Maine Supremes: Despite Lender's Sufficient Proof Of Its Status As Holder Of Note, Its Failure To Prove Ownership Of Mortgage Proves Fatal To Its Standing To Proceed With Foreclosure Action; Indicates That Mortgage May Not Always Follow The Note

A recent ruling by the Maine Supreme Court involving a foreclosure action serves as a reminder that, at least under the state law of Maine, the principle that the "mortgage follows the note" apparently does not necessarily apply where the foreclosing party merely proves its status as holder of the promissory note. Consequently, a foreclosing party in Maine must prove both:

• its status as "holder" of the promissory note, and
• its ownership of the mortgage securing the promissory note

in order to establish its standing to foreclose.

From a recent Justia.com Opinion Summary:

• Scott Greenleaf executed a promissory note to Residential Mortgage Services, Inc. (RMS). That same day, Greenleaf signed a mortgage on property securing that debt. The mortgage listed RMS as the lender of the debt and Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for the lender.
  
  MERS subsequently assigned its interest in the mortgage and note to Countrywide Home Loans Servicing, LP (BAC). BAC then merged with Bank of America, N.A. (Bank). Five years later, the Bank instituted foreclosure proceedings against Greenleaf. The district court entered a judgment of foreclosure in favor of the Bank.
  
  Greenleaf appealed, arguing that the Bank lacked standing to foreclose on the property.
  
  The Supreme Court agreed with Greenleaf and vacated the judgment, holding (1) the Bank proved its status as the holder of the note but failed to establish its ownership of Greenleaf’s mortgage;(1) and (2) because the Bank failed to satisfy two of the Higgins foreclosure requirements, the Bank was not entitled to a judgment of foreclosure in any event.

Source: Justia.com Opinion Summary: Bank of Am., N.A. v. Greenleaf.

For the court ruling, see Bank of America, N.A. v. Greenleaf, 2014 ME 89 (ME. July 3, 2014).

Representing the homeowner were Thomas A. Cox, Esq.,(2) Portland, Maine, and John D. Clifford IV, Esq., Clifford & Golden, PA, Lisbon Falls, Maine.

Filing a joint "friend of the court" brief in support of the homeowner's position in this case were Yale University Law School's Jerome N. Frank Legal Services Organization,(3) New Haven, Connecticut, and the National Consumer Law Center, Boston, Massachusetts.

(1) From the court's ruling:

• The interest in the note is only part of the standing analysis, however; to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage.
  
  Unlike a note, a mortgage is not a negotiable instrument. See 5 Emily S. Bernheim, Tiffany Real Property § 1455 n.14 (3d ed. Supp. 2000). Thus, whereas a plaintiff who merely holds or possesses—but does not necessarily own—the note satisfies the note portion of the standing analysis, the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage. See Harp, 2011 ME 5, ¶ 9, 10 A.3d 718.
  
  In Wilk, for example, Deutsche Bank was able to satisfy the note portion of the analysis by establishing that it was the holder of the note. 2013 ME 79, ¶ 10 & n.3, 76 A. 3d 363. In its attempt to establish its interest in the mortgage, Deutsche Bank produced a series of mortgage assignments from the original lender leading to OneWest Bank, and then from One West to Deutsche Bank. The purported assignment from OneWest to Deutsche Bank, however, was dated two weeks before OneWest had acquired the mortgage from its predecessor. Id. ¶ 12. Notwithstanding Deutsche Bank’s adequate interest in the note, we vacated the judgment of foreclosure because Deutsche Bank failed to introduce any evidence that it owned the mortgage. Id. ¶ 22.

(2) Thomas Cox is Volunteer Program Coordinator at Maine Attorneys Saving Homes, a joint project of the non-profit law firm Pine Tree Legal Assistance ("PTLA") (which provides free legal help to Maine people with low incomes), and the Maine Volunteer Lawyers Project (a part of PTLA which coordinates the volunteer efforts of Maine attorneys and community members to help people of low income navigate the civil justice system.

(3) Yale University Law School's Jerome N. Frank Legal Services Organization links law students with individuals and organizations in need of legal help who cannot afford private attorneys.

New York Bona Fide Purchaser, Possession, Duty To Inquire - State Court Cases

The link below contains a compilation of New York state court cases addressing, either directly, indirectly, or in passing, the effect of possession by an occupant of real property by one other than the seller/vendor thereof on a prospective real estate purchaser's status as a bona fide purchaser.

More specifically, the cases deal with the effect of on a purchaser's status as bona fide purchaser in situations where the occupancy and possession of the real property by someone other than the owner/seller triggered a duty to inquire on the part of the purchaser as to possible unrecorded property rights of the persons in possession of the real estate.

These cases are presented here to remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles) where, after scamming or otherwise abusively relieving an unwitting homeowner of his/her title, the scammer either sells the property to a third party, or encumbers the property with a loan from a mortgage lender, whether or not said 3rd party purchaser or mortgage lender had any actual knowledge of the fraud.

Voiding the deeds and mortgages in these cases (in situations where the instruments are voidable, as opposed to being absolutely void - "void ab initio") will turn on whether the subsequent third party purchaser or encumbrancer, despite lacking in actual knowledge of the fraud or other abusive transaction, can otherwise be charged with notice of the fraud, thereby making bona fide purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.

This case law compilation represents raw research only, but I post it with the view that some readers may find a part of the contents a helpful starting point for additional legal research in an effort to void certain abusive real estate transactions involving unwitting, financially strapped homeowners who have been screwed out of the equity in their homes by unscrupulous real estate operators.

For the cases, see Effect Of Persons In Possession Of Real Estate Other Than The Owner/Vendor On A Buyer's Status As A Bona Fide Purchaser - New York State Court Cases.

For other states, generally, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

See the National Consumer Law Center's Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams for an extensive review of one type of home equity ripoff to which the bona fide purchaser doctrine may apply.

See Foreclosure Rescue Scams (a chapter in a longer publication from the National Consumer Law Center) for a lawyer's guide to making a case on behalf of a victimized homeowner in attempting to void or set aside an abusive transaction.

Lowlife Lawyer/Church Pastor Gets Six Years For Swindling Multi-Million Dollar Harlem Apartment Building Out From Under Elderly Widow; NYC Feds Frog-March Felon Away To Prison While Weeping Wife, Kids Watch; Deportation To Nigeria May Be Next For Foreign National

In New York City, SaharaReporters reports:

• A former Brooklyn-based civil attorney, and Pastor of the Deeper Life Bible Church, Ifeanyichukwu Eric Abakporo, was [] in federal court in New York sentenced to six years in a United States prison in a case of defrauding banks, mortgage lenders, property owners, and property buyers.
  
  Mr. Abakporo was immediately remanded into custody by presiding U.S. District Court Judge, Shira A. Scheindlin. His wife and two children wept openly in the courtroom. He was led away in handcuffs.
  
  In addition to the six-year mandatory sentence, Abakporo will more than likely face deportation to Nigeria after serving his sentence, with the likelihood of a three-year supervisory probation release waved.
  
  His co-defendant, Latanya Pierce, received a lighter, 30-month sentence. In her closing statement, Pierce said she felt like the “biggest fool in the world.”
  
  The legal fate of Abakporo and Pierce was never in doubt. They were convicted in a wide-ranging series of illegal transactions in New York City over a nine-year stretch, dating back to 2003.
  
  Following the sentencing procedures, neither prosecuting attorneys nor the attorneys defending the two would offer comments to SaharaReporters.
  
  As Abakporo was away in handcuffs, his wife and two children wept openly in the courtroom.

Source: Deeper Life Bible Church Pastor, Eric Abakporo, Sentenced To Six Years For Real Estate Fraud.

For earlier stories, see:

• Manhattan U.S. Attorney Announces Arrests Of Two Individuals In Multi-Million Dollar Scam Involving Elderly Woman (Manhattan U.S. Attorney Preet Bharara stated: “As alleged, these two defendants preyed on an elderly woman, using false documents and fraudulent representations to essentially steal her property out from under her. [,,,]"),
• 'Pals' scam 78-year-old Harlem woman out of $15M fortune ("At one point, Abakporo looked up with a smile and said, "You know, there is no crime here. It is not a crime to not repay a loan. You cannot go to jail for that."").

'Disability Dog' Takes $300K Bite Out Of Rogue Condo Association For Jerking Around His Wheelchair-Bound, Reasonable Accomodation-Seeking Owner In Violation Of Fair Housing Act

In Davie, Florida, The Miami Herald reports:

• Calling the behavior of a Davie condominium association “absurd” and “unreasonable,” a federal judge has ordered a Davie condominium to allow a disabled resident to keep her service dog.
  
  The two-year dispute will carry a hefty price tag for the Sabal Palm Condominiums: $300,000.
  
  Deborah Fischer, a retired Broward art teacher who was diagnosed with multiple sclerosis in 2000, was sued by Sabal Palm Condominiums after her dog, Sorenson, moved into her apartment in November 2011. Fischer, who uses a wheelchair and has limited use of her arms and hands, needs Sorenson to pick things, up, open and close doors and retrieve items from counter tops.
  
  “Sabal Palm got it exactly — and unreasonably — wrong,” U.S. District Judge Scola wrote in his order. “This is not just common sense — though it is most certainly that.”
  
  The condominium complex in Davie’s Pine Island Ridge neighborhood does not allow pets over 20 pounds and demanded medical records and other information to prove that Fischer needed Sorenson — a 5-year-old Labrador-golden retriever mix — to help her. Saying Fischer didn’t provide the proper documentation, the condo association sued, said the woman’s attorney, Matthew Dietz of Miami.
  
  Fischer, along with her husband, Larry, counter-sued, saying the condo board’s demands violated the federal Fair Housing Act, or FHA.
  
  Scola agreed with Fischer, and gave the condo board a serious verbal lashing in his 30-page order.(1)
  
  That the condo association “turned to the courts to resolve what should have been an easy decision is a sad commentary on the litigious nature of our society,” Scola wrote in a March 19 order. “And it does a disservice to people like Deborah who actually are disabled and have a legitimate need for a service dog as an accommodation under the FHA.”
  
  In their arguments, board members suggested that, even if Fischer needed a service dog, she could have gotten by with an animal that did not weigh more than the Sabal Palm’s 20-pount limit. But, Scola wrote, such a dog would not have been able to meet Fishcer’s needs. Sorenson, the judge ruled, was a “reasonable accommodation” to Sabal Palm’s requirements.
  
  “That a blind person may already have a cane, or that he or she could use a cane instead of a dog in no way prevents the blind person from also obtaining a seeing-eye dog as a reasonable accommodation under the FHA,” Scola wrote. “A contrary result is absurd.”
  
  After Scola ruled in the Fischers’ favor, Dietz said he negotiated the $300,000 settlement with the attorney representing Sabal Palm, Karen Nissen.
  
  Nissen did not return calls or an e-mail Tuesday. David Rosinsky, the attorney representing Marvin Silvergold, who was the board president at the time and was sued individually, said the case was “amicably resolved.” A summary judgment against Christopher Trapani, who was the attorney of the association at the time, was denied. Trapani could not be reached for comment.
  
  Fischer said the dispute started in November 2011, when she brought Sorenson home after getting him from Canine Companions for Independence, a nonprofit group that provides service dogs for people with disabilities. She had sent the complex’s association a letter notifying them that she would be getting a service dog. For five months, Fischer went back and forth with the association.
  
  “I have an obvious disability,” she said. “I just couldn’t believe how hard they were making it.”
  
  Fischer said Sorenson quickly became an important part of her life. He helped her do things she couldn’t do for herself — such as turning the lights in her apartment on and off, picking up TV remotes from coffee tables or counters, or scooping up keys from the floor. The retriever allowed her to perform routine tasks without bothering her husband.
  
  In all, Sorenson can recognize 40 separate commands, Fischer said.
  
  “He has made my life so much better,” she said.
  
  But as the litigation dragged on in court, Fischer said, the drama began to overwhelm her. She had lived in the complex for more than a dozen years, and, suddenly, people she had lived near for years were adverse parties to a lawsuit.
  
  “It was very difficult to deal with,” she said.
  
  Fischer’s lawyer said the facts were clear: “This is one of the worst cases like this that I’ve seen,” said Dietz, who specializes in civil rights and disability lawsuits. “It is obvious that the service dog would help her.”
  
  Dietz said a new board has since been elected and the rules have changed. He hopes the case will help others become more sensitve to the needs of disabled people.
  
  Fischer agreed, saying she hopes no one has to go through what she went through.
  
  “I am finally free of the questions, investigations and litigation,” she said. “We are at the point where we can have some peace of mind and finally move forward.”

Source: Davie woman with banished service dog gets $300,000 condo settlement (A Davie condo resident with MS will receive $300,000 from her Davie complex after she was told she couldn’t keep her service dog in her unit).

For the court ruling, see Sabal Palm Condominiums of Pine Island Ridge Association, Inc., v. Fischer, Case No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014).

(1) Judge Scola prefaced his ruling by acknowledging that, while the case before him was not such a case, "[t]here is some reason to be skeptical of requests to keep a dog as an accommodation for a disability in certain cases, particularly cases where the dog assists the disabled person by rendering emotional support."

See Fake Service Dogs, Real Problem or Not?  and Disability Dog Scams for more on the possible use of fake service dogs and fake identification by individuals to obtain special access to housing, public places or airports/airlines for their animal.

See, generally:

• Reasonable Accommodations Under The Fair Housing Act,
• Service Animals and Assistance Animals for People with Disabilities in Housing and HUD-Funded Programs.

Go here and go here for earlier posts on service animals and the Fair Housing Act.

Loan Modification Deals That Leave Homeowners Bound & Gagged Grow More Widespread, Preventing Borrowers From Bad-Mouthing Banksters Or Suing Them In Court For Future Misconduct

Reuters reports:

• Joseph and Neidin Henard thought they had finally fixed the mortgage that was crushing them.
  
  In January, the couple reached a settlement with every company that had a stake in the mortgage on their house in Santa Cruz, California, a deal that would have slashed their monthly payment by almost 40 percent to $3,337. It was the end of a process that started with their defaulting in 2009.
  
  But when they saw the final paperwork for their settlement, they found that Ocwen Financial Corp, the company that collected and processed their mortgage payments, had added an extra clause: they could not say or print or post anything negative about Ocwen, ever.
  
  The Henards' experience was not unusual. Mortgage payment collectors at companies including Ocwen, Bank of America Corp and PNC Financial Services Group are agreeing to ease the terms of borrowers' underwater mortgages, but they are increasingly demanding that homeowners promise not to insult them publicly, consumer lawyers say. In many cases, they are demanding that homeowners' lawyers agree to the same terms. Sometimes, they even require borrowers to agree not to sue them again.
  
  These clauses can hurt borrowers who later have problems with their mortgage collector by preventing them from complaining publicly about their difficulties or suing, lawyers said. If a collector, known as a servicer, makes an error, getting everything fixed can be a nightmare without litigation or public outcry.

***

• Attorneys for lenders and servicers say consumer lawyers are overstating the importance of these clauses. Banks are looking to avoid being sued again for the issues resolved in the settlement, but understand they may be sued if they are responsible for a future wrong, said Martin Bryce, a partner with Ballard Spahr in Philadelphia who specializes in consumer finance and banking.
  
  Bryce acknowledges that the language is ambiguous - under the waivers, homeowners often give up the right to sue on claims "whether existing now or to come into existence in the future."

***

• Clauses preventing future disparagement and lawsuits first started appearing after the housing crash, but they have grown more widespread in the last six months, said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington.

For more, see U.S. mortgage collectors gag homeowners in loan deals.

Lender Ordered To Swallow $200K 'Cramdown' On Home Loan Modification In Chapter 13 Bankruptcy Case Despite Fact That Loan Was 1st Mortgage On Borrower's Primary Residence

In Miami, Florida, the Daily Business Review reports:

• Even though a Miami man made money renting part of his duplex, a judge ruled in his favor and lowered the debt on his residential mortgage by nearly $200,000 in a Chapter 13 bankruptcy case.
  
  The question wasn't whether the duplex was Luis L. Ramirez's primary residence, U.S. Bankruptcy Judge A. Jay Cristol wrote in an April 7 order. It was whether the multifamily home on Northwest 26th Street met the legal test that allowed the modification of a first priority mortgage.
  
  "If you're using the home as part of an investment, then there's more of a risk to the lender," said Jacqueline Ledon, staff attorney at Legal Services of Greater Miami Inc.,(1) the nonprofit that filed the motion on Ramirez's behalf. "Primary residences are less risky. Most people will do whatever it takes to save the roof over their head."
  
  The bankruptcy code typically bans the modification of interest rates, principal and other terms on residential first priority mortgages.
  
  But in a case that hinged on how the court would treat a duplex where the homeowner rented part of the property, Cristol ruled in the homeowner's favor and allowed the mortgage modification.
  
  For "bankruptcy purposes the inquiry is not whether the property is the debtor's primary residence," Cristol wrote.
  
  "Rather the inquiry is whether the property is solely the borrower's primary residence. Where the borrower resides in one unit and rents out the other unit of a duplex, the property is not solely the borrower's primary residence and as such the mortgage is subject to modification."
  
  The question was whether lender Lansdowne Mortgage LLC expected Ramirez to occupy the full two-unit building.
  
  Landsdowne argued it did. Its attorneys at Herron Ortiz in Miami objected to Ramirez's third amended Chapter 13 bankruptcy plan that proposed monthly payments of $718 plus interest and a final balloon payment of interest and $66,094 in the 60th month. The mortgage company rejected the proposal, saying it feared Ramirez would renege on the new terms in the 59th month.
  
  In its proof of claim for a first priority residential mortgage at a Jan. 29 evidentiary hearing, the lender told the court it viewed the mortgage transaction as "providing the borrower with a residence."
  
  But Ramirez's attorneys disagreed.
  
  "There are extensive examples throughout the case law that say you can modify the mortgage with a duplex because it's not solely the borrower's primary residence,"(2) Ledon said. "In most cases a single borrower can't occupy both units."
  
  For Cristol, an omission in the mortgage documents was a key factor in deciding whether the anti-modification provision applied.
  
  "The creditor responds that the mortgage does not actually contain a borrower-occupancy provision and suggests the rider was simply an error," Cristol wrote.
  
  The Legal Services attorneys argued the error was on Landowne's part because the lender drew up the contract. And in the end, that omission cost the Miami mortgage company about $200,000.
  
  In his ruling, Cristol permitted the cramdown, ordering Landsdowne to refinance the property and reduce the debt to $100,000—based on the lender's appraisal of the house—down from $297,087. Ramirez now has five years to repay the loan.
  
  "The court further finds that to the extent any ambiguity exists as to the applicability of the rider deleting the borrower-occupancy provision, such ambiguity is construed against the creditor as drafter of the mortgage contract," Cristol wrote.
  
  After the housing crash, Cristol supported a change in bankruptcy law that would have allowed judges to reduce the principal on first mortgages on single-family homes, something that was possible until 1979. Bankruptcy judges already have the power to cut second mortgages and credit card debt. The legislation failed.

For the story, see Lender's Mistake Costly, Leads To $200,000 Mortgage Reduction.

For the court order, see In re Ramirez - Order Confirming Chapter 13 Plan.

Go here for In re Ramirez - Debtor's Response To Creditor Objection To Confirmation.

(1) Legal Services of Greater Miami Inc. is the largest provider of broad-based civil legal services for the poor in Miami-Dade and Monroe Counties in Florida. Each year it provides free civil legal services which benefit more than 30,000 members of the community who have nowhere else to turn for help- women, children, seniors, veterans returning from combat, people with disabilities, low wage workers and the homeless who have problems in the areas of tenants’ rights, homeownership, health, income maintenance, employment, special education, tax and consumer rights, according to its website.

(2) In its order, the court noted:

• As a preliminary matter, the Court notes that the cases permitting modification of residential mortgages secured by multiunit-properties are legion. In re Zaldivar, 441 B.R. 389, 390 (Bankr. S.D. Fla. 2011) (collecting cases). A totality of the circumstances test, analyzing the facts of each case, is used to determine whether a cramdown is permissible. Id. Specifically, the Court looks to the predominant character of the mortgage transaction: [...].

Unwitting Real Estate Owners Get Roped Into Co-Owner's Bankruptcy Proceeding As Chapter 7 Trustee Seeks Court Approval For Sale Of Entire Jointly-Owned Property, As Opposed To Just Debtor's Interest

From a recent post from Bankruptcy-RealEstate-Insights.com by attorney Vicki R. Harding, Esq.:

• A chapter 7 debtor owned real estate jointly with three other people as tenants in common. The chapter 7 trustee sought court approval to sell the entire property, as opposed to just the debtor’s tenant in common interest.
  
  The debtor and his wife listed a 50% interest in real estate described as “125.8 acres rough land” in their bankruptcy schedules. The chapter 7 trustee and the debtors settled a dispute regarding claimed exemptions in the property and agreed to liquidate the non-exempt portion for the benefit of the estate.
  
  Section 363(h) of the Bankruptcy Code provides that if a bankruptcy estate has an undivided interest in property as a tenant in common, the trustee can sell the interests of both the estate and any co‑owner if (and only if):

(1) partition in kind of such property among the estate and such co-owners is impracticable;

(2) sale of the estate’s undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co‑owners;

(3) the benefit to the estate of a sale of such property free of the interests of co‑owners outweighs the detriment, if any, to such co-owners; and

(4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power.

In this case two of the three other co‑owners consented to a sale and stipulated that the trustee was entitled to sell the entire property pursuant to Section 363(h). However, the remaining co‑owner (Simons) objected.

The trustee and Simons stipulated to various facts and agreed that “the only issue remaining under §363(h) is whether the Real Property is capable of partition or must be sold as a whole.” However, the court took issue with this characterization of the issue. In particular, it pointed out that if the trustee did not prevail, the result would not be to partition and sell the property, but rather the trustee’s request would be denied, leaving him with the right to sell the debtor’s undivided interest as a tenant in common.

The court decided that the parties had stipulated that factors 3 and 4 were met. Although their characterization of the question suggested that they were focusing only on factor 1, the court felt compelled to consider both factors 1 and 2 since it was not entirely clear what they intended.

On the issue of whether partition was “impracticable”:

[P]racticable is not a synonym for possible; nor is it a synonym for practical. Its meaning falls between the two concepts of possibility and practicality, and incorporates both ideas – something that is not only possible, but also feasible and sensible.

The trustee had the burden of proof, and his only witness clearly did not impress the court. The witness described the property as “rough, rock, and hilly land with no improvements.” According to him, the property could not be divided without affecting his estimated value. However, he gave no indication of the reduction in value nor the basis for these conclusions. (Apparently his testimony was based on a “drive-by” of the property, and he neither walked the property nor had any knowledge of the topography other than a brief view from an adjacent property and a review of an aerial map.)

In response, Simons testified as a fact witness that the property had been in her family for several generations, its only value was timber, and an old logging road evenly divided the property that would allow for a fair partition. The court determined that the trustee did not establish that partition was impracticable.

Considering the issue of whether a sale of an undivided interest would bring significantly less than a sale of the entire property, there was very little information to consider. The range of the only values available in the record led to a maximum difference of ~$6,500. The court concluded that the record did not contain proof that a sale of the tenant in common interest would bring significantly less, nor did the small change in value support a finding that partition was impracticable.

A more interesting argument was the trustee’s attempt to use a state statutory presumption of indivisibility. Although bankruptcy courts frequently look to state law to decide issues, in this case the court held that the question of whether a partition was practicable was a matter of federal and not state law.

The court further commented that it appeared the parties agreed that either the property should be sold as a whole or it should be partitioned. However, partitioning property is not an option under Section 363(h): the trustee either sells all of the interests in the property as provided in Section 363(h), or sells only the debtor’s undivided interest. Notwithstanding the desire of the parties, the court’s judgment was simply that the trustee failed to prove that the elements of Section 363(h) were met, and consequently he was not entitled to sell the property free of Simons’ interest.

The court’s decision to apply federal law to determine whether partition was practicable, while leaving the partition process to state law, could lead to a catch-22 where a trustee is not able to sell all of the co-owners’ interests based on federal law, but also is not able to partition the property under state law.

A co‑owner that is not familiar with bankruptcy would likely be surprised that the bankruptcy court can order the sale of its interests as well as the debtor’s interests. However, it is worth noting that a trustee (or debtor in possession) does not automatically have that right.

Source: Potential Sale of Jointly Owned Property: Practicable Partition Is Somewhere Between Possible and Practical.

For the court ruling, see Higgason v. Brown (In re Brown), 506 B.R. 446 (Bankr. E.D. Ky. 2014). rogue

Court OKs NY Woman's Use Of Divorce Settlement To Buy Home From Son-In-Law, Then File Bankruptcy & Claim Homestead Exemption To Stiff Her Now-Fired Divorce Attorney Out Of $93K In Legal Fees

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

• A Buffalo woman who used a divorce settlement to buy a condominium from her son-in-law— then filed bankruptcy allegedly to avoid paying her divorce lawyer—can use a homestead exemption to shield her assets, a Buffalo bankruptcy judge has held in a case of first impression.
  
  Western District Judge Michael Kaplan rebuffed HoganWillig's allegations that its former client tried concealing assets to skirt a nearly $93,000 legal bill, noting that as the client's former divorce counsel, the firm "knew every penny of her financial affairs."
  
  The ruling potentially puts law firms on different, and less stable, footing than other creditors.
  
  "She hid nothing from anyone, HoganWillig least of all," Kaplan wrote in In re Wrobel, 12-13001. "The firm's effort to argue that it should be treated as, or represents, some other unsecured creditor of the debtor—a creditor who actually might argue surprise and deception—is rejected."
  
  However, while Kaplan allowed Krystyna Wrobel to claim a homestead exemption, he expressed concern about the possible "insider" transaction and left a lien on the property in place. If Wrobel sells the condominium in the next three years, or her son-in-law returns the money she gave him for the property, HoganWillig may be able to assert a claim.
  
  The case turned on an analysis of 11 U.S.C. §522 (o) of the Bankruptcy Code, which was enacted in 2005. Under that provision, if a debtor disposes property "with the intent to hinder, delay or defraud" a creditor, the homestead exemption is reduced accordingly.
  
  Here, Wrobel was living in an apartment owned by her estranged husband and had retained HoganWillig to represent her in what became a lengthy divorce proceeding. At some point, Wrobel fired HoganWillig and hired a different lawyer, who settled the divorce. Wrobel became the apartment building's owner in the settlement.
  
  When HoganWillig learned that its former client was about to sell the building, and would net about $100,000, the firm went to state court in an unsuccessful attempt to prevent her from using the funds to buy a homestead. Wrobel in turn bought a condominium from her son-in-law; a year later, she filed for bankruptcy and claimed a homestead exemption.
  
  HoganWillig, which is holding a $92,377 judgment against Wrobel, accused its former client and her current lawyer of scheming to convert non-exempt assets into exempt assets in an attempt "to hinder, delay or defraud" the firm, as that phrase is contemplated in §522(o). While acknowledging the law tolerates bankruptcy exemption planning as a financial device, the firm asked the court to determine "when it is that a pig becomes a hog."
  
  But Wrobel's current attorneys with the firm Dennis Gaughan in Hamburg said HoganWillig is trying to "bully" a "relatively unsophisticated Polish immigrant" to extract an exorbitant fee from a client in her 60s who works part time as a $20,000-a-year hospital housekeeper. The attorney, Christopher Tyrpak, said Wrobel made no attempt to conceal assets and argued she should not be denied the homestead exemption.
  
  Kaplan said the dispute centers largely on how §522(o) impacts bankruptcy planning, but with several "twists and turns," agreed with Tyrpak.
  
  The judge said it "once was clear" that a debtor could convert non-exempt property to exempt property before filing bankruptcy. But Kaplan said that changed in the wake of a few notorious cases where wealthy debtors moved to states with unlimited homestead exemptions to keep their money away from creditors, and Congress responded with the "hinder, delay or defraud" provision.
  
  Kaplan said there is no Second Circuit authority on applying that provision in the framework of a bankruptcy planning, and no state law that addresses the situation that arose in the Wrobel matter. He said courts have adopted a "smell test" to determine if a debtor had engaged in an inappropriate transaction.
  
  Here, Kaplan said, HoganWillig's assertion that the debtor concealed assets "borders on sanctionable conduct." He said Wrobel "openly and notoriously acquired the homestead" and rejected HoganWillig's claim that her actions constituted "badges of fraud" and established that the transaction was a sham.
  
  "The badges of fraud bespeak 'hiding,' 'absconding,' 'avoiding, 'sharp dealing,' etc.," Kaplan wrote. "The natural question is 'Who exactly is it who was victimized by such evil actions?' Certainly not HoganWillig, and no one else is complaining."
  
  Tyrpak said the ruling clarifies the law in the Second Circuit.
  
  "I think it is significant because it provides a basis for interpreting §522(o), at least in the Second Circuit, and it adopts a significant portion of the holdings of other circuits that have already answered this question," Tyrpak said.
  
  Cheryl-Lane Bechakas of HoganWillig represented her firm. Steven Cohen, who runs the firm's litigation department, said HoganWillig will seek leave to appeal to the district court.
  
  "Judge Kaplan's decision is very, very dangerous," Cohen said. "He is making new law here. What he is saying is that a law firm is not a creditor in the same category of other creditors."
  
  Cohen said that if the ruling stands, law firms will be understandably reluctant to represent some clients because there would be an almost sure-fire way to cheat lawyers out of their earned fees.
  
  "Certainly, we went into this with our eyes open and the understanding that there were non-exempt assets we could use for our fees, and [that] encourage[d] us to sink the amount of time and effort into this case that we did," Cohen said. "What his honor has said is, 'I don't care what you and your client talked about. I don't care whether these assets are exempt. I don't care if §522(o) prohibits a debtor from hiding this money in a transaction with a son-in-law. You're a law firm so you don't get paid.' That is troubling."

Source: Judge Permits Homestead Exemption to Shield Assets.

For the court ruling, see In re Wrobel, Case No. 12-13001, (Bankr. W.D.N.Y. March 28, 2014).

Court Nixes Ex-Wife's Belated Attempt To Invoke California's $100K Homestead Exemption To Justify Pocketing Tax Refund Proceeds That Victims Of Convicted, Ponzi-Scheming Ex-Hubby Were Entitled To

In Monterey, California, The Monterey Herald reports:

• When convicted embezzler Jay Zubick signed over all his assets to the victims of his $16 million Ponzi scheme in 2007, the agreement meant every penny, a judge ruled Friday.
  
  Judge Lydia Villarreal rejected a bid by Zubick's ex-wife to retain a $43,000 income tax refund she had received before Zubick's conviction.
  
  Suzanne Zubick, who was unaware of her husband's crimes and has since divorced him, reasoned that she signed over her Monterra house under duress and without knowing she had the right to invoke a statutory "homestead exemption." The exemption would have allowed her to keep $100,000 of the proceeds from the house's sale.
  
  Villarreal said the time for her to claim the exemption would have been in 2007 and the tax refund belongs to Jay Zubick's 29 victims.

***

• She said her life was turned upside down by the discovery of her husband's deceit. In one day, she went from believing her husband was dying to knowing he was a thief. She received telephone calls threatening her children, whose schools had to take measures to protect them.
  
  On the advice of her husband's criminal attorney, the Zubicks signed over all assets, including the Monterra house. They were allowed to take only the clothes on their backs and one change of clothing. The investors denied a request for the children's beds.

For the story, see Zubick embezzlement: Years later, victims, ex-wife fight over money.

Bay State Homeowner Ordered To Demolish Newly-Constructed Home Over Zoning Violations After Discovery That Town Issued Building Permit In Error; Family Estimates Losses Close To $500K

In Rockland, Massachusetts, MyFoxBoston reports:

• A Rockland man claims he was given the green light to build his three-bedroom house, but now he's being ordered to tear it down because of an alleged mistake made by the town.
  
  In 2010, Robert Del Prete reportedly purchased a lot at 320 Concord St. in Rockland from his father and uncle to make it useful. The land to the back of it, their old farm, was sold to make a golf course, and other family members live next door.
  
  "As far as the building inspector was concerned it was a grandfathered lot and he gave us the permit," Robert Del Prete told FOX 25.
  
  Del Prete and his wife Sheree say they sunk approximately $400,000 into building the home on the lot and even had a buyer lined up for the property.
  
  The potential buyer told the Del Pretes they were going to use the home to house adults with disabilities; however, around that same time, the town told the Del Pretes they gave the permit in error.
  
  And now, about three years after getting building and occupancy permits, the town is threatening to tear down the Del Prete's house and says Building Inspector Thomas Ruble shouldn't have issued the permits in the first place.
  
  Rockland town officials say the Del Pretes are in violation of zoning laws because they're about 3,700 square feet shy of the minimum buildable lot size in town.
  
  The lot also needs an extra 12 ½-feet of road frontage to comply with the law; however, Del Prete claims his abutter refuses to sell him the land.
  
  "The land doesn't comply for area. It didn't comply for frontage. And the property was not grandfathered," Rockland Town Administrator Allen Chiocca said.
  
  The Del Pretes estimate their losses on the home total about half a million dollars with legal bills. They've lost their business and they were forced to move into the Concord Street house after their personal home went into foreclosure.
  
  The town says they created their own hardship.
  
  The matter will be back in housing court later in August.

Source: Rockland family may be forced to demolish newly constructed home.

Court Nixes Ex-Wife's Belated Attempt To Invoke California's $100K Homestead Exemption To Justify Pocketing Tax Refund Proceeds That Victims Of Convicted, Ponzi-Scheming Ex-Hubby Were Entitled To

In Monterey, California, The Monterey Herald reports:

• When convicted embezzler Jay Zubick signed over all his assets to the victims of his $16 million Ponzi scheme in 2007, the agreement meant every penny, a judge ruled Friday.
  
  Judge Lydia Villarreal rejected a bid by Zubick's ex-wife to retain a $43,000 income tax refund she had received before Zubick's conviction.
  
  Suzanne Zubick, who was unaware of her husband's crimes and has since divorced him, reasoned that she signed over her Monterra house under duress and without knowing she had the right to invoke a statutory "homestead exemption." The exemption would have allowed her to keep $100,000 of the proceeds from the house's sale.
  
  Villarreal said the time for her to claim the exemption would have been in 2007 and the tax refund belongs to Jay Zubick's 29 victims.

***

• She said her life was turned upside down by the discovery of her husband's deceit. In one day, she went from believing her husband was dying to knowing he was a thief. She received telephone calls threatening her children, whose schools had to take measures to protect them.
  
  On the advice of her husband's criminal attorney, the Zubicks signed over all assets, including the Monterra house. They were allowed to take only the clothes on their backs and one change of clothing. The investors denied a request for the children's beds.

For the story, see Zubick embezzlement: Years later, victims, ex-wife fight over money.

More On "Show Me The Note!"

The following is the abstract of a recent article by law professors Bradley T. Borden & David J. Reiss, and law student William KeAupuni Akina, all of Brooklyn Law School, published in a recent issue of Westlaw Journal Bank & Lender Liability (June 3, 2013):

• News outlets and foreclosure defense blogs have focused attention on the defense commonly referred to as "show me the note." This defense seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.
  
  The defense arose in two recent state supreme-court cases and is also being raised in lower courts throughout the country. It is not only important to individuals facing foreclosure but also for the mortgage industry and investors in mortgage-backed securities.
  
  In the aggregate, the body of law that develops as a result of the foreclosure epidemic will probably shape mortgage law for a long time to come.
  
  Courts across the country seemingly interpret the validity of the "show me the note" defense incongruously. Indeed, states appear to be divided on its application. However, an analysis of the situations in which this defense is raised provides a framework that can help consumers and the mortgage industry to better predict how individual states will rule on this issue and can help courts as they continue to grapple with this matter.

For the entire article, see Show Me the Note!

Toxic Land Titles & Title Insurance

The following is the abstract of a recent article by Molly Rose Goodman, Suffolk University Law School published in a recent issue of Real Estate Law Journal:

• By failing to properly transfer ownership of loans and mortgages, recording fraudulent documents, and performing unlawful foreclosures, financial institutions and law firms have generated property titles that range from defective to toxic.
  
  Those actions evince a systemic failure to comply with longstanding principles of real property law and regulations governing financial transactions. Title companies participated in title services and issued title insurance policies throughout the housing boom and although they did not directly cause toxic titles, many title insurers have ultimately assumed the risk for the bad practices that became the industry norms in the last decade.
  
  In this article, I will discuss how title insurers have exposed themselves to liability for toxic titles.

For the entire article, see The Buck Stops Here: Toxic Titles and Title Insurance.

Religious Congregation Sues Its Treasurer For Allegedly Draining $1.1M+ Of Equity In Church Property With Multiple Mortgages, Diverting Proceeds For Personal Use While Allowing Loan Collateral To Be Lost In Foreclosure Sale

In Las Vegas, Nevada, Courthouse News Service reports:

• A Lutheran church sued its treasurer, claiming he embezzled $1.1 million - some of which he spent to buy land from a distant monastery.
  
  Amazing Grace Lutheran Church, of Las Vegas, sued Gregory R. Olson and Wells Fargo Bank, in Clark County Court. The church claims it hired Olson as its treasurer in May 2005, and he was embezzling before he'd been there a year.
  
  "From January 3, 2006 to September 18, 2009, defendant Olson without plaintiff Lutheran Church's approval, drew several checks from the account of plaintiff Lutheran Church in the amount of $1,123,279.84 for his own personal use," the complaint states.
  
  The church claims Olson took out five mortgages against church property without its permission and without notifying it.
  
  It claims that Olson was involved in a lawsuit about a property he had defaulted on, and he used some of the embezzled money to pay his legal expenses. He also bought a 2.5-acre parcel of land and told Amazing Grace he used his own money, according to the complaint.
  
  The church claims it lost title to its property through foreclosure, thanks to Olson's embezzlement.
  
  To top it off, Olson bought land from a monastery with the stolen money, according to the complaint.

For more, see Lutherans Say They Were Bamboozled.

Ex-Pastor Charged For Allegedly Using Short Sale Scam To Screw Financially Strapped Homeowner Out Of Nearly $150K While Leaving Existing Mortgage Unpaid

In St. Petersburg, Florida, The Tampa Tribune reports:

• The former pastor of a south St. Petersburg church who also founded a foreclosure-prevention company was booked into the Pinellas County Jail this week, accused of swindling nearly $150,000 from a Palm Harbor woman who no longer could afford to live in her house.
  
  Demetrius Antonio Lewis, 38, of Wesley Chapel, was charged with grand theft and money laundering. Bail was set at $200,000.
  
  Lewis once was the pastor at the Grand Central Progressive Missionary Baptist Church, 1401 18th Ave. S., but it has been years since he officiated there, parishioners say. Records show he also incorporated a business called Help Is Here Foreclosure Prevention and Credit Repair, though state records show the company as inactive.
  
  The charges against Lewis are just his most recent brush with the law.
  
  Last year he was charged with tax fraud after investigators maintained he received and cashed fraudulent tax refund checks issued in the names of eight different people.
  
  And the year before that, he was accused of taking part in a real estate scam in which authorities say he and an accomplice rented vacant properties they did not own.
  
  In the Pinellas case, Lewis had an alleged accomplice, Eric Leroy Green, the head of the south St. Petersburg charity Everyone’s Youth United, court records state.
  
  Green was arrested in June on the same charges leveled against Lewis, in what was the latest spin in the charity’s downward spiral. Everyone’s Youth United lost most of its funding in 2008.
  
  On Wednesday, in a telephone interview, Green distanced himself from Lewis, portraying himself as a victim of one of Lewis’s schemes.
  
  “We just happened to be in the trail that he, you know, rode down and used us after coming up with one of his schemes ... and unfortunately implicated us as we now know.”
  
  According to court documents, Green told Pinellas sheriff’s Detective David Kavanagh the two men’s financial arrangement was set in motion after he discussed Everyone’s Youth United’s financial turmoil with Lewis.
  
  The victim was Dorothea Giordano, who by 2010 no longer could afford to live at her house at 2492 Glenpark Road in Palm Harbor, court documents show. A close friend of Giordano’s, Jack Dvorak, agreed to buy it from her but allow her to continue living there.
  
  Giordano had been introduced to Lewis, who identified himself as an expert in real estate short sales, and who offered to broker the sale.
  
  As the deal was progressing, the pastor communicated with a Safety Harbor title company, Online Title Services, which was run by real estate agent Cheryl Slaughter, the court documents state. He introduced a woman to Slaughter as a representative of Giordano’s bank, Allied Home Mortgage.
  
  The woman, identified as Tamkea Womack, sent Slaughter an email indicating Allied had approved the short sale, as long as the amount to settle the mortgage was $143,500, the documents state.
  
  The money was to be disbursed to an entity called EYU Inc. EYU was represented as an investor, but is the acronym for Everyone’s Youth United, the documents state.
  
  After the money changed hands on Sept. 27, 2010, Allied Home Mortgage told Slaughter the woman and the company she supposedly was representing, M Caster Home Finance, were not affiliated with Allied, and the money had been improperly disbursed, the documents state. Slaughter called the sheriff’s office.
  
  After the $143,500 was transferred, Green wrote checks totaling more than $10,000 — a check for an employee for $1,000 and a check of $9,700 for Construction Specialties, which is owned by his mother, records show.
  
  He also arranged for his mother to deposit $60,000, telling her the money was a payment to Everyone’s Youth United for a fair he had put on for an organization. Green put the money in his personal account, according to investigative records. Green also got a cashier’s check of $59,000 for Lewis, the documents state.

Source: Ex-pastor accused of bilking $150K.

Lehigh Valley Man Faces Forgery, Theft/Securing Execution Of Documents By Deception, Other Charges For Allegedly Ripping Off His 93-Year Old Uncle Of $200K+ Cash/Other Assets; Suspect Allegedly Abused POA To Drain Bank Accounts, Home Equity With HELOC While Since-Foreclosed Victim Was Confined In Nursing Home

In Lehigh Valley, Pennsylvania, The Express Times reports:

• A Pen Argyl man is charged with 17 counts of theft and related crimes for depleting the life savings of his 93-year-old uncle by using power of attorney and converting property and money for his personal use, according to the Lehigh County’s District Attorney’s Office.
  
  Scott Lee Bartholomew, 52 of the 100 block of Acker Street, is accused of stealing more than $200,000 from his uncle, Wilbur B. Stiles, authorities said. The crimes happened from January 2006 to June 2012, the district attorney’s office said.
  
  Because he lost his home to foreclosure and his life savings, police said, Stiles is living in a veterans center in the Scranton, Pa., area.
  
  Bartholomew is being held in Lehigh County Prison in lieu of 10 percent of $200,000 bail.
  An investigation by South Whitehall Township police, with help from the Institute for Protective Services at Temple University, alleged that a minimum of $217,498 had been diverted from Stiles to Bartholomew, authorities said.
  
  According to an affidavit filed by South Whitehall police Sgt. Michael A. Sorrentino, Sorrentino conducted numerous interviews with agencies and individuals since December 2012 when investigators learned Bartholomew was acting with power of attorney for Stiles.
  
  Bartholomew did not make the required payments of $6,050 for the care of Stiles from March 2011 to April 2011, while Stiles was a resident of Cedarbrook Nursing Home in South Whitehall, officials said.
  
  Bartholomew gained control of Stiles’ finances and directed money from Stiles’ accounts to make unauthorized purchases of vehicles, Internet items and gaming purchases, authorities said.
  
  They allege Bartholomew made cash withdrawals, paid legal fees of an acquaintance, paid tax bills for property not owned by Stiles, and paid for cellphones and cellphone plans not used for Stiles.
  
  Additionally, police said, Bartholomew used the money on meals and entertainment for himself and others, and operational fees as an owner/operator of a sole proprietorship trucking company. None of it was reimbursed to Stiles’ accounts, police said.
  
  Investigators allege that Bartholomew converted Stiles’ savings account, insurance policy, retirement income, real estate, motor vehicles, personal property and savings bonds for Bartholomew’s personal use.
  
  Bartholomew also obtained a home equity line of credit and converted about $133,526 for his personal use, according to police. They also said almost $89,973 was taken from Stiles’ checking account.
  
  Bartholomew is alleged to have used the equity in Stiles’ residence for his personal gain. The property ultimately was placed into foreclosure, authorities said.
  
  Bartholomew was charged with four counts of theft by unlawful taking, three counts of theft by deception, five counts of receiving stolen property, one count of theft by failure of to make required disposition of funds and one count of access device fraud -- all third-degree felonies.
  
  He is also charged with one count of forgery and two counts of securing execution of documents by deception, police said.

Source: Nephew stole 93-year-old's life savings, Lehigh County authorities say.

Saga Continues For Maine Family Victimized By State Bureaucrats Who Allegedly Used Conservatorship Proceedings To Move In & Hijack Possession, Then Unload, Waterfront Home, Other Assets At Fire-Sale Prices Of Man Who Was Involuntarily Admitted To State-Run Psychiatric Facility While Giving Beloved Pet Date With 'The Euthanizer'

In Rockland, Maine, the Bangor Daily News reports:

• The sale of a Rockland man’s waterfront home in Owls Head by the state for less than half its value was only the beginning of a nightmare that has seen an undetermined amount of valuable personal items sold for little in return, according to attorneys working on the case.
  
  “You couldn’t have dreamed this up,” said attorney David Jenny.
  
  Jenny, who lives in Owls Head and Maryland, is referring to the case that involves the sale of property belonging to William T. Dean Jr. and his sister Claire Dean Perry of Liberty.
  
  Dean was hospitalized in 2012 at the state-run Dorothea Dix Psychiatric Center in Bangor. He has since been released and lives in a group home in Camden, according to Jenny, who is a longtime friend of both siblings.
  
  Jenny said that the state has taken a man who had more than $650,000 in assets and virtually assured that he will he become a ward of the state because of its management of his estate.
  
  Attorney Cynthia Dill, who represents the sister in a lawsuit against the Maine Department of Health and Human Services, said in her legal career she has never seen a case like this.
  
  Not only does Dill say the state illegally sold the home owned by William Dean at 9 Castlewood Lane in Owls Head, but that it has since hired an auction company to sell the remaining family belongings and has done it with few records to show what has happened to the items or the money received from the sales.
  
  The Deans’ parents in 1972 bought the Castlewood Lane home, which has since been a place for family outings. Claire Dean Perry had been living in the Owls Head home while her brother resided at 298 Broadway, Rockland, which had been their parents’ primary residence and owned by the Deans since 1957.
  
  The state obtained conservatorship of Dean’s finances in September 2012, four months after he was involuntarily admitted to the state-run mental health hospital. When the state learned that back taxes were owed on both properties — $5,192 on the Owls Head home and $2,329 on the Rockland property — it sought and received permission from the Penobscot County Probate Court to sell the properties for a fair market price in order to cover those costs.
  
  An affidavit filed Sept. 5, 2012, in probate court by Janice Archer, a licensed social worker for DHHS who was Dean’s caseworker, stated that there was already a buyer interested in the Owls Head property. The name of the interested party was not listed and a call to Archer early Wednesday has not been returned.
  
  Claire Dean Perry was kicked out of the house and the locks changed, Dill said.
  
  Perry and other family members, however, contested the move by the state, saying they could raise the money to prevent both properties from going into foreclosure for nonpayment of the approximately $7,500 in property taxes.
  
  The state, however, moved ahead quickly and sold the Owls Head waterfront property to James Taylor of Danvers, Mass., and Owls Head for $205,000, less than half the $476,840 value placed on it by the town.
  
  The human services department moved the date of the sale up by a day to Jan. 9, knowing that the family was going to court the following day to block the transaction, Jenny said.
  
  The Owls Head property consists of nearly 1 acre with 100 feet of ocean frontage and a two-story, 1,000-square-foot home.
  
  After selling the Owls Head property, the state turned to disposing of the Rockland home. The state had reached an agreement with a party that was willing to pay $65,000 for the Rockland property that was assessed at $177,200 — again less than half its value. Dill said the potential buyers backed out after learning of the family’s looming legal challenge.
  
  The state surrendered its conservatorship in March. On Aug. 1, the probate court appointed Dean’s cousin, Pamela Vose of Union, as conservator over his remaining properties.
  
  But Jenny and Dill said that after the sale of the Owls Head home and before the change in conservatorship, there was a fire sale of possessions owned by both Dean and Perry for reasons they cannot understand.

***

• Dill also noted that when state officials took control of Dean’s properties, they had his beloved cat, Caterpillar, euthanized without asking family members if they could care for the animal.

For more, see Attorneys: State officials hired company to auction hospitalized Rockland man’s possessions for well below value.

For an earlier story on this fiasco, see Family claims state held fire sale of patient’s coastal property, euthanized pet.

The Payday Playbook: How High Cost Loan Peddlers Fight To Keep Their Consumer Debt Traps Legal

Investigative reporter Paul Kiel writes in ProPublica:

• [O]utrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.
  
  Last year, activists in Missouri launched a ballot initiative to cap the rate for loans at 36 percent. The story of the ensuing fight illuminates the industry’s tactics, which included lobbying state legislators and contributing lavishly to their campaigns; a vigorous and, opponents charge, underhanded campaign to derail the ballot initiative; and a sophisticated and well-funded outreach effort designed to convince African-Americans to support high-cost lending.

For more, see The Payday Playbook: How High Cost Lenders Fight to Stay Legal.

This article is part of an ongoing ProPublica investigation: Debt Inc.: Lending and Collecting in America (How lenders tempt consumers with high-cost credit products that go far beyond payday loans).

WV Attorneys Providing Free Legal Services To Low-Income Consumers Continue Hammering Banksters With Predatory Lending Lawsuits Alleging Ripoffs In Originating Home Loans

In Huntington, West Virginia, The West Virginia Record reports:

• A lawsuit filed against Nationstar Mortgage LLC alleging predatory lending practices has been removed to federal court. Nationstar is formerly known as Centex Home Equity Company. Mark Greenlee was also named as a defendant in the suit.
  
  The lawsuit has been removed to federal court because the amount they are seeking exceeds the $75,000 requirement, according to a Notice of Removal filed July 25 in the U.S. District Court for the Southern District of West Virginia at Huntington.
  
  The loan amount was for $76,500, according to the Notice.
  
  Greenlee was also “fraudulently joined in this action and, thus, should be disregarded for diversity purposes,” according to the Notice of Removal.(1)
  
  Adam West first moved into his home in Hurricane in 1998, when he agreed to purchase the home pursuant to a land contract for $55,000, according to a complaint originally filed May 2 in Putnam Circuit Court.
  
  West claims in November 1999, when the land contract vendor began experiencing financial problems and West’s mother arranged to finance the remaining balance on the land contract.
  
  In early 2000, West sought to obtain a loan to repay his mother and closed on a loan with UC Lending on April 25, 2000, with a principal balance of $66,700, according to the suit.
  
  On Aug. 18, 2001, Adam West and Bethany West were married and she moved into the home with him, and the plaintiffs went to Lending Tree, an online service, to find a lender.
  
  The Wests claim a few days later, Nationstar contacted them to solicit them into a loan for refinancing and they asked for a fixed rate loan and Nationstar informed them an adjustable rate loan would be best for them.
  
  Nationstar arranged for Greenlee to appraise the Wests’ home, according to the suit, and Greenlee, who has a practice of providing inflated appraisals, provided them with an inflated appraisal and indicated their home was more than $76,000 when it was, in fact, worth approximately $55,800.
  
  The Wests claim after making payments for one year, they contacted Nationstar about promised refinancing, but Nationstar refused to refinance the loan.
  
  Nationstar refused to apply payments to the Wests’ account and charged them illegal fees, according to the suit.
  
  The Wests are seeking compensatory and punitive damages. They are being represented by Colten L. Fleu and Jennifer Wagner of Mountain State Justice.(2)

Source: Nationstar Mortgage suit removed to federal court.

(1) See, generally, Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder for more on the 'cat-and-mouse' games played by state court plaintiffs and defendants jockeying around to either move or block moves of state court cases into federal court.

See also, Bankster Fails In Attempt To Have Suit Accusing It Of Mortgage Flipping Racket Heard In Federal Court; U.S. District Judge 'Abstains' From Hearing Suit, Boots Case Back To State Court, Saying There's No Pressing Federal Interest To Decide Matter Entirely Involving Unsettled Issues Of WV Law.

(2) Mountain State Justice is a non-profit public interest law office dedicated to pursuing impact and significant litigation on behalf of low-income West Virginians. MSJ provides free legal services in our areas of practice to qualifying individuals. MSJ's work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits..

NC Appeals Court Leaves Sloppy Lender Holding The Bag By Voiding Wife's Loan Guarantee Given By Hubby Acting As Her Attorney In Fact; Bank Failed To Read Recorded Instrument, Missed 'Surprise' Provision In POA Making Husband's Authority Ineffectual

From a client alert from the law firm Poyner Spruill LLP:

• On November 6, 2012, the North Carolina Court of Appeals ruled in a unanimous decision that several commercial guaranties were invalid when signed by an attorney in fact, pursuant to a power of attorney which contained a condition precedent that had net yet occurred. This case contains important lessons for lenders regarding transactions with attorneys in fact.
  
  In this case, the appellant-wife executed a durable power of attorney appointing her husband as her attorney in fact. The power of attorney was properly recorded with the Wake County Register of Deeds.
  
  After the execution and recordation of the power of attorney, the husband and his business partner, through various business entities, borrowed money from plaintiff-lender. The husband signed a series of commercial notes, unconditional personal guaranty agreements, and a deed of trust in his wife’s name, relying on the power of attorney. The notes went into default, and the lender/plaintiff commenced foreclosure proceedings. The sale of the collateral yielded less than the outstanding obligations, and the plaintiff sued the borrowers and guarantors – including the wife - to recover the deficiency balance. The trial court granted the plaintiff’s motion for summary judgment as to all defendants.
  
  On appeal, the wife argued that the power of attorney was ineffective, and she should not be bound by the guaranty executed by her husband as her attorney in fact.
  
  The power of attorney contained a provision titled “RESTRICTIONS ON EXERCISE OF POWERS BY ATTORNEY-IN-FACT” which stated that “the rights, powers, duties and responsibilities herein conferred upon my Attorney-in-Fact shall not be exercised by my Attorney-in-Fact until a physician has certified to my Attorney-in Fact that in his or her opinion I am no longer able…to handle my…affairs.”
  
  The Court of Appeals reversed the decision of the trial court, holding that no power of attorney ever vested in the husband, that the wife’s guaranty was invalid, and that the plaintiff was not entitled to recover from the wife as a guarantor.
  
  First, the Court of Appeals agreed with the wife that the power of attorney was ineffective because there was no evidence in the record indicating that the wife had been certified incompetent by a physician, which was a condition precedent to the effectiveness of the power of attorney. Since there was no evidence that the wife was certified incompetent by a physician, no power of attorney ever vested in her husband, and he had no authority to bind her to the guaranty.
  
  Further, the Court of Appeals held that the plaintiff was deemed to be on notice of any limitation or restriction contained in the power of attorney as it was in writing and “a third party who fails to inspect a POA’s terms does so at his own peril since he is deemed on notice of the limitations and restrictions contained therein.”
  
  Nor could the plaintiff argue that it justifiably relied on the husband’s representations of authority based upon the broad grant of authority and the third party reliance provisions contained in the North Carolina General Statutes. Despite the broad grant of authority contained in the statutes, the statutes did not override the restriction that the wife be certified incompetent by a physician. Here, the power of attorney conferred no powers upon the husband because the condition precedent never occurred.
  
  Likewise, statutes which generally protect third parties who rely on the apparent authority of an attorney in fact, did not apply because the plaintiff had constructive notice of the terms of the power of attorney, which was part of the public record, and the power of attorney indicated that there was no apparent authority for the husband to execute the guaranty on behalf of his wife.

For more, see Read the Fine Print! Restrictions in a Power of Attorney May Invalidate Loan Documents.

For the ruling, see Suntrust Bank v.C & D Custom Homes, LLC, 734 SE 2d 588 (N.C. App. 2012).

Judge To Those Facing (Potentially Faulty) Non-Judicial Oregon Foreclosures: Avoid "Presumption Of Finality" - Don't Sit On Your Rights; Time For Properly-Noticed Homeowner To File Court Challenge Is Before The Sale, Not Afterward

In Portland, Oregon, LegalNewsline reports:

• A federal judge ruled last month that an Oregon homeowner could not sue following a completed trustee sale of his property.
  
  Though MERS, the national mortgage registry, was not a party to the action, the plaintiff in the case — Alan Chen — alleged that the foreclosure was wrongful based, in part, on MERS’ role in his deed of trust.
  
  The named defendants in the suit included: Bank of America N.A., ReconTrust Company N.A. and Federal National Mortgage Association, also known as Fannie Mae.
  
  In Chen v. Bank of America N.A., Judge Owen M. Panner for the U.S. District Court for the District of Oregon dismissed the complaint with prejudice. He found that, in accordance with the Oregon Trust Deed Act, Chen received proper notice of the sale, which barred his post-sale challenges to the foreclosure.
  
  “Although plaintiff here had sufficient time to raise any of the current challenges before the sale, he chose instead to raise such challenges after the trustee’s sale and recording of the trustee’s deed,” Panner wrote in his five-page order, filed July 25.
  
  The judge further held that “plaintiff’s challenges to the trustee’s sale are barred, as plaintiff’s interest in the property was ‘foreclosed and terminated.’”
  
  Chen asked the court’s permission to amend his complaint to align his allegations with the recent Brandrup v. Recontrust and Niday v. GMAC decisions from the Oregon Supreme Court.
  
  In both cases, the state’s high court ruled MERS did not meet the statutory definition of trust deed “beneficiary” under Oregon law.
  
  Panner denied the request, finding an amended complaint “would be futile” because Brandrup and Niday dealt with pre-sale challenges to non-judicial foreclosure sales as opposed to Chen’s post-sale challenges, which are barred under state law.(1)

For the story, see Federal judge dismisses wrongful foreclosure complaint involving mortgage registry.

For the court ruling, see Chen v. Bank of America, N.A., 3:12-cv-194-PA (July 25, 2013).

(1) Judge Panner's discussion on the applicable law follows:

• After briefings and arguments in this case, I issued an opinion in a case involving similar issues. See Mikityuk v. Northwest Tr. Servs., Inc., 2013 WL 3388536 (D. Or.). There, plaintiffs waited nineteen months after the sale before filing the complaint. Id. at *1. After examining both ORS 86.770(1), which states the trustee's sale "forecloses and terminates" one's property interest in certain scenarios, and the dual objectives of the Oregon Trust Deed Act, I concluded:
  
  "The legislature provided notice and reinstatement provisions to protect grantors against the threat of wrongful foreclosure. [Staffordshire Investments, Inc., v. Cal-Western Reconveyance Corp., 209 Or. App. 528, 542 (2006).] Voiding the sale here would encourage" grantors who receive notice of a sale to sit on their rights, rather than compelling grantors to bring pre-sale challenges to a trustee's sale. Grantors are wise to raise any challenges to non-judicial foreclosure proceedings, including challenges based on ORS 86.735, before the statutory presumption of finality contained in ORS 86.780. Post-sale challenges run the risk of being barred, as is the case here, because the grantors' interest in the property was "foreclosed and terminated" pursuant to ORS 86.770(1)."
  
  Mikityuk, 2013 WL 3388536 at *10.
  
  Like the plaintiffs in Mikityuk, plaintiff's challenges to the non-judicial foreclosure sale here are barred. As plaintiff received advance notice of the sale, his interest in the property was "foreclosed and terminated." ORS 86.770(1). Plaintiff's argument that notice here was ineffective because it was not signed and dated by a notorial officer is meritless. The time to make such a challenge is long passed. As discussed in Mikityuk, the notice provisions of the Oregon Trust Deed Act reflect the legislature's intent to provide those whose property interests could be affected by a trustee's sale sufficient time to act to protect those interests before the sale. 2013 WL 3388536 at *6 (citing Staffordshire Investments, Inc. V. Cal-Western Reconveyance Corp., 209 Or. App. 528, 542 (2006); NW Property Wholesalers, LLC v. Spitz, 252 Or. App. 29, 34 (2012)).
  
  Although plaintiff here had sufficient time to raise any of the current challenges before the sale, he chose instead to raise such challenges after the trustee's sale and recording of the trustee's deed. Plaintiff's challenges to the trustee's sale are barred, as plaintiff's interest in the property was "foreclosed and terminated." Mikityuk, 2013 WL 3388536 at *10; ORS 86.770(1). For the reasons discussed in Mikityuk, this action is dismissed, with prejudice.
  
  Additionally, plaintiff's request for leave to file an amended complaint [#46] is denied.. Plaintiff seeks to amend the complaint, purportedly to align with the recent Oregon Supreme Court opinions in Brandrup v. ReconTrust Co., 353 Or. 668 (June 6, 2013) and Niday v. GMAC Mortgage, LLC, 353 Or. 648 (June 6, 2013). Those opinions concerned MERS and the Oregon Trust Deed Act. An amended complaint, however, would be futile. Brandrup and Niday dealt with pre-sale challenges to non-judicial foreclosure sales. Neither case affects the outcome here, where plaintiff's claims are barred due to ORS 86.770(1). See Mikityuk, 2013 WL 3388536 at *1 n.2.

Fair Housing Feds' Probe Triggered By HUD Complaint Filed By Legal Guardian For Intellectually Disabled Ward Leads To $80K Settlement With St. Peters In Suit Accusing City Of Discriminatory Zoning Practices

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that the city of St. Peters, Mo. will pay $80,000 and make changes to its zoning laws to settle a lawsuit alleging that the city violated the federal Fair Housing Act (FHA) and Title II of the Americans with Disabilities Act (ADA) when it denied a zoning request to operate a group home for four women with intellectual disabilities.
  
  The lawsuit is part of the Justice Department’s continuing effort to enforce civil rights laws that require states and municipalities to end discrimination against, and unnecessary segregation of, persons with disabilities. The settlement was filed [] and must be approved by the U.S. District Court for the Eastern District of Missouri.
  
  “The Fair Housing Act and the Americans with Disabilities Act ensure that municipalities cannot enforce discriminatory land use policies that restrict the rights of their residents to live in the housing of their choice,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division. “This important settlement compensates the individuals who were harmed by the city’s practices and will prevent future housing discrimination against the city’s residents who have disabilities.”
  
  “Zoning ordinances that unjustifiably keep group homes out of neighborhoods violate the Fair Housing Act,” said Bryan Greene, U.S. Department of Housing and Urban Development’s (HUD) Acting Assistant Secretary for Fair Housing and Equal Opportunity. “HUD and the Department of Justice will continue to work together to ensure that everyone, including persons with disabilities, has access to the kind of housing that meets their needs.”
  
  The settlement resolves the United States’ claims that the city violated the FHA and ADA when it adopted and enforced a facially discriminatory 2,500 foot group-home spacing requirement and when its Board of Adjustment refused, without justification, a variance petition to allow Community Living Inc. (CLI) to operate a group home for four women with disabilities.
  
  The complaint also alleges that the city refused to make reasonable accommodations to the city’s rules, policies, practices or services that were necessary to afford the residents an opportunity to use and enjoy their home.

***

• The case began when a legal guardian for a resident of the group home filed a complaint with HUD after the Board of Adjustment denied the group home’s variance petition. HUD referred the complaint to the Justice Department, which conducted an investigation.

For the Justice Department press release, see Justice Department Settles Allegations of Disability Discrimination Against the City of St. Peters, Mo.

Civil Rights, Brooklyn Feds Score Settlement Agreement In ADA Suit Accusing NYS Of Unnecessarily Segregating/Institutionalizing Thousands With Mental Illness In Adult Homes

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of New York announced [] that they, along with plaintiff adult home residents, entered into a comprehensive settlement agreement with the state of New York under the Americans with Disabilities Act (ADA).
  
  The settlement agreement will provide relief to thousands of people with mental illness unnecessarily segregated in 23 adult homes in New York City. Adult homes are institutional, segregated settings that house large numbers of people with mental illness.
  
  Under the settlement agreement, New York will offer supported housing to people with mental illness currently residing in adult homes. Supported housing is apartments scattered throughout the community for which the state provides rental assistance and housing-related support services. Supported housing residents have access to community-based services and supports that promote their inclusion, independence, and full participation in community life. The settlement agreement has been filed with the U.S. District Court for the Eastern District of New York for the court’s approval.
  
  The Supreme Court made clear in its landmark decision Olmstead v. L.C,(1) that people with disabilities have a civil right under the ADA to receive services in the most integrated setting appropriate to their needs. The state worked cooperatively with the department and private plaintiffs to negotiate a settlement that resolves the allegations that the New York mental health service system violates the ADA by relying on large, institutional adult homes instead of supported housing units that are scattered throughout the community. A state is responsible for segregation when it designs and implements a system that unnecessarily relies on institutional facilities, regardless of whether they are privately owned and operated.

***

• Over the next five years, New York will provide scattered-site supported housing to at least 2,000, and potentially more than 4,000, adult home residents. New York has also committed to providing people moving to supported housing with the community-based services and supports that will allow them to thrive in the community. The agreement also will ensure that adult home residents have the information they need to make an informed choice about where to live. If they choose to move to supported housing, they will participate in a person-centered, transition planning process. An independent reviewer with extensive experience in mental health systems will monitor the state’s compliance with the agreement.
  
  Because of this agreement, people like Ilona Spiegel, one of the named plaintiffs, will get the opportunity to live independently and “become emancipated” after 15 years in an adult home. Spiegel lived independently in her own apartment until she received psychiatric treatment in a hospital in 1998.  When she left the hospital, her only discharge option was to move into an adult home. In the adult home, Spiegel shares a small room with a roommate, has scheduled mealtimes and no opportunity to cook for herself, has little privacy as staff have entered her room without permission and finds living in the adult home extremely isolating. Spiegel has said that she cannot wait to live in her own apartment again and have autonomy over her life, including doing her own cooking, cleaning and shopping, have personal privacy in her home, and be free from intrusion into her personal belongings.
  
  Loretta E. Lynch, U.S. Attorney for the Eastern District of New York stated: “With this agreement, thousands of New Yorkers will be able to leave the shadow of institutional living and instead live in and contribute to their communities. Because of this cooperative effort, their lives will be immeasurably better and our communities all the richer for their presence.”
  
  The individual plaintiff adult home residents, on behalf of themselves and a class of adult home residents with mental illness, are represented by Paul, Weiss, Rifkind, Wharton & Garrison, LLP; Disability Advocates Inc.; Bazelon Center for Mental Health Law; New York Lawyers for the Public Interest; MFY Legal Services Inc.; and Urban Justice Center.

For the press release, see Justice Department Obtains Comprehensive Agreement to Ensure New York City Adult Home Residents with Mental Illness Are Afforded Opportunities to Live in the Community.

(1) Olmstead v. L.C., 527 U.S. 581 (1999).

Civil Rights Feds Tag Florida In ADA Suit Alleging State Unnecessarily Segregates Children With Disabilities In Nursing Facilities Rather Than Placing Them In Their Families' Homes Or Other Community-Based Settings

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that it has filed a lawsuit against the state of Florida alleging the state is in violation of the Americans with Disabilities Act (ADA) in its administration of its service system for children with significant medical needs, resulting in nearly 200 children with disabilities being unnecessarily segregated in nursing facilities when they could be served in their family homes or other community-based settings.
  
  The lawsuit, filed in federal district court in Fort Lauderdale, Fla., further alleges that the state’s policies and practices place other children with significant medical needs in the community at serious risk of institutionalization in nursing facilities.
  
  The ADA and the Supreme Court’s decision in Olmstead v. L.C.(1) require states to eliminate unnecessary segregation of persons with disabilities. The department’s complaint seeks declaratory and injunctive relief, as well as compensatory damages for affected children.

***

• “Florida must ensure that children with significant medical needs are not isolated in nursing facilities, away from their families and communities,” said Eve Hill, Deputy Assistant Attorney General for the Civil Rights Division. “Children have a right to grow up with their families, among their friends and in their own communities. This is the promise of the ADA’s integration mandate as articulated by the Supreme Court in Olmstead. The violations the department has identified are serious, systemic and ongoing and require comprehensive relief for these children and their families.”
  
  Since late 2012, the department has met with Florida officials on numerous occasions in an attempt to resolve the violations identified in the findings letter cooperatively. While the state has altered some policies that have contributed to the unnecessary institutionalization of children, ongoing violations remain. Nearly two hundred children remain in nursing facilities. Deficient transition planning processes, lengthy waiting lists for community-based services and a lack of sufficient community-based alternatives persist. The department has therefore determined that judicial action is necessary to ensure that the civil rights of Florida’s children are protected.

For the Justice Department press release, see Justice Department Files Lawsuit Against the State of Florida for Unnecessarily Segregating Children with Disabilities.

(1) Olmstead v. L.C., 527 U.S. 581 (1999).

Brooklyn Landlord Finds Itself In Crosshairs In Federal Fair Housing/Race Discrimination Suit Accusing It Of 'Failing Black/White Test' In Its Treatment Accorded Black Testers As Opposed To Their White Counterparts

In New York City, the Fair Housing Justice Center(1) recently announced:

• On August 2, 2013, the FHJC and four African American testers filed a lawsuit in federal district court (E.D.N.Y.) alleging that the owners and managers of apartment buildings located in Brooklyn discriminate against African Americans.
  
  The case resulted from an investigation conducted by the FHJC in which African American and white testers posing as prospective renters were deployed to two rental buildings located at 592-596 E. 22nd Street in Brooklyn to inquire about apartments.
  
  The investigation was commenced after the FHJC was contacted by the Flatbush Development Corporation. The lawsuit claims that the defendants, East 22nd Street Towers LLC, East 22 St. Realty LLC, Coney Management LLC, Kalman Zimmerman, Samuel Fleischman, Joseph Lichtman, and Mayer Fishman engaged in racially discriminatory practices in violation of fair housing laws.
  
  The complaint alleges that the rent stabilized buildings on E. 22nd Street were neglected and in serious disrepair when they were occupied almost exclusively by Black tenants. When the defendants acquired the properties, units were eventually remodeled, but it appeared that Black tenants who remained in the building did not receive the same quality of renovations. Concern was expressed by tenant organizers that the owners were seeking to rent newly remodeled units to tenants who were not Black. In response to this concern, the FHJC conducted an investigation.
  
  According to the lawsuit, African American testers were treated less favorably than their white counterparts on four tests. In stark contrast to the treatment accorded white testers, comparably qualified African American testers met with misinformation, discourtesies, and discouragement when inquiring about apartments for rent.
  
  On one test, a white tester was told about four apartments that were coming available in several weeks and, on the same day, an African American tester was told no apartments were available and none would be available for a couple of months.
  
  On the second test, an African American tester was informed that no apartment was available and that it could be “four to six weeks” and none would be available by October 1st. The same day, a white tester was shown an available apartment that was “just about ready” and that would be ready by October.
  
  On another test, an African American tester was treated rudely and quoted a security deposit requirement that was twice as much as the amount quoted to his white counterpart.

For the press release, see Flatbush Landlord Accused of Racial Bias (FHJC Investigation Documents Race Discrimination In Gentrifying Buildings).

(1) The Fair Housing Justice Center, Inc. (FHJC) is a regional fair housing organization based in New York City. The FHJC provides a full-service fair housing program to New York City and the seven surrounding New York counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester.