) and Boothe agree was not correct. Whether Boothe's signature was witnessed by or acknowledged to the Notary is unclear.”

    At some point after September 10, 2009, Boothe, with Williams’ assistance, was able to obtain a reduction of his bail bond to $20,000. Boothe posted bond, reportedly by paying the bail bondsman $2,000 from the sale of a motorcycle.

    The Missouri Supreme Court Disciplinary Panel alleges that Boothe is inarticulate, sometimes contradictory and confusing, and allegedly had little knowledge of the true significance of the legal consequences of his execution of the agreement with Williams.

    Boothe remained free on bond until May of 2010. At that time his bond was revoked because of a new arrest for possession of marijuana. Boothe was returned to the Camden County Jail and remained there until his plea of guilty on June 23, 2010.

    Williams was able to negotiate a suspended imposition of sentence on Boothe's Class C felony of possession of a controlled substance, despite Boothe's status as a persistent offender. Further, Williams was able to negotiate a misdemeanor conviction on Boothe's marijuana possession with punishment assessed at 60 days confinement, most of which Boothe already had served at
    the time of his plea.

    According to court documents, Boothe acknowledges he received good representation and a favorable disposition of his criminal case. Williams’ attorney fees and expenses for representation of Boothe totaled $9,682.20. Boothe acknowledged those fees and expenses were reasonable.

    Boothe never paid Williams for representation, according to court documents. Boothe sent letters to Williams in July and September 2010 saying he would pay some money as soon as he got an income tax refund and also would make other monthly payments.

    Williams sent a letter to Boothe in September 2010 advising Boothe that he would "commence collection action effective September 30, 2010, including the foreclosure on the property.” Williams foreclosed on the property and purchased the property at foreclosure sale on January 11, 2011 for $5,000, according to the Disciplinary Panel.

    Boothe lost his property in which he had invested $63,500. That was an injury, according to the Disciplinary Panel, regardless of Boothe's failure to pay Williams, failure to take action to avoid foreclosure and failure to successfully pursue any legal action against Williams.

    The question is whether taking a security interest in real estate owned by the client for a fee that is yet to be earned violates Rule 4-1.8? We find that it does and that a lawyer practicing in observance of our Rules should have known that in 2009,”(1) the Disciplinary Panel writes in its recommendation to the Missouri Supreme Court.
  • In its concluding paragraph the Disciplinary Panel writes, “This Panel recommends that the Supreme Court issue an order giving Respondent (Williams) an indefinite suspension with leave to apply for reinstatement after six months.” Williams’ law license is currently in good status in the State Missouri. The timeline for a final decision from the Missouri Supreme Court is unclear at this juncture.(2)
For the story, see Sunrise Beach attorney to appeal possible suspension of law license to Missouri Supreme Court.

(1) According to the story, Missouri Supreme Court Rule 4-1.8(a) of the Rules of Professional Conduct states as follows:
a. A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
  • the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
  • the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
  • the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
(2) Real estate conveyances from clients to their attorneys can be problematic for the latter. See, for example, Flanagan v. De Lapp, 533 S.W.2d 592 (Mo. 1976), where the Missouri Supreme Court made the following, among other, observations when slamming an attorney for taking a client's property:
  • 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.
See also Real Estate Conveyances From Clients To Their Attorneys Are "Presumptively Fraudulent" Unless Lawyer Can Prove Otherwise.

Monday, March 4, 2013

Nevada AG Defends Conduct That Led To Criminal Robosigning Indictment Getting The Boot; Considers Returning To Grand Jury With Revised Charges

In Las Vegas, Nevada, The National Law Journal reports:

  • A Las Vegas judge has dismissed a high-profile criminal "robo-signing" case against two Southern California title officers after their attorneys accused the Nevada attorney general's office of prosecutorial misconduct.

    Defense attorneys John Hueston and Kenneth Julian had argued that prosecutors—in their zealous pursuit to bring criminal charges tied to the mortgage meltdown—gave the grand jury an improper definition of what constituted a forgery and threatened a witness into pleading guilty. The witness later committed suicide.
  • [Clark County, Nevada District Judge Carolyn] Ellsworth gave the attorney general's office leave to bring revised charges against both defendants. Jennifer Lopez, a spokeswoman for Attorney General Catherine Cortez Masto, said the office was evaluating whether to do so.

    "There was no intent to mislead the grand jury," she wrote in an email to The National Law Journal. "We think the judge recognized this. The judge's ruling allows this office to return to the grand jury. We are in the process of now evaluating the judge's ruling and the evidence."
  • In court documents, senior deputy attorney general Robert Giunta defended the office's definition of forgery to the grand jury. "The defendants' signatures were not provided on the [notices of default]; the notary falsified the defendants' signatures. This is the falsity or forgery as alleged in the indictment," he wrote.

Another Lender's Lien Sunk By Seemingly Trivial Notary Screw-Up; Chapter 7 Trustee Successfully Voids Mortgage In Ohio Homeowner's Bankruptcy Proceeding

From a post on the blog Bankruptcy-RealEstate-Insights:

  • [In re] Lacy is one more in a long list of cases where an Ohio mortgage was attacked based on defects in execution. Although the Ohio statute requires only “substantial compliance” with the statutory execution requirements, mortgages are sometimes avoided based on seemingly trivial technical defects.

    The debtor, Mr. Lacy, had executed a valid power of attorney appointing Ms. Iacuzzo as his attorney-in-fact to execute documents in connection with the acquisition and financing of a property. Using the power of attorney, Ms. Iacuzzo executed a mortgage on behalf of Mr. Lacy.

    The first page of the mortgage included the following:

...........The signature block included the following:


...........The acknowledgment stated that it was acknowledged before the notary by:

CHARLES L. LACY , U [The court noted that this appeared to
be copied from the first page, where “U” was the
first letter of “Unmarried.”]
  • Since it was Ms. Iacuzzo, not Mr. Lacy, that appeared before the notary, the acknowledgement was incorrect.
  • After reviewing [the applicable Ohio case law], the Lacy court concluded that, while an argument could be made that the acknowledgment was sufficient, this case was closer to the cases holding that the certificate was invalid, causing the mortgage to be ineffective.

    When the notary stated that the instrument was “acknowledged before me,” the notary was purportedly certifying that Mr. Lacy appeared in person and that he was known to the notary or provided satisfactory evidence to the notary that he was the person taking the acknowledgment. That was incorrect.

    Although the court found it to be a close call, it concluded that the certificate was not in substantial compliance with the statutory requirements, and therefore the mortgage was avoidable. As a consequence, GMAC was treated as having an unsecured claim, and the lien of the mortgage was preserved for the benefit of the estate. (This means that the trustee could assert the lien for the benefit of the estate to obtain a distribution ahead of any junior lienholders.)

    As illustrated by these and other cases (see Bankruptcy “Strong Arm” Powers: Bye Bye Mortgage), details can be very important; and if you are going to make a mistake in execution of a mortgage, try not do it in Ohio.
For more, see Mortgage Execution Errors: If You Make a Mistake, Try Not To Do It in Ohio.

For the court ruling, see McClatchey v. GMAC Mortgage, LLC (In re Lacy), 483 B.R. 126 (Bankr. S.D. Ohio 2012).

Property Seller's Slick Maneuver To Jerk Around, Stiff Buyer On Oil/Gas Rights On Sale Of 138-Acre Property Fails; WV Supremes: Convey All Mineral Interests In Connection With Sale Of Premises Under Fully Consummated Land Contract

From an Opinion Summary on US Law:

  • Petitioners and Respondents executed a land contract whereby Respondents agreed to sell a piece of property to Petitioners. After the land contract had been fully consummated, Respondents refused to tender a deed to Petitioners.

    Petitioners filed suit, seeking a delivery of a general warranty deed for the property, including all oil and gas rights.

    Two months later, Respondents tendered a deed to Petitioners reserving oil and gas rights. The deed was recorded on February 17, 2010.(1)

    Petitioners moved for summary judgment, arguing that because the land contract did not contained any language indicating Respondents' intention to except oil and gas rights, any questions of interpretation should be resolved in favor of the grantees.

    The trial court granted summary judgment for Respondents, finding that when the deed was recorded, the land contract was merged in the deed and any cause of action based upon the contract was extinguished.

    The Supreme Court reversed, holding (1) the contract was unambiguous, and Respondents failed to establish any legally sufficient basis for varying its terms; and (2) therefore, Respondents were obligated to convey their title and interest to the property, including their vested oil and gas rights. Remanded for entry of summary judgment in favor of Petitioners.
Source: Opinion Summary - Spitznogle v. Durbin.

For the ruling, see Spitznogle v. Durbin, No. 11-1132 (W. Va. February 8, 2013).

(1) A slick maneuver the sellers attempted in this case in what ultimately turned out to be a failed effort to stiff the buyer out of the property's mineral rights on the sale of the entire fee interest of the 138-acre property was to tender the deed to the buyers while the litigation in the trial court was ongoing, specifically reserving all mineral rights from the conveyance, and then invoke the doctrine of merger to assert that, once the deed was accepted by the buyers, the existing land contract "mergesinto the deed. In this way, if any terms in the land contract are in conflict with the terms in the subsequently-tendered deed, the deed will control (and thereby purportedly leaving the buyers out of luck).

In fact, the sellers (the "Durbins") initially got away with it, as the trial court ruled in their favor.

However, the screwed-over buyers (the "Spitznogles") appealed, giving the West Virginia Supreme Court an opportunity to address the merger doctrine, the lower court's erroneous ruling thereon, and its correct application under the facts and circumstances of this case:
  • The Spitznogles contend that the doctrine of merger should not be applied where litigation to enforce the provisions of the underlying contract is ongoing at the time a deed is tendered and accepted. Under the facts and circumstances of this case, we agree.

    We begin by examining the doctrine of merger. It has been established in our jurisprudence for almost one hundred years, although it is neither well known nor well understood. It was last mentioned by this Court more than seventy years ago, where we defined it in its most basic formulation: "Where an executory contract for the sale of land is followed by a conveyance thereof, the contract is merged in the deed of conveyance, and the deed will control." Syl. Pt. 1, Wolfe v. Landers, 124 W. Va. 290, 20 S.E.2d 124 (1942); see also Syl. Pt. 3, Harman v. Dry Fork Colliery Co., 80 W. Va. 780, 94 S.E. 355 (1917) ("A contract of sale is merged in a conveyance made in pursuance of it, and, if there is any conflict between the papers, the deed controls.").

    In practice, however, and indeed as evidenced by our analysis in both the Wolfe and Harman cases, the doctrine of merger seldom admits of hard-and-fast application. Not all antecedent agreements between grantor and grantee are extinguished upon acceptance of a deed, because merger is not an absolute rule but rather a rebuttable presumption.

    The presumption of law is that the acceptance of a deed, made in pursuance of an antecedent written agreement for the sale of land, is satisfaction of all previous covenants, and, although such acceptance may in some circumstances be but partial execution of the contract, to rebut the legal presumption the intention to the contrary must be clear and convincing.

    Until consummated by deed, an executory contract of sale is subject to modification by agreement of the parties; and where an act is done which without fraud or mistake is tendered by one of them, and accepted as full performance by the other with knowledge of his legal rights and equities, the acceptor and those claiming under him are not competent to assert that some part of the original agreement remains to be performed.

     Syl. Pts. 7 & 8, James Sons Co. v. Hutchinson, 79 W. Va. 389, 90 S.E. 1047 (1916) (emphasis supplied).

    In rebutting the presumption of merger, a litigant must establish that the case falls within one or more recognized exceptions to the doctrine.

    These exceptions include fraud, mistake, ambiguity, lack of knowledge of one's legal rights and equities, and acceptance as only partial performance of an antecedent agreementJames Sons Co., 79 W. Va. at 398-401, 90 S.E. at 1051-52; Wolfe, 124 W. Va. at 293, 20 S.E.2d at 125; see also Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 532 (Ky.App. 2005) ("exceptions to the merger doctrine are fraud, mistake, or contractual agreement clearly not intended to be merged into the deed."); Raymond v. Holliday, 2011 WL 2462671 (Mich.App., 2011) ("where delivery of the deed represents only partial performance of the preceding contract, the unperformed portions are not merged into it[.]").

    When the tender and acceptance of a deed is held to extinguish rights under an antecedent contract, it is most often in cases where the plaintiff/grantee was not a party to the underlying contract whose terms are urged as the basis for reformation. That was the factual situation in Harman, James Sons Co. and Wolfe. In Wolfe, this Court explained that:

    [I]f this were a case between the Charlton Development Company and its grantee, a showing that the restriction inserted in the deed was placed there by mutual mistake or through fraud might justify a reformation of the deed. But that is not asked for, and probably could not be granted to the prejudice of subsequent purchasers of lots in the same subdivision, and who made purchases in reliance on the covenant appearing in the deed as executed and recorded.

    124 W. Va. at 293, 20 S.E.2d at 125. Additionally, our precedents make it clear that the parties' knowledge and intent are important factual elements in determining whether a merger has occurred. See James Sons Co., 79 W. Va. at 400-401, 90 S.E. at1052 (where deed conveyed fewer acres than were specified in antecedent contract, doctrine of merger applied because undisputed facts showed that original grantee was fully aware that the deed conveyed only 141 acres and that he acquiesced in the reduction of acreage until his death thirty years later).

    In its order granting summary judgment to the Durbins, the circuit court treated merger as a principle of law admitting of no exceptions, citing the general rule articulated in Wolfe and Harman.

    Under the facts and circumstances of the instant case, the circuit court erred. The antecedent land contract, the terms of which the Spitznogles sought to enforce, was their own contract with the Durbins, not a contract into which some predecessor in interest had entered.

    The Spitznogles had filed suit on the contract months before the Durbins tendered the deed, and there is no evidence in the record to show that the Durbins tendered the deed, or that the Spitznogles accepted it, as resolution of the lawsuit.[4]

    To the contrary, it is clear from the record that the Spitznogles did not accept the deed as "full performance by the [Durbins] with knowledge of [their] legal rights and equities . . .," Syl. Pt. 8, James Sons Co., but rather accepted it as partial performance of the land contract, believing that they retained their right to pursue full relief in circuit court.

    Indeed, in light of the Durbins' failure to tender a deed to the property for almost five months after the purchase price was paid in full — and then only after the Spitznogles were forced to retain counsel and file suit — it would be manifestly unfair to conclude that by recording the deed, the Spitznogles unwittingly extinguished their right to full relief.

    Finally, the Durbins claimed, in their memorandum in opposition to the Spitznogles' motion for summary judgment, that the parties' lack of mutual understanding as to the conveyance of mineral interests "is undeniably apparent," an admission that fatally undermines their argument that summary judgment was appropriate on the issue of merger.

    In light of the foregoing, we conclude that the circuit court erred in granting summary judgment to the Durbins, as the undisputed material facts of record demonstrate that the land contract between the parties was not merged into the deed, and that the doctrine of merger does not extinguish the Spitznogles' right to seek enforcement of the contract.

Sunday, March 3, 2013

Criminal Robosigning Charges Against Vegas Pair Dismissed; Judge Says State AG's Office Used Misleading Language To Dupe Grand Jury When Scoring Indictment On 306 Counts

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

  • A judge dismissed all felony charges Monday against two people accused of robo-signing.

    The judge decided the Attorney General's office mislead the grand jury to indict two former home loan title officers. This was Nevada's largest criminal case against foreclosure fraud.

    Gerry Sheppard and Gary Trafford were former employees with Lender Processing Services. They faced 306 felony counts of falsifying foreclosure notices.

    Defense attorney John Hueston said Las Vegas Judge Carolyn Ellsworth decided the charges should not have been brought to criminal court and that prosecutors used misleading language to obtain a grand jury indictment.

Pro Bono Law Firm Files 13th Lawsuit On Behalf Of Homeowners Allegedly Screwed Over By Loan Modification Rackets

In Atlanta, Georgia, the Lawyers' Committee for Civil Rights Under Law recently announced:

  • On February 15, 2013, the Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee) and pro bono counsel King & Spalding filed a lawsuit in the United States District Court for the Northern District of Georgia, Atlanta Division, against a purported loan modification company and other individuals.

    The case is brought on behalf of 18 African American plaintiffs, 17 of whom live in the Atlanta metro region and one who lives in Alabama. The suit alleges that the defendants, who operate in the metro Atlanta area, defrauded African American homeowners by inducing them to pay up to thousands of dollars in up-front fees for mortgage loan modification services that were never provided.

    Plaintiffs seek both monetary damages, including recovery of the illegal up-front fees, and injunctive relief to put an end to the defendants’ deceptive practices. The Lawyers’ Committee and King & Spalding are representing the plaintiffs free of charge. (Click here to view Complaint.)

    “This case provides a sad example of how minority communities have been hit hard by foreclosure rescue scams and, in some cases, targeted for such scams,” said Linda Mullenbach, senior counsel, Fair Housing and Fair Lending Project of the Lawyers’ Committee. “We hope this action will send a message that targeting minority communities for scams will not be tolerated.”

    The defendants named in the complaint are All American Home Assistance Services, Inc. (All American) and 12 individuals: Derek Harris,(1) Lawrence Spear, Timothy Spear, Asim Spear, Lynette Townes, Taylor Yvet Bailey, Rick Davidson, Karen Johnson, Saleemah Cannon, ShAunta Moore, Tenephius Williams and Derrick Millin. The plaintiffs allege that the individual defendants initially operated the loan modification scam through National African American Relationships Institute, Inc. and NAARI Housing Counseling Agency, Inc. (the NAARI Entities).

    The complaint alleges that the individual defendants, through the NAARI Entities, engaged in a scheme to defraud and extract thousands of dollars from African American homeowners by promising to obtain loan modifications in exchange for up-front fees ranging from $900 to $3,500. The individual defendants represented that they would work with plaintiffs’ lenders to obtain mortgage loan modifications that would reduce their monthly payments, it is alleged. In most instances, the individual defendants instructed plaintiffs not to make their mortgage payments during the loan modification process.

    The individual defendants often guaranteed they would obtain a loan modification or touted a 90-99 percent success rate. The complaint alleges that instead of securing the loan modifications, the defendants performed little or no work on behalf of the plaintiffs. Rather, the individual defendants quickly became hard to reach. Eventually, the NAARI Entities closed their offices with no notification to plaintiffs beyond a recording on their old phone number. The NAARI Entities then filed a petition for bankruptcy.

    After the NAARI Entities filed for bankruptcy in 2012, the fraudulent and illegal scam operation continued through a new corporation—Defendant All American, according to the complaint. The complaint alleges that the key individual defendants who operated the NAARI Entities —Timothy Spear, Lawrence Spear, and Derek Harris — together with Asim Spear, continue “business as usual” at Defendant All American, where they operate the same or substantially similar mortgage modification scamming activities to those that they previously engaged in through the NAARI Entities.

    The complaint also alleges that the individual defendants, operating through the NAARI Entities and then All American, targeted their scam operations on African American homeowners, in violation of the federal Fair Housing Act and other federal and state laws.

    The plaintiffs’ claims against the defendants include violations of the Fair Housing Act and the Credit Repair Organizations Act, and claims of false advertising, unfair or deceptive practices, deceptive practices toward the elderly, fraud, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment.(2)

    Sampson, et al. v. All American Home Assistance Services, Inc., et al., Civil Action No. 1:13-cv-495-WSD, is the Lawyers’ Committee’s 13th loan modification-scam lawsuit filed nationally as part of its work with the Loan Modification Scam Prevention Network (LMSPN). LMSPN is a broad coalition that includes representatives from key governmental agencies, such as the Federal Trade Commission, the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Justice, the U.S. Department of the Treasury, the Federal Bureau of Investigation and the offices of numerous state attorneys general.